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YY Inc (NASDAQ:YY)
Q3 2019 Earnings Call
Nov 13, 2019, 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 Inc.'s Third Quarter 2019 Earnings Call.

[Operator Instructions]

I would now like to hand the conference over to your host today, Mr. Matthew Zhao, IR Director of YY Inc.

Thank you. Sir, please go ahead.

Matthew Zhao -- Investor Relations Director

Thank you, operator. Good morning and good evening everyone. Welcome to YY's third quarter 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 third 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 note 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 of the Board and Chief Executive Officer

[Foreign Speech]

Thank you, Matthew. Hello, everyone. Welcome to our earnings call today. Our third quarter of 2019 results are characterized with continued success in our group's mobilization [Phonetic] and AI technology driven strategies. Our total revenues increased by 67.8% year-over-year to RMB6.88 billion. Demonstrating our solid progress in three key areas; first globalization efforts resulting in significant growth in both users and revenues. Second, technology advancement leading to increase in our user loyalty and operation efficiency. Third content innovation revitalizing domestic business.

[Foreign Speech]

On the globalization front, we achieved significant progress in expanding the market reach of all four key products which are Likee, IMO, BIGO LIVE and HAGO. Notably Likee, our leading short-form video platform, with global footprint, hit the milestone of 100 million monthly active users, in the third quarter of 2019.

Representing a year-over-year growth rate of 413.4%, such rapid growth in user base, is a result of our relentless drive for content localization, innovative features and AI technology enhancement.

[Foreign Speech]

First, let me share more details on Likee. Short-form video has become the mainstream content format of choice, for generation Z users around the world. Increasingly, influencing their social values and lifestyles. As the second largest short-form video platform globally, outside of China; Likee is well positioned to capitalize on the growing market demand. To extend Likee's global footprint, during the third quarter, we continue to explore the best venues to localize short-form video content, for diverse cultures, backgrounds and values.

For example, in Russia, Likee hosted an offline event called Likee Party Moscow in August. This event marked Likee's Second Anniversary, as an international short-form video brand. The onstage performance dazzles more than 10,000 audience in the capital city of Russia. Our success in organizing such local events in Russia, demonstrates Likee's unique capability in establishing cultural connections among young users, inspiring their creativity and self-expression and boosting their enthusiasm toward original content production. All of which in turn help us expand our brand influence, as well as strengthen our leadership in more global markets.

[Foreign Speech]

In addition to content localization, Likee also started to attract and retain users through continuous introduction of new features and functions, including data visualization tools, collaborative travel vlog projects, AI based image cropping, photo series and face swapping features. These new features significantly lower the short-form video production entry barrier to users, became smashed mass hits upon launching, and attracted millions of users worldwide to create and share videos with their friends.

[Foreign Speech]

Besides expanding its home market reach, Likee was also successful in distributing its content in our instant messaging platform, IMO, by granting access to Likee short-form video feeds to IMO users in over 45 countries and regions, we were able to increase our IMO embedded short-form video, monthly active users to 50.2 million during the third quarter of 2019. This is also a good example, demonstrating the great synergies across multiple products.

[Foreign Speech]

Now, let me share more colors about our progress with IMO. In addition to video content, IMO was also injecting additional innovative social features to enhance user stickiness and promote social interactions. As a result, in the third quarter, IMO's communication services will utilize over 400 million times per day on average, while each users average daily usage exceeded 38 minutes. As IMO's user stickiness continue to grow, we were able to unlock its monetization potential through advertisement.

As a result, IMO's advertising revenues increased by 25% sequentially during the third quarter of 2019. To further establish IMO, as a world-class video-based instant messaging platform. We plan to continue cultivating across platform operational model, diversifying content and services and refining monetization tactics, through both live streaming tipping and video and IM related type advertisement.

[Foreign Speech]

Besides short-form video and instant messaging, our international live streaming platform, BIGO LIVE also achieved solid progress both operational and financial. During the quarter, BIGO LIVE's monthly active user reached a record-breaking level of 21.9 million representing a 9.7% year-over-year increase. As BIGO LIVE secures its foothold in emerging markets. It is able to further expand into developed markets and grab more opportunities. As a result, its revenue contribution from developed markets such as Europe, Americas, Japan and other regions increased further to 26% in the third quarter -- and 21% in the second quarter of 2019.

