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Momo Inc. (NASDAQ:MOMO)
Q1 2018 Earnings Conference Call
May 29, 2018, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to First Quarter 2018 Momo Incorporation Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. Please note this conference is being recorded today.

I would now like to hand the conference over to your first speaker today, Ms. Cathy Peng. Thank you. Please go ahead, ma'am.

Cathy Peng -- Director, Investor Relations

Thank you, operator. Hello, everyone, and thank for joining us today for Momo's first quarter 2018 earnings conference call. The company's results were released earlier today and are available on the company's IR website.

On the call today, from Momo, are Mr. Tang Yan, Co-Founder, Chairman, and Chief Executive Officer; Mr. Wang Li, President and Chief Operating Officer; and Mr. Jonathan Zhang, Chief Financial Officer. Mr. Tang and Mr. Wang will discuss Momo's business operations and company highlights, followed by Mr. Zhang, who will go through the financials and guidance. They will all be available to answer your questions during the Q&A that follows.

Before we begin, I would like to remind you that the call may contain forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to the events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements.

Further information regarding these and other risks, uncertainties, and factors is included in the company's filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under law.

I will now pass the call over to Mr. Tang. I will translate for him. Mr. Tang, please?

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

[Foreign Language]

Good morning and good evening, everyone. Thanks for joining our conference call today. Q1 was a good quarter and a great start to the year 2018. Back in March, we outlined the three priorities for us this year -- user base expansion, topline growth, and a healthy profitability level. I'm glad to see that we've achieved outstanding results an all of those three fronts. Now, my team and I will review the details with you.

[Foreign Language]

Firstly, from a high level, total revenue reached $435.1 million for the quarter, up 64% year-on-year and 13% quarter-over-quarter. The strong topline performance reflected the organic growth momentum we have been seeing from the livestreaming business, which is in turn driven by the continuous strengthening of our content ecosystem. Adjusted operating income for the quarter was $159.9 million, up a 59% from the same curate last year, and representing a 36.6% operating margin.

What we achieved financially in Q1 reflected the strong operating leverage of our business model, leaving ample room for us to make significant investment for our future while maintaining a healthy level of profitability.

[Foreign Language]

Now, a deeper dive into the quarter. Firstly, our community continued to expand. Total MAUs on Momo platform reached 103.3 million for the quarter, up 21% year-over-year and representing a 4.2 million net addition from the previous quarter. We are proud to see that, despite the negative seasonality, per user content per day still showed a slight uptick from Q4's level and grew meaningfully by 16% on a year-over-year basis.

[Foreign Language]

We believe the growth of the community in both sides, and engagement, is mainly attributable to the continuous expansion of the social use cases on the platform.

[Foreign Language]

At our last earnings conference call, I mentioned that, for the coming three quarters, we will focus our product efforts on introducing new ways for the users to discover connections and build interactions. In Q1, we rolled out quite a few new features and updates serving that goal. For example, in January we launched [foreign language], our audio chatroom, which enabled the users to engage in live audio chats in a group environment. Compared to the earlier group video chat feature, the audio version lowers the barrier for user participation.

It also provides a flexible framework for us to build on and add new features to make the interactive experience more enjoyable. One example is that recently we made karaoke function available to the chatroom users. Our plan is to gradually introduce more of this type of tool to the users to have greater fun together.

Other than the newly launched chatroom experience, we also expanded the Werewolf games into a collection of interactive social games, many of which used to be played offline, to bring people more closely together.

Although many of these new offerings are still at early stages, we believe they provide more diversified medium over which users can more effectively build connections and interactions. We will continue to iterate and optimize on these experiences to make them better serve the social demand of our users.

[Foreign Language]

Another key focus of ours in Q1 was to improve the quality of content in the nearby posts. As said before, as a social platform, we are focusing on distributing not just any type of content, but a type of content that facilitates interactions and relationship building. Last Q4, we wrote out a new recommendation piling the nearby proceeds on top of the location and recent dimensions. The new engine also considers the personal social preference of the users as well as the interactive quality scores of the content.

