On November 16, NetEase released its Q3 financial report for 2023. NetEase performed steadily in the third quarter, with net income of 27.3 billion yuan, net profit attributable to shareholders of the company under non-GAAP of 8.6 billion yuan, R&D investment of 4.3 billion yuan in a single quarter, and R&D investment of more than 12 billion yuan in the first three quarters of this year. During the quarter, NetEase AI's self-developed large model was applied in batches in core business and physical scenarios, and at the same time, it used technology to help the smart Asian Games, increase the protection of minors, and give full play to the social value of technology.
In the third quarter, NetEase maintained innovation in various businesses and continued to create value for users and the company. NetEase Games actively promoted business model and gameplay innovation, and a number of new products such as "Against the Cold" mobile game broke through market expectations and won the championship of the subdivision track, driving the net income of the game sector to reach 21.8 billion yuan. NetEase Cloud Music's Q3 net income was 2 billion yuan, and it continued to strengthen the monetization ability of its membership business with music content as the core, and its gross profit margin further increased to 27.2%. Thanks to the rapid development of a number of businesses in NetEase Youdao, thanks to the implementation of AI technology products such as the Ziyue Education Model, the net income in a single quarter was 1.5 billion yuan, and the gross profit margin increased to 55.9%, a new high in the past two years.
NetEase Innovation and other businesses had a net income of 2 billion yuan in Q3. Among them, NetEase Media innovates content production with digital technology, and the proportion of Q3 video consumption on NetEase News client has increased to 74.8%, ranking first in the industry in terms of per capita daily usage time. NetEase Yanxuan focuses on the branding strategy, and during the Double 11 period, multi-channel sales exceeded 100 million Pro, and the number of Pro members increased by 187% year-on-year.
R&D investment in the first three quarters exceeded 12 billion yuan
The first AI model in the field of education and email was approved
Since the beginning of this year, NetEase has increased its investment in the R&D and application of key technologies such as AI's self-developed large models, and the cumulative investment in R&D in the first three quarters has exceeded 10 billion yuan, exceeding 12 billion yuan. In the third quarter alone, NetEase invested 4.3 billion yuan in R&D, and the first AI vertical model in the fields of education and email was filed to inject impetus into the innovation and development of digital services and the digital transformation of physical industries.
NetEase Youdao has accelerated the application of the sub-education model, driving a number of businesses to achieve high growth rates. As one of the first batch of vertical models in the education field that have passed the record, Ziyue has supported the development of six native applications, including the world's first virtual voice and private trainer Hi Echo. Thanks to the implementation of AI productization, the sales of digital content services exceeded 400 million yuan, the gross profit margin hit a record high, the Q3 membership fees of Youdao Dictionary and Youdao Translation increased by more than 160% year-on-year, and the net income of online marketing services increased by 113.5% year-on-year. This year's Double 11 Youdao intelligent hardware has outstanding performance, and the dictionary pen has ranked first in sales of JD.com and Tmall for 4 consecutive years.
NetEase has accelerated the breakthrough implementation of AI self-developed technology in entertainment scenarios, activated user creativity, and created a new model of AI collaborative content creation, which has basically run through many of NetEase's products. In the field of games, as the world's first open-world game with large-scale AI gameplay, the mobile game "Against the Cold" continues to innovate, and the industry's first AI custom voice and other gameplay "AI teammates" have played with more than one billion times. "Egg Boy Party" has also updated a variety of AI functions on the basis of the original UGC content creation ecology, which can help players change the color of the map with one click, generate videos and actions, and also launch functions such as multiplayer co-construction of maps to further reduce the threshold for creation and improve the quality of creation. By the end of August, the number of maps of "Egg Boy Party" had exceeded 100 million.
NetEase's first vertical large-scale model application in the fields of physical industry and mailbox services has accelerated the implementation of scenarios. The first unmanned loading robot in China developed based on the NetEase industrial model has served the intelligent concrete batching plant of Shanghai-Tong Railway, and the work efficiency is close to that of a real person, and has been selected as one of the "Top Ten Typical Cases of Innovation and Development of Chinese Internet Enterprises" released by the World Internet Conference. Recently, the first vertical large-scale model application in the field of email services, "NetEase Mail Intelligent Assistant", has passed the filing and will provide intelligent functions such as AI email writing, email summarization and polishing. NetEase Intelligent Enterprise has launched a large model in the field of customer service, "Shanghe", which can more accurately understand and process complex tasks and information, and improve customer service efficiency and customer satisfaction.
