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YY Inc (NASDAQ:YY)
Q1 2019 Earnings Call
May 29, 2019, 9:00 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 YY's Incorporated First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note, this event is being recorded.

I would 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 Huaxia Zhao -- Investor Relations Director

Thank you, operator. Good morning and good evening everyone. Welcome to YY's first quarter of 2019 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of YY; Mr. Bing Jin, CFO of YY; 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 first quarter of 2019 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 know that, unless otherwise stated all figures mentioned during this conference call are in renminbi.

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

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

Thank you, Matthew. Hello, everyone. Welcome to our earnings conference call for the first quarter. Before we start with this quarter's performance, I should mention as some of you may have already noticed that I've been recently appointed as the CEO of YY by our Board. After almost two years as the Company's Acting CEO, I'm very excited and honored to lead the new YY Group, which consist of our YY, Huya and Bigo business.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

After the completion of the Bigo acquisition, YY has become a global social media platform, with over 400 million in global, video and live streaming average mobile MAUs in the first quarter of 2019. Among these MAUs, more than 75% income market outside of China, which demonstrates the progress that we have achieved in our globalization strategy so far. Additionally, the composition of our user base is very diverse. Of our over 400 million average MAUs, 192.4 million come from our short-form video and live streaming services. This large proportion of users has enabled us to strengthen our leadership in both short-form video and live streaming success around the world.

In addition, 211.8 million MAUs came from IMO, a global video communication application. Going forward with a global strategy and focus on AI technology, we are confident in our ability to bring YY Group into a new stage and solidify our position at a global video based social media platform.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

(technical difficulty) 2019 with a strong first quarter results. Upon completion of the acquisition of Bigo on March the 4th 2019, we began to consolidate financials. Our total revenues increased by 47.1% year-over-year to RMB4.78 billion during the quarter. Excluding the consolidation of Bigo's financials, our top line results still outperformed the high end of our previous guidance range.

Revenue from our live streaming business grew by 47.9% year-over-year to RMB4.49 billion . Revenue from our game live streaming subsidiary Huya increased by 93.4% year-over-year to RMB1.63 billion .

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

These strong growth numbers were a result of our commitment to the following. First, rigorously expanding our global operations. Second, continually enriching and upgrading our content offering. And three consistently improving our technology capabilities, especially our AI know-how.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

First, I would like to highlight YY's global expansion strategy and our progress to date. As mentioned earlier, YY's user base is very global and diverse, including users from segments in live streaming, short-form videos, video messaging and our other products and service offerings, on our -- over 400 million average mobile MAUs in the first quarter of 2019. 211.8 were from IMO. IMO has developed a large user community mainly in the Middle East and South Asian market by offering high quality video communication tools and services. Additionally, IMO's community is highly engaged and attracted to video content. IMO's video communication services were used over 55 million ton per day on average and each users daily average usage is high for video communication was about 40 minutes in the first quarter of 2019. IMO's core competitiveness comes from its ability to fulfill the video communication need of users in a variety of scenarios including home, entertainment and business.

Moving forward, we plan to further develop IMO into a more powerful Super App by providing increasingly diverse content, functions and services to our users. Recently, we started to embed our short-form video feed and video moment into IMO that allow users to access high quality content. Going forward, we will consider embedding live streaming and other types of content into IMO as well.

In addition, the users of IMO's video conferencing services also have significant monetization potential, in the first quarter of 2019, on average, over 200,000 video conferences featuring three or more participants were initiated on IMO every day. This level of usage represent significant future monetization opportunities for IMO. In fact, it puts IMO on equal footing with the major business oriented video conferencing service providers on the market today.

Generally, as we continue to cultivate synergies between our different business units, we will create more diverse social media content and best-in-class user experience for our global user community.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language) (technical difficulty)

Operator -- Chairman and Chief Executive Officer

Excuse me, this is the operator. I do apologize, we've got some problem with the speaker line. You will be on mute -- you will be on music hold while fixing this constraint. Thank you so much.

