JOYY Inc (JOYY) 2016 Q2 法說會逐字稿

Good day, everyone, and welcome to YY second-quarter 2016 earnings conference call. At this time, all participants are in listen-only mode. With us today is Mr. David Xueling Li, Chairman of YY; and Mr. Zhou Chen, CEO of YY; Mr. Eric He, CFO of YY. Following management's prepared remarks, we will conduct a Q-and-A session.

Before we begin, I refer you to the Safe Harbor statement in our earnings release, which also applies to our conference call today, as we will make forward-looking statements.

I will now turn the call over to the Chairman, Mr. David Li.

Thank you, operator. Hello, everyone. Welcome to our earnings call. We have many things to cover, so let me begin with what is at the top of everyone's mind -- the withdrawal of our privatization.

As you know, I, along with Lei Jun, our former Chairman, had aimed to take our Company private up until recently. Given the uncertain surrounding China's capital market policy, we believe that the US capital market are more suitable for YY growth over the long-term, especially as we determine our international strategy. For now, we needed to get back to basics and focus on our respective growth frontiers and drive our business forward more aggressively.

That being said, the first step was the withdrawal of our privatization. The second step we take today with resignation of Lei Jun as our Chairman and as a member of YY's Board of Directors, which will enable him to focus more on Xiaomi. As we mentioned in the press release, Mr. Lei will remain a major investor, strategic partner and advisor of YY going forward.

Additionally, I will take the position as the Chairman of the Company's Board and have resigned my CEO role. This move will enable me to focus more on our broader corporate strategy and the development of new emerging applications and products.

The third step of our revamping includes the promotion of Mr. Chen Zhou to CEO. He has been the key executive who has run our online music business, our largest business segment. For the past six years, Chen Zhou joined YY in 2007, and has built our online music and entertainment business from scratch. Under his leadership, YY online music has grown organically by more than [16 points] in the term of revenue over the past five years.

This significant growth demonstrates Mr. Chen's strong strategic thinking and execution capabilities as well as his ability to quickly adapt to the ever-evolving market. Mr. Chan is known to the Board as respected and known and adventurous leader who has been years ahead of our computation in identifying and executing many of the entertainment business on the YY platform. We firmly believe he has all the qualities necessary to lead YY through our next stage of growth.

Lastly, as a part of strengthening our senior management team for this next phase of growth, we are promoting Mr. Dong Rongjie to be the new CEO of Huya Broadcasting, an independent online game broadcasting subsidiary of YY. Mr. Dong has served as the Executive Vice President of YY since he joined YY in 2006, and over the past 10 years, earned much respect from our employees and the Board for his strategic leadership and deep understanding of the market.

Mr. Dong will bring over 50 years of experience to his new role, and we have no doubt that this appointment will further deepen and broaden our management capabilities across YY's executive team.

Thank you for your support and interest in YY, and we look forward to helping grow our shareholders' value with you together going forward.

With that, I will turn over to our new CEO, Chen Zhou.

Thank you, David, and hello, everyone. It is a great honor for me to take the position as YY's CEO. I have some big shoes to fill, having seen how David's vision and leadership have built YY into a leading live streaming platform in China, and the opportunities that lay ahead of YY are significant going forward.

I am continuing enriching my knowledge and experience in order to accelerate the innovation of our content and service offerings, as well as fully execute our expansion strategy to enhance YY's platform and stay ahead of our competitors.

To begin with, we are glad to report another strong quarter with both top and bottom line growth across the board. Our growth and diversification continues unabated, and the recent popularity of live mobile broadcasting has helped further popularize our platform and growth momentum. This is exemplified by the fact that, during the second quarter, our revenues increased by 46% year-over-year to CNY2 billion.

The broad momentum has primarily driven by solid year-over-year user adoption of over [54.5%] to 4.2 million end-users and robust 48.7% year-over-year growth in IVAS revenue. More importantly, we continue to see steady growth in our large MAU based on the YY platform to over 141.9 million users, a 16% year-over-year increase.