The new algorithm increased the total number of interactions by more than 20% in Q4 from Q3. In Q1, we made further optimizations to the algorithm, including adding the amount of greetings into the evaluation system. As a result, Q1 compared with Q4 last year, we saw another 30% rise in the number of interactions around nearby posts. We view this as a significant progress because it shows that content is playing an increasingly important role in helping people discover new connections and build interactions around it.

That progress is made possible because the technology development based on machine learning is enabling us to better understand what types of content a specific user is more likely to interact with. We believe that algorithm and machine learning are opening up many doors in helping our users discover relevant connections and interact more effectively. We plan to capitalize on it in a bigger way going forward.

[Foreign Language]

Speaking of constant improvements, one of the most encouraging trends that we are seeing on the platform is the continuous improvement in the content ecosystem around the livestreaming service, which is the underlying driving force for the strong organic growth momentum that we're seeing right now. When we talk about growth, we are not purely talking about revenue growth, but also the underpinning factors that can make such growth sustainable, such as content quality and diversity as well as the number of professional broadcasters. Wang Li will elaborate a bit more in his remarks.

[Foreign Language]

Lastly, about Tantan, we closed the expansion in May and together we'll be moving forward as a dominant player in China's open social territory. We view Tantan as a strategic component to the Momo platform and its complementarity comes in several aspects. First of all, its users, on average, are younger than ours. Secondly, and perhaps more importantly, Tantan is very much focused on one-to-one matching for romantic relationships while we are focused on connecting people in a much broader sense over a variety of social use cases.

By acquiring Tantan, we've strengthened our leadership and dominance in China's open social space. In addition, we also believe that Tantan has a great deal of potential to be unlocked, both in terms of user growth and in terms of monetization. In fact, although Tantan officially launched its monetization features only in January 2018, it has been showing a very impressive growth trajectory ever since. All of these give us high conviction that Tantan will be adding a great deal of value to our ecosystem going forward.

[Foreign Language]

Overall, I'm very proud about the strong results and progresses we made on products and operational fronts in Q1. All of these set us up for a strong year ahead.

Now, I'm passing the call over to Mr. Wang Li, our President and COO, for business review. Mr. Wang, please?

Li Wang -- President and Chief Operating Officer

[Foreign Language]

Thanks. Now let me take you through the key things that we've done, as well as the future directions, for our major business lines.

[Foreign Language]

First of all, on livestreaming, although we did see some negative impact from the Lunar Year holiday, particularly in the month of February, the robust organic growth momentum gave us a good January and March, so we ended up delivering an extremely strong Q1, growing 75% year-over-year, and 13% sequentially to $371.5 million.

That strong growth trend came from the fundamental improvement of the content ecosystem, driven by our collaborations with the talent agencies. In Q1, we further optimized the agency incentive programs that was rolled out in last Q4. The new plan focused on two key areas. Number one, is to encourage the agencies to bring in more quality new broadcasters. Number two, is to strengthen our control over the performing talents that we view as important to our platform.

We believe that our strong social attributes and unique community atmosphere give Momo streaming service strong competitive advantages in terms of the development of new performers as well as user stickiness. As we open up doors to the agencies, we are happy to see that more and more NCNs are realizing such competitive advantage of our platform and view Momo as a promising opportunity for them to build their business and grow their revenues.

Because of their contributions, we saw a substantial increase in the number of mid- to high-grossing broadcasters in Q1 from Q4 last year. Those high performing talents, and the competition among them, are the underlying driving force for better quality content, which in turn drives the increase in the number of core paying users for the talent show business. Our goal is to perpetuate that cycle in order to gain share against the overall backdrop of market consolidation.

 [Foreign Language]

Other than optimizing the incentive system, in Q1 we also took the initiative to drive the content diversity. Our radio service continues to do well during Q1 in terms of usage and revenues, contributing to the number of long-tail paying users, with a moderate R2 level. We've also brought in the content pedigrees of Momo official channels, from singing and dancing to comedy and outdoor activities.

Although a lot of these efforts are still early experiments with limited contribution to monetization, we believe they're helpful in broadening the user base of the streaming service. Therefore, we plan to continue down that path.

