Ladies and gentlemen, thank you for standing by and welcome to the Tencent Holdings Limited 2013 third quarter results announcement conference call. At this time, all the participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press star one on your telephone to join the question queue. Your name will be announced when it is your turn to ask a question. If you wish to cancel your question, please press the pound or hash key. I must advise you that this conference is being recorded today. I will now let hand conference over to your host today, Ms. Catherine Chan from Tencent. Please go ahead, Ms. Chan.
Thank you very much. Good evening, ladies and gentlemen. Welcome to our annual conference call for the third quarter of 2013. I'm Catherine Chan from PR team of Tencent. Before we start the presentation, we'd like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some unaudited non-GAAP financial measures that should be considered in addition to, but not as a substitute for, measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of the risk factors and our non-GAAP measures, please refer to our disclosure documents downloadable on www.tencent.com/ir. Let me introduce the management team on the call tonight.
They are our Chairman and CEO, Ma Huateng, President Martin Lau, Chief Strategy Officer James Mitchell, and CFO John Lo. Pony will kick off with a short overview of our financials and key platforms. Martin will discuss his strategy highlights. James will stick to business review. John will go through the financials before we take your questions. Let me turn the call over to Pony.
Thank you, Catherine. Good evening, everyone. Thank you for joining us. In the third quarter of 2013, we delivered a solid growth in revenue and profits. Operationally, we made good progress adapting our products for mobile internet and deepening user engagement. Our online games business strengthened its market leadership by adding smartphone games integrated with Mobile QQ and WeChat. Both WeChat in China and WeChat in international markets continue to grow user bases. Let me run through the highlight numbers for you. Total revenue was CNY 15.5 billion, up 34% year-on-year and 8% quarter-on-quarter. Value-added services revenue was CNY 11.6 billion, up 25% year-on-year and 8% quarter-on-quarter. Online advertising revenue was CNY 1.4 billion, up 37% year-on-year and 7% quarter-on-quarter. E-commerce transactions revenue was CNY 2.4 billion, up 108% year-on-year and 7% quarter-on-quarter. Non-GAAP operating profit was CNY 5.3 billion, up 20% year-on-year and 6% quarter-on-quarter.
Non-GAAP net profit attributable to shareholders was CNY 4.4 billion, up 23% year-on-year and up 5% quarter-on-quarter. Moving on to our online platforms. Our core social communications platforms deepen the user engagement via mobile interactions. While total overall MAU for QQ was stable quarter-on-quarter, MAU on smart devices grew 10% sequentially. On a year-to-year basis, total QQ MAU increased 4% to 816 million. PCU for the quarter reached 178 million, up 7% year-on-year. Combined MAU for WeChat and Weixin reached 272 million, up 124% year-on-year. For social networks, Qzone MAU grew 5% year-on-year to 623 million, driven by increased mobile activities. Qzone remains the leading platform for our users to share photos and journals with their close friends. Our online games platform is the largest and most active in China, measured by MAU. We ranked number one in multiple categories, including casual games, web games, smartphone games, ACG, and MMOG.
Our media platforms, QQ.com, Tencent Weibo, and Tencent Video, continue to enrich content and services for our users' infotainment needs, especially on mobile. On our utility services, we continue to strengthen our presence in mobile security solution and mobile browser. I will pass on to Martin Lau to discuss two recent strategic achievements, our mobile game platform and the Sogou social transaction.
Thank you, Pony, and good evening, good morning, everybody. The third quarter marked the official launch of our Mobile QQ and WeChat-based mobile game platform. To date, we have officially released five games via Mobile QQ and WeChat game centers. The total registrations for these five games reached 570 million in three months. Each of our games topped the free download chart on iOS App Store within hours after launch and successively claiming the number one position during August and September of this year. For our first batch of games, we are mainly focused on providing a light and fun gaming experience to our users. Nevertheless, certain games have started to generate some meaningful revenue. For example, our game, Timi Run Every Day, has ranked for quite some time among the top three grossing titles on iOS App Store.
While the first five titles have been our own games for the purpose of proof of concept, we will broaden the range of titles and launch third-party games very soon. We expect third-party games to constitute the majority of games on this platform in the near future. Based on what we have seen so far, we believe Mobile QQ and Weixin are highly effective game distribution channels. First of all, the games are featured in game centers embedded in the two very popular applications, enabling the games to reach hundreds of millions of users within a very short time. Secondly, users can broadcast their achievements and invite friends to join the games, thus creating viral marketing buzz.