Matthew Huaxia Zhao -- Investor Relations Director

Hello, Operator? Hello, Operator?

Operator -- Investor Relations Director

Hi. You're back online. Thank you. Please go ahead.

Matthew Huaxia Zhao -- Investor Relations Director

Okay. So, we're back to the conference. Thank you.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

In addition, our overseas short-form video and live stream user base also continued to expand rapidly in the first quarter, as the average MAU for Bigo short-form video and live streaming services increased by 160.6% year-over-year to RMB78.7 million. This increase was primarily driven by user growth from LIKE. Recently, LIKE was a short-form video editing platform that allow users to add special effects into our -- into their original video works. In the second half of last year, LIKE has developed into a leading global short-form video social platform. We believe that we are still at early stage of the competition in the global short-form video market which has tremendous growth opportunities. Currently, a majority of short-form video content in the market whether generated by users called UGC or or professionally called PGC is mostly in entertainment or lifestyle categories.

But we also realized that short-form videos is a efficient way to help people acquire knowledge in the future. In fact, a variety of knowledge, skill sets and lifestyle tips can be caught and learned through short-form video effectively. This reflects the tremendous commercial and social value of short-form videos. Recently, LIKE started a program to support high quality talented PUGC or V Media performance to further enrich the content offerings. Moreover, through the efforts of industry-leading AI experts and algorithm specialists, Bigo has further enhanced user stickiness and viewing experience. In addition, our overseas live streaming business Bigo LIVE streaming maintained healthy user growth and further improved its monetization system, cemented our global leadership in the first quarter.

BIgo LIVE has accumulated extensive monetization experiences in this live stream offering through years of successful operation in the international markets. This operational experience will set LIKE apart from the competition by enabling it to monetize through live streaming offerings. Since it is able to give content providers better economic results and returns, it also encourages them to provide better quality content. Therefore, we are well positioned to capture higher global market share by leveraging our valuable content and vibrant social media ecosystem.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

Another progress on the globalization from -- is HAGO, while our casual game oriented social network platform, which also maintained its rapid growth trajectory. During the first quarter of 2019, HAGO continued adding more casual games to it's portfolio. As a result, it maintained a very high level of user engagement, as the daily time spent on HAGO per user exceeded one hour in the first quarter.

In addition, we also introduced voice chatrooms with virtual gifting features on HAGO. These chatrooms and their features enable users to interact with each other, while enjoying casual games. We believe these features will serve as a solid foundation for HAGO to develop its monetization capabilities. HAGO also consistently ranked as one of the top applications on Google Play in Indonesia and Vietnam. According to Sensor Tower, HAGO ranked among top 10 by downloads in the social networking apps worldwide in the first quarter of 2019.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

Secondly, we continued to introduce innovative features and high-quality professional user generated content. For example, we started a new show by combining live streaming with a social detection game, which allowed users to watch six hosts played the game live, while utilizing a series of interactive features to support their favorite hosts. Regarding our high quality PUGC, we introduced a reaction show featuring our top host modern Brothers. The show attracted over 450,000 viewers, who joined the live show room and watched modern Brothers live streaming their own TV reality shows. We believe that these types of innovations will continue to expand and strengthen the loyalty of our live streaming community going forward.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

Thirdly, we have made solid progress toward enhancing our technology through the application and integration of Artificial Intelligence. For content recommendation, we improved the efficiency of our AI powered content distribution engine. Through this improvement, we have created an optimal experience for our users by ensuring that they find their most desired content faster and easier than ever before.

For host recommendation, we upgraded our existing machine learning models, which previously ranked host based on the estimated click-through rates only. By utilizing our deep-neural network technology, we built recommendation algorithms that can simultaneously estimate and quantify metrics such as host click-through rates, average user time spent and conversion rates. As we improved the accuracy and effectiveness of our recommendations, our new users on average spent 25% longer on our platform in the first quarter compared to the previous quarter.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Bing Jin -- Chief Financial Officer

In summary, we continue to execute our global expansion strategy firmly, which help us to achieve strong growth in the first quarter. We also maintained our focus on innovating our live streaming content offerings and helping our host to grow their audiences. Looking forward, we remain committed to strengthening our market leadership, both domestically and internationally. As we continue to invest in our content offering and AI technology innovations, we believe we can further enhance user engagement and monetization going forward.

