Anna Yu – IR Manager David Xueling Li – CEO Eric He – CFO.

Philip Wan – Morgan Stanley Alex Yao – JPMorgan Vivian Hao – Deutsche Bank Jialong Shi – Credit Suisse Gene Munster – Piper Jaffray Alicia Yap – Barclays Natalie Wu – CICC Yu-Heng Fan – China Renaissance Eddie Leung – BofA Merrill Lynch.

Good day everyone, and welcome to YY's Second Quarter 2014 Earnings Conference Call. [Operator Instructions] At this point, I would like to turn the call over to Anna Yu, YY's Investor Relations Manager. Thank you..

Thank you, operator. Welcome to YY's second quarter 2014 earnings conference call. With us today are Mr. David Xueling Li, CEO of YY, and Mr. Eric He, CFO. Following management's prepared remarks, we will conduct a Q&A session.

Before we begin, I refer you to the Safe Harbor statement in our earnings release which also applies to our conference call today as we will make forward-looking statements. At this time, I would like to turn the conference call over to CEO, Mr. David Li..

Thank you, Anna. Good morning and good evening everyone. We are excited to report another solid quarter, marked by strong top and bottom line performance. The growth was fueled by the continued expansion of our music and entertainment business, among with the development of our online game broadcasting and online dating segments.

We generated RMB841 million in total revenues, representing year-over-year growth of 106%. For this total, growth in online music and entertainment beat our expectations as we saw revenues grow by 203% and the paying user grow by 78% year over year. Our GAAP net income extension also grew at an impressive rate of 139% year over year to RMB222 million.

This quarter witnessed the increased user traffic and spending during major events like the World Cup and the romantic day of May 12th -- 20th, Wer Ling [ph], going forward.

We will continue to utilize event-driven user experience across our platform to develop increasingly interactive online activities among our expanding user base for over 100 million average monthly active users. Our real-time interactivity and scale of our user community have created many new business opportunities.

One such opportunity is our online dating segment which we launched about half-a-year ago and has begun to show tremendous potential. Revenues in this new segment increased by nearly 300% quarter over quarter, demonstrating the strong appeal and the revenue-generating potential of this service.

Another area I would like to highlight is our online gaming broadcasting business. We believe that this market has tremendous potential. Being the clear and early leader in this space, we believe that as online gaming continues to rapidly evolve into a spectator sport, mobile game will follow as well, further speeding up the growth of this industry.

We firmly believe that our numerous complementary content and user resources like our Duowan game portal and its 38 million daily unique visitors, we will continue to cement our leadership position in this industry.

Moving on our education offering, since 100 Education launched in February, we have made steady progress developing the offering, improving user interface across the app [ph] and attracting teachers and students.

The product has developed a strong brand recognition in the market for its high-quality test prep [ph] class as well as English class offerings. In addition, we see mobile as a key element to the successful development of this offering.

Already in the second quarter we launched a mobile app that empowers students to study anywhere through our platform. Going forward, we will continue to expand our mobile offerings to address growing user preference for anywhere, any device access to our services.

By further expanding our service offerings, we will continue to meet the changing demands of our dynamic user community. We are confident in the strong market-leading position we have established as we strive to attract new users and provide new and exciting service offerings.

Our online entertainment, live game broadcasting, online dating, education and other verticals position us well for strong and sustainable growth. With that, I will now hand over the call to our CFO, Eric..

Thank you, David. Good morning everyone. To start, I would like to elaborate on two key themes that David briefly highlighted about, before I delve into financial results. First, impressive development of both online game broadcasting and online dating. And second, our improving operating leverage.

Our online game broadcasting revenue grew at impressive 243% to RMB31 million year over year. However, we do not take our leadership position for granted, as we are tirelessly working on improving the video quality and also enhancing the functionality and user-friendliness of the platform.

While our online game broadcasting market is still young, we are witnessing the tremendous growth in the pool of both current and legacy players who have interest in watching talented players compete. This dynamic and large pool of viewers have created a new and profitable genre of spectator sports that now includes online gaming competitions.

This trend is not only evident from our own experience but also we have seen the potential internationally as mainstream cable sports channel even have begun to broadcast online gaming competitions live on cable TV, further strengthening our confidence for growth in this area.

