Good day, welcome to the Bilibili 2018 fourth quarter and full year earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.
Thank you, operator. Please note that discussion today will contain forward-looking statements relating to the company's future performance and are intended to qualify the safe harbor from liabilities as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Bilibili's business and financial results is included in the certain filings of the companies with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only.
For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial measures, please see the 2018 fourth quarter and full year financial results news release issued earlier today. As a reminder, this conference call is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on Bilibili investor relations website at ir.bilibili.com. Joining us today on the call from Bilibili senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer, Ms. Ni Li, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Xin Fan, Chief Financial Officer. I will now turn the call over to Mr. Fan who will read the prepared remarks on behalf of Mr. Chen.
Thank you, Juliet, thank you, everyone, for participating in today's earnings call. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. 2018 was an exciting year for Bilibili as we made great strides across our business. In March, we successfully completed our IPO, and throughout the year, we continued to build on that success and grow each of our core divisions. We added massive amounts of new, diverse content through our robust professional user-generated video, or PUGV ecosystem, as well as entered a number of new cooperation agreements. Our ever-growing content supports our expanding community. By the end of the year, our MAUs grows to record level of 92.8 million. Importantly, we deepened the level of connectivity within our community and enhanced our monetization capabilities.
By the end of 2018, we had increased our revenue by 67% to RMB 4.1 billion, and the number of paying users contribute from 1.1 million to 4.4 million in the last 12 months. The fourth quarter was an extension of this momentum, the total net revenues increased 57% year-over-year to RMB 1.2 billion, once again, surpassing our expectations and beating the high end of our guidance. During the fourth quarter, we further grow our robust compilation of high-quality content through our PUGVs. As we announced during the quarter, we entered a strategic agreement with market giants Tencent and Alibaba, which considerably strengthen our capacity in anime, mobile games, and commercialization. Our extensive and growing library of content continues to attract young people to our community, generating substantial user growth.
In the fourth quarter, the number of monthly active users grew by 29% year-over-year, reaching 92.8 million. Our mobile monthly active users grow even faster by 37% year-over-year to 79.5 million in the fourth quarter. Our platform's exceptional user growth and increased engagement levels are a testament to our unparalleled community. In the fourth quarter, our users spent a daily average of 78 minutes on our platform, excluding time spent playing our mobile games. This is up five minutes compared to the same period last year, while an increasingly large number of new users also joined our platform. In 2018, the most popular content verticals were entertainment, lifestyle, games, anime, and technology. Within our massive user base, we have a unique core user group, official members.
They pride themselves on passing our community entrance exam and exhibit much more loyal and engaged user behavior compared to non-official members. They are also considerably more inclined to pay for Bilibili premium content, and their 12-month retention rate is over 80%. By the end of 2018, our official members once again outpaced our MAU growth, increasing by 44% year-over-year to 45 million. Through our entertainment ecosystem, our video content creations continue to be dominated by PUGV. Looking at the first quarter specifically, approximately 89% of our viewed videos came from PUGVs. Finding ways to support this important constituency was one of our primary goals in 2018. Today, our submission progress has been more streamlined with technical updates on mobile content submission and streaming. Our cash incentive program has over 100,000 enrollments, further activating and encouraging continued content creation.
In the first quarter, we had on average of 570,000 active content creators uploading 1.7 million video monthly, up 143% and 148% respectively, compared to the same period last year. We host the Bilibili Top 100 Content Creators award ceremony in January 2019, where we celebrated the outstanding achievement of leading content creators in various categories. We will continue to improve our platform design competencies and expand our commercialization capabilities to help our content creators shine even brighter. To our diverse PUGVs, our premium licensed content, anime, variety shows, and documentaries continue to thrill our community. As we further our leadership in overseas anime offerings, we are also expanding our footprint in domestic anime. In December, we hosted a Made by Bilibili press conference where we released over 20 Bilibili-produced domestic animation shows.
