Archives for March 6, 2018

YY's (YY) CEO David Xueling Li on Q4 2017 Results – Earnings Call Transcript

YY Inc. (NASDAQ:YY) Q4 2017 Earnings Conference Call March 5, 2018 8:00 PM ET


Matthew Zhao – IR Director

David Xueling Li – Chairman and Acting CEO

Bing Jin – Chief Financial Officer

Ting Li – Chief Operating Officer


Daniel Chen – J.P. Morgan

Binnie Wong – Merrill Lynch

Natalie Wu – CICC

Shi Jialong – Nomura

Eileen Deng – Deutsche Bank

Jerry Liu – UBS

Hillman Chan – Citigroup

Karen Chan – Jefferies

Thomas Chong – Credit Suisse

Wendy Huang – Macquarie


Ladies and gentlemen, thank you for standing by. And welcome to YY Inc. Fourth Quarter and Fiscal Year 2017 Earnings Call. At this time, all participants are in a listen-only mode. Today’s call include a question-and-answer session. [Operator Instructions]

I must advise you that this conference is being recorded today, Tuesday, 6th of March 2018. I’d now like to hand the conference over to your speaker host today, Mr. Matthew Zhao, IR Director of YY. Thank you, sir. Please go ahead.

Matthew Zhao

Thank you, Operator. Good morning, and good evening, everyone. Welcome to YY’s fourth quarter and fiscal year 2017 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman, Acting CEO of YY; Mr. Bing Jin, CFO of YY; and Ms. Ting Li, COO of YY.

For today’s agenda, the management team will provide us with a review of the quarter. Following their prepared remarks, we will conduct a Q&A session. The fourth quarter and full year 2017 financial results and the webcast of this conference call are available at A replay of the call will be available on the website in a few hours.

Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi.

I will now turn the call over to Mr. David Xueling Li, our Chairman and Acting CEO. Please go ahead, sir.

Bing Jin

Thank you, Matthew. Hello, everyone. Welcome to our fourth quarter and full year 2017 earnings conference call. This is Bing Jin, the CFO of YY. I will now speak on behalf of our Chairman and Acting CEO, David Xueling Li.

We’re delighted to conclude 2017 with robust growth momentum. The innovative model of YY Live 7.0 continues to attract new users to our live streaming platform and generate strong operating results.

Consequently, we achieved better than expected financial result in the fourth quarter of 2017. Our total net revenues increased by 46% year-over-year to RMB3.63 billion, exceeding both our guidance and street consensus.

Now let me provide more updates on both YY Live and Huya business, as well as our recent new explorations. Firstly for YY Live, we continue to cultivate new growth engine from product innovation and content enrichment. Our initial foray into AI embedded casual games such as Happy Basketball in the third quarter of 2017 was a smash hit.

To build upon this success, we launched several new Ai casual games such as emoji Tetris in the fourth quarter of 2017. As a result, YY Live continue to attract a younger generation of users and the levels of interaction and engagement between our users have further improved.

We held the YY 2017 Annual Awards in the fourth quarter. In addition to that, we also hosted the first ever YY Carnival in Guangzhou. During that event 38,000 fans joined over 300 hosts from 23 live streaming categories on site for the celebration. And another 8 million viewers turning to watch the live broadcast online.

Meanwhile, we continue to explore more opportunity in the field of casual games to fulfill user demand in their fragmented time throughout daily lives. In the fourth quarter of 2017, we launched our casual game collection platform called Happy Go by introducing over 40 casual small games into this product so far. We continue to attract younger generations to our platform.

Now I would like to give you update on Huya. Recently Huya submitted a confidential filing with the U.S. Securities and Exchange Committee for a possible initial public offering in the U.S. This announcement is being made pursuant to and in accordance with Rule 135 under the U.S. Securities Act of 1933, as amended.

Huya IPO is an important milestone in our long-term strategy. Huya is focus on game live streaming while YY Live on entertainment live streaming. Together we are able to cover the entire spectrum of and become dominant play in the live streaming industry in China. Now Huya has reached a stage near its development where it needs to obtain its own group of investors to fund its long-term growth.

