DouYu International Holdings Limited (NASDAQ:DOYU) Q3 2024 Earnings Call Transcript

DouYu International Holdings Limited (NASDAQ:DOYU) Q3 2024 Earnings Call Transcript November 20, 2024

Operator: Good morning, and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited’s Third Quarter 2024 Earnings Conference Call. [Operator Instructions]

Operator: I would now turn the conference over to the first speaker today, Ms. Lingling Kong, IR Director at DouYu. Please go ahead.

Lingling Kong: Thank you. Hello, everyone. Welcome to our third quarter 2024 earnings call. Joining us today are Mr. Mingming Su, Chief Strategy Officer; Mr. Hao Cao, Vice President of Finance; and Ms. Simin Ren, Vice President from Interim Management Committee.

Lingling Kong: You can refer to our third quarter 2024 financial results on our IR website at ir.douyu.com. You can also check a replay of this call when it becomes available in a few hours on our IR website.

Lingling Kong: Before we start, please note that this call may contain forward-looking statements made pursuant to the safe harbor provision for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company’s control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements.

Lingling Kong: All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company’s filings with the SEC. The company undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call.

Lingling Kong: I will now speak on behalf of our Interim Management Committee on our business update. The call will then be handed to our Vice President of Finance, Mr. Hao Cao for financial discussion.

Lingling Kong: In the third quarter, we stayed closely aligned with market dynamics and proactively adopted our operational strategies. First, we focused on maximizing our core competitive edge to enhance our commercialization capabilities and diversify our revenue stream. In addition, we further refined our business model and optimized our resources to reduce expenses. While solidifying our fundamentals, we continued to systematically invest in our streamer resources and new initiatives, further enriching the premium content and gaming service line across our platform. All these initiatives reinforce our platform’s game-centric content ecosystem.

Lingling Kong: In the third quarter, our mobile MAUs were 42.1 million, a decrease of 18.6% year-over-year. We are seeing increased competition from short video platforms, particularly during the peak summer season when these platforms ramped up their user acquisition promotions. Our data analysis continue to indicate that user attrition was predominantly from low-frequency users with short video hours and low stickiness. Despite certain short-term pressure on our user base, the engagement patterns of our core user group, especially their viewing hours and activity levels, remained relatively stable, thanks to our consistent and strategic content operation optimization. Moreover, our gaming commercialization ventures have been actively drawing in fresh users and reengaging active ones, fostering a more vibrant gaming ecosystem.

Lingling Kong: During the quarter, we broadcasted nearly 30 large-scale official tournaments, including the LPL Summer split, the KPL and CFPL Summer tournaments, the PEL Spring tournament, the CS: GO Blast Fall tournament and the eSports World Cup, among others. Capitalizing on this official event broadcast, we regularly rolled out innovative derivative content.

Lingling Kong: For example, during the eSports World Cup, we initiated targeted activities across gaming segments aligned with EWC events. curating distinctive content tailored to highlight our streamers’ individual styles. This included a mix of streamer vlogs paired with live streaming, outdoor shows featuring streamers with event commentary, streamer coaching and celebrations for [ champion ] streamers. Through these activities, we enriched the user viewing experience and fostered more robust engagement between streamers and their audiences.

Lingling Kong: Additionally, we have been actively expanding our gaming event content portfolio. Recognizing our users’ enthusiasm for hardcore eSports titles, we exclusively broadcasted the CS: GO XSE Pro League this quarter, enriching the professional gaming content lineup for shooting game enthusiasts. With our self-produced content, we broadcasted close to 80 self-produced eSports tournaments during the quarter. We expanded our core platform content co-creation partnerships. Leveraging our platform’s unique assets, we launched an array of collaborative tournaments across official event cycles spanning a broad spectrum of gaming segments like League of Legends, King Pro League, CrossFire and Teamfight Tactics as well as DnF Mobile.

Lingling Kong: Another standout was our League of Legends event, the [ Legendary Cup ], known for bringing veteran streamers and seasoned professional players together over the past decade and innovative play format featuring a [ ban exception ] card, all while preserving streamers’ distinctive play styles. This dynamic and engaging tournament format garnered enthusiastic user feedback, sparking widespread discussion and engagement. It not only sustained the buzz and appeal of our earlier collaborative tournaments, but also facilitated user increased engagement, elevated streamer visibility and breathed new life into our gaming segment.