Furthermore, our self-produced variety shows, Doraemon 2 and annual Bilibili New Year's Eve Gala, granted instant success among the youngster generations following their releases. Building partnerships with market leaders was also one of the important ways we extended our content offerings and improved our commercialization capabilities. In early October, we announced Tencent's equity investment of $370 million and our subsequent partnership. Under our agreement, both Bilibili and Tencent will exchange, co-produce, and jointly invest in anime content, as well as expand our partnership in mobile games operations. As of the end of February 2019, we have already exchanged a number of domestic animation copyrights and more are planned for the rest of the year. We are also jointly working on certain new anime-related projects aiming to deliver more high-quality content to anime lovers.
Furthermore, in December 2018, we entered into a partnership with Taobao, China's largest mobile commerce destination, and Alibaba for content-driven e-commerce and the commercialization of Bilibili's IP assets. Leveraging Taobao's gigantic platform and expertise in e-commerce, we expected to further help our content creators to realize and improve their commercial values, while building a more virtual content community and a commercialization-focused ecosystem. We are working closely with Taobao and in the coming months, we expected to introduce the first batch of top content creators to promote merchandise on both platforms. Our figure remains on the pulse of the online entertainment industry, particularly through our core Generation Z demographic and their continued enthusiasm for ACG content. In November, we considerably strengthened our fundamental competence in ACG with the launch of our new Bilibili Comics App.
Rounding out our offerings and fortifying our position as a leader in ACG, we are rapidly accumulating exciting comic content. In December, we also acquired assets from NetEase's comic division to further build our complimentary suite for premium licensed content. We will continue to invest in ACG content to satisfy the growing demand for our eager community. As we discussed in the past, technology is the cornerstone of our business. We continue to improve our product design and AI power to connect users and grow our community. Over 70% of our video views are now generated by our smart recommendation system and over one-third of MAUs visited Bilibili Moments, a social interactive function that allows users to interact and engage with content creators and like-minded friends in the community.
Based on these functionalities and improved recommendation powers, our users are building deeper connections and engaging more with the platform and each other than ever before. In the fourth quarter, we saw exciting participation levels with 476 million daily views and 1 billion monthly interactions through bullet comments, likes, and the Bilibili Moments posts, up 107% and 298% year-over-year respectively. These unique interactions are central to our success and one of the ways that we continue to build our loyal offerings. With that overview on content community, I'd like to take a few moments to review our commercialization progress. Revenues from our mobile games grew 50% year-over-year to RMB 713 million in the fourth quarter of 2018, or $104 million, led primarily by Fate/Grand Order, or FGO.
The game pervasive popularity continued throughout the fourth quarter. Users responded quite favorably to the release of the major content update, FGO Chapter 2.0 around the 2019 Chinese New Year. Additionally, we released new titles including Song of Time in November, an exciting ACG-themed RPG based on a well-known IP, which has been gaining popularity among core users. For our jointly operating games, in the fourth quarter, we published several titles including Naruto Online from Tencent and LifeAfter from NetEase, both of which were well-received by our users. Looking at our pipeline, besides those titles we have previously announced, we have added a number of new games to our release lineup. On the exclusive licensed game front, we have Final Gear, a highly anticipated tactical RPG set against a doomsday background. We are also jointly operating two thrilling ACG-themed mobile game, RWBY and Arknights.
These three games have already obtained regulatory approvals and are scheduled for launch on Bilibili's platform in the second quarter. Turning to our advertising business. Revenue from advertising increased by over 300% to RMB 160 million, or $23 million in the fourth quarter of 2018. Our two growth engines, brand advertising and performance-based advertising, gained considerable momentum throughout the year. We are actively improving our advertising efficiencies while expanding the number of advertisers in different industry verticals. The top three industry verticals for brand advertising in the first quarter were games, e-commerce, and internet services. The top three verticals for performance-based advertising were e-commerce, education, and games. Our live broadcasting and VAS revenues increased by 276% year-over-year to RMB 202 million, or $29 million in the fourth quarter of 2018, with contribution from both our live broadcasting business and premium memberships.