In a public company we also strengthen Huya’s plan recognition and help it for its more strategic partnerships, which in turn should enable both YY and Huya to further grow our combined licensing ecosystem.

Looking forward, we will continue to explore innovative ways to attract more uses, enhance user engagement, enrich live streaming content and improve the traffic to monetization conversion. We believe that we have the right strategy in place to solidify our leading position in China’s live streaming social media industry.

That concludes the remarks of our Chairman and Acting CEO, David Xueling Li. Now as the CFO, I would like to discuss our financial results.

We are very pleased to sustain our growth momentum in the fourth quarter of 2017. Our total net revenues for fourth quarter increased by 46% year-over-year to RMB3.63 billion, exceeding the high-end of our previous guidance range. Notably, revenues from live streaming which are accounted for 92.9% of our total net revenues grew by 51.9% year-over-year to RMB3.37 billion.

Consistent with our strategic focus on the both mobile platform, mobile consisted 53.4% of our live streaming revenues in the fourth quarter of 2017. Mobile live streaming MOUs grew by 36.6% year-over-year to RMB76.5 million from RMB56 million in the prior year period. Live streaming paying users reached 6.5 million, up 25% from 5.2 million in the prior year period. Mobile paying users consisted 79.5% of our total live streaming paying users in the fourth quarter of 2017.

Our cost of revenues for fourth quarter increased by 40.8% year-over-year to RMB2.2 billion, which was in line with our topline growth. The increase of cost of revenues will primarily attributable to our 49.6% year-over-year increase in the revenue sharing fees and content costs to RMB1.83 billion.

Our gross profit increased by 54.7% year-over-year to RMB1.43 billion and our gross margin expanded to 39.4% in the fourth quarter of 2017 from 37.2% in the prior year period.

Our operating expenses increased by 31.8% year-over-year to RMB652.9 million during the fourth quarter of 2017, which was a slower pace than that our revenues.

Sales and marketing expenses were RMB148.8 million in the fourth quarter of 2017, up 33.4% year-over-year. As a percentage of total net revenues, sales and marketing expenses in the fourth quarter of 2017 was 4.1%, down from 4.5% in the prior year period. In addition, our R&D and G&A expenses as a percentage of total net revenues were 7.2% and 6%, respectively, in the fourth quarter as compared to 6.4% and 8.3%, respectively, in the prior year period.

Our GAAP operating income increased by 32.2% year-over-year to RMB821.5 million in the fourth quarter of 2017. GAAP operating margin was 22.7% in the fourth quarter of 2017, as compared to 25% in the period year period, primarily due to an increase in newly issued share-Based compensation in the fourth quarter of 2017.

Our non-GAAP operating income which exclude share-based compensation expenses increased by 59% year-over-year to RMB1.03 billion in the fourth quarter of 2017. Non-GAAP operating margin increased to 28.4% in the quarter from 26.1% in the prior year period.

Our GAAP net income attributable to YY increased by 29.4% to RMB740.4 million in the fourth quarter of 2017. Net margin in the fourth quarter of 2017 was 20.4% compared to 23% in the prior year period. Primarily due to the increases in the new issued share based compensation in the fourth quarter of 2017.

Non-GAAP net income attributable to YY increased by 58.5% to RMB948.9 million in the fourth quarter of 2017. Non-GAAP net margin in the fourth quarter of 2017 expanded to 26.2% from 24.1% in the prior year period.

Diluted net income per ADS in the fourth quarter of 2017 increased by 18.4% to RMB11.53 from RMB9.74 in the prior year period. Non-GAAP diluted net income per ADS increased by 45.2% to RMB14.77 from RMB10.17 in the prior year period.

Now turning to the results of full year 2017. Our total net revenues increased by 41.3% year-over-year to RMB11.59 billion, driven by a 51.9% year-over-year increase in live streaming revenues.