Lingling Kong: Blockbuster new games also bolstered our gaming ecosystem. With the high-profile launch of the much anticipated Black Myth: Wukong in August, we rolled out promotional incentives and tapped into our robust network of PC game streamers to deliver exceptional streaming content. Thanks to the games’ immense popularity, numerous streamers spontaneously took to live streaming, dramatically boosting the content supply during the initial launch phase. To expand on streamer content, we rolled out waves of event-driven content like gaming strategies and interactive challenges, which boosted user reengagement and drew in new users, elevating the overall user activity across our platform.

Lingling Kong: We have long been committed to optimizing our platform’s content ecosystem by acquiring official tournament copyright, signing top-tier streamers and innovating self-produced content. Each piece aims to provide users with high-grade content and viewing experience. With the shifting macro dynamics and revenue pressure on the platform in mind, we needed to maintain adequate investments in premium content while simultaneously enacting new cost-saving strategies by improving content efficiency.

Lingling Kong: To begin with, we enhanced the commercialization of our gaming event content. We have continually deepened our collaborations with game developers, harnessing game resources to explore and stage more diverse marketing initiatives. During the quarter, we continued to promote our game-specific membership program during the PEL official tournament. We also offered time-limited game promotions during broadcasts of official CrossFire events.

Lingling Kong: In addition, we executed similar game commercialization initiatives in our self-produced events, such as the DouYu [ Commentary ] Cup and the collaborative event [indiscernible] Cup, both in the CrossFire gaming segment, all of which had successful outcomes and boosted our gaming content commercialization efficiency.

Lingling Kong: We also focused on enhancing our streamer management efficiency to reduce costs, which promoted us to refine our streamer management strategy. First, we performed an in-depth ROI analysis for our existing streamers and modified their compensation assessment criteria. This new approach emphasized live streaming content quality and commercialization capabilities, motivating streamers to actively engage in more commercialization programs while pursuing their creative endeavors. So far, we have noted an uptick in the ROI for streamers after implementing the updated assessment criteria.

Lingling Kong: Second, our summer recruitment campaign for streamers successfully attracted new streamers. By widening the recruitment scope, diversifying recruitment channels and improving streaming incentives, we notably increased the daily average number of streams in the third quarter compared to June’s daily average, coupled with substantially enhanced streamer retention rates. Overall, the ROI from our streamer recruitment initiatives was higher than expected.

Lingling Kong: Moving on to commercial monetization. Our total number of paying users in the third quarter was 3.4 million with a quarterly ARPU of RMB 237. The year-over-year decline in paying users was caused by prolonged macroeconomic challenges and our strategic decision to scale back promotional activities and incentives that carry high operational costs. These initiatives were unlikely to result in sustained spending by the users they attracted as these users typically have low stickiness to our platform, consequently leading to low ROI and higher operational costs. The number of paying users remained stable quarter-over-quarter as we focused on maintaining our core users’ spending habits.

Lingling Kong: To address the macroeconomic impact on users’ willingness to spend, we introduced more budget-friendly paid products tied to platform rewards and game props, while continuously promoting traditional affordably priced revenue-generating products. This approach encouraged gamers’ diversified spending and helped maintain the overall spending patterns of our paying users. As a result, while quarterly ARPU was down year-over-year, it remained relatively stable quarter-over-quarter.

Lingling Kong: During the quarter, we deepened our commercialization collaborations with game developers, consistently promoting game prop sales through various models.

Lingling Kong: The first model was a seasonal sales-driven approach based on collaborative promotions. We worked closely with game developers on large-scale promotional initiatives featuring DouYu’s top-tier streamers. Our promotional strategy prioritized fun and appealing marketing initiatives as well as our platform incentives and benefits. We also harnessed cross-platform marketing channels to maximize our reach. Since piloting this sales-driven promotional model in late 2021, we have successfully attracted substantial external traffic and boosted gaming users’ impression of DouYu’s game prop offerings. Whenever a similar promotion takes place, gamers associate it with DouYu’s initiatives, successfully positioning our platform as the to-go destination for game prop purchases and setting the stage for rolling out our diversified game prop sales models in the future.