In 2018, we started a number of initiatives to expand our live broadcasting content, including growing the number of high-quality esports matches to cater our highly concentrated base of game lovers. These include top matches in League of Legends and the Overwatch League championships. The results were encouraging. We recorded peak live streaming page views during the LPL S8 final game, which reached the top industry levels. We have also improved product design and user experience, attracting more live streaming viewers and improving our monetization efficiency. In the fourth quarter, live broadcasting paying users grew over 200% compared to the same period last year. In January 2018, we launched a premium membership program allowing paying members to enjoy exclusive or advanced licensed content. The program was an immediate hit in the community and attracted millions of subscriptions.
By the end of December, we had recorded 3.6 million valid premium members, demonstrating our user high willingness to pay for premium content and Bilibili's heightened monetization potential. Last but not least, we are delighted to share our e-commerce and other revenue segment, reaching RMB 81 million, or $11.8 million in the fourth quarter, an increase of 254% from the same period of last year. Largely thanks to the increase in sales of products through our e-commerce platform. We are optimistic about the potential of this business with the growing demand for ACG-related products from our users. As we move through 2019, we will continue to strategically grow our business by adding best-in-class content to our industry-leading platform, and further increase the bond within our dynamic community, driven by the increasing might of the Generation Z population. This concludes Mr. Chen's remarks.
I will now provide a brief overview of our fourth quarter 2018 and full-year financial results. During the fourth quarter, each of our primary business lines continued to grow. Our total net revenue increased by 57% year-over-year to RMB 1.2 billion or US$168 million. We further improved our revenue structure with increased gains from our advertising and live broadcasting segments, as well as our value-added services business. Our non-GAAP revenues accounted for 38% of total revenues in the fourth quarter, up from 31% in the third quarter and 16% in the first quarter of 2017. As we execute our commercialization strategy, the number of paying users nearly quadrupled in 2018 versus 2017, reaching 4.4 million in the fourth quarter, demonstrating our heightened monetization potential. Of note, this number accounts for each paying user, not each service a paying user purchases.
Cost of revenues increased by 72% to RMB 959 million or US$139 million from the same period, 2017. Revenue sharing costs, a premium component of cost of revenues, was RMB 434 million or US$63 million, representing a 54% increase year-over-year. Gross profit increased by 12% to RMB 197 million or US$29 million from the same period of 2017. Our gross profit margin declined to 17%, primarily due to increased bandwidth costs, content costs, staff costs, and a lower revenue contribution mix from our higher margin game mixes. Total operating expenses increased by 104% to RMB 486 million or US$71 million from the same period of 2017. As we continue to grow our business and further optimize our monetization structure, we expect to see better operational leverage. Selling and marketing expenses were RMB 182 million or US$27 million, representing a 181% increase year-over-year.
The increase was primarily attributed to the increased channel and marketing expenses associated with our app and the brand, including promotional activities for our Made by Bilibili press conference, as well as promotional expenses for our mobile games and an increase in headcount in selling and marketing personnel. General and administrative expenses were RMB 150 million or US$22 million, represent a 75% increase year-over-year. The increase was primarily due to increased general and administrative personnel-related expenses and increased other miscellaneous expenses. Research and development expenses were RMB 153 million or US$22 million, representing a 76% increase year-over-year. The increase was primarily due to increased headcount in R&D personnel and increased share-based compensation cost expenses. Losses from operations were RMB 289 million or US$42 million, compared with a loss of RMB 62 million in the same period of 2017.
Income tax expenses were RMB 9 million or US$1.3 million, compared to RMB 2 million in the same period of 2017. Investment income was RMB 75.1 million or US$10.9 million, representing an increase of 892% from the same period of 2017. The increase was primarily due to the gain arising from the revaluation for our previously held equity interest in one of our investees, when we obtained control over during the fourth quarter of 2018, partially offset by the impairment loss charged to four other investees. Net loss totaled RMB 191 million or US$28 million for the fourth quarter of 2018, compared with RMB 51 million in the same period of 2017. Adjusted net loss, which mainly excludes share-based compensation expenses and amortization expenses related to intangible assets acquired through business acquisitions, was RMB 152 million or US$22 million from RMB 25 million in the prior year.