Thirdly, interaction among real-life friends within the games, such as social leaderboards, helping friends by donating hearts, and also playing either alongside or against your friends in PVP mode, add another dimension of fun that differentiates our games from others. In short, mobile games, when connected with our platform, enjoy broad reach as well as social network effect, which enables both user adoption as well as user engagement. Next, I'll share some perspective around the recent Sogou, Soso transaction. We are excited about this deal for a number of reasons. Operationally, merging Soso with Sogou creates a strong combination of product and technology teams to deliver superior search experiences to users. Strategically, the new Sogou is well-positioned to compete, especially in mobile search, by capturing traffic synergies with social platforms, online security, browsers, as well as opinion input. Advertisers also benefit from working with an enlarged advertising platform.
From a financial perspective, the new Sogou can capture cost synergies as well as monetization potential as a result of larger advertising platform that's inherent in the search business model. Now we have high regards for the new Sogou management team, and we'll provide Sogou with full support via access and integration with our key properties. This deal is also in line with our open approach of cooperating and working with strong and independent teams to create innovative products for users, and also resulting in a healthy ecosystem for the industry. With that, I'll pass to James to talk about business review.
Thank you, Martin. Good evening. During the third quarter, we achieved revenue growth of 34% year-on-year. Online games contributed 54% of our revenue, social networks 21%, online advertising 9%, and e-commerce transactions 15%. Our social network revenue was CNY 3.2 billion, up 4% year-on-year and up 2% quarter-on-quarter. Our open platforms expanded their user base, paying users and ARPU year-on-year. Positive summer seasonality and the initial contributions from mobile games distributed through Mobile QQ and Weixin contributed to a slight uptick in sequential revenue growth, more than offsetting continued weakness in subscription revenue. Online game revenue was CNY 8.4 billion, up 35% year-on-year and up 11% quarter-on-quarter. Monetization improved on some key titles such as League of Legends and Crossfire. Some new high-profile titles such as Asura moved into wider release, and we booked initial contributions from self-developed mobile games distributed through Mobile QQ and Weixin.
Taking a closer look at our social networks, during the quarter, we launched Mobile QQ version 4.5, which includes the Game Center, a reading center linked to our online literature business, and digital coupons. Mobile QQ usage has substantially increased in the past 12 months as we add features, differentiate the user experience from Weixin more clearly, and benefit from the uptake of smartphones in 2nd and 3rd-tier cities where QQ has historically been very popular. We also launched Weixin version 5, which includes a game center and importantly, the Weixin payment solution for in-app purchases, which deepens our relationship with smartphone users and opens the door for future transactional relationships. Our open platforms support an increasingly vibrant development community with the number of revenue-generating applications doubling year-on-year.
We added distribution capabilities such as click for reward tasks and PC push to mobile downloads, which help developers maximize their traffic on our platform. Moving to online games, our QQ Games platform's average concurrent users dipped 7% year-on-year to 3.9 million as certain users migrate from PC client to web and mobile. In August, we released a new version of Mobile QQ Game for Android users, adding features such as location-based invitations. For advanced casual games, our average concurrent users grew 42% year-on-year to 6.4 million. Paying users and ARPU also generally increased. League of Legends organized a widely watched global tournament series culminating in a finale in L.A. at Staples Center, where a Korean team won the League of Legends Season 3 World Championship. Crossfire's anniversary promotion and new game items contributed to its increased user activity and monetization.
For massively multiplayer online games, combined ACU was stable year-on-year at 2 million. DNF user activity decreased year-on-year due to a less impactful expansion pack versus the year-ago period and to an anti-bot program. Legend of Xuanyuan released a successful expansion pack in early July with a new play mode and new game items, helping it exceed 800,000 peak users. Asura entered unlimited closed beta testing in mid-September, generating a positive user response. Blade & Soul moved into limited closed beta testing during October. Our online advertising segment revenue was CNY 1.4 billion, up 37% year-on-year and up 7% quarter-on-quarter. Display advertising revenue was CNY 1.3 billion, up 42% year-on-year and up 9% quarter-on-quarter. Despite the Olympics comparison from the third quarter of last year, brand display ad revenue grew at a healthy double-digit rate year-on-year, helped by video and regional portal contributions.
Performance display ad revenue more than doubled year-on-year due to enhanced targeting technology and higher impression volume. Our search advertising revenue was CNY 94 million, down both year-on-year and quarter-on-quarter. Following the merger of our general search business with Sogou, we'll no longer be breaking search out as a separate sub-segment in the future. Within brand display, our top 5 advertiser categories were food and beverage, automobiles, online services, consumer electronics, and real estate. Year-on-year, we believe we have gained market share in the consumer electronics, real estate, and automobile categories, among others. Our video branded ad revenue grew over 90% year-on-year due to increased inventories and higher CPMs. On mobile, we're distributing customized news content to a rapidly expanding smartphone user base via not only our Tencent News app, but also plugins to Mobile QQ and Weixin.