Lingling Kong: The second model is DouYu’s game-specific membership program. We established long-term partnerships with game developers to market game props. Our membership offerings integrated game props with platform incentives, aligning seamlessly with our streamers’ marketing style and the needs of our users. Since its launch in the second half of 2022, this model has consistently driven stable revenue growth.

Lingling Kong: The third model featured a multi-platform marketing approach led by game developers. Game prop stores were set up by game developers and embedded with links in our partnered live streaming channels. By leveraging our platform’s content promotion and streamers’ outreach efforts, we drew users into streamers’ channels where they could click links to access game prop stores and complete their purchases. This promotional model standardized streamer participation and better facilitated streamer engagement, bringing shared revenue opportunities for both streamers and the platform from game prop sales.

Lingling Kong: In general, within these 3 models for game promotions, we strategically planned our marketing initiatives to capitalize on the timing of game updates, new prop launches, festivals and seasonal events, increasing our game prop marketing visibility while expanding our diversified revenue streams.

Lingling Kong: Moving forward, we will replicate these models for game prop promotions through a more comprehensive selection of gaming content scenarios, further reinforcing the commercialization capabilities across our platform.

Lingling Kong: In summary, we proactively navigated various challenges during the third quarter, steadily advancing our revenue diversification strategy while reducing costs through adopted operational strategies and optimized resource allocation. We pursued balanced growth across traditional and new business segments, strategically allocating corporate resources to secure solid business fundamentals while consistently investing in new ventures with promising growth prospects.

Lingling Kong: Each of these steps was underpinned by our commitment to our long-term development strategy for cultivating a vibrant, diverse game-centric content ecosystem. We believe these initiatives position us well to overcome short-term challenges and lay a solid foundation for the company’s long-term sustainable growth.

Lingling Kong: With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Cao, to go through the details of our financial performance in the quarter.

Hao Cao: Thank you, Lingling. Hello, everyone.

Hao Cao: This quarter, we focused on strengthening our new revenue streams and tightening cost control measures in line with our long-term development strategy. Despite a challenging macroeconomic environment, our revenue diversification efforts have already shown a promising growth trajectory.

Hao Cao: Let’s take a closer look at our financial performance for the third quarter. Our total net revenues decreased by 21.8% year-over-year in the third quarter to RMB 1.06 billion. However, supported by increased revenue contribution from our innovative business, we achieved a 3% quarter-over-quarter increase in our total net revenues, making our first sequential growth in the past 8 consecutive quarters.

Hao Cao: Live streaming revenues were RMB 0.75 billion, down 34.7% from RMB 1.15 billion in the same period of 2023. Prolonged macroeconomic challenges and shifts in user spending behavior primarily impacted live streaming revenues. In response, we continued to scale back paying user acquisition promotions and provide more affordable product offerings to promote ongoing spending from our existing paying users. As a result, there was a year-over-year decline in both the total number of paying users and our quarterly ARPU, which decreased by 22.5% to RMB 237 from RMB 306 in the same period last year.

Hao Cao: Meanwhile, our efforts to enhance our innovative business segment delivered continued growth. Innovative business, advertising and other revenues increased significantly in the third quarter by 49.4% to RMB 311 million, up from RMB 208.2 million in the same period of 2023, contributing 29.3% of our total revenue. The year-over-year increase was primarily driven by increased revenues from our voice-based social networking service and game membership service.

Hao Cao: Cost of revenues in the third quarter of 2024 decreased by 14.1% to RMB 1 billion compared with RMB 1.17 billion in the same period of 2023. These cost reductions were largely due to a decline in our revenue sharing fees and content costs, which dropped 6.2% to RMB 0.87 billion from RMB 0.93 billion in the same period of 2023. Revenue sharing fees deductions were largely from decreased live streaming revenues, which were partially offset by increased revenue sharing fees related to increased innovative business. In addition, the decrease in content costs primarily came from improved cost controls in streamer payments.

