NetEase profit drops as expenses surge

NetEase Inc, the second-largest online game operator in China, said on Thursday that its net profit decreased 1.7 percent in the third quarter to 812 million yuan ($130.3 million).

The drop was mainly due to decreased revenue from Blizzard Entertainment Inc's online game World of Warcraft, which NetEase operates in China, and increased expenses in sales and marketing, and in research and development.

The company said that increased revenue from NetEase's self-developed games was partially offset by decreased revenue from World of Warcraft.

Blizzard's hit game World of Warcraft saw its number of players decline in the second quarter globally, but the situation improved in the third quarter because of its new expansion pack, Mists of Pandaria. Blizzard had more than 10 million subscribers in the third quarter, compared to 9.1 million in the previous quarter.

William Ding, chief executive officer of NetEase, said that the new expansion pack, launched in China on Oct 2, has helped boost the performance of the game in China.

NetEase's total revenue for the third quarter was flat year-on-year at 2 billion yuan. Out of that figure, 1.7 billion yuan came from its online game business, the company said.

Ding said that the company will continue investing in R&D, in a bid to create self-developed games.

The company spent 201.7 million yuan on research and development in the third quarter, 65.2 percent higher than in the same period last year, according to its financial report.