Ashley Jing: I think we perhaps have time for one last question, right? So, operator, do we have any more questions on the line?
Operator: We do. We have one more question. And our final question today comes from Xueqing Zhang with CITC.
Xueqing Zhang: Thank you management for taking my question. Related to management, as you mentioned in the prepared remarks, reducing costs and improving efficiency is a key strategy in a second half of 2022. So can management share more on the cost conscious strategy and the overall margin change in the first quarter in 2023?
Peng Hui: Thank you. Okay. I’m going to take this one last smoking question as we can end the call before market is open. The three biggest cost items that we have are. Number one is payout to the broadcasters and the performers and the moderators in the value-added service line. And the second and third is our marketing expenses and payroll. I guess I’ll take them one by one. For payout, as you can see, Q3 versus Q2 this year is been largely stable. The dip in gross margin was really caused by the mix shift in between different business line items. In Q4, we do expect payout to go up a couple of percentage points due to the year-end promotional events, but that should be Q4 specific. It happens every year and will bounce back early next year when the year end gala is gone.
Overall, for next year, at this point of time, my view is that, payout is likely to remain largely stable because, A, no one that we are currently seeing out there the market is still aggressively boosting the supply side by pulling off the payout ratio. And, B, internally we do not see it as an effective strategy to grow revenues by sacrificing margins. So, that’s my view on the payout. Gross margin wise it may fluctuate a little bit around the current level due to the mix shift to one way or another. Moving down to payroll and marketing. This year, we have done a pretty good job in controlling these two cost items. And this can be evidenced by the decrease in R&D and marketing expenses. I guess in Q4 because we have the year-end bonus, the double pay, et cetera, the payroll might increase a little bit.
But overall, we have that overall downward trend in the payroll and marketing due to the cost optimization. We are going to continue to apply the same strategy next year and investors can expect hydro control and more focused on the cost efficiency for payroll and marketing. The other thing worth mentioning as far as cost control and the overall strategy to increase efficiency is concern is that. In terms of the allocation of resources internally, we won’t treat every business line in an equal manner. What that means is that, we are going to lean more towards new businesses with higher ROI. In the second half of this year, we have been real creating engineering resources and marketing dollars from Momo to new applications. I’m happy to see that, while the overall payroll and marketing expenses went down, we did not under-invest in the new applications and they have been growing pretty well and that will continue to be the case next year.
I guess, these are the answers to the margin question. And with that, I’m coming back to Ashley for the closing remark.
Ashley Jing: Well, we are very much all the time. So thank you very much for participating in today’s call and we will see you next quarter.
Operator: Thank you. That does conclude our conference for today and thank you for participating. You may now disconnect your lines and have a wonderful day.