Hao Cao: Bandwidth costs in the third quarter of 2024 decreased by 32% to RMB 72.2 million from RMB 106.1 million in the same period of 2023, primarily due to a year-over-year decrease in peak bandwidth usage.

Hao Cao: Gross profit in the third quarter of 2024 was RMB 60.8 million compared with RMB 192.4 million in the same period of 2023. The decline in gross profit was primarily due to live streaming revenues decreasing faster than the cost of revenues, resulting in reduced gross margin efficiency. Gross margin in the third quarter of 2024 was 5.7% compared with 14.2% in the same period of 2023.

Hao Cao: In line with our strategic initiatives to streamline our operations, we reduced staff-related expenses across the board, leading to a 23% year-over-year decline in total operating expenses. Breaking this down further, sales and marketing expenses declined by 11.9% in the third quarter of 2024 to RMB 79.3 million from RMB 90 million in the same period of 2023. Research and development expenses were reduced by 42% to RMB 43.2 million from RMB 74.5 million in the same period of 2023. General and administrative expenses decreased by 18.7% in the third quarter of 2024 to RMB 41.5 million from RMB 51 million in the same period of 2023.

Hao Cao: Loss from operations was RMB 94.2 million in the third quarter of 2024 compared with RMB 8.8 million in the same period of 2023.

Hao Cao: Net income for the third quarter of 2024 was RMB 3.4 million compared with RMB 76.4 million in the same period of 2023.

Hao Cao: Adjusted net loss, which excludes share of loss or income in equity method investments, gain on disposal of investment and impairment loss and fair value adjustments on investments, was RMB 39.8 million in the third quarter of 2024 compared with an adjusted net income of RMB 71.9 million in the same period of 2023.

Hao Cao: For the third quarter of 2024, basic and diluted net income per ADS were both RMB 0.11 while adjusted basic and diluted net loss per ADS were both RMB 1.32.

Hao Cao: As of September 30, 2024, the company had cash and cash equivalents, restricted cash, restricted cash in other noncurrent assets and short-term and long-term bank deposits of RMB 4.38 billion or USD 624.7 million compared with RMB 6.86 billion as of December 31, 2023. The decrease was primarily due to our special cash dividend distribution of USD 300 million and USD 20 million allocated to the share repurchase program.

Hao Cao: Finally, I would like to update you on our share repurchase program. At the end of last year, we announced our 2024 share repurchase program for up to USD 20 million. As of September 30, 2024, we have completed the program, repurchasing an aggregate of USD 20 million in ADS under this program.

Hao Cao: Looking ahead, we are committed to navigating macroeconomic challenges and a shifting business landscape with resilience and agility. We will continue to use our new revenue streams to drive growth and sharpen our focus on cost efficiencies to mitigate near-term financial pressure. By pursuing new growth opportunities and reinforcing our fundamental strengths, we aim to support sustainable development of our platform while delivering enduring value for our stakeholders.

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

Q&A Session

Operator: [Operator Instructions] Our first question comes from Lei Zhang of Bank of America.

Lei Zhang: My question is mainly regarding your live streaming business. And how should we look at the future growth of live streaming business and any strategic change here?

Hao Cao: Thank you for your question. As discussed earlier, ending 2024, we faced 2 key challenges: fierce market competition and a softer macroeconomic environment, both of which have impacted our platform’s traffic and revenue. The decline in traffic was mainly due to persistent market competition as short video platforms aggressively stepped up their promotions of gaming content and gaming services during the summer vacation, accelerating user trend, in particular by low-frequency users. As a result, our mobile MAU for the third quarter decreased both year-over-year and quarter-over-quarter.

Hao Cao: On a related note, the scale of our revenue was mainly impacted by the macroeconomic sluggishness with a notable drop in paying users’ willingness to spend on live streaming virtual gifts, placing continued pressure on revenues from our traditional live streaming business. To tackle these challenges, we actively adapted our operational strategies.

