China's biggest online game company posted a 22 percent increase in third-quarter earnings year on year as a result of higher revenue, Beijing-based NetEase.com reported yesterday.

The Beijing-based firm also forecast that fourth-quarter profit may drop as much as 19 percent as a result of falling revenue from its core online game and advertising sectors.

The company said it earned 314.8 million yuan (US$39.8 million) in the third quarter, up 0.2 percent from the previous three months.

Total revenue for the past quarter increased 24 percent from a year ago but dropped 0.6 percent from the second quarter to 571.9 million yuan. Eighty-two percent of revenue came from online games.

William Ding, NetEase chief executive officer and director, attributed the revenue decrease from the second quarter to intensified competition from other game companies, particularly their free-to-play games, and complaints by some players of the company's popular "Fantasy Westward Journey," in which they "mistakenly identified an image in it as a Japanese flag," the company said.

NetEase experienced a severe drop in the number of users around September, and it may be difficult for the company to resurrect user levels, officials said.

Company officials said that they are working on their own free game to attract more online traffic. It could debut in about five months, they said.

NetEase replaced Shanghai-based Shanda Interactive Entertainment Ltd earlier this year as the biggest player in terms of revenue in China's fast-growing online game market. Other major competitors are The9 Ltd and Tencent Holdings Ltd.

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