That concludes David's prepared remarks. Now as well as CFO. I will talk about the financial results.

We continued to deliver solid financial and operating metrics during the first quarter of 2019. Our total net revenues for the first quarter increased by 47.1% year-over-year to RMB4.78 billion . Specifically, our live streaming revenues for the first quarter increased by 47.9% year-over-year to RMB4.49 billion , accounting for 93.8% our total net revenues this quarter. Even excluding the effect of the consolidation of Bigo, we exceeded the high end of our previous guidance range by over 5%, due to the strong financial performance for both YY and Huya segments. In the first quarter, mobile contributed 69.6% of our live streaming revenues, while mobile live streaming MAUs of YY Live plus HAGO increased by 65.6% to RMB59.8 million -- RMB59.8 million, as compared to the same quarter in 2018.

Live streaming paying users of YY increased by 17.1% to 4.1 million in the first quarter of 2019. Cost of revenues for the first quarter increased by 56.8% year-over-year to RMB3.16 billion . Revenue sharing fees and content costs paid to the performance skewed and content providers increased to RMB2.52 billion in the first quarter, reflecting the growth of live streaming revenues of YY, Huya and Bigo.

In addition, bandwidth costs for the first quarter increased to RMB297.4 million, primarily reflecting continued overseas user base expansion. Gross profit for the first quarter increased by 31.4% year-over-year to RMB1.62 billion . Gross margin was 33.9%, compared to 38% in the prior-year period, primarily due to the increase in revenue sharing fees and content costs. The decrease in gross margin was also attributable to the impact caused by the relatively low gross margin of the Huya segment as its contribution to our net revenues increased significantly year-over-year.

Operating expenses for the first quarter were RMB1.2 billion , compared to RMB649.1 million in the prior-year period, primarily due to our increased efforts in sales and marketing activities as we continue to expand in overseas markets, as well as the increase in staff related expense for AI research and development personnels.

Sales and marketing expenses for the first quarter were RMB534.2 million or 11.2% of total revenue, compared to RMB235.7 million or 7.3% of total revenue in the prior year period. Our R&D expenses for the first quarter of 2019 were RMB404.7 million or 8.5% of total revenues compared to RMB249.5 million or 7.7% of total revenues in the prior year period.

G&A expenses were RMB276.4 million or 5.8% of total revenues in the first quarter of 2019, compared to RMB164 million or 5% of total revenues in the prior year period.

Our GAAP operating income for the first quarter was RMB473.6 million compared to RMB596.4 million in the prior year period. Operating margin for the first quarter was 9.9%, compared to 18.4% in the prior period, primarily due to the decrease in gross margin and the increase in sales and marketing expenses, which is partially related to the acquisition and consolidation of Bigo.

Our non-GAAP operating income for the first quarter, which excludes share based compensation expenses, impairments of goodwill and investments, amortization of intangible assets from business acquisitions, as well as gain on deconsolidation and disposal of a subsidiary was RMB717.3 million compared to RMB727.3 million in the prior year period. GAAP net income attributable to the controlling interest of YY for the first quarter was RMB3.1 billion , compared to RMB963.5 million in the prior period, mainly due to the remeasurement gain of YY's previously held interest in Bigo amounting to about RMB2.7 billion , which was included as part of the gain on fair value change of investments.

Non-GAAP net income attributable to controlling interest of YY was RMB653.5 million, compared to RMB730 million in the prior period. Non-GAAP net margin in the first quarter of 2019 was 13.7%, compared to 22.5% in the prior period. Diluted net income per ADS in the first quarter of 2019 was RMB44.55 compared to RMB6.86 in the prior period. Non-GAAP diluted net income per ADS was RMB9.32, compared to RMB10.96 in the prior year period.