(technical difficulty) Into 2016, we revamped our online music and entertainment branding to YY Live. This rebranding effort is a [pay] touch of the Company's transition to a broad -- live broadcasting entertainment platform and a strategic focus on our core live broadcasting capability with the new brand. We aim to further leverage the established YY brand and build even deeper content -- excess content.

First, we will put on the development of PUTC, the professionally curated user generates the content. We view it as YY's most important content innovation mode. Then it combines the advantage of ATC and UTC and hence is able to balance the content quality, quantity and the cost of production.

Secondly, on PTC said, YY Live will dive into more diversified market segments such as bought movie, LME, et cetera. Through our core operation with leader partners, we believe that with the joint effort of our partners, YY will be able to further enhance the live broadcasting interactivity with high quality and innovative content offerings overall. With our revamped management structure, new branding, and comprehensive content acceptance, we firmly believe YY is making solid progress in the transition to a broader entertainment platform while focusing on our core live broadcasting capability.

We are confident in our ability to stay ahead of our competitors and further fortify our competitive mode as China's leading interactive live streaming platform.

Now, I would like to turn the call over to our CFO, Mr. Eric He.

Thank you, Chen Zhou, and good morning and good evening, everyone. As previously mentioned, we saw both top and bottom line growth across the board in the second-quarter 2016. Driven by the robust growth of our paying user and [IVS] revenue, which leads me to discuss the performance of our business segments.

First, in Huya, our online game broadcasting business we are quite excited and proud of the success we have achieved from the strong lineup of hugely popular hosts, Huya's innovative and diversified content offerings as well as improved monetization strategies we have implemented on mobile devices, all of which have resulted in significant growth. To amplify this, during the second quarter, we saw revenue increase by 67.7% year-over-year to CNY143.1 million, which was primarily fueled by a significant 111.6% year-over-year growth in a number of paying users to 1.1 million.

Moving on to our online music and entertainment business, as Dave and Chen Zhou mentioned, we have revamped our online music and entertainment branding to YY Live. In second-quarter 2016, we maintained strong revenue growth of 50.3% year-over-year to CNY1.1 billion. The number of paying users further grew from -- further grew by 51.4% year-over-year to 2.8 million.

Meanwhile, our music entertainment business on mobile devices continued its robust growth with 96.7% year-over-year increase in revenue and 88.3% year-over-year increase in the number of paying users. According to our internal analysis, our YY Live app was Most Downloaded Live Broadcasting App in Android arena in second-quarter.

Going forward with the new brand, we will expand into a broader entertainment platform and strategically focus on our core live broadcasting capabilities. We will continue to strengthen and invest into our content offerings, especially PUTC, to further expand our user communities and user stickiness on our platforms.

For our online dating business, in the second quarter of 2016, revenue continued to grow by 72.3% year-over-year to CNY271.1 million, mainly driven by a 35.6% year-over-year increase in the number of paying users to 316,000. Going forward, we will continue to invest in and leverage our comprehensive content ecosystem and resources of our host, celebrities, and industry partners to further expand our innovative content and service offerings across our business lines.

This strategy is one of our key differentiators as we strive to meet evolving demands of our massive user base in China dynamic Internet markets. Overall, we remain confident in our market opportunities, especially with the new branding strategy, and aim to fortify our position as a leading interactive live streaming platform in China.

Now I will turn to our quarterly financial details. Before I get started, I would like to clarify that all the financial numbers we are presenting today are in RMB terms; presented changes are year-over-year comparison unless otherwise noted.

Net revenue for second-quarter 2016 increased by 45.9% to CNY1.98 billion. This increase was primarily driven by increase in IVAS revenues. IVAS revenues increased by 48.7% to CNY1.93 billion, which was mainly driven by a 54.5% year-over-year growth in number of paying users.