The other area which I would like to highlight is our online dating business. This business has grown at incredible rate and has tremendous potential, as a growing population of younger internet users seek new forms of entertainment. The main appeal of our online dating platform center around the playfulness and casualness of the program.

Unlike traditional dating, our online dating platform is staged around online dating show that encourage real-time interactions among its users and participants. This new form of entertainment has captivated the interest of large portion of our users, as demonstrated by the strong financial results, and holds great potential going forward.

The recent success of these two business lines highlights the creative ways of our user utilizing our platform. As our user community reach a critical mass, we expect the evolution of our platform to become increasingly user-driven.

We will continue to respond to the evolving demands of our users, facilitate organic development of our platform by augmenting our own -- our offerings with innovative new services. One last area I would like to briefly highlight is our strong operating leverage.

Initially, non-GAAP operating margin were under pressure due to our expansion into new business lines. As associated R&D costs -- however, as we began to monetizing these new lines of business, we alleviate some of our margin pressure and our non-GAAP operating margin should remain relatively stable going forward.

Now, moving on to our quarterly financial details. Before I get started, I would like clarify that all financial numbers we are presenting today are in renminbi amounts and percentage changes are year-over-year comparison unless otherwise noted.

First of all, I'd like to highlight that in the second quarter we were once again able to achieve the results that exceeded our expectations on the top line. Moreover, we also saw net income attributable to YY increased by 139% due to expanding scale and leveraged our YY business operations.

Net revenues for second quarter 2014 increased by 106% to RMB841 million. This increase was primarily driven by increase in IVAS revenues. IVAS revenues increased by 118% to RMB801 million. The overall increase primarily reflected increase in the number of paying users and increase in ARPU. Let's look at each of IVAS business lines more specifically.

Revenue from online music and entertainment increased by 203% to RMB516 million. This increase primarily reflected a 78% increase in number of paying users to just over 1.1 million and a 70% increase in ARPU to RMB458 during second quarter 2014. Revenue from online games increased by 10% to RMB167 million.

This increase primarily reflected the increase in ARPU of 10% to RMB381. Also the number of online games increased to 150 as of June 30th, 2014, from 96 last year. Revenue from others increased by 169% to RMB117 million. Revenue from membership program increased by 54% to RMB49 million.

This increase primarily reflected a 43% increase in the members to 921,000 as of June 30th, 2014. Revenue from live broadcasting of online games increase significantly RMB31 million from RMB9 million in the prior-year period. Revenue from online dating increased significantly to RMB29 million from RMB7 million in the prior quarter.

Online advertising revenue were RMB40 million in the second quarter 2014 compared to RMB42 million in the corresponding period of 2013. Cost of revenue increased to RMB425 million. This was primarily attributable to an increase in revenue-sharing fee and content cost which increased to RMB256 million this quarter from RMB89 million last year.

This increase included revenue-sharing fees and content cost to performers, channel owners and content providers, and was primarily due to higher level of user engagement and spending.

In addition, bandwidth costs increased to RMB77 million, representing 9% of the revenues, down from 11% of revenue in the same period last year, as we continue to manage our bandwidth cost through better allocation of bandwidth resources and infrastructure improvements. Gross profit increased by RMB91 million -- sorry, 91% to RMB416 million.

Gross margin was 50% compared to 53% in the corresponding period 2013. The increase in gross margin was mainly attributable to a higher portion of revenue coming from online music and entertainment business, which has a higher cost ofrevenue structure due to revenue-sharing fee and content cost.

Our non-GAAP operating income increased 140% to RMB275 million. Non-GAAP operating margin increased to 33% from 28%. The increase in operating margin was primarily due to increased operating leverage associated with our expansion. GAAP net income attributable to YY increased 139% to RMB222 million from RMB93 million.

GAAP net margin increased to 26% from 23% in the same quarter last year. Non-GAAP net income attributable to YY increased by 107% to RMB258 million, while non-GAAP net margin remained stable at 31%. Diluted net income per ADS increased to RMB3.71 or $0.60 from RMB1.58 in the same quarter last year.

Non-GAAP diluted net income per ADS increased to RMB4.32 to $0.70 from RMB2.13 in the corresponding period 2013. For the quarter of 2014 -- for the third quarter of 2014, we currently expect our net revenue to be between RMB925 million and RMB935 million, representing year-over-year growth of approximately 90% to 92%.