NetEase Technology also contributed scientific and technological strength to the Hangzhou Asian Games. NetEase Intelligent Enterprise provides intelligent real-time translation services for athletes and guests from all over the world, and has been affirmed by the Hangzhou Asian Games Organizing Committee with a high standard of zero accidents throughout the process. As the official online brand promotion service provider of the Hangzhou Asian Games, NetEase Media once again deeply participated in the coverage of top international events, and used AI technology to create creative columns such as "Hot AI Asian Games", using high-quality content to let hundreds of millions of netizens resonate with the Asian Games at the same frequency.
The high-quality, low-payment model has begun to bear fruit
A number of new products won the championship of the subdivision track
NetEase Games actively explores model innovation, and a number of new products in Q3 start from the needs of users and market demand, break through the segmentation track with the competitive strategy of high content quality and low average payment, achieve multi-point flowering, and provide new practical support for long-term development.
As the industry's first MMORPG mobile game driven by content, it has set a new record of more than 50 million users in 45 days of public beta. In order to meet the needs of players for small payments, the mobile game "Against the Cold" launched the "price war in the game circle" for the first time, and the sales of "six-yuan game skins" exceeded 100 million pieces, which not only gained a good reputation, but also built the first large-scale small-amount user payment ecology in the MMO field, contributing leading experience to the transformation of the traditional MMO game payment model.
NetEase's self-developed new products also won the top spot in their respective tracks with differentiated innovation in content and channels. "Peak Speed" deeply polishes the realistic physics of the racing car, and uses the top physics engine technology to simulate the real racing experience, which has topped the free charts many times. "All-Star Street Ball Party" breaks through the constraints of traditional basketball gameplay, and creates a variety of battle gameplay, which is very popular. As the first NetEase game not to launch the Android channel, "All-Star Street Ball Party" divided the channel into 1.5 billion yuan to give profits, and players successively won the first place in the iOS overall list, free list, and best-selling list, and became the first basketball game to be awarded the "Editor's Choice" of the App Store.
In July, Naraka: Bladepoint changed its core business model and made it available to all users for free to further expand the international market. After switching to a free-to-play game, the number of players in Naraka: Bladepoint has continued to climb to more than 40 million, and it has collected awards from four major international game platforms such as Steam, Xbox, Epic, and PS5, achieving the "Grand Slam" of domestic games going overseas.
More than 100 million yuan is invested in the protection of minors every year
All games support minors to prohibit recharge with one click
Protecting the healthy growth of minors in an all-round way is an important responsibility for the long-term development of Internet enterprises. As one of the earliest Internet companies in China to build and invest in the protection of minors for a long time, NetEase has listed the protection of minors as a core business assessment index and included it in the company's long-term development strategy. At present, NetEase's core content products have all launched "Youth Mode" or related juvenile protection functions.
NetEase Games attaches great importance to the construction of the protection system for minors, and continues to upgrade measures for the protection of minors. NetEase Games invests an average of more than 100 million yuan per year in the protection of minors, and has launched the "one-click ban play" and "prohibition of recharge" functions for minors, parents only need to bind their children's NetEase game accounts on the "NetEase Parental Care Platform" official account, and they can query and manage game duration and consumption with one click, and can also set account permissions to prohibit games and recharge.
In order to promote the solution of the industry problem of minors' "false real names", NetEase Games upgraded its AI face recognition technology in the summer, improved the accuracy of the AI face recognition algorithm through SDK glare protection and server-side 3D spatio-temporal double verification, and solved the problem of minors using photos, synthetic videos and other methods to bypass the verification mechanism. This summer, face recognition was triggered 10.76 million times in the game login process, of which more than 83% of accounts were included in anti-addiction supervision due to refusal or failure to pass verification. NetEase will continue to strengthen investment in the protection of minors, promote collaboration and co-governance among all parties, and create a clear and progressive cyberspace.
NetEase has always adhered to the long-term development concept, and will continue to give full play to its advantages in technology and content from the perspective of the overall social situation, promote the innovation and development of the digital economy, the digital innovation of the real industry, and practice corporate social responsibility.
Produced by Nandu Bay Finance Society Science and Technology Innovation Studio
Written by Chen Peijun, a reporter from Nandu Bay Finance Society