[Foreign Speech]

All of our aforementioned business success is built on the foundation of our technology advancement. During the third quarter, we continued to incorporate AI based recommendation technologies into our platform. Through our proprietary multi-target intelligent recommendation model and real-time exploration discovery model, we are able to characterize, manage and distribute global short-form video and live streaming content more efficiently.

Our multi-target intelligent recommendation model, analyzes comprehensive user behaviors, such as viewing, commenting, interacting, et cetera, to improve the relevancy and accuracy of our overall recommendations. The real-time exploration discovery model compiles and analyze a massive amount of content, generated by users each day, to timely discover short-form video clips of top quality that could potentially become smash hits.

As a result, the number of high-quality videos discovered by AI machines in September has more than doubled compared with June.

[Foreign Speech]

In addition to enhancing our recommendation capability, we are also leveraging software algorithms to improve our operational efficiency. For example, BIGOs in quota system, a technology we developed in-house recently, could automatically adapt and improve the live streaming video quality by over 10% without putting any extra strain on network or bandwidth.

[Foreign Speech]

Meanwhile, HAGO, our casual game-oriented social media platform has not only maintained its rapid expansion of user base, but also achieved meaningful progress in monetization. During the third quarter, HAGO's, MAUs increased to 32.3 million, representing a 92.4% year-over-year increase. Leveraging its past success in Indonesia, HAGO was able to further penetrate into other markets such as India.

In addition, HAGO has paved a very clear path to monetization through its user, who based interaction model, in its previously developed markets. We expect HAGO to make profits in its previously developed markets in the fourth quarter. Going forward, we seek to increase HAGO's user engagement and retention continuously on three fronts, expanding its casual game variety and quality or quantity; accelerating its content-centric community development and introducing new social features such as interest based user groups.

[Foreign Speech]

While we are successfully implementing our growth strategy through globalization, we are also revitalizing our domestic live streaming business, YY Live, through continuous innovation and reinvention. As we keep close attention to the constantly evolving user in entertainment demand, we have uncovered the growing user preference for variety shows. During the third quarter, we launched our partnership with Yixing Zhang, a renowned Chinese singer and songwriter, to add more content of variety show style to our library.

Our effort has paid-off handsomely. Yixing Zhang's initial live-streaming session attracted 7.2 million cumulative users and viewers and 240,000 peak concurrent viewers. Our partnership with Yixing Zhang continued to render success in producing premium live-streaming content, attracting viewers and fans, shaping [Phonetic] a new live streaming plus artist business model and opening up another monetization trail for entertainment stars. Since then, we have formed partnership with 13 additional celebrities specializing in variety shows.

[Foreign Speech]

Consistent with our efforts of incorporating variety shows into our live streaming content, we're also introducing new interaction features to provide our YY Live users and immersed variety show experience. Through the multi-person microphone relay feature and the multi-party PK function, YY Live can dynamically generate personalized variety show programs, on a real-time basis. As a result, our YY variety show live streaming received stable and widespread viewership, during the daily premiums time slots. Thus, leading the industry charge in patent entertainment innovation.

[Foreign Speech]

In summary, we achieved substantial success in globalization, AI technology enhancement and revitalization of our domestic growth engine. Going forward, we envision, vast market potential for our global video based social media platform. We are confident that we can continue to deliver consistent and superior shareholder value through the synergies across our multiple product and markets, continuous efforts in globalization through localization and the enhancement of our operation efficiency.

With that, I will turn the call to Bing Jin, our CFO, to go through the details of our financial results.

With that I will turn the call to Bing Jin, our CFO to go through the details of our financial results.

Bing Jin -- Chief Financial Officer

Now, as YY's CFO, I'll talk about the financial results. We continue to deliver robust financial and operating results during the third quarter of 2019. Total net revenues for the third quarter increased by 67.8% year-over-year to RMB6.88 billion, exceeding the high-end of our previous guidance range and exceed expectations.