We're testing monetization on our News app with splash screen ads and sponsored news feeds. For performance display, our impression volume more than doubled year-on-year as we extended performance advertising from Qzone to other online properties, and more recently to our video platform. Our performance display revenue yields increased due to higher click-through rates. When we can improve click-through rates, we not only raise revenue yield for media owners, but we also improve the return on spend for the media advertisers. Turning to e-commerce transactions, segment revenue was CNY 2.4 billion, up 108% year-on-year and up 7% quarter-on-quarter. In our principal business, GMV approximately doubled year-on-year as our user base and total number of orders expanded. Home appliance sales dipped quarter-on-quarter due to the termination of government energy-saving subsidy programs and adverse seasonality. In our agent business, revenue grew year-on-year, driven by increased commission fees.
With that, I'll hand over to John to discuss the financials.
Hello, everyone. For the third quarter of 2013, our total revenue was CNY 15.5 billion, up 34% year-on-year and 8% quarter-on-quarter. Operating profit was CNY 4.8 billion, up 17% year-on-year and up 5% quarter-on-quarter. Income tax expenses was CNY 955 million, up 3% quarter-on-quarter. Effective tax rate for the quarter was stable at 19.8%. Net profit attributable to shareholders was CNY 3.9 billion, up 20% year-on-year and 5% quarter-on-quarter. On non-GAAP basis, operating profit for the third quarter was CNY 5.3 billion, up 20% year-on-year and 6% quarter-on-quarter. Net profit attributable to shareholders was CNY 4.4 billion, up 23% year-on-year and 5% quarter-on-quarter. Operating margin was 34%, down four percentage points year-on-year and one percentage point quarter-on-quarter. Net margin was about 28%, down three percentage points year-on-year and one percentage point quarter-on-quarter. Let's turn to segment gross margin.
Gross margin for VAS was 65%, down one percentage point year-on-year, or up one percentage point quarter-on-quarter. The sequential increase mainly reflected higher revenue contribution from in-house games. Gross margin for online advertising was 52%, up two percentage points year-on-year or down two percentage points quarter-on-quarter. The sequential decrease mainly reflected higher online video content costs as we continue to acquire video content. Gross margin for e-commerce transactions was 6%, up two percentage points year-on-year, or stable quarter-on-quarter. Moving on to operating expenses. Selling and marketing expenses was CNY 1.5 billion, up 79% year-on-year and 19% sequentially. The year-on-year increase was mainly due to promoting WeChat in international markets, online games, and certain mobile applications as a percentage of revenue. Selling and marketing expenses increased to 9% from 7% in the third quarter last year. G&A expenses was CNY 2.6 billion, up 29% year-on-year and 9% sequentially.
The year-on-year change mainly reflected increases in R&D expenses, staff costs, and administrative costs such as office rental to cope with business expansion. As a percentage of revenue, G&A expenses decreased to 17% from 18% in the third quarter last year. Included under G&A, R&D expenses was CNY 1.4 billion, up 21% year-on-year and 9% sequentially. R&D represented 9% of quarterly revenue. As of quarter end, we had about 27,000 employees, up 15% year-on-year and 6% sequentially. Comparing to last year, we employed more people to run the warehousing and logistic operations for our e-commerce business. Quarter-on-quarter, the increase was due to our annual recruitment of university graduates to support business growth. Now we'll look at margin ratios for the third quarter. Gross margin was 54.7%, excluding e-commerce. Non-GAAP operating margin was 34.3%, excluding e-commerce transaction revenues and costs, it would be 39.4%.
Non-GAAP net margin was 28.4%, excluding e-commerce transaction revenues and costs, it would have been 32.4%. During the third quarter, we did not repurchase any shares. For 2013 to date, we repurchased 6.64 million shares for an aggregate consideration of HKD 1.6 billion. The total number of shares outstanding was 1.859 billion. Basic EPS was CNY 2.105 on GAAP basis and CNY 2.382 on non-GAAP basis. The listed EPS was CNY 2.07 on GAAP basis and CNY 2.343 on non-GAAP basis. Total CapEx for the quarter was CNY 1.6 billion, up 43% year-on-year and 11% quarter-on-quarter. Operating CapEx was CNY 985 million, up 1% year-on-year and 35% quarter-on-quarter. During the quarter, we repurchased more servers to support growth in our PaaS businesses. Non-operating CapEx was CNY 636 million, up 312% year-on-year, or down 14% quarter-on-quarter.