Our GAAP net income attributable to YY for the full year 2017 increased by 63.6% to RMB2.49 and our non-GAAP net income attributable to YY for the full 2017 increased by 63.6% to RMB2.75 billion.

Diluted net income per ADS for the full year 2017 increased by 56.6% to RMB41.33 from RMB26.4 in the prior year period and non-GAAP diluted net income per ADS for the full year 2017 increased by 57.2% to RMB45.56 from RMB28.98 in the prior year period.

Looking forward to the first quarter of 2018, we expect our total net revenues to be between RMB3 billion and RMB3.15 billion, representing a year-over-year growth of 32.3% to 39%. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

Finally, please be noted, as Huya has filed a draft registration statement on Form F-1 on a confidential basis to the U.S. SEC for a possible initial public offering under the view of the proposed IPO there will be no questions expected relating to Huya in this call.

That concludes our prepared remarks. Operator, we will now open the call to questions.

Question-and-Answer Session


Thank you. [Operator Instructions] Your first question comes from the line of Daniel Chen from J.P. Morgan. Please ask your question.

Daniel Chen

Morning, management. Thank you for taking my question and congratulations on the strong quarter. I have two questions. My first question is regarding our gross margin. Our gross margin has been pretty strong on sequential basis and given that the competition in the both talent show live broadcasting and game broadcasting are both increasing recently. How should we look at the revenue sharing ratio and the gross margin in 2018?

The second question is on our new product Happy Go, can management share some color on the some of the user site, for example, modernization status. What’s our user acquisition strategy and the user retention? Thank you. [Foreign Language]

Bing Jin

Okay. Mainly I will address the first question and then Ting Li can address the second question. So in terms of the grow margin, I can only give you general trend. Again, we cannot provide guidance or forecast on this call. With regard to entertainment live streaming, as I mentioned to you many investors quarters abandoned supply in China for top quality music and dance or other category kind of entertainment live streaming host. So we don’t think there will be a lot of pressure in terms of acquisition of those hosts.

On the game live streaming, I think, Huya strategy right now is to focus on growing the user base, investing in good quality content and also retain and attract high quality game hosts. And as we mentioned in the previous calls that Huya one of Huya strength is in terms of the cultivation of the mid level host, which I think Huya continues to do well. So I think in terms of the gross margin pressure on Huya side is also manageable in general.

Ting Li

[Foreign Language]

Matthew Zhao

Let me do the translation. So in terms of Happy Go is recently we launched the product which is focus on the casual games connections. Compared with the single social games, for example, like Happy Werewolf Kill. The Happy Go actually in terms of the users stickiness, as well as user activation we saw that comparably much better of the results. So that is what we can disclose now. Thank you. Next question please, Operator.

Daniel Chen

Thank you.


Thank you. [Operator Instructions] Next question comes from the line of Binnie Wong from Merrill Lynch. Please ask your questions.

Binnie Wong

[Foreign Language] So I will just translate questions above in the English. So first question is that in terms of the topline growth, I noticed that 1Q outlook seem to have a slight decelerations from our revenue growth into 4Q and given that last comparable quarter, if not particular of a high pace then just wonder what are the reasons in terms of when the management guide the 1Q outlook? What are the assumptions management had in mind?

And then the second question is just in terms of the growth in the total paying users. Net addition this quarter is again slightly slower than what we see in Q3 and given that we have quite a few new features and product innovations in 4Q. Just wondering that what are the reasons and how should we look at the strategy in 2018 as to company’s priority in terms of growing the traffic in paying users, what are the some of the strategies in mind and what are the focus we have in 2018 as we start the year?

And then, lastly is that, if we look at the overall competition environment with the possibility that there are more and more competitors going into live broadcasting and all these big internet giants are also chasing for good quality content. How we see that that would affect our sharing ratio, do we have to make it more attractive to ensure good quality content stay on our platform and down the road how do you think that would impact our margins. Understand that we are not getting exact number on 2018 margin guidance but any quality comment by management would be very helpful? Thank you so much here. Thank you.