Looking forward to the second quarter of 2019, we expect our net revenues to be between RMB6 billion and RMB6.2 billion , representing a year-over-year increase of 59% to 64.3%. This forecast reflect our current and preliminary views on the market and operational conditions which are subject to change.

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

Questions and Answers:

Operator

Thank you so much. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line of Daniel Chen from JPMorgan. Daniel, your line is now open.

Daniel Chen -- JPMorgan -- Analyst

(foreign language) I will translate myself. Congratulation on a very solid quarter. So my question is on the AI. So we now have above 400 million of global user base, which is a huge and there is a lot of user data globally. So how are we going to utilize this data for our global products in the next few years. Thank you.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language) Yeah, this is David. Let me answer your question. So thank you for your question regarding to the AI technology. So AI technology actually is one of the -- of our major strategies for the corporation amount to our future strategy, which is one globalization, secondly, AI technology. So starting from 2018, actually, we have applied a lot of effort to apply AI technology into the data operations for the company.

Firstly, we actually used AI technology into the content management. So that part not only including short-form video, but also including live streaming, as well as mini games and et cetera. So, we're actually using the AI technology to match of the users when they play games from our HAGO platform or also watching live streaming content in our live -- other live streaming platforms. So in conclusion, the content management definitely will be using the AI technology to apply into that.

Then the second part is the base capabilities related to the AI technology, for example, like facial recognition, audio recognition and et cetera. For that part of purpose not only is better to manage the content, but we also had some of the requirement from the content censorship as well as content management. So we're actually using the AI technology to better censor, as well as manage our content in all.

And Internet one year to two years, we think we will and we truly believe the major battlefield for the AI technology improvement will be focused on the short-form video content management, because for the short-form content, most of them is quite fragmented coming from the different kind of topics. If we can use the better AI technology to provide users a better experience in the one year to two years time period with united theme or united topic which is the live related content. So definitely that will be -- further improve the stickiness for our short-form video content. So as I mentioned in the future, definitely the short-form video will be one part, we will put our more focus in terms of the improved of the AI's capability.

And second part is worth to mention is in terms of our AI-focused personnels. For the whole YY growth this year, we actually have accumulated and attracted more than 230 of the engineers and AI experts, which is focused on the algorithm as well as AI capabilities. So in terms of the scale of the AI teams, we're actually one of the biggest one within the China internet companies. So in the future, we'll further leverage those talents capability to continue improve our algorithm competitive . That has one correction is our AI teams total people is 3,020 -- sorry 320 not 230, sorry.

Daniel Chen -- JPMorgan -- 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

Thank you very much management for taking my question. Congratulations on the strong quarter.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language)

Eileen Deng -- Deutsche Bank -- Analyst

(foreign language) My question is really is maybe on the second quarter guidance, can management give us a breakdown of how much is from Bigo and YY Live. And second question is more on Bigo operating metrics. Can we have more color on key metrics such as paying users and ARPU. And also for the both key products Live and LIKE, what is the outlook for the full-year revenue growth and margin outlook and also the monetization plan. Thank you very much.

Bing Jin -- Chief Financial Officer

Yeah. Eileen, thank you. Let me address those questions. So the first question regarding the breakdown of the second quarter guidance, we provide guidance RMB6 billion to RMB6.2 billion that include both YY, Huya and Bigo. Now for YY number, I think you can refer to the Bloomberg consensus and I think yeah also last week, they have announced their result and also their guidance, so you can refer that. And then you deduct both YY and Huya from the guidance, that would give you the number for Bigo, right that's the breakdown.