This year-to-year change reflected the expansion of three data centers in China. Free cash flow reached CNY 4.2 billion, up 2% year-on-year and 3% quarter-on-quarter. Our net cash position at quarter end remains strong at CNY 34.4 billion, up 46% year-on-year and 3% quarter-on-quarter. Finally, I will detail the financial impact of the Sogou-Soso transaction and our revenue recognition for mobile games. For the Sogou-Soso transaction, we will deconsolidate Soso-related advertising revenue and costs and capture our share of the new Sogou's net income or losses as share profit or loss from associates in the profit and loss account. On the balance sheet, we will recognize our equity interest in the new Sogou under interest in associates. For mobile games distributed on Mobile QQ and Weixin game centers, we split revenue between social networks and online games.
We allocate the platform portion of revenue under our open platform segment and the operator and developer portions under online games. This concludes our presentation. Thank you.
Yes, thank you, John. Operator, shall we take the first question, please? Operator?
Ladies and gentlemen, we will now begin the question-and-answer session. If you wish to ask a question, please press star followed by the number one on your telephone, then wait for your names to be announced. If you wish to cancel, please press the pound or hash key. Your first question comes from the line of Alex Yao from JPMorgan. Please ask your question.
Hi, good morning and good evening, everyone. Thank you very much for taking my question. I have two questions. The number 1 question is, Martin discussed the operation of mobile game publishing on Mobile QQ and Weixin has demonstrated mobile social platforms' user reach and the viral adoption ability. My question is, beyond mobile gaming, what other digital content and services do you think such power can be applied to on mobile? Do you have a plan to introduce these content and services to your mobile social platforms? The number 2 question is, obviously this quarter we have seen the media usage has been shifting to mobile as well. What will be the monetization across different ads categories such as brand ads, video ads, and performance-based ads such as Guangdiantong? Thank you very much.
Okay. On the question of what additional content, I think a lot of digital content are actually quite suitable for mobile distribution, we have already sort of put in some of these integration points. For example, on our news platform, we actually now have got daily news, one in the morning and one at the night, which sort of provide the headlines of our news service to the WeChat as well as Mobile QQ users. That is very popular, and it's a service that has a lot of user value. Through that, we actually also have been able to cross-promote for our Tencent News individual clients. That's an example. In addition to that, we have been sort of promoting our music content as well as video content through social
- sharing within our platform. A lot of these digital content are actually very suitable for social distribution, we have been leveraging our platforms to do that. Now, in terms of the monetization, James would actually address the question.
I think you were asking about as media usage shifts from desktop to smartphone, how can we shift our advertising revenue in response? Our belief is that for performance advertising, the shift is relatively natural. If you look at the financial results from companies like Facebook or Twitter and the rest of the world, they've obviously been able to ramp up their mobile performance advertising relatively rapidly. In China, we've been experimenting with putting performance ads from Guangdiantong on third-party mobile apps. What we find is that the click-through rate on mobile can be comparable to, or actually superior to, the click rate on desktop for performance ads. Moving on to display advertising, the transition's a little bit rockier, we are now seeing some success with our experiments in areas like splash screen ads that appear when you load a news app each day.
Finally, video advertising is probably the most challenged at the moment, partly because of the proliferation of piracy. There are some apps out there that enable users to watch video content from any site, including our own, actually strip the advertising out. That is obviously a fairly substantial deterrent to the ability of the industry to generate mobile video advertising at meaningful scale. That's part of why we and other companies in the space are very focused on cracking down on video piracy. You may have seen an announcement about that this afternoon. Thank you.
Thank you very much. That's very helpful.
The next question comes from the line of Dick Wei from Credit Suisse. Please ask your question.
Hi, good evening. Thanks for taking my questions. I guess some other questions on the dynamics on the social network side. I guess in the press release, we talked about some of the decline in subscription was offset by the item-based related revenue on the social network. Can you talk a little bit about the dynamics? How should we expect that to change down the road? In particular, with this new mobile revenue booking accounting methodology, how did it change the kind of numbers in the third quarter? Thank you.
Yeah. I would say some of your questions is related to the subscription revenue. I think we have actually been already explaining this for a few quarters. When we were in the PC regime, we actually had a lot of privileges related to the membership and VIP for the users. When we actually start to migrate users over to the mobile platform, we actually have really focused on building user experience, the basic communication and social functionalities. A lot of the monetization mechanisms, a lot of the privileges were actually sort of add-ons that were not the most important for the basic user experience. That's why, to some extent, we have sort of left them to a later time. Now when we look at the subscription services and the VIP services, a lot of the privileges are not mobile related.