Basic and diluted loss per share were RMB 0.59, non-GAAP base, and diluted loss per share were RMB 0.46. For the full year of 2018, total revenue increased by 76% to RMB 4.1 billion or $601 million. Revenues from mobile games increased 43% to RMB 2.9 billion or $427 million. Revenue from live broadcasting and VAS increased 232% to RMB 586 million or $85 million. Revenue from advertising increased 191% to RMB 464 million or $67 million. Revenue from e-commerce increased 92% to RMB 143 million or $21 million. Cost of revenues for 2018 increased by 71% to RMB 3.3 billion or $476 million. Gross profit increased 56% to RMB 855 million or $124 million. Total operating expenses increased 105% from 2017 to RMB 1.6 billion or $230 million. Net loss for 2018 was RMB 565 million or $82 million compared to RMB 184 million in 2017.
Adjusted net loss for 2018 was RMB 377 million or $55 million compared to RMB 101 million in 2017. Basic and diluted net loss per share for 2018 was RMB 2.64 or $0.38 compared to RMB 8.17 in 2017. Adjusted basic and diluted net loss per share was RMB 1.84 or $0.27 compared to RMB 6.99 in 2017. As of December 31, 2018, we had a cash equivalent as well as time deposits of RMB 4.3 billion or $624 million, compared with RMB 664 million as of December 31, 2017. As we look ahead, our financial goals are to further grow our business and improve our operational efficiency. With that in mind, we are currently projecting net revenue for the first quarter of 2019 to be between RMB 1.27 billion and RMB 1.29 billion. Thank you for your attention. We would like now to open the call to our operations. Operator, please go ahead.
Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Again, it's star and one if you wish to ask a question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Again, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Our first question comes from the line of Thomas Chong from Credit Suisse. Thomas, your line is now open.
Thanks, management, for taking my questions, and congratulations on a strong set of results. I have two questions. My first question is about our e-commerce strategy. With our cooperation with Taobao, can management talk about more details about how we should think about this business line in 2019 and any financial implications to the top line and the bottom line? My second question is about our user growth. Given our strong user growth for this quarter, can management share our thoughts in 2019 and 2020? Thank you.
Thank you, Thomas, for your question. I will translate Mr. Chen's answer. The cooperation with Taobao we announced in December last year. The cooperation mainly include content-driven e-commerce business and commercialization of Bilibili intellectual IP assets. For example, Bilibili content creators will register and operate a number of accounts on Taobao and promote merchandise by producing content in a creative and interactive format on both platforms in a way to increase their commercial values. As for Bilibili's IP assets, we'll connect both the front and the back end of the database and to improve our commercialization of our IP assets.
Taobao will provide Bilibili with e-commerce technical support to ensure a smooth and more efficient user experience.
对，目前我们和淘宝就是在UP主方面的业务合作，正在顺利推进。
Currently, our collaboration with Taobao regarding the content creators is progressing very smoothly.
我们的第一批拥有百万粉丝的优质原生UP主，正在陆续加入和淘宝的合作计划。
We are actually in the process of introducing our first batch of content creators who have over 1 million followers to be set up in Taobao.
对，所以我们跟淘宝的合作应该是两个生态的一个合作，就是哔哩哔哩的内容生态和淘系商业生态的合作。在这个合作当中，我觉得两个生态都会因此受益。
The collaboration between Bilibili and Taobao is more of a union of two ecosystems: Bilibili's content ecosystem, as well as Taobao's commercial system. As the two ecosystems united, we see a lot of synergy and commercialization opportunities.
未来的话，这个合作将以多种方式体现在变现上，比如说电商广告，比如说UP主相关的变现收入。
In the future, there will be multiple ways for us to work together. That includes advertising opportunity related to e-commerce and for our content creators to better monetize their traffic.