For Bigo's operating metrics, they have different product obviously. The main monetization comes from Bigo LIVE, in terms of the paying ratio, well, Bigo LIVE is still relatively lower compared with YY Live in China because a lot of market are still in the early stage. In terms of ARPU actually is very high, because a lot of the owners they are from Middle East and obviously Middle East a very high purchasing power. So the ARPU in Middle East very high. But the ARPU in other emerging markets such as Southeast Asia and other parts of the world tend to be low. So we do think there will be a lot of room for growth for both paying ratio and ARPU. Now for the revenue and margin, as we told the investors that last year Bigo generated close to USD500 million revenue, this year we're still seeing very high growth rate. For the margin, we also mentioned previously that last year Bigo was loss making. This year I think Bigo will continue to be loss making, but be careful that Bigo LIVE is already making some money. So Bigo LIVE has handsome margin, but LIKE as David mentioned, that still in the early stage of short-form video market, there will continue to be more content upgrade and sales, marketing and branding effects. So the key focus for LIKE is to grow user base that's why we'll continue to spend money, that's why the margin for LIKE itself will be negative.

Another big component for Bigo part is called IMO, which we haven't publicly discussed that before, but right now we disclosed the IMO user number to be over 211 million MAU. And then we'll continue to add more features including short-form video and live streaming to enable better user experience for video conference and video communication.

For monetizing, we are also gradually -- ramp up the monetization in the IMO business, including both the advertising and also going forward, the live streaming. But we do foresee that in short-term we'll continue to invest in terms of content, in terms of sales marketing. So I think putting all these together for Bigo business, it will be loss making still this year, but we do have a clear path to profitability, which we can go in further detail later. But I -- on a high level I want to mention that this year's focus for YY as a group is to grow the user base. As you all see that we have over 400 million MAU, that put us into one of the world leading social media platform.

So we hopefully will reaccelerate our user growth and drive a much better exciting story.

Eileen Deng -- Deutsche Bank -- Analyst

Thank you very much.

Operator

Thank you so much. (Operator Instructions) And our next question comes from the line of Ashley Xu from CLSA. Ashley, you may now ask your question.

Ashley Xu -- CLSA -- Analyst

(foreign language) I will translate myself. So, I have two questions, one is on YY LIVE. We see that first quarter shows a better result than expected. So want to have management guidance for the full-year on YY LIVE. And what's HAGO's monetization progress. Do we have any target for the full-year as well. And second question is our recent credit rating dropped by S&P is reported that the drop is on company's request. Just want to check the background of this. Thanks.

Bing Jin -- Chief Financial Officer

Yeah, just first question regarding the full-year prospect for Live core business, as you see that the first quarter, our revenue on YY LIVE goes more than 10%. That is better than we expect because I think there are several reasons, one is due to our operational expertise, we do have a better edge compared with some of the competitors, particularly in the first quarter, the government tend to very stringent in terms of content screening. So that affect some of the smaller players, but it actually benefit the big platform like YY, because we have been very stringent in the content screening and monitoring.

So the eco-system, the expertise really helped. Secondly after Chinese New Year swing, first of all, we do see a very healthy returning pattern for the users and the host. So we continued to benefit from that, I will say recovery of the user demographic and then host demographic. So looking ahead for the rest of the year, we do think that the similar pattern will continue. So that's the full year kind of prospect.

Secondly, you asked about the dropping of the rating. I think there are several reasons. One is we have a public credit rating from S&P since 2015. So we maintain a regular dialog with the rating agencies. But given we don't have a immediate plan for fixed income products or bond offering in near term. So we don't think there is emerging need for continuing on public credit rating, that's the first reason. Secondly, our business has been growing very fast particularly recently we acquired Bigo. And then in terms of this in context of this fast-growing business, constantly upgrading -- updating agencies, then take a very meaningful share of management time resource. So as such, we believe that is more efficient to withdraw our credit rating at this point, so that we can focus effort on all our business to optimize the resource. So that's the key reason. Thanks.

Ashley Xu -- CLSA -- Analyst

Thanks.

Operator

Thank you so much. (Operator Instructions) And our next question comes from the line of Natalie Wu from CICC. Natalie, your line is now open.

Natalie Wu -- CICC -- Analyst

(foreign language) I'll translate myself. So, I have a question on IMO which has actually -- has a huge state of user base of LIKE. So the third question on the growth of the user. The second include video and live presentation. I wonder how should we think about the tradition of each product, whether it's like app or independent app? And how should we think about the future monetization model of IMO?