Now we have started to provide certain mobile-related privileges and put it into the VIP packages. We are seeing the decline of the subscription leveling up at this point in time. I think it would take us more effort as well as longer time in order to really provide the full suite of privileges in relation to the VIP services. Of course, in the meantime, as we move to mobile, we're now having a pretty vibrant gaming platform, and that would actually help us to generate some revenue over the near to medium term. John would actually talk about how exactly we actually book the revenue.
All right. As I mentioned before, we allocate the platform portion of the revenue under open platform segment and the operator and developer portion under online games. In this quarter, since we have just started our game, the revenue is noticeable, but it's not that huge. Since all of our five games are self-developed, they are more portion booked under online gaming versus the platforms.
Okay. Got it. I just want to maybe go back to the speed of the subscription, the PC-based subscription declined. When would you see kind of the re-acceleration of some of the subscription, kind of mobile proliferation related subscription to more to drive the growth on the segment?
Well, I don't think we will give this kind of a specific guidance. As and when more and more privileges are added on the mobile side, then the mobile side subscription would actually start to pick up, and hopefully that would actually overcompensate for the PC decline. We'll have to see. I think, a lot of it actually, we know there are a whole host of things that we need to do. Sort of the speed at which we do it will also be impacted by how much fundamental work that we need to do to improve the basic user experience. We can't really give a timetable. At the present time, I think, the most important thing is still to make sure that the application itself is actually providing the best user experience on the fundamental value side.
Great. Thank you.
The next question is from Alan Hellawell from Deutsche Bank. Please ask your question.
Great. Thank you so much. Just a quick question. We probably all recall the results presentation from your partner, Nexon, and generally, somewhat of a negative surprise as they talked about the fourth quarter, and the reference to Dungeon & Fighter. I know that there are oftentimes extenuating circumstances that would explain that, but can you give us your interpretation of why they might be bringing this up and add a little color there, if you don't mind?
I think we'll probably pass on interpreting what other people say. I did mention in the introductory remarks that Dungeon & Fighter revenue has experienced some pressure. The specific reason is because the expansion pack released in the third quarter of 2013 was less impactful than the expansion pack in the third quarter of 2012. I think it's probably fair to argue that as a game gets older, it is logical that expansion packs may have diminishing impact over time, or conversely, that an expansion pack needs to be bigger and better in order to achieve the same impact as earlier expansion packs. Be that as it may, I think it's also worth pointing out that our aggregate game revenue achieved relatively healthy growth in the third quarter of this year versus the third quarter of last year.
The majority of that growth was actually driven by self-developed games. I don't think that will necessarily be the pattern going forward because we have lots of licensed games that we're very excited about in our portfolio. The key takeaway, I think, is that we do have a portfolio of games, and while we'd like every game to be doing spectacularly well every quarter, that's never really been the case in the past and will probably never be the case in the future.
Got it. James, sorry, one quick follow-up. You've heretofore very rightly talked about the growth in mobile gaming as being significantly incremental to your burgeoning desktop business, gaming business. As we really start hitting scale in mobile gaming, what do you see as the interactions between desktop and mobile in terms of time spent, et cetera?
I think at this point, our view is that mobile game could be somewhat cannibalistic of the mini casual game category of desktop games, which as you know, is very much the minority of our desktop game revenue. At this point, we believe that mobile gaming is very largely incremental in terms of both time spent and also money spent to the desktop game category. That belief is based on what we've seen so far in China, what we've seen so far in Korea, Japan, and the rest of the world. Obviously, things may change in the future, but that's how things look at the moment now in China and overseas.
Fantastic. Thank you very much.
The next question comes from the line of Timothy Chan from Morgan Stanley. Please ask your question.
Hi. Good evening. Thank you very much for taking my questions. I have two questions. The first one is about the competition for Weixin in China. Your competitors, they're now getting more aggressive in competing with your racing product, and some even started to subsidize the data charges. Can you talk about how meaningful is the competition now in China? Thank you, and I have a follow-up question.
Yeah. On the competition side, well, first of all, I think we actually do welcome competition. Competition, I think, is really a nature of life in the China Internet market, right? It's only when you have a good segment that competition starts to come in. I think the important thing is actually by having competitors, it actually drives you to actually work harder in order to come up with better user experience for the users. I think that's, to some extent, a good thing for the market. Secondly, I think for us, we continue to view that the biggest value of a communication and social product is actually within the product itself. We are very focused on building user experience in order to deliver the best user experience for our users. When you have the best user experience, then the users stay.
The users, when they stay, they actually keep each other. I think that's actually the biggest value of a social network and of a communication tool. From a more light perspective, you never see a product which gives away money actually eventually taking over the market. I think ultimately, the most important thing is really the fact that who has the best user experience, who can actually provide the best user value to the users. I think, on that front, we are completely focused on.