Hao Cao: On the traffic side, we have been consistently adjusting our user acquisition strategies based on market competition and evolving user habits. For example, in 2021, recognizing the maturing market and established gamer base, we put an end to the purely channel-driven customer acquisition approach at a relatively earlier stage. By 2023, we took a further step to scale back investments in low-ROI marketing initiatives. Rather than solely chasing user growth, we placed a strong emphasis on retaining our core users. We further upgraded this user strategy in 2024, focusing on maintaining core users and improving user operational efficiency, which all aim at ROI enhancement.

Hao Cao: This involves increasing the appeal of our platform’s content offerings, retaining and attracting users through distinctive premium content and diversifying user traffic monetization channels to offer a variety of content consumption scenarios, including through game props and other engaging offerings. We also upgraded our content strategy. We continued to enhance our different content metrics enriching official tournaments and innovating our derivative content.

Hao Cao: Based on the content consumption patterns of our hardcore users, we tailored niche content targeting their needs, reinforcing our leading edge in these gaming segments. Additionally, we actively advanced resource sharing partnerships in cross-platform content collaborations, enhancing both the depth and breadth of our alliance. Amid fierce market competition, we believe high-quality content and a healthy, vibrant content ecosystem are the foundation for sustainable growth.

Hao Cao: Since content initiatives may not yield immediate results in the short term, our platform’s traffic may continue to face competitive challenges for the foreseeable future. Nevertheless, our core users’ consistent and stable content consumption behavior has afforded us more time and opportunities for exploring new ventures.

Hao Cao: Regarding new ventures, leveraging our deep partnerships with game developers, our strategy mainly focused on launching diverse marketing products related to game props. We have long recognized our platform’s reliance on revenue from live streaming, and we have made an array of attempts to diversify our revenue streams. So far, the most effective commercialization channel to align with our user base has been monetization initiatives that leverage game props.

Hao Cao: Since late 2021, we have been actively engaging with game developers and implementing a phased approach, which has proven successful. The commercialization of game props is largely facilitated through content promotions with a small share tied to official event content and the majority driven by platform operations and streaming content.

Hao Cao: With the implementation of multiple business models, we have established our platform as the preferred choice for users thinking to purchase game props. And we will consistently and methodically invest in new content and new ventures, seizing opportunities to drive renewed growth and prioritizing our platform for long-term development. Thank you.

Operator: The next question comes from Ritchie Sun of HSBC.

Ritchie Sun: Can management elaborate in detail about the strategy to optimize our cost structure as well as the streamers’ operations? And what are the detailed measures and goals and achievements?

Unknown Executive: Thank you, Ritchie. So to answer your question, let’s first review our relatively fixed cost, specifically the content costs within our primary business expenses, which have constantly accounted for 20% to 25% of our total revenues. Our content costs include streamer compensation, copyright fees and costs associated with our self-produced content with the first two making up the bulk of our content cost. To optimize our content structure, we have implemented a series of adjustments to our content cost, including refining our streamer management strategies.

Unknown Executive: So let’s get into the details. Firstly, we refined the control of copyright content cost. We dynamically evaluated the value of our platform’s content through the lens of both traffic and monetization and adjusted our content strategy based on ROI. For example, in 2022, amid rising copyright cost of official tournaments, we adopted a selective purchasing approach, foregoing certain high-cost official tournaments. As price of these tournaments normalized in 2023, we resumed the strategy acquisition of the copyrights for key official tournaments. And then in 2024, navigating intensifying competition and industry shifts, we engaged actively with copyright holders to negotiate lower royalties for cost saving, exploring sustainable long-term commercialization models for copyrighted content. These initiatives directly reduced copyright costs and enhanced ROI for our copyrighted content.

Unknown Executive: And secondly, we optimized the cost of our self-produced content. By proactively balancing the supply of copyright events and our self-produced tournaments, analyzing the ROI for self-produced and PGC content and scaling back on low-ROI self-produced content, we effectively controlled our overall content cost. In 2024, embracing the trend of collaborative content creation and content sharing, we actively pursued cross-platform partnerships and integrating each of the parties’ advantageous resources, with these enhancements, we delivered more high-quality content, amplified streamer visibility and lowered the cost of our self-produced content.

Unknown Executive: Second, we restructured our streamer compensation framework under our long-term exclusive contract with core streamers. The average base compensation for those signed in recent years has been relatively high. This has been particularly impactful during period of revenue decline for the company, resulting in a rising share of overall streamer compensation cost related to our revenue.

