Netease (NASDAQ:NTES), one of our top Internet stock picks, has come together with China telecom to form a joint venture which will launch ‘YiChat’ a social instant messaging app. This launch is a possible response to the launch of Tencent’s WeChat service. The obvious question which arises is how would YiChat differentiate itself from a host of other IM services? Well the service makes it possible for a user to send text and voice messages to any mobile or fixed line connections without requiring the receiver to have installed ‘Yichat’. This launch marks the entry of Netease into the smartphone instant messaging space and as per the company statements this is a key component of their strategy for the mobile space. This is seen as a diversification of the company’s services from its mainstream online gaming and advertising services. The new app, if successful, will lead to increased growth opportunities for Netease, considering the growth rate of Chinese smartphone users. This move will also help Netease reach out to more mobile users to establish itself in the mobile space and provide opportunities to upsell their mobile games to the additional users.
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