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YY (NASDAQ:YY)
Q2 2018 Earnings Conference Call
Aug. 13, 2018 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to YY Incorporated's second-quarter 2018 earnings call. [Operator instructions] I must advise you that this conference is being recorded today, Tuesday, the 14th of August, 2018. I'd now like to hand the conference over to your speaker host today, Mr. Matthew Zhao, IR director of YY.

Thank you. Please go ahead.

Matthew Zhao -- Director of Investor Relations

Thank you, operator. Good morning and good evening, everyone. Welcome to YY's second-quarter 2018 earnings conference call. Joining us today are Mr.

David Xueling Li, chairman and acting CEO; Mr. Bing Jin, CFO; and Ms. Ting Li, COO of YY. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session.

The second-quarter 2018 financial results and webcast of this conference call are available at ir.yy.com. A replay of this call will also be available on our 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 [Inaudible].

I would now turn the call over to Mr. David Xueling Li, our chairman and acting CEO. Please go ahead, sir.

Bing Jin -- Chief Financial Officer

Thank you, Matthew. Hello, everyone. Welcome to our second-quarter 2018 earnings conference call. This is Bing Jin, CFO of YY.

I will now speak on behalf of our chairman and acting CEO, Mr. David Xueling Li. We once again sustained our strong growth structurally and delivered a robust quarter. Our total revenues increased by 44.6% year over year to RMB 3.77 billion, which exceeded the high end of our previous guidance.

Revenues from our livestreaming business grew by 50% year over year to RMB 3.56 billion and remain the primary driving force of our growth in the second quarter. Our continued growth momentum in YY Live demonstrates our achievements in three areas: innovative traffic acquisition, continuous product advancement, and AI-backed technology enhancement. First, during the second quarter, we continued our unwavering commitment toward defining innovative measures to increase our traffic. One such measure is to promote our hosts, not only on our own YY Live platform but also through other social media or short-form video platforms and then channel their fan base back into our ecosystem.

A prime example is how we have boosted one of our top hosts called Modern Brother, Modern [Inaudible] to stardom and then capitalized on their popularity. Recognizing that shop-on-video platforms are flourishing rapidly in China, we have leveraged their traffic to help Modern Brother multiply their fan base. Once Modern Brother became an online phenomenon in China from the shop-on-video content, we then actively connected the increasing number of loyal followers back onto our YY Live platform to enjoy livestreaming performance and real-time interaction with the celebrity. Going forward, we will replicate the model into promoting other hosts.

We will also continue exploring new and innovative ways to promote our hosts through their social media and short-form video platforms. Now moving to our achievement in continuous production advancements, as announced during last quarter's call, in May this year, we launched a new feature on YY Live called Host Battalion. Since then, many hosts and users have been viewing Host Battalion, which improved host interaction and user participation. We recently rolled out two new games called Happy Chinese Checkers and Heavy Sheep into the Host Battalion feature.

By infusing social features into livestreaming and casual games, we have further enhanced our user experience, boosted user engagement and strengthened host interaction with friends. Going forward, we will use Host Battalion as a testing ground to cultivate the next-generation livestreaming entertainment services, which will aim to make more interactive and more engaging than ever before. Last but not least, following the appointment of Mr. Jeff Pengjun Lu as our CTO in June, we have made substantial progress toward enhancing our technology with artificial intelligence.

As we mentioned before, Jeff is a top AI scientist. Under his leadership, we have successfully implemented audio and visual recognition technologies to automatically identify and classify livestreaming content into various categories. Embedded with the sophisticated machine-learning models based on the user behavior data, our AI-based content recommendation engine enables us to accurately and efficiently match live-streaming content with user preference. As a result, average user time spent on livestreaming content on our mobile platform has improved significantly quarter by quarter.

To further strengthen our technology -- technological prowess, we have also appointed Mr. -- Dr. Lei Jiang as the company's vice president, reporting to Jeff. Prior to joining us, Dr.

Jiang served at Baidu, as its chief architect for the search advertising platform called Feng Chao. The addition of more top-class technological expert empowers us to continuously upgrade our technological capabilities, thus upselling YY's market leadership in the livestreaming industry. Overall, we are pleased with our achievement in traffic acquisition, product advancement, and technological enhancement. However, we're not resting on our laurels.