Now let's look at each of our IVAS business lines. Revenue for online music and entertainment increased by 50.3% to CNY1.1 billion in the second quarter of 2016. The increase was driven by a year-over-year increase of 51.4% in the number of paying users to 2.8 million. In addition, the number of mobile users grew by 88.3% year-over-year to 1.8 million in the second quarter.

Revenue from online dating increased by 72.3% to CNY271.1 million. This increase reflected a 35.6% year-over-year increase in the number of paying users to 316,000 and 27.1% year-over-year increase in ARPU to [CNY858] in the second quarter. Revenue from online games were CNY188.3 million as compared to CNY199.4 million in the corresponding period of 2015. This decline was primarily caused by a 29.2% year-over-year decrease in the number of paying users, which reflects the continued softness in China's Web game markets, but was partially offset by a 33.3% year-over-year increase in ARPU of online games.

Other [IDS] revenue increased by 76% -- 76.6% to CNY375.3 million in the second quarter of 2016. This mainly includes revenue from Huya broadcasting, which increased by 67.7% to CNY143.1 million and revenue from PK shows, which significantly increased in the second quarter of 2016. Other revenues, mainly including revenue from our online education platform Guangzhou Education Online, and online advertising revenues from doan.com were CNY47.8 million in the second quarter of 2016 compared with CNY57.2 million in the corresponding period of 2015.

Cost of revenues increased by 45% to CNY1.2 billion, which was primarily attributable to an increase in revenue sharing fees and content costs to CNY893.9 million in the second quarter of 2016. The increase in revenue sharing fee and content cost paid to performers, channel owners and content providers, was in line with the increase in revenue, and was primarily due to higher level of user engagement and spending, driven by promotional activities, as well as the Company's investment in expanding the amount of new and innovative content to provide to our users.

In addition, bandwidth cost increased to CNY150.7 million in the second quarter of 2016, primarily reflecting the continued user expansion and the video quality improvements, but partially offset by our improved efficiency and pricing terms. Gross profit increased by 47.4% to CNY772.4 million in the second quarter of 2016. Gross margin increased to 39% from 38.6% in the prior-year period.

Our non-GAAP operating income increased by 52% to CNY485.4 million in the second quarter of 2016. The non-GAAP operating margin increased to 24.5% from 23.5% in the prior-year period. GAAP net income attributable to YY increased by 18.1% to CNY343.3 million in the second quarter.

Net margin in the second quarter of 2016 was 17.3% compared to 21.4% in the corresponding period of 2015. Excluding a one-time nonoperating expenses of CNY23.5 million for the disposal of subsidiary of the Company of YY, net income attributable to YY was CNY366.8 million, representing an increase of 26.2% year-over-year.

Non-GAAP net income attributable to YY Inc. increased by 27.3% to CNY384.8 million from CNY302.3 million in the prior-year period. Non-GAAP net margin was 19.4% in the second quarter of 2016 compared to 22.3% in the prior-year period. Diluted net income per ADS in the second quarter of 2016 increased by 17.1% to CNY5.97 from CNY5.10 in the prior-year period. Non-GAAP diluted net income per ADS increased by 25.7% to CNY6.65 from CNY5.29 in the prior-year period.

Finally, looking at our business outlook, for the third-quarter 2016, the Company expects its net revenue to be between CNY2 billion to CNY2.1 billion, representing a year-over-year growth of approximately 34% to 41%. This forecast reflects the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Operator, this is the conclusion of our prepared remarks. We can go into Q&A session.

(Operator Instructions) Jialong Shi, Nomura.

Thanks for taking my call. (spoken in Mandarin) Eric. Good evening, and also congratulations to Chen Zhou for a new role. And I have two questions. Firstly, I think Chen Zhou has explained a little bit about this, but I still want to get some more colors on the rationale to rebrand your YY Music to YY Live. I just wonder if there are any difference in the contents and the services provided between YY Live versus YY Music?