Sure. Could you also talk about the latest competitive landscape for WeChat in overseas market? What are the countries now you have a clear lead, and where do you need to continue to spend on marketing? Finally, how should we think about the WeChat marketing spend next year compared to the CNY 100 million to CNY 200 million this year? Thank you.
I think there's not that much to update, right? I think we have given sort of the overall situation of WeChat in the overseas markets. One quarter has passed. The number had been consistently growing, we are very focused on making sure that within the market that we're penetrated, we continue to provide good product, good service quality, so that the users will have reliable service and we'll have increasing user engagement. I think for now, the marketing will go on, we'll see, at least for the next few quarters, we'll continue to spend on marketing so that we can sign up new users. Over time, I think the focus will be gradually shifted to making sure that the users are engaged more on our platform.
Now with sort of the launch of 5.0 in the overseas markets that's coming up, we will have games, we'll have more emoticons that we'll provide to the users, we'll have new functionalities, and hopefully all these things will actually add to the user engagement. The geographic coverage is still primarily Southeast Asia, and certain countries in Latin America, as well as countries like Italy in Europe. I think we have a number of these markets. Some of them we have a pretty good concentration of users already. Some of them we are seeing early traction. I think it will take another few quarters to play out.
Sure. Thanks, Martin.
Thank you. The next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.
Hi. Good evening. Thank you for taking my questions. I have two questions. The first one is about your mobile game platform. Could you share more color on your strategies to open up your mobile game platform to perhaps your hundreds and thousands of developers out there? How quickly will we see the number of games increase on your platform? How do you see the differentiation between Mobile QQ and Weixin in servicing your developers? Secondly, just a housekeeping question. Could we have the ARPU trend of your online games? Thank you.
Okay. On the mobile game platform right now, I think we actually sort of have a whole series of different platforms. The strategy might be sort of slightly different with respect to these different sort of properties. Overall, I would say the focus is actually sort of to be able to work with as many good developers as possible so that we can actually deliver the best games and the best gaming experience to the users. Because of the different nature of the different properties, the strategy might be different. For example, if you look at our social platform, Weixin and Mobile QQ, I think the strategy there is actually should be more selective in terms of introducing games.
The nature of these platforms is that we try to sort of bring on games that has a social element that sort of can not only provide the gaming experience, but also sort of enhance the communication and social experience of the users. We have to sort of pick the games that actually fulfill those circumstances and sort of criteria. Now, on other parts of our overall platforms, such as our App Store, the strategy will be sort of to be as open as possible. In the future, if we launch Guangdiantong, for example, which allows different applications to promote their games, then that would be sort of a open platform with much wider selection.
I think depending on what kind of properties it is and what kind of setup that would actually provide for the best user experience according to their expectation, we'll have to sort of different strategy. By and large, in the very near future, third-party games will sort of be the dominant force within our platform. That's what we want to eventually sort of achieve. In respect of the ARPUs, the MMOG in quarter three was CNY 185-CNY 275, and for advanced casual games, it was CNY 75-CNY 175.
Thank you.
The next question comes from the line of Alicia Yap from Barclays. Please ask your question.
Hi, good evening. Thanks for taking my question. My question is related to WeChat payment. Can management elaborate a little bit, so far since the introduction of the features in August, how the user traction has been so far and, in addition to the payments that related to the in-game purchase, is there anything that we generate so far from the O2O business activities and how is the traction? If so, where is the revenue actually being recorded? Thank you.
I think your WeChat payment, actually it's called Weixin Pay because it's not available on the WeChat platform, which is for international users yet. Weixin Pay is an early trial of our payment mechanism sort of for the Weixin platform. It's actually leveraging sort of the existing infrastructure of our Tenpay platform, and we extend part of the user experience onto the Weixin application. I would say, right now it's actually sort of mainly for providing convenience to the users, so that they can actually pay for our own games as well as pay for some of their sort of mobile subscription, as well as buying certain sort of virtual items. Over time, we believe that it would actually also be very helpful to different kinds of merchants, right, who wants to get into mobile transactions.
For example, our public account ecosystem can actually sort of benefit from the fact that there is a Weixin Pay platform, also some of our partners on the e-commerce side, on the group buy side, on B2C side they also sort of can leverage Weixin Pay to get payment from the users. I think it's still early days in terms of the development, but we believe with more and more payment mechanisms, with more and more sort of payment applications and partners, it will continue to grow.
I see. Great. Thank you.
The next question comes from the line of Jiong Shao from Macquarie. Please ask your question.