Bing Jin

Yeah. Binnie, yeah, let me address those questions. So the first question is regarding the revenue guidance for the first quarter seems that slowing down a little bit. I would point it out that this year the Chinese Spring Festival comes late is around the mid-February and then the recovered period post the Chinese New Year is bit shorter. That’s why I think in general this quarter is low season for our business and that’s why we provide the current guidance as it estimated.

Second question is regarding the paying users. The main reason I think last quarter is because it’s a low season for Huya. Huya’s typical high season is the holiday season meaning the third quarter and first quarter, but in general the fourth quarter is the Huya’s paying user scale is relatively low compared with the others.

And then you asked about the 2018 kind of trend. Obviously, our key focus is still on the users. Once we get the users we find different ways to converting them into paying users. So MAU, DAU always come first before the paying user.

So that’s regarding your second question. The third question is about the competition. Actually the competition in live streaming is always there and we have gone through a several cycles. I think the reason they are trying some big players coming into this live streaming actually is good for us, because it allows more people’s interest and help converting more ordinary people into streaming viewers. So I think in general that that’s good for the industry and that’s only good for the big players by the way due to recognition concerns. But it will be tougher and tougher for smaller players.

In terms of comment, we are focusing on UGC. We are not a PGC platform. As UGC is created because like the community feeling and while it has already build a very strong community where ordinary people across China want to share and entertain themselves by watching the high quality user generate content. So I think as long as we have the users and interesting way of engaging people that community feeling will always be there and always continue to attract users to create good quality content and then we don’t need to spend a lot of money in terms of investing those content. So that’s why I think in terms of revenue sharing with the host it wouldn’t change a lot, because we believe in our ecosystem.

Binnie Wong

Okay. I also have a quick follow up…

Bing Jin

And the management a lot of the — yeah, sure, go ahead.

Binnie Wong

Okay. Please, after you.

Bing Jin

Yeah. I was just going to say that a lot of new players coming into this live streaming market, as I said, awareness war and then we are already at a very mature stage for YY in terms of the live streaming, where probably live streaming is 3.0. Some other player they come, they need to build up the activity in terms of our regional experience and that takes time. Go ahead.

Binnie Wong

Okay. Sorry, just one quick follow-up here, so you think that the competition now and also our expectations in 2018 our sharing ratio given the competition environment is not going to be impacted we can just maintain the current sharing ratio and in turn how do you see margin trend in 2018?

Bing Jin

Yeah. Margin trend, as I said, for YY Live will generally be stable, as I said, that we wouldn’t change this revenue sharing. But we are — it’s really difficult to say at this stage because on the game licensing industry is relatively competitive and then there are relatively few supplier for top quality game host. So I think it will take some time for Huya to maintain the leading position for top quality game host.

Binnie Wong

Got it. Thank you so much.

Bing Jin



[Operator Instructions] Thank you. Your next question comes from the line of Natalie Wu from CICC. Please ask the question.

Natalie Wu

[Foreign Language] I will translate myself in English. My question is regarding the sales and marketing expenses, you have the very low control debt market expenses this quarter, which — how should we think about the number going forward. What kind of the strategy you will mainly adopt to promote your product this year? And also on the guidance, anything related with [inaudible] (26:22) incident something like that and also what current top performance contribution to YY Live at current stage? Thank you.

Bing Jin

Hi. Natalie, thank you for questions. Let me try to address those. So first question is regarding sales and marketing expense in the fourth quarter, I think that we had a good control. I think main reason is we focus on [inaudible] (26:43) in our Carnival event in the fourth quarter, which is regular in the fourth quarter. So in terms of the sales marketing for other product, we don’t spend that much, that’s the fourth quarter review.

In terms of the 2018 forecast, I think, that’s difficult to say at this stage. As I mentioned many times before, it depends on our product launch, pace across our platform and then we might need to spend a good amount of sales and marketing to support that product. So it’s hard to give specific guidance at this point.

For the second question, why the first quarter guidance a bit low, I think, the main reason is still for the Spring Festival, as I explained. For KU and the other incident, I wouldn’t say that those who have impact on our ecosystem, because KU just one of our host. We have many, many host across the platform and they continue to flourish on our platform. So I don’t think KU’s incident has any impact on our platform.