Specifically, live streaming revenues for the third quarter increased by 66.2% year-over-year to RMB6.47 billion, mainly driven by the continued growth in live streaming revenues from the YY and Huya segment, as well as the consolidation of Bigo, which contributed RMB1.42 billion in the quarter.

Other revenues in the third quarter increased by 98.3% to RMB408.3 million, driven by higher advertising revenues from both Huya and Bigo. Cost of revenues for the third quarter increased by 76.2% year-over-year to RMB4.71 billion. Revenue sharing fees and content costs increased to RMB3.46 billion in the third quarter, from RMB2.21 billion in the same period of last year, as a result of increase in live streaming revenues of the Company.

Bandwidth costs increased to RMB496.8 million from RMB249.5 million in the same period last year, mainly reflecting the continuous expansion of our global user base and time spent following the Bigo consolidation. Gross profit for the third quarter increased by 52.1% year-over-year to RMB2.17 billion. Gross margin was 31.5% compared to 34.8% in the prior-year period. The decrease in gross margin was caused by increases in both revenue sharing fees and content costs.

In addition, both Huya and Bigo have lower gross margins, but contributed a significantly greater portion of the net revenue in the third quarter of 2019 compared to the prior year period, which also contributed to the gross margin contraction.

Operating expenses for the third quarter were RMB2.16 billion compared to RMB864.7 million in the prior year period. This increase was primarily due to higher sales and marketing expenses, which reached RMB1.08 billion in the third quarter. The increase in sales and marketing expenses was primarily attributable to our increased efforts in sales and marketing activities in overseas markets, as well as the impact of depreciation and amortization related to the consolidation of Bigo.

R&D expenses for the third quarter rose to RMB673.1 million from RMB314.1 million in the prior year period, mainly due to the increase in staff-related expenses. GAAP operating income for the third quarter was RMB160.3 million, compared to RMB610.9 million in the prior year period.

Operating margin for the third quarter was 2.3% compared to 14.9% in the prior year period, primarily due to the decrease in gross margin, the impact of depreciation and amortization related to Bigo consolidation and other overseas expansion initiatives. Non-GAAP operating income, which excludes share-based compensation expense, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, was RMB611.4 million in the third quarter, compared to RMB774.2 million in the prior year period.

Non-GAAP operating margin for the third quarter was 8.9% compared to 18.9% in the prior-year period. GAAP net income attributable to controlling interest of YY for the third quarter of 2019 was RMB109.9 million, compared to RMB650.7 million in the prior year period.

Non-GAAP net income attributable to the controlling interest of YY was RMB574.1 million compared to RMB787 million in the prior period. Non-GAAP net margin in the third quarter of 2019 was 8.3% compared to 19.2% in the prior period. Diluted net income per ADS in the third quarter of 2019 was RMB1.11 compared to RMB10.01 in the prior year period. Non-GAAP diluted net income per ADS was RMB6.42 compared to RMB12.07 in the prior year period.

Looking forward to the fourth quarter of 2019, we expect our net revenues to be between RMB7.32 billion and RMB7.52 billion, representing a year-over-year increase of 57.7% to 62%. 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'd now like to open up the call to questions.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Thomas Chong from Jefferies.

Thomas Chong -- Jefferies -- Analyst

[Foreign Speech]

Thanks management for taking my question and congratulations on a solid set of results. I have two questions. The first question is about Bigo. Given that Bigo demonstrates very strong user growth, as well as geopolitical coverage. Can management talks about the KPI in terms of user and revenue supports our different product offerings, BIGO LIVE, IMO and HAGO in 2020.

And my second question is about our AI capabilities. Given that our AI capabilities is getting so strong right now in getting the user traction, retention and providing where we personalize content. Can management share about what other areas or how we can further strengthen our AI capabilities in 2020 to track more user growth and retention in domestic and overseas market? Thank you.

David Xueling Li -- Chairman of the Board and Chief Executive Officer

[Foreign Speech]

Thank you for your question. This is David. Firstly, in terms of our international strategy, we actually have been implemented our current international strategy about two years already. So if you look at our global product map, we actually had three major product, which is Likee, IMO and BIGO LIVE.