This concludes our prepared remarks for today. Operator, now we are ready to take questions..

Ladies and gentlemen, we will begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Philip Wan from Morgan Stanley. Please ask your question..

Hi, good morning, David and Eric. Thanks for taking my question and congrats on a very strong quarter. My first question is about your new business, online dating and live game broadcasting.

As they are emerging as new growth driver for the company, would you share with us any internal sales target for these two business? And then also, how do margins for them are compared to your music business? Thank you..

[Chinese language spoken].

Now I would like to actually translate what David just mentioned. We think that game broadcasting business has a great potential, has a great future. The reason is that we have seen that the game become more of a spectator sports.

As we can see that the old PC online games now evolve into mobile game, we have seen a couple of the mobile game actually has allowed great demand on our platform as well. So we think that this type of the competition, competitive activities, overall can become a very interesting genre [ph] on our YY platform.

So not only in gaming itself, we think that a lot of other activities which has the elements of competition will become important pillars of our competitive platform and the real-time broadcasting business. So we think that the real-time broadcasting competitive activities in the future can be a big business.

So we are preparing ourselves to moving directions. So we think this business can become long-lasting big business into the future..

[Chinese language spoken].

The dating show actually on our platform is a brand new one. We think in this era we have seen a lot of younger generation of internet users, their entertainment needs is not being completely satisfied. We think our dating shows actually fill part of the demands from these new generations.

We also see that the dating show actually has some sort of differences from our very famous music and entertainment activities. Entertainment activities that we have demonstrated our capabilities, strong capability in the past, actually is provided -- the content was provided by the performer or the singers along.

A lot of users and fans actually are watching, are viewers. But on our dating shows, it's not like that. On our dating shows, the viewers can become content providers, can become the focus of the spotlight.

So believe these interactions, the casualness of the whole environment of the shows could actually create a very different type of entertainment down the road which is different from our current entertainment/music channels..

Next question please?.

Thank you. The next question comes from the line of Alex Yao from JPMorgan. Please ask your question..

Hi. Good morning everyone and thank you for taking my question. Congrats on a very solid quarter. I have two questions. Number one is on web game outlook. The growth rate of web game decelerated from the previous quarter pretty significantly in this quarter.

Can you share with us why is the weakness for this quarter, and what would be the web game outlook for the rest of the year? And then secondly is, in the prepared remarks you guys mentioned MAU has exceeded 100 million in this quarter.

Can you provide us with the accurate number and the breakdown across different activities such as gaming, music, dating, education, et cetera? Thank you very much..

Okay. Alex, yes, you are correct. In the second quarter we have seen some softness in our online game revenue, which is -- consist of the web game collaboration, web game cooperation revenues. I think the softness was due to the pipeline issues, because we have seen a couple of our web games has slowed down in the pipelines.

So the new pipelines actually has not come up into the stream. However, in third quarter, which is the current quarter, we already see that the pipeline actually start to develop into its shape. So in third quarter we have seen that web game actually has come back in terms of revenue very strongly.

So in terms of the rest of the year, we are very confident that our online gaming revenue still will be growing in the target rates, as I think right now the consensus of our online game revenue is in the range of 30% to 40%, I think that target is fine, and we still are very confident to reach that target.

So, yes, the second quarter was a little bit of a slowdown, but in third quarter, it actually has come back quite strongly. So we are confident that for the rest of the year should be okay. In terms of MAU numbers, yes, in the second quarter we have exceeded 100 million, which actually is pretty strong.

But in terms of the specific MAU number, we did not actually disclose the details. As you know that on our platforms, sometimes it's difficult to distinguish the gamers and the people who participate in the music. But I think there's a rough classification.

I think as of now, still our gaming users, still accounts for roughly 45% to 50% of the total MAU numbers. Our music users accounts for roughly 40% to 45% of this total numbers. And the rest of the others, users, accounts for roughly 5% to 10% of this 100 million MAU numbers. So that is very broad in general classification.

Usually we will use that as a base to calculate the conversion rate and -- conversion rates. So I think that -- I hope that answers your questions..

Yeah, it does, very helpful. And I'll get back to the queue. Thank you..

Thank you. Your next question comes from the line of Vivian Hao from Deutsche Bank. Please ask your question..

Hi. Thank you for taking my question. Hi, Eric and David. I have two questions. First of all, we noticed that your music segment ARPU for the second quarter has 20% year over year.