OK，这个是关于第一个问题。第二个问题是？
第二个问题是我们用户目标2019年和2020年。
之前我应该也提到过，我们在用户增长方面的一个计划。今年我们应该是能够做到1.1到1.2亿的月度活跃用户，这是2019年。在2020年，我们应该是能够做到1.4亿到1.5亿的月度活跃用户。目前我们仍然是按照这个计划稳步推进。
Thomas, regarding the user expansion plan, Mr. Chen has discussed in the past. In 2019, our user goal is to reach a peak MAU around 110-120 million, and to reach 140-150 million in 2020. Currently, we are well on track to deliver that goal.
Thank you.
Thank you so much. Our next question comes from the line of Alex Yao from JP Morgan. Alex, you may now ask your question.
管理层早上好，谢谢接受我的提问。我第一个问题是想follow up一下刚才Thomas的问题，就是和淘系这边的商业合作。现在考虑到这样一个新的合作的机会，比如说我们看明年后年，就是两到三年的时间周期的话，我们现在的收入构成比例会发生怎么样的一个变化？但今天是以游戏为主，对吧？其他的包括直播，其他的广告什么的，涨得很快，但是相对小一点。比如说看三年的话，我们的收入结构占比会有什么变化？会有什么新的收入形式会进来吗？第二个是如果要做到我们今年对19年月活的这样一个数字的预期的话，需要在用户获取成本上面做多大的财务努力？我们应该怎么思考这个sales marketing expense？我自己翻译一下吧。So my first question is to follow up Thomas' question on the partnership with Alibaba.
Given the Alibaba partnership, how should we think about your revenue mix change over the next two to three years? The second question is on the user acquisition cost to achieve our target of 2019 MAU. To be able to achieve that target, what's your user acquisition strategy, and how should we think about your sales marketing budget over the coming quarters? Thank you.
好，我回答一下关于第一个收入结构的问题，第二个我们在用户增长方面的问题由Carly来回答。收入结构我们之前是曾经做过一个预测，我们如果拿三年的一个尺度来看，未来我们预测是会有一半的收入来自于游戏，有另外一半的收入是来自于其他的一个业务。从目前我们的情况来看，这个预测我们现在仍然觉得仍然会是这样。
In the past, we have made revenue structure forecasts. From a three-year horizon, we projected that by then, we will have about a 50/50 revenue split: 50% games and 50% non-games. Based on our current business plans, this goal is still on track.
我觉得我们跟淘宝的合作的意义应该是超越收入的，它不仅是体现在收入上。我这儿多说两句，刚才我也提到了，我认为这是两个生态之间的一个合作。我认为这个合作会对我们，比如说商业广告，它肯定会带来帮助，它可能会让这一块的增长更快和更健康一些。但是它比如说对于我们的UP主的体系，对于我们整体的一个打通内容和商业相关的数据，我觉得在这方面的帮助，它是对我们内力的一个内在竞争力的帮助，它未必是直接体现在现金的收益上，但是对我们其实是非常重要的，它可以让我们的整个商业的生态的一个健康度和竞争力更强。
OK. Mr. Chen added, as he mentioned earlier, that the collaboration with Taobao is beyond just on the revenue lines. It's more of a union of two ecosystems. This will, for one, definitely help on our commercial advertising business, which will help us to grow faster and healthier. More importantly, they will also help us to build a stronger ecosystem with our content creators to better connect the user, the content and the merchandise. In a way, it's from a fundamental baseline to reinforce our powers to generate revenue more healthily.
对，我觉得B站商业方面的竞争力，未必是我们能够，比如说短期让这个数字涨得很快，或者说是把数字做得很大。我觉得它的竞争力主要是两点，第一个是健康，第二个是长期持续。所谓的健康，就是我们的商业化不会伤害我们的用户体验，不会伤害我们的内容生态，它反而是对用户体验和内容生态的一种帮助。
OK. The core competitiveness in our commercial ability, one is to grow in a healthy way, second is more sustainable way. It probably won't immediately show on the P&L, but will help us not only not hurting our user experience, but finding and providing more right content and right consumption products to our users and to help us to grow in the longer run.
对，持续的话，我觉得我们的商业收入会是一个长期稳健的增长。
As for the sustainability, we think our revenue growth will be a very healthy, a longer term sustainable growth.