So if you look at the third quarter results, which has already demonstrated the very strong synergies between the three different platforms. So looking into next year, we were quite confident, firstly in terms of the IMO's strong support in terms of the short-form video content from Likee distribution, within the IMO's platform. And meanwhile, the social relationships within IMO, also will significantly help our further content distributions within the different platforms. And meanwhile, on the other side, the experienced -- monetization experience coming from BIGO LIVE, also will continue to help both IMO and Likee to further explore of the monetization opportunities.

So in summary, we truly believe the synergies between -- among all these three platforms, as well as we further exploring of the user's social relationship within of the three platforms, definitely, will continue to help us to grow our international business with the very prospectus future. Thank you.

[Foreign Speech]

I think, the second question, in terms of the AI development. So the major reason, why the companies are really focused on to develop the short-form video contents, because if you look at the nature of the short-form video platform, it actually has been embedded all different types of the AI-related technologies here. It could be divided by the three parts. The first one is relatively traditional, what we call the recommendation systems. So we use a -- continue to develop our personalized recommendation capability to further -- to recommend the more targeted content into the users.

Then the second part is content engine. So it is majorly focused on the how to better recognize explore, as well as reediting of the different types of the content. And we truly believe that part of the technology will continue to develop, and we will have more competitions within that sectors, especially all the peers will compete each other in terms of how we -- how -- which peers can deliver the better content search engines in terms of how to have a deep understanding of the content, as well as the relevancy and the logic reason of those kind of content and we truly believe we were one of the best within of the industry as well.

Then the third part and most importantly is AI also will back to further develop and help of the evolution of the search engines. We truly believe in the next several years. Short-form video content will become the major content format in terms of -- to gather people education as well as informational.

So in the future, a lot of the different types of the information and acknowledge will reserved, produced as well as searched in the short-form video products. So we truly believe, after a decade, it will be a totally different world. So the Generation Z or the young people, they will majorly using short-form video as a major way to get access of the information, as well as get educated. And we are still very excited about the future development. Thank you.

Thomas Chong -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from the line of Daniel Chen from JPMorgan. Please go ahead.

Daniel Chen -- JP Morgan -- Analyst

[Foreign Speech]

I will translate myself. So my question is related to BIGO LIVE revenue, which grows very strongly this quarter, up by 35% quarter-over-quarter. And how much of that actually come from BIGO LIVE? And how much comes from other products like Likee and IMO? What's the drivers behind? Is it more from developed country or developing country? And how should we think about the revenue growth trajectory of the Bigo in the future quarters? Thank you.

Ting Li -- Chief Operating Officer

Thank you, Daniel. This is Bing. Let me address those questions. So for BIGO LIVE and IMO and Likee's monetization, the majority of revenues is coming from BIGO LIVE. IMO, as we mentioned they have some revenue from advertisement, which increased by 25% quarter-by-quarter. But on an absolute dollar term, it's still much smaller than BIGO LIVE's live streaming revenue. Likee is in very early stage of monetization. So Likee will continue to explore monetization, both from advertisement and live streaming. But in terms of advert dollar value is very small.

So to give you a picture, that majority of revenue from Bigo is from live streaming of BIGO LIVE. That's the first question.

Second question, in terms of the country breakdown, we are seeing, obviously, more rapid growth from developed world. As we mentioned in the call, that 26% of revenue is coming from developed world, including US, Europe, Korea and Japan, et cetera, compared with 21% last quarter. So obviously developed world, we'll contribute more and more portion of the revenue. Meanwhile, Middle East and Southeast Asia market are still the mainstream monetization regions currently. And then for the future forecast, I think, that is consistent with what we discussed on the analyst and investor report.

So I wouldn't go into detail, but we are confident that Bigo will continue to maintain that revenue growth. And obviously, additional revenue will be coming from further synergies into IMO and Likee.

Daniel Chen -- JP Morgan -- Analyst

Thank you.

Operator

Our next question comes from the line of Natalie Wu from CICC. Please go ahead.

Natalie Wu -- CICC -- Analyst

[Foreign Speech]

I will translate myself. So I have two questions here, first one is about Likee. Firstly, congratulations on the Likee of exceeding 100 million mobile MAU. Just wondering what's the highest the penetration rate in your top five cities for Likee on top of the mobile Internet user population and what do you see as a tipping-point for the explosive growth in the same region for Likee?