And the third point is regarding the top 10% host revenue contribution. We didn’t disclose that number before and we didn’t disclose right now. But I will say in general we track the number regularly that percentage contribution is going down gradually. Even though it’s not a big drop because the problem is too dominated by those top host, but as long we see a gradually coming down trend it is helping for the ecosystem.

Natalie Wu

Great. That is helpful. Thank you.


[Operator Instructions] Your next question comes from the line of Shi Jialong from Nomura. Please ask the question.

Shi Jialong

[Foreign Language] So I have three quick questions. My first question is about the China regulation. So in addition to the recent regulation across major online live broadcasting platform based on the company talks with relevant watchdogs, should we expect any further tightening regulations toward live broadcasting or the general online entertainment industries.

My second question is about the competition as in addition to the existing competitors we saw some new entrants into this live broadcasting space, many of the new entrants such as [ph] Kwaish, Bini Bini (31:23) and Huoshan are leveraging their user base of the short video service to penetrate the game or entertainment live broadcasting service. So I just wonder if this short video plays could become a challenge or a disrupter to the existing live broadcasting landscape?

My last question is about YY’s previous investments in Tantan, when YY made that investment in Tantan one year ago. It seemed to be straightedge instead of financial investments. So we understand YY has made huge profits from these investments following the sale of the stake to Momo and [inaudible] (32:03). I just wonder what has prompted YY to sell out the stake in Tantan? Thank you.

Bing Jin

Thank you, Jialong. I’ll address the first question and the third question, and Ting Li can comment on the second question on competition. For the first question regarding regulation, we do think that the Chinese government will continue to strengthen the content monitoring and the overall regulation on this industry.

But I think, as I mentioned before, it is good for the big players. Reason being that, first of all, we have years of experience operating the ecosystem so we have the highest standard in terms of the quality screening in terms of the operation of the overall ecosystem. So I think it will benefit the big players.

I also want to make additional note on KU because people are very interested in that. As explained, KU incident was regarding one of the small incident in back in 2015. And along the years we have done many things to improve the overall quality of KU’s content or platform. And then, I think, the mainstream culture of YY is to cultivate and bring more hosts to shine their talent on a platform in a very positive way. So we will always cooperate with the government and set up industry trend and pattern and the best quality practice for other players in this live streaming social media industry.

So that’s the first question. Regarding Tantan, the third question. We did made a minority investment last year. In fact, reason being that we want to test and see whether this is the area that we’re exploring more and after some time of experiment we haven’t decided whether this is the area where we put all of our cash in, and so that’s why we sold to stake to Momo. We make a decent return.

That means that we still have very good investment strategy and going forward we’ll continue to explore other areas where they can provide additional traffic to our ecosystem, because very strong — we are very strong in terms of monetization conversion. So as long as we get younger traffic, new traffic we find different ways to convert them and Tantan is just one exploration. Yeah.

Ting Li

[Foreign Language]

Matthew Zhao

Okay. Let me do the translation. So in terms of the short video development, we — actually we already noted there has several the large kind of the emerging from these kind of industries, so that actually demonstrates the video — era of the video has been coming and they also extrude encouragement for ourselves.

In terms of the development of the short form videos, we know notice for the short form video content is more like FMCGs, which is useful for the short-term of the consumptions. But in terms of the live streaming content that is more immersed kind of more of a company related of kind of content. So that’s what we think in terms of the consumption of that usage.

Going forward definitely it will be converts from those kind of cell phone video fast — FMCG types of the consumption into the immersive consumption which is coming from the live broadcasting in the long run.

So for our practice, the success of other cell phone video platforms, we are still very confident of obtaining of and retaining the subscribers from those kind of — from the live streaming of the services going forward.


Thank you. [Operator Instructions] Your next question comes from the line of Eileen Deng from Deutsche Bank. Please go ahead.