Instead, we wake up every day excited about the prospect of engineering new innovations in our products, providing new breakthroughs in our user engagement, and developing new additions to our comprehensive ecosystem. That concludes the remarks of our chairman and acting CEO, Mr. David Xueling Li. Now as the company's CFO, I would like to discuss our financial results in more details.

During the second quarter of 2018, we continue to deliver strong financial and operating metrics. Our total net revenues for the second quarter increased by 44.6% year over year to RMB 3.77 billion. Specifically, our livestreaming revenues increased by 50% year over year to RMB 3.56 billion, accounting for 94.3% of our total net revenues this quarter. Our ongoing efforts and investment into our mobile platform and related technologies have also continued to yield results.

In the second quarter, mobile contributed 57.2% of our livestreaming revenues, while mobile livestreaming MAUs increased by 21.3% to RMB 80.2 million from RMB 66.1 million in the same period last year. Livestreaming paying users increased by 21.1% to RMB 6.9 million in the second quarter of 2018, while mobile paying users constituted 72.7% of overall livestreaming paying users. Cost of revenues for the second quarter increased by 48% year over year to RMB 2.31 billion. The increase in revenue-sharing fees and content costs paid to performance, guilds and content providers was in line with the increase in livestreaming revenues.

In addition, bandwidth costs for the second quarter increased to RMB 246 million, primarily reflecting continued user base expansion and livestreaming quality improvements. Gross profit for the second quarter increased by 39.6% year over year to RMB 1.46 billion. Gross margin was 38.7%, compared to 40.1% in the prior-year period, primarily due to an increase in revenue-sharing fees and content costs. Our operating expenses were RMB 779.6 million during the second quarter of 2018, compared to RMB 476.3 million in the prior-year period.

Sales and marketing expenses for the second quarter were RMB 246.1 million, or 6.5% of total revenue, compared to RMB 204.4 million, or 7.8% of total revenue, in the prior-year period. Our R&D expenses for the second quarter were RMB 295.9 million, or 7.8% of total revenues, compared to RMB 167.4 million, or 6.4% of total revenues, in the prior-year period. G&A expenses were RMB 237.5 million, or 6.3% of total revenues, in the second quarter, compared to RMB 104.5 million, or 4% of total revenues, in the prior-year period Our GAAP operating income for the second quarter 2018 increased by 19.1% to RMB 713.8 million, compared to RMB 599.4 million in the prior-year period. Our non-GAAP operating income, which excludes share-based compensation expenses, impairments of goodwill and investments, and gain on deconsolidation and disposal of a subsidiary, increased by 45.5% year over year to RMB 933.1 million in the second quarter of 2018.

GAAP net loss attributable to YY was RMB 136.9 million in the second quarter of 2018. Our GAAP net loss attributable to YY this quarter includes our nonrecurring and noncash item of RMB 2,273.4 million in fair value loss on derivative liabilities, which resulted from the preferred shares of Huya Inc. that existed before its IPO and the increase in Huya Inc.'s enterprise value as indicated by the price of its initial public offering in May this year. GAAP net loss attributed to YY this quarter is partially offset by RMB 1,205 million of fair value change of investment, including a gain on fair value change of Bigo Inc.

Our non-GAAP net income attributable to YY increased by 51.6% year over year to RMB 873.2 million in the second quarter of 2018. Non-GAAP net margin in the second quarter of 2018 expanded 23.1% from 22.1% in the prior-year period. Diluted net loss per ADS in the second quarter of 2018 was RMB 2.14, compared to diluted net gain per ADS of RMB 9.98 in the prior-year period. Non-GAAP diluted net income per ADS increased by 34.3% to RMB 13.46 or USD 2.03 from RMB 10.02 in the prior-year period.

Looking forward to the third quarter of 2018, we expect our net revenues to be between RMB 3.89 billion to RMB 4.02 billion, representing a year-over-year increase of 25.8% to 30%. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change. That concludes our prepared remarks. Operator, we would now like to open the call to questions.

Questions and Answers:

Operator

[Operator instructions] And our first question comes from the line of Thomas Chong from Credit Suisse. Thomas, your line is now open.

Thomas Chong -- Credit Suisse -- Analyst

[Inaudible] [Inaudible] for taking my questions. I have two questions. My first question is about the user trend for YY Live in the second half in 2019. Is there any KPI in terms of the user level? And my second question is about Bingo given the facts that, I think, we have talked a lot on Bingo in last earnings conference call.