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language) Thank you for question. This is David. So IMO at the beginning, it actually has very simple functionality, which is focused on video call, especially targeted into the Android phones. So you can think actually IMO is a kind of the fit time into the Android phones. So because of the app has very simple and very simple functionality. So actually, there has been accumulate a very significant of user base because between Android phones, as well as between the Apple phones and Android phones, the people were using IMO to -- having the video calls to each other. So that's the major reason IMO has a large user base. And now what our monitor -- our monitoring is IMO's user base has entered to our most stabilized of the freight. So the next step, we will focus on the -- that also actually provide us a lot of opportunities to continue bringing more different kinds of services, as well as content into IMO's product to enable IMO continue evolving into a super app.

So another thing it's worth to mention is with the app, actually the user stickiness with what was very high per user span over 40 minutes in IMO every day. So that also provide us a lot of opportunities to expand our -- into the -- all the different kind of content as well the services in the future.

We -- from the higher end we truly believe throughout the IMO, we actually help the YY Group to complete of the user close loop because based on the -- we actually already have the large short-form video platform which is LIVE provide a huge amount of the short-form video content on the databases. But through IMO's platform, we actually have the better distribution through the LIVE -- through of the video moment, as well as other functionality embedded into IMO to better distribute of the short-form video content into IMO as well as other external of the social media platforms.

Then after the users has been accumulated a lot of popularity that we also will encourage the user back to our platform such as like to generate the mall content. So that will complete our users loop within our platform. And also another thing it's worth to mention is if we look at IMO's currently daily active users actually more than 30% has already converted into of the short-form video of the users. And in the future, we fully believe this ratio will continue to improve which it means IMO there has more and more users continue using more short-form video content. So in the future, connect all the things together will make YY group a very unique of the video player, which is quite different compared with other video players within of the market, because through of the LIKE, we will be helping out generate a huge amount of content.Then through IMO through help us distributing of those kind of short-form video content. Then we can use the live stream into better monetize those kind of short-form video content. So that will make YY, it's quite different of the players compared with mainstream video players in the market, such as YouTube.

So in conclusion, IMO will play a very important role in our future, the overall group's video strategy. Thank you.

Natalie Wu -- CICC -- Analyst

Great, thanks. Very helpful.

Operator

And your next question comes from the line of Hillman Chan from Citigroup. Please ask your question.

Hillman Chan -- Citigroup -- Analyst

(foreign language) Thank you for taking my questions. So my first question is on the overseas strategy for Bigo. Could management share more on the utilization and marketing strategy going forward. And also on the bottleneck of challenges that we face so far in some of these overseas market. And regarding IMO, super app strategy, could management share more on the new features to be introduced in second half this year. Thank you.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language) Thank you for the question, this is David. So first, I think your first question is more related to the Bigo LIVE's business. So for Bigo LIVE business, which is our leading live streaming platform overseas, we truly believe going forward our major goal is still focused on to build out the global users community, as well as the users relationship into the one by one different country regions, because based on our -- in the past experience in China, we actually had a deep understanding in terms of the live streaming content, as well as live streaming ecosystem. So going forward, we will continue to leverage of those kind of experience into the overseas expansions.

Another thing is worth to mention is we monitor is the live streaming content is not only popular within developing countries, but also is very popular within the developed world. For example, our revenue contribution coming from American plus European has been increased into 14% of the total revenues in the first quarter of this year. And the total overall Tier 1 countries revenue contribution has been reached to 20%. So that's also demonstrating in the Tier 1 or the developed world, we also had a strong demand for the live streaming content from the user base. So going forward in conclusion for Bigo LIVE we will continue focus on live streaming expansions from global wide. Your second question related to IMO. So the IMO's nature is to -- we truly believe is still focused on the social, social communication as well as social relationships. And in the future as I mentioned before, so the IMO's major role still how we can better distribute our short-form video content through the IMO's platform.