Eileen Deng

[Foreign Language] My first question is regarding YY Live’s core business, wondering what’s the next powerful monetization feature expect to show that and with the rough timeline and except the Happy Contest launched last year, is there any other new features last year studied, we see meaningful revenue contribution yet?

And my second question is the algorithm change, when I checked the progress of this upgrade and any meaningful contribution to our business metrics yet? Thank you.

Bing Jin

Eileen, thanks. Maybe I’ll let Ting Li to take the questions.

Ting Li

Okay. Eileen. [Foreign Language]

Matthew Zhao

Okay. Let me do the translation for the first question. So in terms of the new sales through generated of the revenues, I will see the Happy Contest is just a good starting in the year of 2017. So Happy Contest is basic on the two hosts of the competition within the live stream scenario. So going forward we will use probably more opportunities in terms of the multi people or the multi host of the competition and of the live streaming scenario. So that actually can help to significantly improve the efficiency, as well as interactive to — within of the live show rooms, as well as to increase the revenues.

So, in summary, the Happy Contest is just a start. So the Happy — which is a basic services. So going forward what means — I mean the DAU, the contest it can be very — various in terms of the tab, as well as the content. So meanwhile we you have to follow the format of the — of those kind of the revenue generating results and meanwhile we also will to focus on the content enrichment, which is related to the Happy Contest tab of the services. So that’s what our key focus going forward.

Ting Li

[Foreign Language]

Matthew Zhao

The second question in terms of the iRhythm operating in the past few quarters. So the key focus for the iRhythm updating is in terms of improving the consumption rate. In terms of both of the user time spend, as well as the stickiness of the users.

So another part for the iRhythm upgrading is related to the revenue increase in the first quarter, as well as diversification of the revenue sales, which has been fully exempted in our — demonstrate from our annual guidance in the year of 2017. So we noticed because we have choose iRhythm personal phase those kind of recommendations to the different users.

We noticed for both of the deals, but the participation for the both of the deals, as well as users has been — as well as the host has been significantly increased in the past year. So that also demonstrated to our effort in terms of algorithm update in the past quarter. Thank you.


Thank you. Your next question comes from the line of Jerry Liu from UBS. Please ask your question.

Jerry Liu

[Foreign Language] I’ll do the translation. So the first question is around the M&A and the investment strategy. We talked earlier about Tantan, but outside of that, do we see other opportunities in adjacent categories, as David Li mentioned Education before. Is that the focus this year or next year or are there some other categories?

And second is the — in terms of the regions that we want to focus on. Is it still mainly within China or would we increase focus on areas like Southeast Asia?

And then, second question is around MAU and paying users. Could we get the YY Live mix of these metrics? Thank you.

Bing Jin

Thanks, Jerry. Let me first take those two questions. So, first question, regarding investment strategy in terms of the target and the region. I think, first, for region wise, we are looking at both China and globally. For global market, Southeast Asia market definitely is an attractive market. We are also looking at other areas as well including U.S.

In terms of the associated categories and target, I think, I mentioned that before is, upstream, midstream and downstream. For upstream, we’re looking at platforms such as Tantan or other social network or instant messaging kind of community which have organic traffic, so that we can direct some of those traffic to our platform or we can embed our licensing within their platform to help better monetization. So that’s on the upstream. It’s about traffic acquisition.

On the midstream is about content. So we continue to look at good quality content across China, across the world for good games, good quality content that can engage users and have them spend more time.

For the downstream is about monetization, further enhanced monetization. So we’re looking at different kinds of technologies for AI, artificial intelligence across China and globally. So those are the key area of focus.

For Education we will continue to look at that. But as I mentioned before in the initial stage, so it wouldn’t be a material impact to our financials.

For the second question on MAU and payer user breakdown between YY and Huya. Jerry, I’m sorry I cannot disclose that, because as I mentioned in the script that due to Huya’s sensitivity around its proposed IPOs, we could not disclose the relevant data regarding Huya. So hope you can understand.


Thank you. Next question comes from the line of Hillman Chan from Citigroup. Please ask your question.