[Foreign Language]

Next, turning to VAS business. Despite the negative impacts of the Lunar Year holiday, vast revenues generated impressive year-over-year and sequential growth in Q1, driven by three factors. Number one, the ramp-up in SCIP subscriptions. Number two, our different experimental monetization efforts around the new use cases, such as VAS. And, number three, the natural growth of the virtual gifting revenue in existing social use cases, such as greetings and interest groups.

These factors contributed positively to the RP2 of the VAS business, growing by 23% from last quarter. Our focus for VAS business this year is to build paying features that can enhance the social experience and thus contribute positively to the overall user retention and stickiness.

As compared with the talent show business, such monetization features tend to be relatively moderate in RP2 and thus can appeal to a much broader base of paying users. We believe that the larger user base and the bigger variety of social scenes on Momo provides a long runway for us to cultivate the right type of opportunities. The potential is big, and we will be moving forward in a careful and methodical manner to make sure we get the product experience right.

[Foreign Language]

Now, recently on Tantan. Although Tantan only started to monetize in January this year, it is already making remarkable progress. What's more exciting to us to see is that paying features not only drive revenues, but also improve the matching efficiency and thus contributes positively to user experience and retention. Tantan's early monetization results stand as a good example of how the VAS model, if done right, can help drive the virtual cycles in monetization and user experience. As Tantan keeps pushing forward with its monetization progress, we believe it will be contributing meaningfully to the VAS business line in the year 2018.

[Foreign Language]

Now, briefly on mobile marketing business. With the growing activities around the live video, short video, and content feeds, the potential to build ad inventory also increases. However, as the priority of the company this year is still growing user base and engagement, we will be very careful in limiting the ad load and making sure that the ad quality and relevancy continue to improve to take better care of user experience.

On the other hand, our expertise in building video and AR elements into social activities, and the higher tendency of Momo users to interact with people and content, are things that we can uniquely leverage to develop innovative ad products such as sponsor lenses. Such products are playful in nature and does match well with the overall attribute of our community. They also provide the ad consumer a truly native marketing solution that can blend into the consumer experience in a positive way. We've just made an official release of such kinds of interactive ad products to the market. That will be the key focus for the team for the coming few quarters.

[Foreign Language]

Overall speaking, we are off to a strong start for the year 2018. I'm excited about the many opportunities ahead and will continue to capitalize on them to deliver good business results.

With that, I'm passing the call over to Jonathan for the financial review.

Xiaosong "Jonathan" Zhang -- Chief Financial Officer

Thanks Tang Yan, Wang Li, and Cathy. Hello, everyone. Thank you for joining our conference call today. We started the year off with a great quarter. Our user base continued to expand while both topline and bottom line showed robust growth.

Total net revenue for the first quarter reached $435.1 million, up 64% year-over-year, exceeding the high end of our revenue guidance by 8%. Despite the negative seasonality from Chinese New Year, we still achieved a 13% sequential growth in revenue due to the strong organic growth momentum from livestreaming business.

Rapid topline growth, coupled with operating leverage, enabled us to deliver a 36.7% non-GAAP operating margin. Non-GAAP net income attributable to Momo was $142.3 million, up 57% from the same quarter last year.

Looking to the key revenue items, in the first quarter of 2018, the revenue from live video services reached $371.5 million, up 75% year-over-year. In Q1, we continued our initiative on the incentivizing the talent agencies, which significant posted an improvement of our content ecosystem. At the same time, our operational efforts focused on introduction of new gamifications into showrooms during the non-event days, allowing the organic growth momentum of livestreaming business to overcome the negative impact from the Lunar Year holiday. It grew at an impressive 13% on a quarter-over-quarter basis.

As a result, the number of livestreaming, paying users for the quarter was 4.4 million, a 7% increase from the same period last year. The quarterly ARPPU was RMB563 before excluding VAT, compared to the RMB385 from a year ago.

Moving on to the VAS and mobile game business, revenue from VAS, which includes membership subscriptions and virtual gifting services, together was $37 million, up 62% from the same period last year. The year-over-year increase was largely driven by the fast-growing virtual gifting business and increased in VIP subscriptions as Wang Li mentioned earlier.

