NetEase, China's second-largest online game operator by marketshare, saw profits climbing in its second fiscal quarter to 438.2 yuan ($63.9 million), compared to 312.6 million yuan ($45.6 million) in the same period last year.

NetEase's total revenues were 715.9 million yuan ($104.4 million), up from 558 million yuan ($81.3 million) for the second quarter of 2007. About 80 percent of the total came from online games as opposed to other internet services the company offers, it says.

NetEase yesterday announced a deal with Blizzard to distribute upcoming RTS Starcraft II in China. The company is primarily known for its fantasy MMO Journey to the West, which NetEase says is among China's top 10 in downloads and "continued to perform quite well" in the second quarter thanks to new expansions and in-game marketing activities.

The third installment of the franchise is currently in development, and NetEase's first 3D item-based title, Tianxia II, launched its open beta in June.

The company credits its strong performance to both its online gaming and advertising businesses. "We believe that China's online gaming industry is in the midst of unprecedented growth and NetEase is very well positioned to benefit from this trend," says CEO William Ding.

"To leverage the opportunities provided by the 2008 Beijing Olympic Games, we have been further strengthening the content on our portal, which helped drive increased traffic to our site and achieve further growth in the number of our e-mail users during the second quarter," says Ding.

[The preceding article by Leigh Alexander originally appeared on Worlds in Motion sister site Gamasutra.]