And second question is for David. So David, just wondering what will be the resource or time allocation for you next year? Thank you.

Bing Jin -- Chief Financial Officer

Thank you, Natalie. I'll address the first question and then Xueling David will address the second one. So in terms of the Likee MAU, you are right, we achieved over 100 million MAUs. In the top five countries, those as we said before, it's -- are India, Indonesia, Russia and some of the other developed and emerging markets. And you asked about the penetration rate. What I can tell you, if we look at the industry landscape or the short-form video market in global markets, except China are very -- I'd say, relatively low penetrated. My take would be less than 10% penetration in terms of mobile Internet users. So from that perspective, we are seeing massive opportunities and potential across all those emerging market developed world. As David mentioned in the last question that we truly believe short-form video is just starting to take-off globally. So we are very excited in terms of the penetration of future market potential.

David Xueling Li -- Chairman of the Board and Chief Executive Officer

[Foreign Speech]

This is David. Let me address your second question. So, we truly believe in the next year or even the longer period, our key focus as well as major energy allocation will be into the short-form video arena. Because based on our understandings, definitely the short-form videos will be further improve our comprehensive capabilities for the whole companies. That's also the major reason why we took the short-form video as one of the key strategies for the corporation.

If we look at the international development in terms of short-form video content, which we believe it will be in the future, it will be similar as China, which means every person will be use of the short-form video apps. So our ultimate penetration rate for the short-form videos will be very similar as the social media or even social network products. And this trend actually already happened in China. But we -- I'm afraid, actually for the rest of the world, probably still a lot of people still catching that in terms of the future of the short-form videos. So based on our understandings, which we believe this is a historic opportunities for the Company.

So in the next one or two years, so we will continue to develop our short-form video apps in order to catch those massive market opportunities. That's the first part. And second part, after we have a development of the short-form video content as well as, it also will back train of our AI capabilities and train our teams, because as I mentioned previously, the AI technology actually has been -- the short-form video actually has been used most of the AI capabilities in the market.

And if we look at the nature of the short-form video, it's -- actually, already quite similar as a reality world. The only difference will be a camera, right? So understanding about the short-form videos will also represent understanding of the reality world through of the AI capabilities. So once we have the industry-leading of the AI technology -- capability has been established, is that actually give us more opportunities to grab of the future opportunities within of the sector. So that's a major reason why we will keep on -- keep most our energy focused on the short-form video development in the future. Thank you.

Operator

[Foreign Speech]

Our next question comes from Lei Zhang from Bank of America. Please go ahead.

Lei Zhang -- Bank of America -- Analyst

[Foreign Speech]

Thanks management for taking my questions. Congrats on the strong results. The first question is on the overseas competition, maybe with TikTok, our launch year management's updated view on the competitive dynamics and your recent user channel in lieu [Phonetic] of the acquisition and last year short-form videos spending overseas? And second question about Likee's or short-videos record lower rates. You can see there what has happened, though, with TikTok. Thank you.

David Xueling Li -- Chairman of the Board and Chief Executive Officer

[Foreign Speech]

This is David. Let me address your question. So in terms of the short-form video competition, we have to agree, year 2019 is most of the difficult year for us. The major reason behind that is, firstly, if you look at our short-form video platforms history, we are actually much shorter than other of the major peers within this sector. We only give up likely about two years compared with other peers already existing in the market last five years. And meanwhile, in terms of the recommendation capability behind of the short-form video platform, our peers even had the longer -- the experience, which is more than eight years.

But -- and meanwhile, in terms of the sales and marketing spend on the full-year of 2018, our major peers also has more or less 5 times of the sales and marketing expenses compared with Likee in the last year. So put all those factors together, 2019 is most of the -- I'd say, the most of the difficult year for our short-form video platform development.

But, meanwhile, even we are facing those kind of difficulties, but our -- the Likee's market share continue to increase. In the third quarter of this year, as we mentioned before, our overall short-form video MAUs has been reached 250 million outside of China, which is already amazing scale for the short-form video user base already. And so, we truly believe, especially followed by our -- the AI as well as other technology capability continue to improve, definitely looking into 2020, the competition pressure for us will be significantly eased.

