A Lifeline or a Massive Gamble? How Ding Lei Pulled NetEase Back from the Brink with a Single Game

Prologue: An Epiphany in an Internet Cafe

The summer of 2001 was the most grueling period of Ding Lei's life. NetEase's stock price had hit rock bottom, the company's future was uncertain, and he had even considered selling the company to end it all.

At his most desperate moment, to clear his head and understand the market, he began to frequent the major internet cafes in Guangzhou. He wanted to see for himself what Chinese netizens were still excited about during the internet winter.

Soon, a strange sight caught his attention.

In almost every internet cafe, a large group of young people were glued to their screens, playing the same games—"King of Kings" and "Stone Age"—which, by today's standards, had incredibly crude graphics. They would stay up for days and nights for virtual equipment and levels in the game and willingly pay real money for game point cards.

This discovery was like a bolt of lightning that pierced the gloom in Ding Lei's heart.

He suddenly realized that he might have been on the "wrong" track all along. In the past, NetEase's business, whether it was email or a web portal, was essentially a "traffic business," monetized through advertising. This model worked well when the industry was booming, but once a systemic crisis like the dot-com bubble hit, advertisers tightened their purse strings, and the company's revenue would plummet.

Online games were completely different. Their business model was to charge users directly. As long as your game was fun enough, users were willing to pay for it continuously. It was a perfect business model that could bring in stable and healthy cash flow.

"Why don't we make a game ourselves?" A bold idea rose in his mind.

Act I: A "Distracting" Decision

When Ding Lei first proposed the idea of "going all-in on online gaming" at a senior management meeting, he was met with opposition from almost everyone.

"Mr. Ding, we are an internet portal company. Our DNA is in news and community. We don't know anything about games!" a vice president stood up and said excitedly.

"Exactly, the Korean games on the market are so dominant right now. We have no experience. Wouldn't we be walking into a death trap?" another manager expressed his concern.

To many at the time, making games was a "distraction." It was full of uncertainty and, in the mainstream business context, far less "prestigious" than running a news portal.

But this time, Ding Lei was unusually resolute.

His observations in internet cafes and his deep reflection on business models had made him incredibly certain that gaming was the only chance to pull NetEase back from the brink of death.

More importantly, Ding Lei himself was a hard-core "game enthusiast." Since his college days, he had a strong interest in all kinds of video games. He believed that only people who truly love games could make truly fun games.

"This must be done! Even if we have to spend all the company's remaining money, we have to make it!" Ding Lei ended the debate with an almost unquestionable tone.

Act II: From "Westward Journey" to "Fantasy"

After deciding to self-develop games, Ding Lei immediately set up a new game development department. The first task he gave this team was to develop a massively multiplayer online role-playing game (MMORPG) based on the classic Chinese novel "Journey to the West."

Choosing the "Journey to the West" theme was a well-thought-out decision by Ding Lei. He believed that compared to the popular Japanese and Korean fantasy-style games on the market, the culturally rooted "Journey to the West" would more easily resonate with local players.

However, developing a large-scale online game from scratch was far more difficult than anyone had imagined.

The team not only had to overcome a series of technical challenges such as servers and graphics engines but also had to explore new territory in game planning, numerical balance, and art style.

Ding Lei once again transformed into the omnipotent "chief product manager." He was personally involved in every detail of the game's design, from the stats of a monster to the art style of an item, he would scrutinize everything.

After more than a year of hard development, "Westward Journey Online" was officially launched at the end of 2001. However, due to initial bugs and balance issues, the market response was not ideal.

Ding Lei was not discouraged. He led the team to quickly iterate and optimize the game based on player feedback and soon launched "Version 2.0." This time, "Westward Journey" finally took the market by storm, becoming one of the most popular online games at the time.

After the first victory, Ding Lei pressed on. In 2003, he launched another game with a Q-version style that was more appealing to younger players—"Fantasy Westward Journey."

This game eventually became a monument in the history of Chinese online games and has been NetEase's most stable and powerful "cash cow" for nearly two decades.

Epilogue: Passion is the Best Moat

The huge success of "Westward Journey Online" and "Fantasy Westward Journey" completely rewrote the destiny of NetEase.

The substantial profits from the gaming business not only allowed NetEase to safely weather the internet winter but also gave it the confidence and capital to later expand into more diverse businesses such as music, e-commerce, and education.

Ding Lei, because of this successful "gamble," became the "richest man in China" in 2003.

Looking back at NetEase's textbook transformation, we can see that it was driven not only by Ding Lei's keen sense of business models but also by his genuine "passion" for games.

Because of his passion, he could see opportunities that others couldn't; because of his passion, he could endure the hardships of the development process; and it was because of his passion that he and his team could create a great product that was truly recognized by players.

For an entrepreneur, business acumen is certainly important, but sometimes, the kind of pure, non-utilitarian "passion" from the heart is the most indestructible moat to cross cycles and resist risks.