关于用户增长方面，是Ni Li来回答这个问题吧。
第四季度我们的平均月活用户的增长，包括全年的用户增长情况下，其实都是符合我们从开始到现在的一个预期的。
The fourth quarter user growth as well as the full year user growth is in line with our initial projections.
主要还是来自于B站很丰富的PUGV跟OGV内容，还有极具活跃跟粘性的社区生态。内容的输出对于用户增长发挥了很重要的、最核心的一个作用。
The key driving force of that user growth is mainly driven by our content, specifically in PUGV and our OGV content, as well as the stickiness and engagement level of our community.
同时，我们依据我们的内容体系，也会进一步地找到外部适合我们内容的用户，进行合适的推广。
At the same time, based on our strength and advantage of our content offering, we'll also actively to try to attract user from outside of our community to come to Bilibili.
在2018年，我们从我们的推广策略、用户的活跃、留存率上也积累了丰富的经验。
In 2018, our user acquisition strategy has gained a very deep experience in terms of evaluate the quality of the new user, in terms of level of engagement and level of retention.
同时也看到，在2018年的新增用户里面，其实它的转化注册或者转化付费，同比17年的新增用户还是有明显的提高。
Based on our internal analysis, we see the new user who come in in 2018, their conversion to registered user and their conversion to paying user, the level is much higher compared to the same period in 2017.
也印证了我们在18年的市场推广的策略上是有效果的。所以在2019年，我们会增强在持续关注活跃用户的活跃度，还有用户的转化率，还有用户的消费情况等方面进一步地进行深化。
That result is a strong improvement of our 2018 user acquisition strategy. Looking into 2019, we'll continue to focus on the quality of new users and focus on the key metrics such as their engagement level, their conversion to paying users, and to improve our user acquisition policy.
所以就在2019年还是会适度地去增大我们对用户的获取的数量跟金额。
All in all, in 2018, we'll considerably add some budget in terms of absolute dollar amount in user acquisition.
Yeah. Let me have some input for that. Actually, there were 3 cost components in our selling and marketing expenses. That's the promotion expense for our online game, and the cost to acquire the new users, as well as the personal cost related to our commercial sales team person. As we mentioned that there will be more games to be released this year, and we will enlarge our investment in the user acquisition. We forecast that overall, the selling expense will count in around 16% of the total revenues, but the percentage will vary through the different quarters. Like in Q1 and Q3, there will be higher percentage. In Q2 and Q4, that will be a little bit lower.
Thank you so much. Our next question comes from the line of Alex Poon from Morgan Stanley. Alex, your line is now open.
你好，管毅成。恭喜非常好的业绩和一季度的guidance。我第一个问题想追问一下这个user growth。可不可以说一下，你觉得19年、20年这个增长点是在这些学生、非学生，或者一线城市、低线城市，年龄层是比较年轻的用户，或者是成年的用户，或者是用户不看抖音，然后去看多一些的B站。这是第一个问题。第二个问题想问一下现在的这个四季的gross margin大概是17%。假设今天的revenue mix已经是50-50的话，这个gross margin会是大概什么程度？然后在看未来两三年的话，因为有这种比较高的revenue share，比如说在游戏与广告和直播方面的分层都是比较高的，而且有一些的up主的奖金。那怎么想这个gross margin在每一个不同的板块，未来怎么可以把它提升呢？I'll translate my questions.
My first question is regarding MAU growth. Could you give us some more color on where these new users will come from, whether they are students or non-students or come from higher tier city, lower tier cities, age demographics, whether they are game streaming users or they watched Douyin and they don't watch Douyin anymore, or they come from Taobao because of the new partnership? My second question is regarding gross margin improvement in the next few years. Assuming fourth quarter, assuming the revenue mix is already 50-50 between games and non-game, what the gross margin would be today? For most of the business segments, you have a quite high revenue share for games, advertising and live streaming. In the next two, three years, what are the plans to increase the gross margin of each of these businesses? Thank you very much.