Good evening. Thank you for taking my questions. My first question is about WeChat and Mobile QQ. You talked about you split your revenue between gaming and social for the revenues you're getting from the games on these two social platforms. Could you share with us the exact split? Is that 50/50 or 70/30? How do you split that, and is that the same split you intend to use once you open the WeChat to the third-party games? What the timing for that opening up is going to be later this year, I think you talked about earlier. My second question is on your e-commerce business. I was hoping you can talk a bit about what you saw on the Singles' Day activities compared to last year for both of your platform business as well as for your sort of first-party merchant principal business. Thank you.
As I've explained earlier, the amounts of revenue booked under online gaming, for those mobile games is more than that booked under open platform. Going forward, if there are third-party developers going onto our platform, it will really depend on whether we are the principal or agents. In some cases in which we do not determine the pricing, or the risk and rewards rest with the developers, then it will be booked as net revenue. However, if we operate the games ourselves, set pricing and stuff like that, then it will be booked as gross revenue, and they will be sharing the payout to them. That's how the accounting works for those mobile games going forward.
On e-commerce, right.
John, I want to follow up on this. I was asking, if you have CNY 100 revenue from a Weixin game, do you put a 50 into the social network, 50 into the games? I was asking the split, if you're able to share with us.
I think it's pretty clear that we're not going to be able to share the split with you. What John is saying is that for self-developed games right now, which sort of the first five games are all self-developed as proof of concept, sort of the revenue booked to the gaming division is actually higher than that to the platform, because the gaming division sort of is both responsible for the content as well as for the operation of the game. Okay. On your question regarding e-commerce, right. I would say a Singles' Day is actually sort of a little bit difficult sort of indicator of the overall performance of a platform. Obviously this year, right, because everybody has prepared for this particular one day, the performance of our platform has been quite good compared to last year.
As a data point, because of the focus on making sure that our logistics is actually well-prepared, as well as we're more focused in terms of traffic generation and also in terms of making sure that we have enough inventories. The first party sale, actually, GMV order is actually more than five times what we had last year on the same day.
Okay, great. Thank you for that. Thanks.
Thank you. The next question comes from the line of Thomas Chong from Bank of China International. Please ask your question.
Hi, good evening. Thanks for taking my question. I have a question about WeChat, the stickers features. If you look at overseas players like Line in Japan, we know about 20% of their revenue coming from stickers. How should I think about the trend in China? Is stickers going to be a meaningful revenue contributor to Tencent WeChat? Thanks.
The answer is actually sort of no. We believe actually stickers is actually a pretty good way to engage users rather than generate revenue from the users. On the revenue generation front, we provide free games, but within the games it is probably easier to generate differential experience so that some people may want to pay for it, some people do not want to pay for it. With stickers, I think, the guiding principle for us is probably going to be trying to provide the stickers, if possible. Some IP owners would not give us a blanket right to distribute the stickers. If and when the cases are possible, then we actually want to provide the stickers to as many users as possible, which means that it will be relatively free.
I see. Thanks.
Thank you. The next question comes from the line of Ming Zhao from 86Research. Please ask your question. Excuse me, Mr. Ming Zhao, your line is now open. Please proceed with your question.
Okay. Operator, I think he might be not around. Also in the interest of time, shall we take the last three questions, please?
No problem. The next question comes from the line of John Choi from Daiwa. Please ask your question.
Okay. Good evening, guys, and thanks for taking my question. I have a couple of questions. First of all, on your search business cooperation with Sogou, could you elaborate more on when should we be seeing the integration really happening between Sogou and Tencent, especially on the mobile search area? Would like to get more color on that area. My second question is regarding the Blade & Soul. I recently heard very positive feedback from the limited CBT. When does the management expect BNS to officially launch the game in China? Also based on the positive feedback and response from users so far, does the management think this game could be as successful as comparable to DNF, which is obviously one of the key games for Tencent? Thank you.
On our integration with Sogou, I would say the progress has been pretty smooth. We have merged the teams, and we are in the process of moving the inventories from Soso over to the advertising platform of Sogou. We are also providing a transition plan for the search advertising agencies and distributors on the Soso platform. Things are moving in order and the more complete integration will probably be happening toward the end of this year.
On Blade & Soul, we probably won't answer the question you're asking, as a high-level observation, Blade & Soul is a game that's tracked relatively well in the most anticipated game rankings in China for a long time now. So far it seems as if it's one of those rare happy circumstances in life when the reality, at least for the early bunch of users, indeed lives up to the elevated expectations. Looking forward, the sequence of progression for our games is typically they move from a limited closed beta test where only a certain number of people can play into an unlimited closed beta test, and then open beta and full commercial launch thereafter. That's sort of the forward trajectory.