Is there any particular reason for the spike in the quarter? And also, could you give us -- provide us some color on the current VIP player or high-roller players contribution to the music segment revenue? And my second question is, as for the early business model explanation on the game broadcasting side, is it correct to understand we're moving to more of a [indiscernible] live show grassroots players model versus the previously it's more like elite versus fans, followers model? Thank you..

For the music business, yes, you are right. The music business ARPU has risen a little bit to RMB458 for second quarter. Remember that is a quarterly number. So, yeah, on a year-over-year, yes, it's about 20%, 30% increase.

But I would like to highlight that we view this increase in ARPU is very normal, because if you look at our business, our total revenue from music actually has doubled -- has actually tripled from last year's. So this significant growth actually come from two parts. One is our expansion of our paying users. The other portion is increase in ARPU.

I think with these two very strong driving force help us to achieve such a great performance of our music business. So I see this ARPU increase is very normal course of expansion in our business, as we are designing new items, or we are actually -- has created a lot of event-driven activities which stimulate the spendings from our users.

I think your second part of the question is our VIP members and all those so-called big rollers, how much did they spend. I think the percentage is still the same as the last quarter, you asked the same questions. I give you the answer already. So I think that percentage still holds true.

But I would like to point out that we have very interesting, you know, membership members. We have what we call the noble membership. We aggregate all the noble membership, we have more than 100,000 members as a nobility, one of the members of nobility.

I think that number of the nobility is still growing, which represents a very healthy development of our music and entertainment business. For the game broadcasting business, as pointed out by David earlier, that we view game broadcasting business is a very interesting business, has great potential.

We actually have seen that the game broadcast business has moved from the PC game onto mobile game. As you all know that the mobile game is growing like crazy. And so -- and not only that, we also see that a lot of other activities which have competitive elements of it could actually be broadcast on a real-time format on our platform.

So we think that game broadcasting business has a great potential moving into the future..

Thank you. Very helpful..

Your next question comes from the line of Jialong Shi from Credit Suisse. Please ask your question..

Hi. Good morning, David, Eric. Congratulations on a very strong quarter. I have two questions. My first question is still about the game broadcasting service. We -- I noticed from the media, from media, that YY recently signed agreement with Baidu Tieba regarding the cooperation on game live broadcasting service.

I just wonder when you guys will officially launch this initiative. And what's the potential impact on your game broadcasting service? Any colors will be appreciated. I have a follow-up question..

I will ask David to answer your question. I think David already got the question and he will answer in Chinese, I will translate later..

Thank you..

[Chinese language spoken].

Yes. I think we have initially agreed with Baidu Tieba on some of the collaborations. I think the main purpose for our game broadcasting business is that we all know that Baidu has tremendous traffic. Specifically in the gaming area, it has more than 400 million page views on a daily basis, which is tremendous traffic.

I think game broadcasting business of YY will definitely enrich Baidu Tieba's contents and help Baidu keep longer time of their users on Tieba. On the other hand, I think we can capitalize or leverage Baidu Tieba's traffic, help us to grow our user base on the game broadcasting business. We would love to see this cooperation come to reality.

And for the detailed collaborations, I think we would announce it in the near future..

Thank you very much. I think David mentioned in the opening remark, YY leveraged some special events in Q2 to -- like World Cup and May 20th in Q2 to drive up the user engagement. I just wonder, which of your services most benefit from these kind of events in Q2.

And should we expect to see a pull-back [ph] in user engagement or consumption for those services in Q3 since World Cup is over? Thank you..

Yes. I think David mentioned in the context of that our entertainment business actually has been benefited from World Cup and May 20th which is a romantic day in the internet business in China. It's, in Chinese, it's called Wer Ling [ph].

So I think mainly the event-driven activities or marketing scheme has been implemented by our music or entertainment business in great details. We have had very good success in the past. We will continue to do that. So I think that is mainly geared to our entertainment business. Yeah..

Thank you. Very helpful..

The next question comes from the line of Gene Munster from Piper Jaffray. Please ask your question..

Good morning and my congratulations. Eric, you talked a little bit about the guidance. Can you recap where the strength in the guidance is coming from? I think you said music. And separately, is you talked about different initiatives, in the past we've talked a lot about education, you mentioned a couple of other ones here.