And my second question is about the live broadcasting competitive landscape. The competition in China's live broadcasting industry seem to be intensified with a lot of live broadcasting startups. I just wonder what are YY's strategies in the competitive ages or competitive ages to defend your market share, especially your market share on the mobile?

I will translate myself. (spoken in Mandarin)

(spoken in Mandarin)

Allow me to translate this. I think the reason for us to rebrand our YY Music to YY Live is, it's very clear that YY needs to have a strategy that we are going to even more focused on live streaming, live broadcasting.

On top of that broader corporate strategy specifically on the music entertainment arena, we are going to execute or deliver an even more specific PUTC strategy. And also we are providing the channel partners' strategies. Among those strategies, we are going to diversify our contents.

On YY platform, the varieties of our contents are various -- are numerous. For example, we have singing, we have dancing, we have talk shows, we have a lot of performances on our platform. So those are the areas that we are going to further fortify, and this will be a key differentiator between YY and the rest of the competitors

(spoken in Mandarin)

In the future, we are even going to add more different categories, such as sports, such as traveling, such as foods, culinary. And those are the areas that we are going to further to broaden our content horizon so that we can attract even more users in the future.

(spoken in Mandarin)

Now I'm going to answer the second part of the question with regard to the competition in the industry.

(spoken in Mandarin)

In my opinion, there are several categories of so-called live broadcasting business in the industry. The first one is actually headed or represented by YY, which includes many different talents. Second category is the one that, being represented by our Huya business, is mainly on online game broadcasting area.

The third one is the one that is being exemplified by the so-called celebrities and by Weibo, is a very good example. And the fourth one is the one that try to peek into your personal life or the lifestyle type of the live broadcasting, which is the very typical link type of broadcasting.

(spoken in Mandarin)

And it also includes some other ones like some in the verticals area like eCommerce live broadcasting.

(spoken in Mandarin)

Among all those different categories, I will conclude that for the one that -- a variety of talent shows and the game broadcasting type are the one that with a very strong content and broadcasting capabilities, which is very different from the rest of the crowd.

(spoken in Mandarin)

The one that represented by the Weibo, which is a celebrity type of the live broadcasting, is more towards so-called media pools, which, because of the celebrity, they will have lots of fans to be crowded in that services. But whether that's going to be a long-lasting business model which is remain to be seen.

(spoken in Mandarin)

The fourth one, as I mentioned, is with regard to the lifestyle or peeking through some of the very personal life type of the broadcasting represented by Inke mainly was driven by users' curiosities. But those curiosities seems to be plateauing in recent months. So, we don't know whether this curiosity can last how long. So I think there is a chance for those trends to be -- go down to the other -- another way.

(spoken in Mandarin)

So, for those celebrity and lifestyle type of the live broadcasting will actually face some difficulties down the road, such as we would like to see how long and how fast it will go. So we will see the future development of all those live broadcasting services, which is very different from YY. We have been in the marketplace for more than five years, and we have shown that we have a very strong capability of expanding our business and growing our business in the last five years.

(spoken in Mandarin)

That's my answer. Thank you.

Thanks for the insight, Zhou and Eric.

Thank you.

Joy Zhou, Credit Suisse.

Thank you for taking my question. I have two questions. One is on the content strategy. As you just mentioned, we are going to expand our content categories as well as build more PUTC. Just wondering, are we going to invest in those contents directly, or more like by open platform strategy?

And the second question is regarding Huya's monetization. Can management give us a breakdown of revenue from this being to gaming contents versus the entertainment contents as well as the paying ratio? I'll translate by myself.

(spoken in Mandarin)

(spoken in Mandarin)

I think I'm going to answer the first part of the questions. With regard to the PUTC questions and the content varieties, I think in my previous comments on PUTC and channel partners, already answered part of the questions.