Just want to see if there's any update about the Q2 and also the second-half outlook for Bingo? Thanks.

Ting Li -- Chief Operating Officer

[Inaudible]

Matthew Zhao -- Director of Investor Relations

OK. Let me do the translation. First thing, in terms of YY Live's future users' growth, this is not our major KPI. Actually, they will be -- continue to be one our key focus for the management teams in the long-run goal.

In terms of the future initiatives, how we can grow our users, there will be the following parts. So firstly, when we look at the domestic competitive landscape, actually it's become more and more diversified. Especially we noticed the emerging of the short-form video platform, as well as the social media platform. Actually, we look at all the traffics from those kind of platforms and we may to using those kind of traffic to promote our top host or the top celebrities in –on those kind of platforms, such as Weibo and Douyin.

What is a very good example recently happened is we are actually using Douyin to promote one of our top host, which is called Modern Brothers. So they attract a lot of fans in the Douyin platform, but after that, we bring those kind of traffic back to the YY Live to watch their livestreaming content. They will be one of the good example, and it will continue to replicate this successful case to other top host. And the second part will be we will continue looking at other ways in terms of the product innovation and we will look at more ways to grow our user number.

And the third part is, we also look at traffic-to-monetization capabilities because we know that in China there – except for us, there also has a lot of different kinds of traffic, large traffic platforms. We're actually looking for the cooperation opportunity with all those kind of large platform. Hopefully, we can find out some of the cooperation going forward. And the last part, we'll continue -- we will be focused on Tier 3 and Tier 4 city users, especially the lower end of users, because they are going to be another huge growth potential in China going forward.

So we will find out a way to grow our user number in the Tier 3 to Tier 4 cities users.

Thomas Chong -- Credit Suisse -- Analyst

[Inaudible]

Bing Jin -- Chief Financial Officer

Let me answer your question in terms of Bigo's recent update. So the first half of 2018 actually in terms of both of the user number as well revenues for Bigo has seen continuously rapid growth. So the monthly active users for Bigo has been -- exceeds RMB 40 million in the first half of this year. And the income -- the revenue is coming from the first half of this year has reached to the whole year's -- the last year's whole-year scale -- the revenue scale.

Thomas Chong -- Credit Suisse -- Analyst

Thank you.

Operator

Thank you so much. And our next question comes from the line of Eileen Deng from Deutsche Bank. Eileen, your line is now open.

Eileen Deng -- Deutsche Bank -- Analyst

[Inaudible] My first question is regarding the third-quarter guidance. How much is the impact from the World Cup actually have you seen? And how strong have you seen the recovery post the event? My second question is regarding the promotion of top host in other -- on social media and the short-form video player platform. Can management quantify how big the user base and paid user growth based on the example of Modern Brother. And do we have any target on the progress of such strategy in the following quarter? Thank you.

Matthew Zhao -- Director of Investor Relations

Thanks, Eileen. Let me address the first question and Bing Jin can address the second one. So for the third-quarter revenue guidance, I think, there are two main factors: one is the World Cup, because the World Cup broadcasting time is highly overlapping with our peak timing, which is 8 p.m. to 12 midnight, that's why it impacted the user and as well the revenue side.

Second factor is, we are seeing declining revenue from other segments, including our gaming segment because of the competition of the mobile game in China. The mobile game as well web game continue to decline, that's why I think -- that reflect in the second quarter – third-quarter revenue guidance. For the World Cup, we are seeing a recovering trend. After World Cup is over, we are seeing the user and host coming back to the platform as normal.

So I think that trend has already been gone. For the declining of the mobile game, I think, that will still continue given the market environment in China these days. So that's a general observation.

Ting Li -- Chief Operating Officer

[Inaudible]

Matthew Zhao -- Director of Investor Relations

OK. Let me do the translation. So in terms of your question for the promotion of our top host in the -- outside of traffic. Firstly, for the Modern Brothers, actually in the past two months, their followers number in the YY Live platform has been doubled.

And their [Inaudible] actually has been 10 times compared to the promotion before. So actually, from the Modern Brothers case, actually it's a very successful case. We can further replicate to other our top hosts going forward. And in terms for the online promotions, so we are actually also using other ways to promote Modern Brothers.