And except for that, I also want to mention IMO, our IM products. So for the IM product, currently, we only allow the users to watch all the short-form vidoes, but in the future, once we start to allows and encourage the users to produce and upload to more short-form video content within IMO, we definitely can leverage IMO's very strong social relationships to further boom of the activities, as well as viewership of the short-form videos within of the IM products.

So, all-in-all, this year, we actually focus on to continuously solidify our fundamental capabilities, especially AI capabilities. So, next year, once we see more users growth, definitely, we will see those kind of capability will continue to help us to grow the short-form video platform. Thank you.

[Foreign Speech]

The second question related to the directory risk in overseas. The difference in terms of our short-form video platform compared with other peers is likely starting from day one, we were a global company. We really focus on to understand of the demands of the global users compared with most of our peers is there, short-form video business-oriented from the China business. So, it's very different.

And since we're actually starting from a global company, so even starting from day one, we really focused on the top-line, as well as a deep understanding about the local regulatory, as well as the local government requirements. So, that is behind that. So, that can help likely to build up more mature of the policies and the technical actions in terms to better protect the user privacy, as well as the data -- the overall data protection.

So, all in all, we believe we -- in terms of the regulatory risk globally, we are better than most of our peers. Thank you.

Operator

[Foreign Speech]

Thank you. Our next question comes from Alex Liu from China Renaissance. Please go ahead.

Alex Liu -- China Renaissance -- Analyst

[Foreign Speech]

I'll translate myself. So, first of all, Xueling, we see some sort of easing side on the sales and marketing expense for people this quarter. I just wondering how should we think about this cost item shifting into the trend of the cost side into 2020 in the fourth quarter of 2019?

And then also, given the fact we have multiple different products within Bigo umbrella, namely IMO, Likee and also BIGO LIVE, would the management share a bit of color on the user acquisition cost across different products at the moment? Thank you.

Bing Jin -- Chief Financial Officer

Hi. Thank you. Let me address those questions. So the first question regarding sales margin expense for BIGO. We did see that the third quarter, the sales margin expense is relatively lower compared with second quarter, because we are seeing very healthy pattern for our user retention. And then as David mentioned, that we start with small base. We're seeing more rapid progress in more emerging markets and developed world. So we're continuing to monitor our user retention, as well as the balance of the growth for the user base and the marketing spending.

In 2020, David did mention that our pressure will be less. But that doesn't necessarily mean that we're going to spend less money for sales marketing. It just means that we are seeing more opportunities. And once we see that pattern, meaning user retention pattern continued to be healthy, we are confident to spend more dollar value to attract more users to build a bigger ecosystem.

And meanwhile, we also focused on monetization on the Likee. As I mentioned, we monetize through live streaming and advertisement to releverage synergies among different products. So, that's, I would say, the trend that I can foresee for Bigo sales marketing.

For the user acquisition cost, it is different across different product. But for IMO, our key focus right now is to focus on enhancing the quality of the content into IMO rather than expand sales marketing to attract more users. So I think the near-term we'll focus on content quality enhancement for IMO.

For Likee, as I said, it differs from country-to-country. It differs according to different stage of development. So we cannot share a single number for Likee's user acquisition cost. For BIGO LIVE, we've been doing BIGO LIVE for quite a long time, so I'd say, it's a relatively stable business. We'll continue to do sales marketing for BIGO LIVE user, but it's not on a big scale compared with Likee. So that's, I think the color I can share.

Alex Liu -- China Renaissance -- Analyst

Thank you.

Bing Jin -- Chief Financial Officer

Thank you.

Operator

Our final question will come from the line of Jialong Shi from Nomura. Please go ahead.

Jialong Shi -- Nomura -- Analyst

[Foreign Speech]

I have two questions. And first question is about YY Live, the live broadcasting business in China, as we are approaching year-end, so I just want if management can any colors as to the potential growth rate YY Live could achieve next year? And also, just wondering if there -- the management see any changes in the competition landscape in China's live broadcasting business that is caused by new entrants, such as DouYu and Kuaishou.