Unknown Executive: To improve the efficiency of streamer management and achieve better cost control, we have implemented a series of targeted adjustments. We conducted an in-depth ROI analysis for our existing streamers and revised their performance assessment criteria, placing greater emphasis on the quality of live streaming content and their ability to drive commercialization. We offered support by aligning platform resources with streamers’ needs. We encouraged streamers to actively engage in more commercialization programs while creating high-quality content, taking part in collaboration with game developers, cross-platform content partnerships, new game promotions and game marketing, et cetera; all aimed at enhancing streamers’ personal brand values and generating additional revenue for our platform.

We have been gradually phasing in our adjustment to the streamer compensation system with ongoing improvements based on streamers’ feedback to ensure a smooth transition to the new framework.

Unknown Executive: Fourth, we adjusted our approach to streamer contract renewal and recruitment. For streamers nearing the end of their contract, we renegotiated their compensation terms, primarily focused on lowering base compensation while elevating performance-based incentives. This strategy tiered streamer compensation to performance, fostering greater creativities and marketing effectiveness. Under the updated compensation framework, we comprehensively evaluated the signing cost and operational efficiencies of our streamers, negotiating and selectively renewing their contracts. In the meantime, we continue to recruit and nurture new streamers to inject fresh vitalities into our content offering. During their initial onboarding phase, we assessed new streamers’ performance based on the ROI achieved through our resource support to better align streamer compensation with ROI.

Unknown Executive: So all these initiatives are designed to drive efficiency improvements and cost control through strategy adjustment and refined management. All will preserve the high quality and appeal of our platform content. We seek to secure the company’s financial health through these measures, allowing us more time to adapt our business strategies to emerging industry shifts and to continue to deliver premium content and services to our users, thereby maintaining DouYu’s leading position in the crowded live streaming market. Thank you.

Operator: The next question comes from Thomas Chong of Jefferies.

Unknown Analyst: My question is about the GP margin. So we see the change of GP margin in third quarter. So how should we think about gross profit margin and also the profit for the whole year of 2024? And also with the adjustment of the operating strategies, so do we expect the profit improvement in 2025?

Hao Cao: Thank you for your question. In the third quarter, the year-over-year decline in gross margin was still mostly due to the decrease in live streaming revenues. Revenue sharing fees and content costs as a percentage of revenue significantly increased year-over-year from 68.2% in the third quarter of 2023 to 81.8% this quarter.

Hao Cao: First, to look at revenue share fees, revenue share ratio of live streaming business increased year-over-year, primarily driven by the increased incentives over the summer relating to user retention. In addition, revenue from our voice-based social networking business significantly increased year-over-year, leading to a substantial rise in relevant cost of revenues.

Hao Cao: Then regarding content costs, the changes in relatively fixed cost within our live streaming business, such as copyright fees and streamer-based compensation, et cetera, did not align with the year-over-year shift in our live streaming revenues. Consequently, as live streaming revenues declined, this cost continued to weigh on our gross margin. While we have implemented diverse measures to optimize content costs and streamer compensation, the effect of our gross margin improvement remained modest. On a quarter-over-quarter basis, the increase in content costs as a percentage of revenue was primarily driven by higher copyright fees due to more copyright events being broadcasted during the summer.

Hao Cao: Regarding bottom line, by continuing to control operational expenses, the company’s net loss did not widen sequentially in the third quarter despite a sequential decrease in gross margin and reduced interest income. Specifically, our research and development expenses as well as general and administrative expenses continued to decline, driven by workforce optimization, while sales and marketing expenses slightly increased quarter-over-quarter, largely resulting from the promotional ramp-up for our innovative business during the summer.

Hao Cao: In general, as we continue to refine the revenue mix, we have been taking a series of proactive measures to tackle the challenges posed by revenue decline. On the cost side, we managed content costs through a variety of strategies, including controlling copyright costs, balancing the supply of our self-produced tournaments, increasing partnership content and adjusting the streamer compensation structure. We also leveraged technological solutions to reduce bandwidth costs.