Firstly is a good brand recognition promotion for YY's brand as well and then meanwhile, we are also trying to using other off-line demand such as music, concert, other ways to promote the popularity of Modern Brothers going forward. So all those kind of practice will continue to replicate to other top hosts. And secondly, in terms [Inaudible] doing outside promotions, so all of our top hosts will be into the list and will continue to -- based on the data internally, we will continue track those data and to -- dynamically to monitor and manage this list. So once the people – the hosts enter the top 100, definitely they got a chance to using the platform's traffic and we will help them to using outside traffic to promote their content, as well as increase their popularity.

So that's the answer to your question. Thank you.

Eileen Deng -- Deutsche Bank -- Analyst

[Inaudible] Thank you.

Operator

Thank you so much. And our next question comes from the line of Natalie Wu from CICC. Natalie, you can now ask your question.

Natalie Wu -- CICC -- Analyst

[Inaudible] I would just lay myself. I have two questions here. Firstly, excluding Huya, your sales and marketing expanding in the second quarter actually went down compared with the first quarter. So just wondering, can you help us understand what's your sales and marketing plan in the future? And you just have the plan to how to attract actually users in the future.

So just wondering what kind of assets will you make to resume the growth in terms of paying user number for YY Live in the future? And secondly, you have accumulated abundant cash in your balance sheet. Just wondering how the management plan in terms of the use of the cash? Will you consider a repurchase or dividend payout or potential M&A? Thank you.

Bing Jin -- Chief Financial Officer

Thanks, Natalie. Let me address those questions. So first question regarding the sales and marketing expense, you are right that excluding Huya, our second-quarter sales and marketing as a percentage of revenue is roughly 7%. Compared with the first quarter, it's roughly 8% to 9%.

The decrease of the percent of revenue for sales and marketing I think mainly because in the second quarter, we don't promote that many new products. In the first quarter, we promote Happy Go as a leisure game collection platform. In the second quarter, we do not promote that many product. However, having said that, in the third quarter and fourth quarter, we have other new product in our pipeline, both in China and offshore, mainly focused on new traffic acquisition.

So it could be leisure game, it could be short-form, it could be other formats. So when time matures, we will make sure that we spend decent amount of sales and marketing. So you would -- in general, you expect percentage of revenue for sales and marketing in the third quarter and fourth quarter and the rest of the year will be higher than the second quarter. That's the answer to your first question.

For the how we grow the paying user, I think, again we are focused on introducing more games into Host Battalion because we see increasing activities in Host Battalion. We will explore and innovate other similar features, such as Host Battalion to enable more hosts to compete among themselves and enable more hosts to compete against the fans as a way of increasing the paying behavior and ARPU – paying ratio ARPU. For the third question, we do have a lot of cash on hand. We have over RMB 6 billion onshore.

We have roughly USD 200 million offshore. I think we will make sure that we use those money to the place that we think makes sense. So we will continue to -- and we are actively looking at different kinds of M&A targets, as I've said before, focusing on new traffic acquisition, enhancing the user engagement and also enhancing our AI and technology capabilities, both through organic products and through external M&As. So we are looking actively for onshore and offshore M&A targets.

Natalie Wu -- CICC -- Analyst

Any plans to in terms of share buyback or dividend payout?

Bing Jin -- Chief Financial Officer

No immediate term. We do things -- there's many interesting opportunity we can capture. So we'll focus on organic product, sales and marketing and M&A at this stage.

Natalie Wu -- CICC -- Analyst

Got it. Thank you.

Operator

Thank you so much. And our next question comes from the line of Jerry Liu from UBS. Jerry, your line is now open.

Jerry Liu -- UBS -- Analyst

[Inaudible] My question is on the product competitive landscape with guys like Douyin and Weibo specifically. For example, with Douyin, is it more a competition moderate since we would like to use some as a content distribution platform, but at the same time, they will be interested to do livestreaming products themselves? And then the second question is around any direct monetization for content exporting? We obviously benefit from additional fans and tipping on the YY Live platform. But could we see any new revenue streams? Thank you.

Ting Li -- Chief Operating Officer

[Inaudible]

Matthew Zhao -- Director of Investor Relations

Yes, let me do the translation. So to address your question in terms of the competition between YY and Douyin and all other short-form video platforms, first, we truly believe the short-form video content, we have the livestreaming content is coming from the different [Inaudible]. So the short-form video platform is more flattish. It's more diversified content platform compared with the livestreaming platform.

