Chinese online game and media company Shanda Interactive Entertainment Ltdsaid Wednesday its second-quarter net profit fell 95% from a year earlier as higher expenses outweighed rising revenue, the Wall Street Journal reported.

Most of Shanda's revenue is from online games, but the game industry's growth in China has slowed as it has matured. In response, Shanda Interactive has sought to diversify by boosting revenue from businesses like videos and online publishing. Its game unit has boosted spending on product development. But those efforts have also pushed up Shanda's expenses.

Shanda's net profit in the three months ended June 30 was 8.8 million yuan ($1.4 million), down from 169.9 million yuan, or 2.78 yuan per ADS, a year earlier. Net profit was well below the average $13.75 million forecast of eight analysts polled by Thomson Reuters.

Revenue rose 26% to 1.71 billion yuan from 1.36 billion yuan a year earlier.

Shanda's game unit, Shanda Games Ltd, last week said its second-quarter net profit inched up 0.3% to 305.2 million yuan from 304.3 million yuan a year earlier, as higher operating costs and tax expenses nearly overwhelmed a top-line increase. Shanda Games' second-quarter revenue rose 19% to 1.32 billion yuan from 1.11 billion yuan.

Shanda Interactive's revenue from online value-added services unit Shanda Online Holdings Ltdrose 24% to 308 million yuan from 248.9 million yuan, it said. Revenue from other sources, including social online games, online video business Ku6 Media Co and online publishing unit Cloudary Corp, rose 53% to 403.8 million yuan from 263.3 million yuan.

Cloudary in May registered for an initial public offering on the New York Stock Exchange in which it will sell up to an estimated $200 million in equity. The listing will follow a string of US IPOs by Chinese Internet companies this year, though investor interest in Chinese companies has cooled in recent months amid market turmoil and concerns about accounting irregularities at some US-listed Chinese firms. Shanda Interactive spun off Shanda Games in 2009.

Shanda's second-quarter operating expenses rose 44% to 858.6 million yuan from 596.7 million yuan a year earlier, as a result of higher spending in areas including product development and sales and marketing.

Shanda adjusted its results in the year-earlier period to reflect the disposal of Huayi Brothers Music Co, sold by its online video business Ku6 Media to Huayi Brothers Media Corp in May last year.