As the social behaviors on our platform continue to evolve, and the social use cases continue to diversify, one of our key observations is that some social experiences previously put under livestreaming business in and the VAS business line are actually converging. For example, the same person who used to chat in the live channels, or video services under livestreaming, can shift to chatrooms for quick chat experiences, which are under VAS business line. And vice versa can happen, too.

As more and more users adopt live interactive experiences, we expect the line between what is livestreaming and what is not livestreaming to get increasingly blurred. Therefore, we would encourage investors to look at the paying users form VAS business and livestreaming business holistically. The total number of paying users from VAS and livestreaming services, without double counting the overlap. Was 8.1 million for the first quarter 2018, up from 7 million from the same quarter last year, and 7.8 million a quarter ago, or a 0.3 million quarterly net add.

Mobile game revenue decreased by 43% year-over-year to $6.2 million due to our strategic focus on jointly operated games.

Now, on revenue from mobile marketing. The revenue from mobile marketing services was $18.7 million, up 5% year-over-year. The increase was driven by brand ad revenue growth. The number of key account customers grew significantly from the same period last year as we gained more recognition from the brand marketers.

Now, quickly to talk about some highlights on the cost and expenses items for the first quarter 2018. Our cost of revenue on non-GAAP basis totaled $209.1 million, up 74% from the same quarter last year. This was primarily attributable to the increase in revenue sharing with the livestreaming broadcasters and agencies. However, in a sequential basis, the organic growth of livestreaming services during the non-event days came in extremely strong during Q1. We scaled back the revenue oriented operating efforts around the quarterly competition event. Therefore, cost of bonus or rewards offered to broadcasters during the March tournament was significantly reduced. As a result, the non-GAAP cost of revenue as a percentage of total net revenue dropped by 3.6%.

Non-GAAP sales and marketing expenses for the first quarter was $41.1 million, compared to $31.8 million for the same quarter last year. The increase was mainly due to our stepped-up efforts in marketing spending to drive user growth. The sequential decrease in sales marketing expenses was largely due to the seasonality in our marketing spending. Q1 tends to be the lowest season in our marketing activities. We do expect marketing spending to pick up from Q1's level, both in terms of absolute dollar amount and as a percentage of revenue, as we head deeper into the year.

Non-GAAP R&D expenses for the first quarter $15 million, compared to $7.2 million for the same period last year, representing 3.4% and 2.7% of total net revenue respectively. The increase reflected our strategy to step up our investment efforts in R&D area by recruiting additional R&D talents to support our product innovations. We ended the quarter with 1,303 total employees, up from 985 a year ago, of which 46% and 39% are R&D personnel respectively.

Non-GAAP G&A expenses for the first quarter was $11.2 million, compared to $6.4 million for the same quarter last year. The G&A expenses as a percentage of total net revenue remains stable. Non-GAAP operating income was $159.9 million, up 59% year-on-year from $100.6 million. The Non-GAAP operating margin for the quarter was 36.7%, 5.8% higher sequentially. However, as the year progresses, the investment tends to ramp up in different areas, such as marketing and R&D activities.

The operating margin will come down from Q1 level and fluctuate on a quarterly basis. We will carefully manage the balance of this investment, driving overall business growth and annual profitability targets.

Now, turning to balance sheet and cash flow items, as of March 31, 2018, Momo's cash, cash equivalents, and term deposits totaled $899.4 million, compared to $1,059.6 million as of December 31, 2017. The decrease was mainly due to the first crunch of payments in connection with the acquisition of Tantan, which was $229.8 million. Net cash provided by operating activities in the first quarter was $129.9 million, compared to $95.4 million for the same quarter last year.

Now turning to our second quarter of 2018 revenue guidance. We estimate our second quarter revenue to come in the range from $470-485 million, which translates into a year-over-year growth from 51-55%. As we close the Tantan acquisition in May 2018, we will consolidate Tantan's financials from June 2018. Therefore, our Q2 guidance includes around $4.5 million of revenue from Tantan, which represents our current estimate of Tantan's revenue for the month of June. Please be mindful that this forecast represents the company's current and preliminary review on the market and operational conditions, which are subject to change.