I think YY, it's a platform which has a very open -- we are very open to being incorporated with third parties' partners. In the previous time, our partners are mainly our broadcaster or the performers or our users, in some instance. But in the future, with the PUTC strategy, our partners will actually turn more and more into so-called institutions or the business who has lots of different professional contents on their -- under their management.

(spoken in Mandarin)

For the second part of your question, I think my answer is this. Our Huya broadcasting was primarily created through -- by our online game broadcasting business. Since the second part -- second half of last year and the first half of this year, we actually broadened their revenue base from the online game broadcasting to other entertainment business.

As far as so far, we have not actually break down the revenue. Because when we actually look into the revenue of Huya, we would treat them as homogenous revenue. So, it's very difficult for us to break down every channel of Huya business and telling us which is coming from entertainment, which is from game broadcasting. So we don't actually have their metrics on hand.

With regard to the paying ratio, I think in recent quarters, we have seen significant growth on the paying numbers. The paying ratios have been on the rise. In terms of the paying ratio on our platform, it ranges from 1% to 3%, depending on different business lines. For Huya specifically I think is somewhere in this range, but I don't recall the specific ratio numbers. I will probably come back to the questions later on, and if you are still interested, we can provide that in the future -- in a future call. Thank you.

Thank you. That's very helpful.

Ronnie Ho, CCBI.

Thanks, management, for the question time. This is Ronnie. I just have two questions -- three questions in all. Number one is actually -- how about the mobile contribution so far for YY's music and other part of the business's [soft] second-quarter and how does it compare to last quarter and last year?

My number two questions will be -- can you give us more color about the growth of the paying user ahead? Because so far, the paying user growth is quite encouraging, like still [50%, 60%] over the last few quarters. So I just wanted to get a sense like how is it moving forward?

And my last question then comes to how the -- can you give more color about online education? It seems like it's ramping a little bit, but I just want to have more color about the second half this year and 2017.

(spoken in Mandarin)

Okay. Yes, thank you, Ronnie, for your questions. Let me try to answer your questions. On -- we all know that YY actually originated from a PC platform, but in recent years, YY has very successfully transformed itself from a PC type of company to mobile type of company in two ways.

So far, our mobile users, the number of our mobile users exceeded our PC users, both in music and entertainment business and in Huya business. Secondly, I think from the revenue side, the same thing happens. The revenue coming from the mobile devices actually already exceeded our PC revenues.

So, I would say that in the process of transforming into a mobile company, YY has done a lot. Obviously, we will continue to try to even make it happen faster in the future quarters. As far as I know, all the product upgrades and product new features will be conducted on mobile platform only. So that's our determination and our goal.

Second question is with regard to our paying users growth rate. Currently, our paying users are growing very, very fast. That means the conversion ratios have been very, very smoothly going up. I think one of the reasons for this is our continued -- continuous growth on our mobile users.

Because in China, within the last one year, we have seen a lot of users are very used to use mobile devices to pay for or to buy virtual items. We are seeing the trend happening. So, that's one of the reasons why our paying users in music area and in online game broadcasting areas have been ramping up very, very strongly. And we expect this trend will continue for the rest of the year and 2017.

Number three, on online education business, as you know that YY is coming from gaming, from entertainment business in the past. However, in 2014 and the end of 2014, we did actually acquire two teams of education. One of the teams didn't work out very well. We already wrote it off last year in 2015. And the one that left, which we already disclosed on our press -- earnings release, which has been doing quite well.

In the first two quarters, they are growing very nicely on a sequential and year-over-year basis. However, their base is still very small. Even with a very fast pace of growth, their revenue is not going to be very significant among our entire pictures.

So, I would say that online education is one business that we think it's very interesting and important, but because of the size of the business on our platform, it's not going to be a very significant or the core in the near future, I think. But we are seeing this team is doing well. It is progressing very well and growing very fast.

Okay, thank you.

Natalie Wu, CICC.