Okay, thanks.
Thank you. The next question comes from the line of Ravi Sarathy from Citigroup. Please ask your question. We will proceed for the next question. The next question comes from the line of Piyush Mubayi from Goldman Sachs. Please ask your question.
Thank you. I have two questions. The first is when I look at the rollout of games on Weixin, and I contrast that with the way Line progressed and KakaoTalk progressed, it looks like you've been a lot more cautious. Could you comment on that and tell us what the pros and cons are of the strategy you're deploying? That's the first question. Second, on the merger of Soso and Sogou, does it lead to your eventually taking costs out? If that's the case, is there anything else that we could look at in the next couple of months as being areas where costs could be taken out potentially? Thank you very much.
Okay. On the gaming platform side, your observation is actually correct. As I actually explained earlier, we do have quite a number of different platforms to leverage. I think we are applying differential strategy with respect to the different platforms. Now, on Mobile QQ and Weixin, these are our crown jewel platforms. We very much care about the user experience, and we want to have a symbiotic relationship between these applications and the games, such that the games are not there just using the distribution channel. We actually want to have these games actually feeding back into the social and communication interaction for those platforms. We actually, I would say, attach a pretty high standard for admitting games into these platforms.
That's why in the initial stage, it's actually self-developed games, so that we actually have the full control to tweak all the user experiences, so that we want to make sure that the games are not hurting the applications. Rather, they're actually going to be able to help the applications over time. I think we have gotten pretty good of such proof of concept, so that now we can actually start to admit new third-party games into the platform. By and large, we'll be very cautious because we do want to maintain a very conducive and nice environment for our users within our crown jewel platforms.
On the other hand, in some of the market place-oriented platforms that we also own, such as the App Store, such as in the future, maybe the browser, we can actually provide a place for more open platform type of operation, which include many more games.
With regard to the Soso-Sogou transaction, again, you're right to observe that there will be consequent cost savings. Running a search business is an expensive business, particularly in terms of engineers and server CapEx. That's not the primary or sole rationale for the transaction. The primary rationale is delivering a better search product for our users and better traffic for our advertisers. It's a fair observation. The capital and profit that's freed up, we'll reinvest some of that in strategic investment areas where we see continued growth opportunities, such as online video. You shouldn't expect us to suddenly change our stripes and become very short-term oriented. We'll continue to invest aggressively for the long term. At the same time, I think the transaction does illustrate that we invest aggressively, but not irrationally.
Thank you.
Thanks very much.
Thank you. Our last question comes from the line of Ravi Sarathy from the Citigroup.
Thank you very much for taking my questions. I have a couple of very quick questions, if I may. You've certainly whetted our appetite with the first statistic you gave for the five key games of 570 million registrations on the mobile platform. I was wondering, last quarter you shared number of DAUs and number of downloads in 10 days. I was wondering if you had any other color you could possibly share around any one or all of those games. My second question is, I may have missed it, but the amount of spending for WeChat International on sales and marketing in the quarter, or any numbers you may wish to share for the quarter or other time periods.
Yeah. In terms of the mobile games, I think the numbers that we gave for this quarter are the following. The first one is actually 570 million across the five games cumulatively, within the first three months. At the same time, we also gave the ranking of these games. Basically, each one of them moved to the top of the App Store very quickly after launch and stayed there for quite some time after the launch. Thirdly, from a revenue generation perspective, one of our games, which is Timi Run Every Day, actually had reached the top three in terms of the grossing chart for iOS App Store, and it has stayed there for quite some time as well, which does prove the monetization capability of certain of our games. That's for the games. What was the last question? Sorry.
Sales and marketing on Weixin.
The sales and marketing on Weixin. I would say the spending actually in the third quarter on WeChat International is actually mainly related to the Messi marketing program that we actually launched across 15 different markets. Towards the latter part of the quarter, because it's in summer vacation, we actually reduced the spending quite substantially. Stepping into the fourth quarter, we started spending again, and this time around it was both a global campaign as well as quite a few of the local campaign in the target markets. I would say you should expect this quarter will be a step up in terms of spending compared to the third quarter. As I said, we will actually keep spending to acquire users for the next few quarters. We feel that this is actually important for the long-term growth of our company.
Thank you very much, Ravi, and thank you, operator. We are rounding up the conference call now. If you wish to check our press release and other mentioned information, please visit our website under www.tencent.com/ir. We'll also post a replay of this webcast on the site shortly. Thank you and see you next quarter.
Thank you, everyone. That does conclude our conference for today. Thank you all for your participation of Tencent Holdings Limited 2013 third quarter results announcement conference call. You may now disconnect.