My second question is about the relationship -- YY's relationship with, again, live broadcasting subsidiary, Huya. As we are approaching the two-year anniversary, upon which Tencent will likely become a majority shareholder of Huya. So I just wondered if we should expect to see any changes in YY's relationship with Huya before and post the divestment as Huya is also talking about expanding into a broad-category of non-gaming entertainment content, which could potentially make it a competitor to YY in China and overseas market as well. So I just wonder if YY currently has or will sign a non-competition agreement with Huya post the divestment? Thank you.

Ting Li -- Chief Operating Officer

[Foreign Speech]

This is COO, Ting. Let me address your question. So firstly, in terms of the competitive landscape with short-form videos in China, we all agree the short-form video products is a very comprehensive product, which can have an impact with the different parts of the services or products at the same time. That is also the major reason why we developed -- the overseas short-form videos.

So for the China part, we already noted the trend, for example, in terms of the new music distributions, the short-form videos, such as already become the mainstream platform, which is already impact of the traditional of the music distribution channels. Another good example is, since the short-form video has occupy a lot of users time, as well as interactive features, that is why it also has some of the impact for the stranger social network. But by comparison, since the live streaming business, our live streaming platform has a very stickiness of the user feature as well as the immersive user experience. So that is why if you look at this year's YY Live environment, although we're facing the competition from the short-form videos, but we actually keep the very stable outlook growth for the overall YY Live's revenue. And we expected next year also have the same -- similar situation.

And meanwhile, a worse to mention is for this year is paying user number for YY Live also has been significantly improved, demonstrates a very healthy trend for the whole platforms. So all-in-all, in the future, in terms of our live streaming business in China, especially since we continue focus on the -- to create more diversified content, as well as to create the different types of the interactive features, definitely we are still very confident in terms of future YY Live's development. Thank you.

Bing Jin -- Chief Financial Officer

And Jialong, I'll address the second question regards our relationship with Huya. First of all, we are still very favorable look upon Huya's potential as China's leading game live streaming platform and also the enormous e-sports market opportunities. So we will continue to support Huya and consolidate with Huya on to the point where Tencent can exit the auction, which is coming from March next year to March 2021. If they exit the auction, we can obviously consider sell portion of Huya's shares to Tencent.

Regarding your second question for the competition of Huya's non-game live streaming, business with YY, I don't think that's a big issue. As I explained before, both in China and overseas, entertainment live streaming is never a zero-sum game market. The market opportunity is enormous, both from the supply side and demand side.

On the supply side, we have seen more and more ordinary people becoming popular online live streaming stars. So the supply will continue to drive more and more hosts coming into different and stimulating platform. On the demand side, even in China, with this huge competition, as you have asked the question, YY Live will continue to grow. And overseas, it's a very early stage for entertainment live streaming. So I don't think competition would be -- entertainment live streaming is a big issue, hopefully.

Jialong Shi -- Nomura -- Analyst

Thanks gentlemen. As a quick follow-up, so how are you going to use the cash proceeds to be received from the sale of Huya shares?

Bing Jin -- Chief Financial Officer

That -- we can have a range of options. Depending on the ROI of different alternatives. So I think, our strategy right now is to remain flexible. Obviously, we also patent [Phonetic] to the shareholder value. Meanwhile, we're also trying to find new ways of generating high ROI project for ourselves.

Jialong Shi -- Nomura -- Analyst

Thank you for the color. This is it. Thanks all.

Bing Jin -- Chief Financial Officer

Thank you.

Operator

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

Matthew Zhao -- Investor Relations Director

Thank you, operator. Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you.

Bing Jin -- Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

Matthew Zhao -- Investor Relations Director

David Xueling Li -- Chairman of the Board and Chief Executive Officer

Bing Jin -- Chief Financial Officer

Ting Li -- Chief Operating Officer

Thomas Chong -- Jefferies -- Analyst

Daniel Chen -- JP Morgan -- Analyst

Natalie Wu -- CICC -- Analyst

Lei Zhang -- Bank of America -- Analyst

Alex Liu -- China Renaissance -- Analyst

Jialong Shi -- Nomura -- Analyst

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