Hillman Chan

[Foreign Language] So my first question is to follow-up on the product development strategy. So just now we discussed a lot on the Happy Contest and I just want to have more comments from management on some other inefficiencies on the older user interaction and especially more on the social side and also on the more long-term users and going into 2018 what’s the strategy and also the direction and pace of the product development?

And then my second question is on the short video apps. So we made some attempt last year and how should we think about our priority and also the strategy on this front and going forward.

And lastly, on Bigo, so what’s the scale, growth outlook and profitability of this business? Thank you very much.

Bing Jin

Hillman, thanks. I will now let Ting Li take the first two, I’ll take the question on Bigo.

Ting Li

[Foreign Language]

Matthew Zhao

Okay. So first question we have — actually we have already covered some of the colors before. So the Happy Contest is a basic [Technical Difficulty] and based on that framework, the Happy Contest and we will provide more the different content, as well as different result so that actually can improve the efficiency. Going forward, we will have more the different products is ongoing. So please closely to monitor our updates please.

Ting Li

Okay. [Foreign Language]

Matthew Zhao

In terms of the updates of the short form videos, so the first maybe the short form section end of the YY Live which is — its video views number has been continue to double in the last quarter compared to the previous three quarter.

So for our — the independent products updates, firstly, one of the products called [ph] Budav (51:40), so that one is continuing to improve the user stickiness and improve their functionalities, and meanwhile we also actively to install more new functions and new ways during the spring fall in China.

So why is kind of a AI focused two of those kind of short form video products that’s why actually it has been very welcomed among all of the social media platform, as well as other social networks. So that actually is a good example to demonstrate our continued effort in terms of the short form video development. Thank you.

Bing Jin

And then another question on Bigo. Because YY as the holding company, we only already invested in Bigo. That’s why we couldn’t disclose too much information in terms of the data, scale and profitability for Bigo. But I would say in general Bigo is going well. As I said the global live stream market is still in the early stage. So Bigo is very strong in Southeast Asia market and continue to grow globally.


Thank you. Next is the final question from the line of Karen Chan from Jefferies. Please ask your question.

Karen Chan

[Foreign Language] We saw very strong growth of advertising, although it’s coming off a relatively small base. Just wondering what drives that and how we should think about the overall advertising potential in particular on Huya platform? Thank you.

Bing Jin

Thank you, Karen. As I said before, for Huya we cannot disclose too much information, but I will say in general you’re right, the advertising has great potential particularly on Huya to promote the value for game developers, as well as brands that cater for younger consumers. So I think that part will continue to go up. But I cannot further disclose any additional information.


Thank you. We’ll take the next question from the line of Thomas Chong from Credit Suisse. Please go ahead.

Thomas Chong

[Foreign Language] Thanks management for taking my question. Right now much of people talking about the blockchain training initiatives, which is going to be adopted in different scenarios and I just want to get a sense about how we embrace these opportunities and is there any chance that we can see monetization in the next couple of years? Thanks.

Matthew Zhao

[Foreign Language]

David Xueling Li

[Foreign Language]

Matthew Zhao

Okay. Let me do the translation. Firstly, in terms of blockchain is a new technology, so that is compared with the previous technology is a new way to allocate the profit within all the communities. So that’s why we think it has the potential for the future and so based on those kind of characteristics, as well as decentralized also characteristics of the blockchain. So in the long-term we think the blockchain will be — the more valuable blockchain services will be the blockchain which can provide a sustainable and true and useful of the demands and services, which is to the users. So we’ll continue to look at this part of the area, but we don’t think it has — we can generate revenues in the short run. Thank you.


Thank you. Our last question comes from the line of Wendy Huang from Macquarie. Please go ahead.

Wendy Huang

Thank you for taking my last, last questions. [Foreign Language] First we noticed lots of other live streaming and social networking platforms. They’re pursuing a way to integrate online offline better in the months ahead. So does YY have any thinking behind that?

Second, can you share some YY Live user data in terms of a geographic breakdown and also the usage breakdown?

And lastly, is there any initial thought about the potential investment size and strategy for the Education business? Thank you.