In summary, we are very pleased with the remarkable results achieved in the first quarter of 2018. That demonstrated the effectiveness of our strategy and the strong execution capabilities of the management team.

That concluded the prepared portion of today's discussion. With that, I would like to turn the call over to Cathy to start Q&A. Cathy, please?

Cathy Peng -- Director, Investor Relations

Right. Before the Q&A, as always, just a quick reminder for the Chinese speakers. Please ask the questions in Chinese first, followed by English translation by yourself. Also, please limit the number of questions to two at maximum per person to give other people opportunity to ask questions.

...

Operator, we are ready for questions, please. Please queue in the analysts.

Questions and Answers:

Operator

Thank you, Cathy. Ladies and gentlemen, we will now being the question and answer session. [Operator Instructions] We have the first question from the line of Thomas Chong from Credit Suisse. Please ask your question.

Thomas Chong -- Credit Suisse -- Analyst

[Foreign Language]

Thanks, management, for taking my questions. I have two questions. The first question is about [foreign language] and other soft video has been rising very rapidly recently. What's our take about impact to Momo, if there is any? And my second question is, excluding Tantan, how should we think about the trend in paying users in 2018? Thank you.

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

[Foreign Language]

Cathy Peng -- Director, Investor Relations

Let me translate.

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

[Foreign language] has indeed been rising at an incredible pass during the past 15 months. However, we really haven't seen any negative impact on our operating data. If you look at the operating metrics during the past few months, on our platform, they have been showing some very positive trends, including the user world, per user timespan, retention, number of contractions, and obviously the revenue has been growing very robustly as well.

[Foreign Language]

I think the reason why we haven't seen any negative impact from [foreign language] on live was mainly because we have very different positionings in the sense that the core type of user demands that we are trying to serve are very different. That leads to huge differences in the way we design our products and the way the users are using our products. Although, on the face of it, there could seem to be some overlap in some of the use cases, there won't be direct competition between exactly the same type of product offerings.

For example, what a user is primarily looking for on Momo is to find someone new to interact with. So, even if you are talking about constant consumption use cases, such as live video and short video, these types of functionalities need to be deeply integrated with other social features such as user profile page, news feeds, interest groups, and instant messaging in order to serve the users demand to build new connections and to find other people to interact with.

However, if you look at the situation for a lot of the livestreaming and short video pure play, the core user demands that they are trying to serve is constant consumption itself. The way they design their products is therefore not centered around helping people to build new relationships or helping them to interact with other people. Instead, it is centered around encouraging the users to consume more and more and more content.

Those two purposes, in a lot of occasions, contradict with each other as far as product design is concerned. So, that's the reason why we really haven't seen as complete and comprehensive set of social infrastructures in either [foreign language]. So, if what a user is primarily looking for from a platform is to build new relationships or to interact with other people, then that user is more likely to choose between Momo and Tantan instead of between us and a short video platform.

[Foreign Language]

If you're talking about a short video platform that has been quickly rising in time spent, then that short video platform is more likely to have higher levels of competitive pressure on other types of short video platforms, or to a broader sense, to other content consumption platforms. The negative impact that it's going to have on a platform like Momo is going to be extremely limited because we serve different demand and design our product in a completely different way.

In the past, if you look at bigger players, such as [foreign language], they have all pushed very hard in the area of livestreaming or short video or both. They have all been growing pretty well, But, during the time that they have been growing pretty well, we have never seen any substantial negative impact on our platform. I think the reason for that goes back to the difference in the product positioning.

[Foreign Language]

So, the first question is on MAU targets and MAU growth trends. We believe that this year, Momo is going to see pretty positive trends in the user world. Basically, it is the function of several different factors. Number one, is the retention of the Momo platform. Since October last year, the retention has been showing a stable trend with a slight uptick. In the year 2018, our plan is to continue to expand the social use cases through product efforts and constant improvement in order to drive the retention ratio, especially we need longer term retention ratio. As we step up our investment in research and development and speed up the pace of product iterations and upgrades, we are confident that we will be able to reach that goal.

