UPDATE 3-NetEase Q1 earnings top Street; shares down on rev miss

* Q1 earnings per ADS $0.47 vs est. $0.46 * Q1 revenue up 20 pct * Online games rev up 30 pct, ad rev down 47 pct

* Shares down 6 pct on ad revenue disappointment (Recasts; adds analyst comments, share movement)

By Bijoy Anandoth Koyitty

BANGALORE, May 20 (Reuters) - NetEase.com Inc (NTES.O), China's No. 2 online games operator, reported a 55 percent jump in first-quarter profit as online games revenue rose 30 percent, but shares fell 6 percent as advertising revenue slumped further.

Analysts said the company's rivals such as Baidu Inc (BIDU.O), Tencent (0700.HK), Perfect World Co Ltd (PWRD.O) and Sina Corp (SINA.O) had a better quarter in terms of advertising revenue.

"I was actually expecting advertising to be down a little bit, but the miss was very significant...," Thinkequity analyst Atul Bagga said by phone.

Advertisers remained cautious overall during the first quarter as the global economic slowdown continued, Chief Executive William Ding said in a release.

Online advertising results from NetEase's competitors were not as bad, which implies some company specific issues in the quarter as well, Adam Krejcik of Roth Capital Partners said.

NetEase's total revenue rose about 20 percent to $114.4 million, but lagged analysts' expectations of $116.6 million due to a 47 percent fall in advertising revenue to $6 million.

However, revenue from the company's core online games business rose to $106.0 million from $81.4 million a year ago.

NetEase.com's online game business did well, helped by the longevity of the game lifecycles, strong user loyalty and robust online communities, CEO Ding said.

GAME ON

NetEase, which is chasing Shanda Interactive Entertainment Ltd (SNDA.O), is a major player in the burgeoning Chinese online gaming market, which could almost double to 34.5 billion yuan ($5.06 billion) by 2012 from 18.3 billion yuan last year, according to U.S. research firm Oppenheimer.

Beijing-based NetEase said last month it had won the licence to host Activision Blizzard's (ATVI.O) popular role-playing game World of Warcraft for three years in mainland China.

World of Warcraft's current licence is owned by rival The9 Ltd (NCTY.O) and is set to expire in June.

"The main story of the company is in 2010, when it will have a number of games operating their full potential, and they have got some new games that will be coming online," ThinkEquity's Bagga said.