And we truly believe it attracts different talents for the different kind of platforms. For the livestreaming platform, we have a lot of, what we call, the UDC producers, which is our host. Then they can produce very valuable livestreaming content comparably with the short-form videos. And for those kind of people, actually, it's very -- for them, actually the short-form video platform is very ideal [Inaudible] for amplified of their influence and meanwhile also to more distribute of their content to more target of the users.

But comparably, the people who can do the short-form videos may not have the possibility to do the livestreaming content. So my point is, this – both -- the different kind of platform actually has been attracted the different kind of talents. And definitely, compared with the people doing the short-form videos, actually the talent, which is doing the live streaming certainly will have a better position going forward. And meanwhile, let's go back to the Modern Brother's case as I mentioned before.

So firstly, in terms of their -- as I mentioned before, so after they have been -- become a phenomenon in the Douyin platform, actually their site number, as well as the interaction or the revenues from -- generated from the YY platform also has been significant growth. And meanwhile, we also consider seriously of their -- the agency business growing. So in the past two months, [Inaudible] livestreaming content actually they got a lot of imitation in terms of different layers of the business events or other kinds of artist agency contract. But during this period actually, we are more seriously considering and more carefully to pick up those kind of artist agency events, because we want to try to maximize our top host of the valuation in both of our platform as well as for themselves.

So all in all, actually we truly believe we are totally different compared with Douyin. So we will continue to find out more ways to distribute our content as well as promote our host in their platform. Thank you.

Jerry Liu -- UBS -- Analyst

[Inaudible] Thanks.

Operator

Thank you so much. And our next question comes from the line of Penny Wang from HSBC. Penny, your line is now open.

Penny Wang -- HSBC -- Analyst

Hi. Thank you. Thank you management for taking the question. [Inaudible]

Bing Jin -- Chief Financial Officer

Penny, you want to translate?

Penny Wang -- HSBC -- Analyst

OK, yes. Sorry, sir. Thank you. In terms of the increase in the revenue share piece and also the content costs, it's actually good to see that it was in line with the increase in the livestreaming revenues and most of the paying ratio has also been quite stable.

But we understand that it's a quite intensively competition environment, right, for top skills and hosts. Do you see that as more just because of our strong leadership position and that we'll maintain such ratio? Or you think that because we want to step up our market share and then down the road that we might see some changes in terms of like the sharing ratio of the guild, just in terms of our strategy, how we will -- in the face of the increasing intensive competition? And then second is just that in terms of the competition of the top hosts' revenue concentration, because we've previously been talking about the top 10 or top 100 hosts concentration in terms of our revenue contribution. With our new strategy, how has that been diversified down the road?

Bing Jin -- Chief Financial Officer

Thanks, Penny. Let me address those questions. I think first question regarding the revenue sharing. It has been stable in the past and will continue to be stable in the future, because we have already formed a very healthy ecosystem with our host and the guilds and also our fans.

So given our active revenue scale, a lot of the guilds are willing to cooperate with us on a continuing basis. You see the Modern Brother example just demonstrates how well we can promote our content and promote our host through different platforms. So I think that revenue-sharing percentage will continue to be stable going forward. For the second question regarding the concentration of our top host, we actually track the data for the top 1% of the hosts, top 3% of the hosts, top 10% of the hosts, how much revenue they contribute.

And that number has -- is continuously decreasing on a quarter-by-quarter basis. So I think that indicates that we have achieved more decentralization with regard to the guild -- to the host, as well as those guilds as well, yes.

Penny Wang -- HSBC -- Analyst

OK. Thank you.

Operator

Thank you so much. And our next question comes from the line of Karen Chan from Jefferies. Karen, your line is now open.

Karen Chan -- Jefferies -- Analyst

[Inaudible] I'll translate myself. For the first question, management mentioned that YY Live streaming is showing recovery trend after the World Cup. Was just wondering, how should we think about the full-year YY Live revenue growth and into the next couple of years? Secondly, can management share some of the user feedback or operating metrics on Host Battalion? And lastly, on -- across the different tier cities, especially Tier 3 and 4, what's the current user penetration? Thank you very much.