How should we think about those impacting the model in 2015 and if it's possible for you to make any comments beyond that, are these initiatives more about 2016 and kind of beyond or there's something that could be more incremental next year?.

Yeah. Gene, I think, yes. When we look into the future, we do see there's a lot of potentials could happen on YY platform. I think David and I, we actually emphasized two new activities which has been very successful, as we mentioned it, that game broadcasting business. This is growing at a hand over fist rate in second quarter.

The other is our dating show. It was just started six months ago, now it becomes a great revenue contributor already. Those two business actually we see that will continue to grow for the rest of the year into next year. I think if you look at YY, YY actually has such diverse activities. People often ask what exactly is YY.

What we have seen YY is we have seen that YY more and more so become a marketplace for talents, for services.

We can see that in our music business, those talented performers who usually or in the past would have to go to, you know, television station or radio station or other professional organizations in order to make a living, but now if you are talented, on YY platform, we can put you in front of millions of users.

And those users can actually spend money to purchase your service via YY platform. And I think that is a very powerful marketplace, so to speak. So we think that YY has evolved itself into a service or talent marketplace. At the same time, as you can see that our goal for the education business is to do the same.

Teachers used to be teaching in schools or the teaching organizations or crime school. We think in the future the talented teachers should be able to make a living on YY platform, because YY is capable of putting those teacher in front of many students. So I think that’s the main themes of the power of the YY platform.

So into 2015, as we can see, more and more activities can start or become monetizable, then we will see the stronger revenue to come in in 2015 and 2016, and also we will keep very choosy margin into the future. Because right now we are providing a lot of free service.

Into the future, if we start to monetize all those activities, we think that we can actually enhance our margin down the road in 2015 and 2016..

Great. Thank you, Eric..

Your next question comes from the line of Alicia Yap from Barclays. Please ask your question..

Hi. Good morning, David and Eric. Thanks for taking my questions. Congrats on the strong quarter. I have a couple of quick questions.

Number one is on the online dating business, to follow up on that, is that it seems like we already have close to 4% of the total revenues coming from this business line now, and how big will this business do you anticipate to grow into? And also, can you share with us, is there any difference on the revenue sharing front for this online dating versus your music business?.

I think for this online dating business, it's still at a very early stage. As we pointed out, it was started only six months ago. So it is very difficult to predict what is the future of online dating business. But we have seen it has huge potential.

But of course we are augmenting [ph] a lot of details in terms of products, we are also trying to diversify how to even enlarge the user base for this line of business. I think at this moment of time, we are not ready to give any specific targets in terms of how big this business is going to be.

But we do think that this business should have a long leg into the future..

I see.

And then for the margins trend, so can you remind us again on some of the cost and the spending and what would be contributing to your comment on the more stable margins rather than more margins leverage?.

Right. As we are expanding into different line of business, it actually requires a lot of promotions. So as you can see, in second quarter our sales and marketing has risen to more than RMB13 million, which is more than double from the first quarter's. I think that's our efforts to expand our user base into different sources.

I think that trend to continue. But at the same time, because our business is growing very fast, so the operating leverage will help us to alleviate some of the margin pressures from spending into different line of business.

So that's why I said, because of the combination of those two, we see that the current margin could be somewhat in pain, at very narrow range into the futures. It could be higher a little bit, it could be a lower a little bit. It will depend on the specific activities that we are involved with into the futures.

But as of now, we see that our margin should be pretty stable for the rest of the year..

I see. Can I just quickly follow up, will the gross margins, is also a function of the music business, being higher contribution? And then, will online dating business, if it's higher contribution, will that impact gross margins as well? Thank you..

Well, in order to affect our gross margin, the line of business needs to be very big. I think dating business right now is still very tiny, very small. I think it's unlikely to affect our gross margin. But you're right, our music and entertainment business will affect our gross margin.

As you know that the gross margin actually has been on a down-trend over the course of last 18 months simply because that our music business has grown faster than the rest of the activities, because music business has higher content of -- there's content cost, higher cost structures. So that will automatically, inevitably, lower our gross margin.

But because of the operating leverage, as you look at our operating margin, and operating margin, actually it's pretty stable and actually on the rise. So I think overall, you know, I will see that the gross margin will continue to dip a little bit as long as our music still is revenue driver for the rest of the year.

But our operating margin should be pretty stable..