Hao Cao: All these endeavors are aimed at minimizing the impact of relatively fixed costs on gross margin. However, restructuring cost is a gradual process and positive effects take time to materialize. In the near term, we aim to contain the extent of losses and refine our revenue cost structure through ongoing operational adjustments, steadily improving the company’s financial performance over time. Thank you.

Operator: [Operator Instructions] Our next question comes from Nelson Cheung of Citibank.

Fuk Lung Cheung: My question is regarding the domestic new console TV game Black Myth: Wukong. Given the strong popularity of the title, can management share more details regarding the performance on DouYu platform? And how should we think of the future promotion and operation strategy for this type of game title?

Unknown Executive: Thank you for your question. So Black Myth: Wukong has become a breakout hit among both domestic and international gamers for its stunning graphics and classic journey to the vast narratives and innovative gameplay experience. As a highly anticipated single-player blockbuster, Black Myth not only amplified the appeal of China’s single-player game, but also drove traffic growth on our platform.

Unknown Executive: On its launch day, 23% of all streamers who went live across the DouYu platform were those in the Black Myth segment, and viewers of Black Myth content [ comprised ] nearly half of our platform’s daily active user base. Additionally, among our new and returning mobile users, 37% were drawn in by Black Myth, making the game our traffic engine for that day.

Unknown Executive: So to fully capitalize on its buzz, we partnered with the developer for Black Myth before it released, creating excitement for its debut through diverse promotions like downloading rewards, viewing giveaways and community discussions, et cetera. We also recruited streamers and rolled out streaming incentive plans, facilitating significant streamer participation with a wealth of content offerings, which drove a surge of interest on the release day.

Unknown Executive: For Black Myth, we employed a diverse content operation strategy and catering to different user needs. We offered speed running streams for viewers eager to quickly grasp the storyline while also supporting streamers who engaged in slower exploratory streamers, highlighting the intricate details of the game, enhancing user immersion and retention. This immersive streaming approach resonated particularly well with console gamers and traditional players, fostering deeper interactions through stream viewing and game experience sharing, and thereby elevating user stickiness to our platform.

Unknown Executive: This in-depth content consumption model underscore DouYu’s differentiated advantages appealing to our core user base of hardcore gamers. Their engagement with game content is more profound and enduring with more frequent interactions with streamers, which benefits the development and refinement of our overall gaming ecosystem.

Unknown Executive: In addition, we initiated interactive activities such as game reviews and challenge competitions, continually encouraging community engagement and discussions to extend the game’s popularity. We also shared created highlights and standout moments in short video from live streams within and beyond our platform, driving additional traffic growth.

Unknown Executive: While the excitement surrounding Black Myth as a single-player narrative game might be challenging to sustain in the long term, we proactively channeled users to more [Technical Difficulty].

Lingling Kong: Operator, are we still on the line?

Operator: Yes, you are connected. Please go ahead.

Lingling Kong: Yes, please continue.

Unknown Executive: Okay. So with our comprehensive and sophisticated content recommendation capability, we guided users from the Black Myth segment to other top-performing gaming segments such as classic PC games and other console gaming segments and further enhancing user retention.

Unknown Executive: For example, we encouraged streamers in these top-performing gaming segments to actively feature Black Myth in their live streams, providing them with traffic support and facilitating initiatives like collaborative live streams with other gaming streamers to boost content visibilities. As users assessed any streamers’ content, they could further explore the streamers’ distinct style, sparking new interest and gradually converting them into long-term users of our platform.

Unknown Executive: So in summary, Black Myth: Wukong delivered fresh content to our platform and boosted traffic growth in the short term. Harnessing this opportunity with our carefully created content and tiered content operations, we effectively directed this influx of traffic from the high-quality new title to other gaming segments, contributing to our platform’s ongoing traffic retention. Even as the buzz of the new game close down, we expect to retain this user stickiness and activity, reinforcing the development of DouYu’s stable, sustainable and diverse platform ecosystem.

Operator: At this time, we have no further questions. I will now turn back over to management for closing remarks.

Lingling Kong: Thank you all for joining our call today. We look forward to speaking with everyone next quarter. Thank you.

Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect your lines.