Bing Jin -- Chief Financial Officer

Karen, thanks. Let me address those questions. For YY Live livestreaming revenue, as I mentioned that, we are seeing recovering trends from the World Cup. I think for the rest of the year, as well as next year, the key focus will continue to be on user growth.

So our revenue user times the paying ratio times ARPU, even though we still think ARPU and paying ratio has room for improvement. But I think the primary driver will be on the user growth. So we would need to see how we systematically build out our product and how we -- systematically we can sustain the user engagement and then monetize them. So I think in general, that's the pattern.

For the Host Battalion, we have introduced more games into the Host Battalion and it's getting more popularity. Compared with the Happy Contest last year, Host Battalion hasn't reached a systematic scale yet, but we are seeing an encouraging pattern. So what we'll do is we will continue to embed more interesting leisure games into Host Battalion. And hopefully, they can be used more and more by different levels of hosts.

For the user demographic distribution of first tier, second tier, and third tier, I think that's likely stable. Over half of our users, 50% of the users are on third-tier cities or below. And as Ting Li mentioned in the call just now, our – one of our focus in the future will also continue to find our more new users in third tier and four tier cities in China, which -- among, which they have a lot of idle time and they have needs to pursue better quality entertainment, including livestreaming. So I think going forward, we will find more ways to attract those users.

Karen Chan -- Jefferies -- Analyst

Thank you very much.

Operator

Thank you so much. And next question comes from the line of Alex Yao from JPMorgan. Alex, your line is now open.

Alex Yao -- J.P.Morgan -- Analyst

[Inaudible] So I have three questions. First one is regarding the third-quarter revenue guidance and the potential fourth-quarter revenue outlook. So the implied growth rate for the YY Live is only at a low teens based on the current revenue guidance. You guys have talked about the impact of the World Cup and then the operation metrics recovers in the following weeks.

Based on the current visibility, would you be able to give us a little bit of preliminary color in terms of how you think about 4Q revenue growth outlook for core YY Live of the entire group? And then secondly, you guys discussed the initiative, such as Modern Brother to drive traffic generation from external sources, would additional traffic generated from these initiatives fit into the use case of our immersive company experience on the YY Live live broadcasting platform? And more importantly, would these guys potentially become -- converted to the heavy core users hosting a lot of money and a lot of time on the platform? And third question is regarding the R&D. So if we take out the Huya part of the financial R&D, increased almost RMB 40 million on a sequential basis in second quarter 2018. How should we think about this line item in second half? Thank you.

Bing Jin -- Chief Financial Officer

Alex, thanks. Let me address question one and three and then Ting can answer question two. So for the first question, I think, some colleague have asked that question before. We do see recovering trend from the World Cup.

The third-quarter guidance currently reflect our current assessment. But again, we need more visibility down the road in the rest of the third quarter and as well as the fourth quarter given we will launch the [Inaudible] event, etc. to see how the growth of YY Live, the core livestreaming business, will grow. So that's the first question answer.

The third question regarding R&D, actually the second quarter, the percentage of R&D expense as revenue is around 6.4%. That compare with 6% in first quarter, so I don't see a big increase as a percent of revenue per se. But a pattern that I can share with you is after our CTO joined, as our Dr. Jiang Lei joined, we continued to recruit more high-quality R&D and AI expert.

So that will incur some of the R&D expense as well. But again, that's manageable. I think for the rest of the year, the percentage of R&D as percent of revenue will be relatively stable compared with the second quarter.

Ting Li -- Chief Operating Officer

[Inaudible]

Matthew Zhao -- Director of Investor Relations

OK. Let me answer your question in terms of the monetization value for the Modern Brothers fans in the YY live platform. Actually, I already answered this question. So as I mentioned before, so Modern Brothers fans number is up.

It just grow like twice compared before. But actually, the revenues for – or the income for Modern Brother actually has been increased almost 10 times. So that actually demonstrates the strong monetization capability coming from their fans base.

Alex Yao -- J.P.Morgan -- Analyst

Thank you.

Operator

Thank you so much. And our next question comes from the line of Eddie Leung from Merrill Lynch. Eddie, your line is now open.

Eddie Leung -- Bank of America Merrill Lynch -- Analyst

Yes. [Inaudible] So my question is more about artificial intelligence. From the management's remark, it seems like at the moment, the company has been using artificial intelligence mainly to drive the efficiency, as well as monetization of the platform. Just wondering whether there is any opportunity for us to use AIs to do a better job in terms of our marketing and user acquisition? Thank you.