Okay. Great. Thank you..

Your next question comes from the line of Natalie Wu from CICC. Please ask your question..

Hi. Good morning, David, Eric and Anna. Thanks for taking my question, and congratulations on a strong quarter. I have two questions. The first one is, can you share us what's the MAU and ARPU of YY music on the mobile end? And just want to check again with the answer to the prior question.

Do you mean that we can assume your YY music ARPU growth can be sustainable in the following quarters? And about game broadcasting and online dating business, will it bring a relatively higher ARPU as it will facilitate better user engagement, I assume, especially online dating business?.

Okay. Well, as I said, in terms of the MAU numbers for our music business, I think that was your question, right? MAU numbers, because as I said, on our platform is somewhat difficult to distinguish very clearly who are the music users, who are the end-users.

So -- but roughly we can say that out of that 100 million monthly active users in the second quarter, we will classify 40% to 45% of those MAUs are as our music and entertainment MAU. So if you apply that, that would give you something like 40 million to 45 million MAU. But ARPU number, as we already see in the release, is RMB458.

But I do not have a specific ARPU and MAU number for mobile yet, but I think I can provide it next time, in next earnings release. But I do not have the specific ARPU number for our mobile MAU -- mobile paying users for the music user yet. I think in terms of dating and game broadcasting business, definitely it's a great contribution on our top lines.

We continue to see that those are very good elements to help us to alleviate our margin pressures. As I said that we're expanding into a different line of business, we had tried a lot of ways of promotions, but at the end of the day, we need to actually monetize some line of business in order to hold up our margin levels.

I think all those business has helped us to maintain a very stable margin picture as of now..

Thank you very much. And my second question is, I have noticed that the other revenue actually increased from the normal level of RMB3 million to RMB4 million per quarter to RMB8 million this quarter.

Can we attribute this incremental revenue to a series of mobile apps you have launched in the second quarter, like Hello [Chinese language spoken]?.

No. Actually we have many other activities which are small we did not announce publicly, but those small activity is in incubation stage. If you added together, will actually help us to increase revenue on others category. I think that was others, including some of the things that you mentioned, some mobile apps.

But as far as I can remember, the mobile apps right now is not generating too much of the revenue so far..

Thank you..

Your next question comes from the line of Yu-Heng Fan from Chinese Renaissance. Please ask your question..

Hi. Good morning, David and Eric. Thanks for taking my question. My first question is related to online dating business. What is the management though on any potential expansion into more standalone social networking service on the basis of your online dating and video platform? Then I have a follow-up question..

I will translate the question to David. David could answer your question. Hold on a second..

[Chinese language spoken].

I think -- I just want to elaborate a little bit this online dating show that we had, normally we have eight people in online dating scene who are on the stage. Actually there's one host. Eight people including four guys and four girls. So they will be introduced to each other and they will be able to ask questions to the other side.

And then you will see a lot of -- hundreds of audience that's watching this show, is ongoing. So this online dating show, it's very different from our entertainment shows because all those eight people, including the host, nine people, they are actually providing the content.

So there is no specific very renown or famous performers taking the stage, become a celebrity. All of the people actually participate into the show. So this is a very different form of entertainment in the past. We think this type of form is being welcomed by our users at this moment.

But overall, into the long term, we think this could become SMS [ph] product which has a great potential, but we need to actually break through into the mobile devices. So we need to actually think how to incorporate these online dating shows with mobile users and mobile usage. And we are trying in this direction definitely.

But so far I think we are still in the stage of experimenting. So if we can be successful in this direction, this could be a very big business into the future..

Thank you, that's helpful. My second question is on your future initiatives. So, beyond online dating and broadcasting, you mentioned earlier that YY has become a back [ph] marketplace for the talent.

So beyond online dating and online gaming broadcasting, what other types of content you think that could potentially appeal to your core music and entertainment users? Thank you..

Yu-Heng, I'm sorry, I was too preoccupied by another thing. Could you repeat your question again? I'm sorry..

Yeah. You mentioned earlier that YY has become a marketplace for different types of talent like online game broadcasting, education and online dating. So beyond those initiatives, what other types of content you foresee could potentially appeal to your core entertainment and music users? Thank you..

I think in general, because this is a service and talent marketplace, so we believe that our users like to directly or has a real-time interactions with our content. So as long as this exists, YY will provide great value to our users.

