Higher costs weigh on NetEase

Surging expenses for game promotions and dwindling advertising revenues could weigh on NetEase.com Inc as the online gaming operator grapples with fierce competition in the crowded industry.

The company may also suffer due to the regulatory spat over its operation of blockbuster online game World of Warcraft (WoW).

NetEase earlier said net income during the third quarter rose to 393.8 million yuan from 313.3 million yuan a year earlier. But its gross profit margin of online game services declined to 79.9 percent from 89.7 percent in the same period of last year.