Bing Jin -- Chief Financial Officer

Eddie, thanks. Yes, let me address the question. I think at the end of it, we are a technology-enabled company and we focus on voice and video content. So we need to make sure that we are the world leader in that aspect.

AI is the second, I would say, layer of our technology capability, meaning we will find more ways to mine the data and analyze the data and push the revenue content to the right audience. That increase – that includes the enhancement of our current content, push the relevant content to the right audience and also attracting the new traffic, who would like to see certain categories of content. So in general, to make our video and audio content be more interactive and high quality and cater for different audience. So you're absolutely right that AI can be applied to the existing content, to the new content, to the existing user and new traffic.

Eddie Leung -- Bank of America Merrill Lynch -- Analyst

[Inaudible]

Operator

Thank you so much. And our next question comes from the line of Hillman Chan from Citigroup. Hillman, your line is now open.

Hillman Chan -- Citi -- Analyst

[Inaudible] So my first question is about the upcoming new games of Host Battalion to develop out in second half. Can management share more on the trend and also the direction of the development outlook? And the second one is on the Blockchain adoption that [Inaudible] has been talking publicly about its application in the messaging and communication. Could management share more on this development and also the [Inaudible] with existing YY products? And lastly, on Bigo, could management share more on the investment and also the profitability outlook of this business? Thank you.

Bing Jin -- Chief Financial Officer

Thanks, Hillman. Let me address question one and three and Xueling Li can address question two. Question one is regarding Host Battalion. We have introduced Happy Chinese Checker and Happy Sheep.

We will continue to add more interesting, I would say, games into Host Battalion. As I said, we have seen increasing enhancement of the user stickiness, even though it hasn't become systematic compared with host Happy Contest that we introduced last year. So I think there's still room for improvement. So definitely we'll continue to launch new games to attract and retain users.

For the Bigo investment, Bigo's livestreaming business is highly profitable in many Southeast Asian markets, as well as Middle East market. Bigo also has a rapid-growing short-form video ad called Like. That is still in the initial investment stage. So we will continue to invest to -- for good-quality content and for sales and marketing, for branding, etc.

So that's the general pattern for Bigo. I'll have Xueling to answer the second question.

David Xueling Li -- Chairman and Acting Chief Executive Officer

[Inaudible]

Matthew Zhao -- Director of Investor Relations

OK. Let me address your question in terms of Blockchain. So firstly, we noticed in the market, most of the currency -- the start-up of Blockchain they all focus on the visual cash application. But for us, we truly believe the future for Blockchain will be more focused on the technical perspective so -- especially in the long run.

So we truly believe that the [Inaudible] Blockchain for the Internet services all coming from as well as some of the two basic demand from the users. Firstly, will be the ID, the identification of the user; and secondly, is Internet transition. So who will tend to provide the better service for -- to fulfill those two of the basic demand from users? That maybe will be the dealer for the Blockchain going forward. So from our company's perspective, definitely, we will continue to develop more applications, as well as doing more innovation in terms of Blockchain going forward.

Thank you.

Hillman Chan -- Citi -- Analyst

Thank you for very much for the comments.

Operator

Thank you so much. I would now like to hand the conference back to the management team for your closing remarks.

Matthew Zhao -- Director of Investor Relations

Thank you, operator. Thank you all for joining us today. We look forward to speaking with you in the coming quarters. Thank you.

Operator

[Operator signoff]

Duration: 59 minutes

Call Participants:

Matthew Zhao -- Director of Investor Relations

Bing Jin -- Chief Financial Officer

Thomas Chong -- Credit Suisse -- Analyst

Ting Li -- Chief Operating Officer

Eileen Deng -- Deutsche Bank -- Analyst

Natalie Wu -- CICC -- Analyst

Jerry Liu -- UBS -- Analyst

Penny Wang -- HSBC -- Analyst

Karen Chan -- Jefferies -- Analyst

Alex Yao -- J.P.Morgan -- Analyst

Eddie Leung -- Bank of America Merrill Lynch -- Analyst

Hillman Chan -- Citi -- Analyst

David Xueling Li -- Chairman and Acting Chief Executive Officer

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