[Foreign Language]

Secondly, in terms of the top of funnel additions, the user acquisition, this year compared with last year, we're going to be taking more results driven marketing approaches. For example, on pay channel marketing, other than new registrations, we're also going to be focused on resurrecting the dormant users by leveraging some of the new use cases that we introduced to the platform. In Q1, we actually did a pretty good job on that front. Resurrected users as compared with complete new registrations, the per user acquisition cost is lower wile the retention ratio is higher. Obviously, we're sitting on a huge amount of dormant users, so this year we think we'll have a lot of opportunity on that front.

The other thing is that we are also looking at user acquisition opportunities by leveraging Momo's video content. For example, we are considering working some of the well-known variety show IPs and other third-party partners, both to elevate the brand equity and to drive the new registrations. So, if you consider all of these variables in the equation, all of these give us a pretty good level of optimism about the quarterly net ad, about the opportunity to drive a healthy quarterly net ad to any user in the year 2018.

Cathy Peng -- Director, Investor Relations

Thomas, is there a second question on paying user or not? Or, that's all? Is there a question on paying users?

Thomas Chong -- Credit Suisse -- Analyst

Yes, Cathy. I had a question on the paying users. It's Tantan -- how's the trend in 2018? Thank you.

Cathy Peng -- Director, Investor Relations

So, the second question is on paying users?

Thomas Chong -- Credit Suisse -- Analyst

Yes, on the paying users --

Cathy Peng -- Director, Investor Relations

On Tantan.

Thomas Chong -- Credit Suisse -- Analyst

It's Tantan, yes.

Li Wang -- President and Chief Operating Officer

[Foreign Language]

Tantan officially rolled out its membership subscription business in January 2018, and since then its number of subscribers has been growing at a very impressive pace, much faster than the pace that we saw when Momo and other similar companies first rolled out these types of services. We believe that speaks to the very strong demand coming from Tantan's user to improve their chances of matching through purchasing of value added services. We do think that Tantan, at this stage, is at a very early stage in terms of monetization.

If you look at a roadmap of other similar companies, they've actually achieved an acceleration in the number of subscriber growth and monetization growth. Up to this point, Tantan has done none of these yet. Therefore, even within the membership subscription area, we do think that [foreign exchange] has a lot of potential to further grow its number of subscribers and monetization.

In addition, as Tantan continues to grow its user base and reach its social features, we do think that Tantan will have a lot of opportunities to monetize beyond the membership subscription business as well. In the area of diversifying into other business lines, obviously Momo has a lot of expertise and resources that Tantan can leverage down the road. Therefore, we have a high level of confidence in the future growth strengths about Tantan's paying user as well.

Cathy Peng -- Director, Investor Relations

Operator, next.

Operator

Thank you. The next question comes from the line of Alex Poon from Morgan Stanley. Please ask your question.

Alex Poon -- Morgan Stanley -- Analyst

[Foreign Language]

My first question is about Tinder and Tantan, which is a very successful in US -- the Tinder version. I wanted to ask about the future strategy and potential of this business in the next two to three years. You mentioned about the revenue, it's about $4-5 million in June. If I analyze, it's about $50-60 million a year. How should we expect the revenue and margin in the next two to three years, and also some MAU and paying ratio forecast?

My second question is about investments Your balance sheet is very strong. Operating cash flow is very strong. Can you share with us what would be your future focus on investments, whether it's R&D or M&A, etc. Thank you very much.

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

[Foreign Language]

Maybe your second question first. I think the focus for the management team at this point is still to drive the organic growth in user base and business. But, of course, in the general area of social and entertainment space, if there are good target companies that can help us expand along the industry chain, or help us to diversify our product lines or brand portfolios, of course we're going to consider going through M&A opportunities to pursue higher and more efficient kind of development and growth.

[Foreign Language]

With regards to the second question about Tantan's monetization plan in the future, I actually addressed a big part of this in the earlier question about Tantan's subscriber and paying user growth. I'm going to talk about two points here. Number one, since Tantan started to officially roll out its subscription business in January 2018, it has been growing at a very rapid pace. However, at this point, I don't think monetization is the most important thing that draws the attention and focus of us as the management of the combined company. Instead, the number one priority for us is still user growth from Tantan. The current user growth trajectory of Tantan, since the beginning of 2018, is actually very positive. So, that's the most important focus of us on Tantan.