Good evening, management. Thanks for taking my question. We all know that YY actually always took a very conservative and efficient sales and marketing strategy in the past. So, just wondering, will there be any change regarding the sales and marketing spending style, given the new launch of several apps such as ME live broadcasting? And also, the rebrand which involves there was a broader content coverage and maybe a different type of audience.

And I also have a follow-up question regarding the ME live broadcasting. So just can management show us some actual color on the operational data, say, latest maybe your ARPU, et cetera? And what is the ramping up pattern of ME in terms of monetization? Thank you.

Natalie, do you want to translate your questions by yourself? I think that would be more accurate.

Oh, sure. (spoken in Mandarin)

(spoken in Mandarin))

Well, YY has a tradition of being very low-key, so we actually have spent very limited amount of marketing expenses up until 2014. We -- so that's why the YY Music, entertainment or YY Live now or Huya has very lopsided influence compared with our market shares, despite the fact that we have been a pioneer and the leader of this industry, but we have little influence in the marketplace.

Our -- with regard to the many questions, I think we launched ME in February of this year. It has been a tremendous success for us. Again, this particular line of business, it's more on the lifestyle type of the broadcasting, which is a very similar to Inke. It's completely on the mobile part of it. It will make the live streaming very easy. And it's aiming at young people, boys and girls who are in their early 20s.

You know, this has been our policy that the Minis are numbers, in terms of metrics, in terms of revenue, has been -- has not been disclosed in the past. I don't think at this moment we would like to break that, so we would like to keep those numbers or metrics within ourselves for a period of time when we will probably choose appropriate time to disclose the mean metrics numbers in the near future.

But so far, I think the ME line of business has been very successful. Their revenue has been ramping up very strongly. It's a line of business which is already passed their breakeven point.

Great. So just one quick follow-up. You just mentioned that the sales and marketing expense will be increased in the future. So what kind of sales and marketing spending level should we be expecting? Si can management give us some guidance on that?

(spoken in Mandarin)

Well, yes, let me answer your question, Natalie. I think what Chen Zhou means is that before 2014, sales and marketing expenses as a percentage of revenue at YY is less than 1%. So we have very negligible amount of the dollars spending in sales and marketing.

But since then, our sales and marketing has steadily grown to 4% to 5% of the total revenue. In this quarter, second quarter, sales and marketing expenses as a percentage of the total revenue is running at 4.4%, 4.5% of the total revenue. I think this level is adequate for the time being. We will continue to spend those type of money to do our sales and marketing.

However, we don't have any specific targets for sales and marketing expenses for any particular times. It will really depend on the development of our business. If the business warrants, if the business has needs to expand their reaches and we think it's -- it makes sense, we will do so. But so far, I think at this point in time, we think that the current level of sales and marketing spending is adequate and appropriate.

Got it. Thank you, Eric, and thank you, Chen Zhou.

Alex Yao, JPMorgan.

Thank you for taking my questions. Just wanted to follow-up on Jialong's previous question regarding the competition in the mobile live broadcasting market. Thank you, Chen Zhou, for giving us a very insightful discussion from content generation and better position to consumer perspective.

I'm just wondering from the addressable market, i.e., the people who consume these contents, are there big difference across the four major categories you just identified? Which model fits the larger addressable market? And what is the trend in the market?

(spoken in Mandarin)

(spoken in Mandarin)

Okay, let me do the translation for the first part of it. Obviously, we did mention actually there are four different categories of live broadcasting. For all those user base, for those different websites or streaming or broadcasting business, the differences are very, very clear and very obvious.

For example, for the online game broadcasting business represented by our Huya business, obviously if you are not a gamer, you don't play certain games. It will be very difficult for you to watch, to use Huya online game broadcasting services. So that is virtually a vertical type of the business for those gamers.