Bing Jin

Okay. Thanks, Wendy. Let me address those questions. So for the first question, we do think that there is lot of opportunities for online/offline combination and YY, as you have witnessed, we have online [inaudible] (58:56), we have offline Carnival, so that’s a perfect example of how we combine online/offline.

We’ll make sure that we further penetrate into massive third tier and fourth tier cities in China. We do think that the mainstream publishing in those third tier and fourth tier cities do have a lot of massive demand for both online/offline entertainment need that haven’t been fulfilled or satisfied. So we continue — we can grab the opportunity for both online and offline in the China market and by the way we have been doing that.

So that’s the first question. The second question for YY Live user demographics, age and cities. In general our YY Live, the core users for YY Live as I mentioned before is people around 30 years old in majorities in third tier and fourth tier cities, we also have people in the first tier and second tier cities, but relatively low income.

But as we said we are cultivating different ways to attract younger generation. So our new product such as Happy Go, such as Happy Basketball, those new features, they attract many younger generation people born after 1990s and people born out even after the 2000. So as we continue to innovate new products we hopefully will expand the user base. So that’s about the user profile.

For the investment into the Education, as I say, it’s still in the initial stage, so hard to give a number in terms of the straight dollar, but we have been doing Education for a while and we have made some investment. So we have accumulated, I will say experience in this area. But again Education is a factor that needs long-term investment and operational expertise. So I think my suggestion is for analysts and investors keep monitoring our progress and we will update whenever necessary.


Thank you. I’ll now like to hand the conference back to the management team for the closing remarks.

Matthew Zhao

Thank you all for joining us today. If you have any further questions you are welcome to contact us anytime. So we are looking forward to speaking with you in the coming quarters. Have a nice day.

Bing Jin

Thank you, everyone.


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

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World Economic Forum leads creation of fintech cybersecurity consortium

NEW YORK (Reuters) – The World Economic Forum has led the creation of an industry consortium focused on improving the cybersecurity of financial technology companies, as collaboration between fintechs and financial institutions grows.

FILE PHOTO: A logo of the World Economic Forum (WEF) is seen as people attend the WEF annual meeting in Davos, Switzerland January 24, 2018. REUTERS/Denis Balibouse

The consortium’s founding members include Citigroup Inc (C.N), online lender Kabbage, the Depository Trust & Clearing Corporation, Zurich Insurance Group (ZURN.S) and Hewlett Packard Enterprise (HPE.N), the companies said on Tuesday.

The group will create a framework to assess the security level of fintech companies and data aggregators, whose preparedness against hacks is seen as increasingly important to the stability of the wider financial industry, the companies said.

The financial services sector is among the most vulnerable to cyber crime because of the vast amount of money and valuable data that banks and investment firms process each day.

Over the past few years, banks and other finance firms have been strengthening their ties with young tech-savvy startups which are aiming to revamp the way financial services are created and consumed. The growth in collaboration is occurring either voluntarily, with banks looking to remain competitive, or due to new regulation such as the European Union’s revised Payment Services Directive.

This has heightened the need for fintech companies to implement sturdy cybersecurity measures, said Matthew Blake, head of the Financial and Monetary System Initiative at the WEF.

“Many partnerships are forming between financial technology companies and incumbent institutions,” Blake said in an interview. “Through those linkages there is a potential introduction of risk.”

The need for better cybersecurity assessment mechanisms was identified in a WEF report published on Tuesday as one of the solutions to the security challenges posed by the increased use of digital services in finance.

The report noted that the use of technology innovations such as robotics and biometrics was expanding the amount of customer data at risk.

“While we are excited by the innovation of fintech, it also creates risks that I think need to be identified and worked on to establish standards,” Michael Dodson, president and CEO of DTCC, said in an interview.

The new consortium, which will be managed by the WEF and work with the organization’s new Geneva-based Global Centre of Cybersecurity, will develop a point-based scoring system for fintech firms.

Reporting by Anna Irrera; Editing by Phil Berlowitz