We actually gave the different kind of roles for our different kind of products. For example, like LIKE which is the short-form video platform going forward continue focus on producing and consume of the short-form video content. By contrast IMO will be more focused on the distributing of the short-form video content. So we -- so going forward, we think one of the key focus for better development of the social relationship within IMO, we will continue focus on the development of the growth functionalities.

So the Group will -- starting from the people that's around 3 to 5 people. they extend to a dozen, then even into over hundred or even thousands. So we will -- are trying to build out the better relationship within those kind of different interest based growth and we can better distribute our short-form video content within those kind of group. So that is our thinking in terms of the IMO's future strategy. Thank you.

Hillman Chan -- Citigroup -- Analyst

(foreign language)

Operator

Thank you so much. And our last question comes from the line of Tian Hou from T.H. Capital. Tian, your line is now open.

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

(foreign language) So growing up well, it's a great thing because the users are really haven't started to adopt to what we have already so familiar within China. However, those countries are much smaller than China. So the marketing effort has to be country-by-country given then when you were doing that in China, one advertisement can be seen or accessed by millions of millions of youngsters in China. So in that case the marketing effort must be difficult then when you were in China. So how do you envision the marketing efforts going abroad and also how your margin is going to be throughout the year. Thank you.

David Xueling Li -- Chairman and Chief Executive Officer

(foreign language) This is David, let me answer you first question. So, in terms of our sales and marketing expenses in the overseas market. Firstly, as you may noticed, so in terms of the sales and marketing directly related to the brand promotions actually is quite low as a percent of total sales. We only have some of the branding contents in the major countries with large population. For most of the smaller countries, we actually make or use performance based enhancement as major channel to promote our products. And another thing was to mention is currently we are also using the AI technologies to monitor and manage the overall performance -- from the performance advertisement platforms. And going forward as our AI technology continue become more mature and comprehensive, we truly believe that can deliver better ROI through the AI managed -- of the performance-based product promotion. Thank you.

Bing Jin -- Chief Financial Officer

And also I want to add two additional points, one is in some of the foreign market, actually the ROI for advertisement can be better than in China because in China, you have lot of advertising agencies. so that each of them take a cut on the total budget. But in foreign market there are basically Google play and Facebook. So it's relatively transparent. And already as David mentioned, we will use AI to closely monitor the ROI, that's the first thing.

Secondly, you asked about the margin profile for Bigo. As I mentioned before, Bigo has different business unit, Bigo LIVE definitely is making profit, LIKE will be a key area for sales, marketing, because we do see LIKE's user base doubled in the last half year and we see even more greater opportunities. So we need to make sure that when we spread a content globally, we need to make sure that more and more audience are aware of this product. Now, for IMO even though it has over 211 million MAU, it actually doesn't do a lot of sales and marketing, it has very little sales and marketing spending before. The users basically come organically, as David mentioned, because IMO provide very seamless video communication tool and environment.

Going forward, as we include more content, we might also do some of the sales marketing and branding for IMO as well. So those are the two spending areas for Bigo. So in total Bigo will still be loss making, but I think we're very encouraged by the future prospect of this business. Thanks.

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

Thank you. Thank you.

Operator

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

Matthew Huaxia Zhao -- Investor Relations Director

Thank you, operator. Thank you all for joining us today. That close our call today. We're looking forward to speaking with you in the coming quarters. Thank you.

David Xueling Li -- Chairman and Chief Executive Officer

Thank you.

Bing Jin -- Chief Financial Officer

Thank you.

Operator

And that does conclude the conference for today. Thank you for participating. You may all now disconnect.

Duration: 71 minutes

Call participants:

Matthew Huaxia Zhao -- Investor Relations Director

David Xueling Li -- Chairman and Chief Executive Officer

Bing Jin -- Chief Financial Officer

Daniel Chen -- JPMorgan -- Analyst

Eileen Deng -- Deutsche Bank -- Analyst

Ashley Xu -- CLSA -- Analyst

Natalie Wu -- CICC -- Analyst

Hillman Chan -- Citigroup -- Analyst

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

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