Another example for Weibo. Weibo, in fact, as we all know that they are -- Weibo is media. They are full of celebrities or stars. So, if you don't care about those celebrities or the stars and you don't use those media, the chances are that you are going to be their users are slim. And we did mention actually we don't know that -- how long this type of the media can last in terms of a live broadcasting format. Because, in our division, we have seen a lot of Weibo type of broadcasting is for celebrity to meet their audience or their fans.

But the frequencies of this type of the occasions it's not very frequent. It's not on a daily basis. It's not even on a weekly or even monthly basis. So that's why we will start to have some doubt how long-lasting these type of services will be consumed by their users or their fans.

(spoken in Mandarin)

Okay. The last part of the category is what we call represented by Inke is the lifestyle live broadcasting. Those services are satisfying lots of so-called rural area or Tier 3/Tier 4 users who like to see how those guys or those persons who live in the First-Tier city or Second-Tier city, their lifestyle.

There is a strong curiosity behind it. And this type of curiosity has its own period or cycles. When those cycles or when those curiosity is being satisfied, we would think this type of services will be consumed or required with less degree of desire.

So, that's why we say the long-term development of this type of the services will be questionable. So, when that happens, we think that those services will all turn to YY's type of the so-called talents of variety of shows type of the broadcasting. Yes.

I see. Very helpful. Thank you very much. Cheers for Zhou and Eric.

Your last question comes from the line of Benny Wong from Merrill Lynch. Please ask the question.

Hi, management. Thank you for taking my questions. I have two questions here. First is on the online music and entertainment business.

If I look at the average quarterly ARPU, right, it's around [392 -- 400] this quarter. So if I look at on a YY basis, it is around flat. And then should we expect -- and the trend is relatively at about a similar level, except for fourth quarter last year was higher. So should we expect that our strategy here now is going -- in terms of the number of users -- going for the breadth of the users, and rather than monetizing further deeper on a user basis? That's my first question.

And then my second question is, if management can help us understand more about the online broadcasting business, if we look at the interactive concert broadcasting services (spoken in Mandarin) and also the (spoken in Mandarin), can management please share with us your thoughts on the online broadcasting, what are the key elements to maintain a sustainable monetization model? Thank you.

Hi, Benny, if you can translate on your own. I think that's even more and more efficient.

Ok, yes, sure. (spoken in Mandarin)

(spoken in Mandarin)

On YY music and entertainment, we have spent tremendous efforts

You know, on YY Music and entertainment, we have spent tremendous efforts to increase our paying user space. And also, we tried to expand our paying ratios. This has been pretty successful. That's why you have seen that we are having our paying users increase very fast in recent quarters.

And as paying user base is growing bigger and bigger, the ARPU numbers tend to stay stagnant, is not going to increase very, very fast. And we also believe that if ARPU becomes very high -- in fact, it's detrimental to the platform's development and the expansion. So, we don't think we would like to see ARPU to increase very fast or getting bigger and bigger.

(spoken in Mandarin)

As we have been pretty successful on developing so-called low paying users, since they are new, they are paying a low amount of money to participate in YY service. When those users start to mature, to grow, we believe that, as long as we can provide the content they like, those so-called low paying users one day will come medium-paying or high-paying users, which will be very beneficial for the future growth of our platform.

(spoken in Mandarin)

(spoken in Mandarin)

(spoken in Mandarin)

(spoken in Mandarin) -- one of the features that we provided on our platform for two seasons. But so far, I think we have bumped into some sort of hiccups, and we actually are suspended service until the first quarter of next year. So, the current status of (spoken in Mandarin), it had been suspended.

(spoken in Mandarin)

Instead of (spoken in Mandarin), we replaced it with so-called specific 24x7 music channels. We have actually recruited some of the entertainer or the singers to perform in those channels. I think this effort has just started.

(spoken in Mandarin)

As of now, those entertainers performing in those music channels have been very successfully monetized their services.

That will conclude this answer of these questions.

Thank you. (spoken in Mandarin)

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.