So I think as David mentioned earlier that we think there are a lot of actually competitive activities can be broadcast on the YY platform. So I think moving into the future, we will try to work in that direction. Secondly, I think we will also work on the mobile direction, because we see that future as a mobile era. Mobile is close to everyone.

So if we will be able to allow users to have access to real-time platforms such as YY anytime, anywhere, this can make YY actually expand into even larger user base. I think those are the area that we are working on and we are trying to make progress..

Thank you. That's helpful. Congrats to the quarter..

Thank you. Your next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question..

Hi. Good morning. Just two quick questions. The first one is on competitive landscape. Would you share with us your thoughts on the competitive landscape after one of your competitors got listed? Should we expect higher competition on talent cost as well as on sales and marketing going forward? And then secondly, a follow-up question on mobile.

Eric, you mentioned that you can't give us the paying users for mobile at the moment, but could you share with us the user behavior difference you see on mobile versus on PC? For example, the time spend, the conversion rate, so on and so forth? Thanks..

Okay. Wait. I think I will ask David to answer your first question and I will answer the second question later. Let me translate the question to David first. Just hold on a second..

[Chinese language spoken].

Yes. I think if you get YY's history, when we actually started YY service in 2008, we had seen many competitions. In fact, YY originally was positioned as a real-time voice communicator. In the early days, almost every online game company launched a YY-like product. So we got a lot of competition during those times.

But all of those competitions has fade away over the last couple of years. Now we are still the market leader in real-time voice communication market for online gamers. So that actually demonstrates we have a very strong capability to fend off the competition.

But if it comes to the music scene, yes, you are correct, there are some newcomers in the marketplace, or sometimes they even have a longer history than ours. I would say, yes, we do have some competitors in these areas.

But because the fact that we have experienced tremendous growth over the last couple of years, we have a lot of things internally needs to be taken care of. So we only focus on solving all the issues internally, so we rarely actually look at outside.

And to be very frank, we don't feel the competitor for us is that strong, because we have been growing very, very strongly. However, recently we have seen the power of ecosystem or the economy of scale. Because we become so big, we actually now look around, we can actually open several options or channels, allow the performers to join us.

Once we start doing that, we have seen tremendous attractions to those performers, to those channel owners, they would love to join us. Because previously we didn't even open up those opportunities for those people. Once we start to open up those opportunities for those peoples, we have seen tremendous attractions for those guys.

So we actually have seen we are gaining the market share, we are competing very effectively in the marketplace right now..

[Chinese language spoken].

David would like to actually give you guys example how we actually successfully attract those content providers or singers to join us. For example there is a performer who can earn RMB5,000 a month in our competitive platforms.

But once -- with that kind of capabilities, in fact this person can actually have the potential to earn like more than RMB20,000 per month on the YY platform. But the problem was, when they join us, they will have to experience some sort of hiccup, so their earnings would dip down when they join us, because it's in transition.

But right now we actually opened up some opportunities or initiate some programs to help them to smoothly transit their join in YY, to help them shorten the very painful dips in their monthly revenues, so that they can very easily transition into YY platform without loss too much of their monthly earnings.

I think you, Eddie, you had a second question, is regarding our mobile users. Yes, I think mobile users, as I mentioned it, mobile user is a very important direction that we are going to track.

I think in last quarter, we announced that roughly one-quarter, 25% of our mobile -- our monthly active users for music activities, actually it's paid through mobile. I think -- I don't have the percentage for this quarter, but I can certainly provide it later on for all you guys.

But the specific characteristics or behavior of mobile user is, as of now, mobile users spend less time on our platform. According to last quarter's numbers, their ARPU is lower. But as I mentioned it before, I think, I don't have the numbers in front of me, I think the percentage of the mobile paying users are increasing.

I believe the ARPU for mobile users are increasing as well. So I think those are the specific user behavior. They spend less time, and now the ARPU is less, but I think we are working on to enhance the conversion ratio for both mobile users. We are trying to increase ARPU for mobile users as well.

So I hope that -- I will provide more information about this in the future for you guys..

Got that. Thank you very much, David and Eric. Thanks..

Thank you. That does conclude our Q&A session for today. I would now like to hand the conference back to management for closing remarks. Thank you..

Thank you everyone. Now we conclude our conference call right now. Thank you..

Thank you..