That pig seller Ding Lei is back again.

Author: Huang Yu

No one expected that since December 13th, the long-standing internet company CLOUD MUSIC, with a market value of approximately HKD 542.6 billion, has surpassed MEITUAN-W to become the fourth largest internet company in China, second only to Tencent, Pinduoduo, and Alibaba.

Over the past year, CLOUD MUSIC's market value has continued to rise against the trend, surpassing JD-SWR and BIDU-SWR, and returning to the ranks of giants.

On November 30th, when Pinduoduo's market value surpassed Alibaba, it sparked industry discussions. However, CLOUD MUSIC's market value surpassing MEITUAN-W tells a different story. While the former is a newcomer surpassing the established players, the latter is a fallen aristocrat making a comeback and surpassing the newcomer.

The protagonist of this story, CLOUD MUSIC's founder and CEO, Ding Lei, has left a deep impression over the years. One notable thing is that he raised pigs, and another is that he launched CLOUD MUSIC's curated platform and sold pork on it.

Compared to the newcomers like MEITUAN-W, Pinduoduo, and Douyin, or the contemporaneous giants like Alibaba, Tencent, and BIDU-SWR, CLOUD MUSIC may have a lower profile, but in fact, Ding Lei has been quietly making a fortune.

The strong rebound in CLOUD MUSIC's stock price this round is mainly due to the outstanding performance of its gaming business, especially the game "Egg Party" launched in May last year and the mobile game "Nishuihan" launched in June this year.

As a popular party game this year, "Egg Party" has not only become the game with the highest daily active users (DAU) in CLOUD MUSIC's history but also maintained steady growth.

According to official data, in August of this year, the monthly active users (MAU) of "Egg Party" exceeded 100 million. Just three months later, on December 8th, CLOUD MUSIC announced that the cumulative number of users for the game has reached 500 million, accounting for nearly three-quarters of China's total gaming user base.

During the earnings conference call earlier this year, when investors asked about the long-term viability of "Egg Party," Ding Lei expressed great confidence and said, "We will invest more research and development resources and operate this game for the long term, which means at least 10 years, just like 'Fantasy Westward Journey' that has been running for 20 years."

In addition to "Egg Party," the mobile game "Nishuihan" has also become a hit. CLOUD MUSIC executives stated that about one-third of "Nishuihan" players had not played any CLOUD MUSIC games before. The game adopts a more user-friendly and relatively low average revenue per user (ARPU) payment model, which has driven a higher payment ratio compared to other products.

Reflected in the financial report, in the third quarter of this year, CLOUD MUSIC's net revenue from games and related value-added services was CNY 21.8 billion, a year-on-year increase of 16.5%, higher than the growth rate of the previous two quarters. However, MEITUAN-W's stock price has been under pressure this year, mainly due to the attack and threat from Douyin in the local life sector, as well as MEITUAN-W's own poor profit performance and slowing growth.

Behind the intertwining of these two factors is a change in investor preferences, shifting from focusing on growth to focusing on profit performance. MEITUAN-W's third-quarter revenue was significantly ahead of CLOUD MUSIC, nearly 2.8 times that of CLOUD MUSIC, but its profitability was lower. MEITUAN-W's gross margin in the third quarter was 35%, while CLOUD MUSIC's gross margin during the same period was as high as 62%.

Thirty years in the east, thirty years in the west. In February 2021, when MEITUAN-W's stock price reached its peak, its market value was about four times that of CLOUD MUSIC. In less than three years, CLOUD MUSIC's market value has caught up with MEITUAN-W.

CLOUD MUSIC is one of the earliest internet companies in China. In the golden age of internet startups, Ding Lei was one of the first beneficiaries. The company he founded, CLOUD MUSIC, along with Sohu and Sina, were collectively known as the three major portal websites in China. They were listed on NASDAQ in 2000 and their status at the time was comparable to that of BAT ten years later.

Over the past twenty years, the internet landscape has changed several times, and CLOUD MUSIC has long fallen from the pyramid's peak. However, among the once three major portal websites in China, CLOUD MUSIC is the only company that still exudes vitality and can compete with the top internet giants.

Affected by the overall environment, Chinese internet stocks experienced a significant decline in 2021 and 2022. In this year's rebound, CLOUD MUSIC and Pinduoduo have performed the best, with their stock prices rising by nearly 50% and 80% respectively.

It is worth mentioning that Ding Lei and Pinduoduo's founder Huang Zheng have a deep connection. In the early years, Huang Zheng helped Ding Lei solve a technical problem, and the two became friends. Later, Ding Lei introduced Huang Zheng to the investment tycoon and founder of BBK Electronics, Duan Yongping, becoming Huang Zheng's "guide" on his entrepreneurial journey.

Unlike Sina and Sohu, which failed to transform in a timely manner and gradually declined, Ding Lei firmly embarked on the path of transformation with CLOUD MUSIC as early as 2001. At that time, online gaming had not attracted much attention in China, and the only well-known company in this business was Shanda Network.

Although today's CLOUD MUSIC has four major business segments, including gaming, education, cloud services, and innovation and other businesses, gaming remains its mainstay. Over the past three years, gaming revenue has accounted for over 70% of CLOUD MUSIC's total revenue. In the third quarter of this year, the proportion of revenue generated by gaming further increased, accounting for about 80%.

For CLOUD MUSIC, how to stabilize its gaming business while creating diversified sources of income remains a major challenge. From the perspective of external competition, CLOUD MUSIC is also facing considerable pressure, with its primary opponent being Tencent Games, which has been engaged in endless competition with it. It is not difficult to see that the fierce competition between these two giants revolves around every gaming hotspot in the past, such as "PlayerUnknown's Battlegrounds" and "Rules of Survival," "Nishuihan" and "Moonlight Blade," "Clash Royale" and "Hearthstone."

Seeing the popularity of CLOUD MUSIC in party games, Tencent naturally won't let it go and has created "Dream Star," which directly competes with "Egg Party." "Dream Star" was launched on December 15th, and Tencent's level of attention and resource allocation far exceeded expectations.

In this new round of competition, who will emerge victorious between "Egg Party" and "Dream Star" can only be answered by time.

In the ever-changing landscape of the internet world, CLOUD MUSIC, which has experienced ups and downs, has become a company that has gone through a trough and crossed the cycle. Now, with the promotion of games like "Egg Party," it has seized the current consumption characteristics of society. CLOUD MUSIC's market value has risen to the top ranks, and Ding Lei, with a net worth of 240 billion yuan, ranks sixth on the Hurun Rich List, second only to Zhong Shanshan, Ma Huateng, Huang Zheng, Zeng Yuqun, and Zhang Yiming.

Ding Lei, who practices a laid-back approach to entrepreneurship, has once again made a comeback. CLOUD MUSIC provides an enduring business model for internet companies. Whether it is Alibaba, which is currently undergoing a one-to-six stock split, or Tencent, which is facing confusion and the need to combat corruption, both have the potential to unleash new energy and return to the spotlight.

In the ever-changing internet world, only by understanding the direction of the waves can one navigate the cycles and thrive in the long run.