I think we'll pass on to Xiaosong Jonathan to address the financial question.

Xiaosong "Jonathan" Zhang -- Chief Financial Officer

Hi, Alex, this is Jonathan. Just one color to add. As can be seen from our guidance, around $4.5 million revenue added into our guidance, that only reflects the revenues generated on the existing subscription business. However, Tantan does have a plan to roll out new rounds of monetization efforts, getting into the second half of this year. So, we do expect the revenue to ramp from the current level in a meaningful way when those initiatives get launched.

Cathy Peng -- Director, Investor Relations

Operator, ready for the next.

Operator

Thank you. We'll move to the next question by Tian Hou from TH Capital. Please ask your question.

Tian Hou -- T.H. Data Capital -- Analyst

[Foreign Language]

So, I want to follow up with the first analyst's question regarding the short reduce and [foreign language] why short reduce developing really rapidly. And certainly, because the content difference and user difference and two different things -- Momo into the short reduce satisfy different needs. However, who knows what's going to happen? I cannot believe that management is not preparing yourself for the future or potential pressure from a short video, or at least in a short video maybe one of the directions that Momo can also get into to increase another source of content providing.

So, I really want to ask Mr. Tang, what have you done and how are doing in this area to prepare yourself for the future on both fronts? Defend yourself from competition and getting into a new area of the business.

[Foreign language]

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

[Foreign Language]

On the face of the two objects might seem the same, but if you peel off the very outer layer, inside them, they are actually very different things. The way we position our short video service is that we're hoping that our users can, through creation and consumption of short video content, build up very effective connections and interactions. That's the reason why, during the past year and a half period of time, we have been very proactively driving the integration of short video functionalities with every major social experiences and modules on the platform, such as news feeds and user profile page and livestreaming.

In Q1, because of what we did to the algorithm around short video, we saw new highs around a lot of operating, including the number of videos viewed, the number of videos published, and some other operating metrics that internally we view as more important -- such as viewer penetration and number of interactions around the short video content. For example, in Q1, the short video DAU penetration ratio has already reached 67%. So, it's fair to say that short video has already become a very important content medium over which users are building up their social activities.

[Foreign Language]

With regards to future optimization around the short video service, basically we're looking at several key areas. Number one, is that we are going to continue to optimize the short video creation tools. For example, we will soon be launching a new feature that encourages the professional video creators on the platform to set examples and drive more and more content creation activities from regular Momo users. Number two, is that we're going to continue to optimize the algorithm. As a social platform, we're going to be optimizing for interactions, for the users to build interactions and form new relationships instead of purely focus on encouraging the users to consume more and more content.

Number three, is that we will be working driving more synergies between live video service and short video service. We're seeing seve3ral benefits in here. Number one, is that live broadcasting actually provides a very effective way for the short video creators to monetize. At the same time, the broadcasters, especially new ones, can very quickly build up their fan base and influence through the creation and distribution of short video content. And, number three (sic) that cycle between live video service and short video service can drive more and better quality short video content into the system for our users to consume and interact.

So, although I think we design our overall short video product within Momo platform in a very different way as the way you see in some of the pure content consumption platforms, we do think that short video, as a content medium that people use to build future activities will continue to play a very positive role through the overall social ecosystem.

Cathy Peng -- Director, Investor Relations

In the interest of time, that's going to be the last question for today's conference call. For those who haven't gotten an opportunity to ask questions on the call, we are happy to entertain more questions offline. Thanks for joining us today. We'll see you next quarter.

...

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may all disconnect the lines now. Thank you.

Duration: 73 minutes

Call participants:

Cathy Peng -- Director, Investor Relations

Tang Yan -- Co-Founder, Chairman, and Chief Executive Officer

Li Wang -- President and Chief Operating Officer

Xiaosong "Jonathan" Zhang -- Chief Financial Officer

Tian Hou -- T.H. Data Capital -- Analyst

Thomas Chong -- Credit Suisse -- Analyst

Alex Poon -- Morgan Stanley -- Analyst

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