关于用户增长的进一步问题，我来说一下吧。B站用户增长的驱动力是内容和社区，就是我们通过内容吸引用户，然后通过社区留住用户。我们用户增长的一个驱动力并不是靠流量购买。
The driving force of our user growth is through content. We use content to attract users and use our community to retain users. We do not solely rely on pure traffic acquisition.
对，所以我们可以看到，无论是前年、去年、今年、明年，对我们的用户的增长都会是这样的一个模型。所以为什么我们的用户越变越多？是因为我们的内容的种类越来越多，内容阔的越来越宽，同时内容的质量越来越好，所以就会有很多新用户进来。而我们的老用户基于我们良好的社区氛围，他又能够比别的平台有更好的留存，所以这个就构成了我们用户持续增长的一个动力。
We have been relying on this model for the past years and will rely on this model in the future. The key reason behind our user growth is we are a content-driven business model. As we expand our content categories and improve our content qualities, we will be attracting more and users who are interested in those categories. Because our strong community features that our old users have much higher retention level compared to other platforms. That's why we are able to continue to grow in the future. I think for the young generations in China, their demand for content will only grow stronger, and their demand for the quality of content is another way of consumption upgrade. That's why more and more young people will become our users.
Based on the second half of 2018 new user profile analyzed, we see both first and second-tier city as well as third and fourth tier, fifth tier city, they are both growing. The users who are coming from third tier and below are growing faster than the first and second-tier city. We think this trend will continue in the next few years.
Okay, let me take the question about the gross profit margin. Actually, if you look at the revenue sharing cost, that we already disclosed that in Q4, the number is around 78% of the revenues. That means that we don't pay too much to those kind of users. For the individual business segment like games, actually, for exclusive games, the gross profit margin quite stable, like 55% for exclusive game licensed. For the whole operation model, we don't share any profit to third parties. That means the GP margin will be around 100%. For the live broadcasting, currently, the gross profit is not that high, but actually, if you count our subscription membership revenues, the overall margin is still reasonable. We will not like to calculate gross profit margin in just looking at one quarter or two quarters numbers.
We will keep investing in our comic business, that will incur more content cost for our comic. We will also invest in different kind of areas like virtual idol Luo Tianyi, that will help us to grow our community. In the short term, like one or two quarters, the gross profit margin may have some fluctuations. You already saw that in Q3 and Q4. Also, there might be some pressure in Q1. In the long run, I think the investment for today still have their value to help us to achieve more stabilized sales mix. At that time, we foresee that when normalized our gross profit margin, where we have 50% revenue from games and 30% from advertising and 10% from VAS, that means the gross profit margin will be around 40%. That's our projection.
Thank you so much. Our last question comes from the line of Hillman Chan from Citi. Hillman, your line is now open.
entertainment、lifestyle，等等。我想问一下，我们在2019年嘛，在内容方面，我们有哪一些比较重点要培养的关注的内容的种类，去吸引新的用户。然后同样的也想问一下，随着我们的内容越来越多元化的话，这会影响到我们B里的一个branding吗？或者那个核心的那种20亿用户的一个粘性度吗？然后相关的就是说这个内容的投入，大概在2019年那个预算会是怎么样，然后这个turnaround的target是怎么样的现在。然后第二个问题，就很快想问一下，接下来在那个游戏的pipeline，我们这个时间表，还有那个game approval的一些update，可以请管理层也分享一下吗？谢谢。然后很快翻译一下。So my first question is about our content strategy.
As we are getting more and more diverse in terms of the content offering, could management share more on our focuses and plans for a particular content genre into 2019 to attract more new users?
Related to that, how should we think about the impact to Bilibili branding and the potential impact to the core ACG user loyalty? Related to the content investment budget, could management share more on that for 2019? How should we think about the timeline of turning around the business? My second question is on the game. Could management share more on the pipeline, the timelines, as well as the game approval process update? Thank you.
关于内容的问题，我这儿来回答。B站的内容我把它分成两类，一类我叫做核心内容，就是ACG，就是动画、漫画、游戏类的内容。还有一类是更泛化的一些内容，比如说泛娱乐和泛生活类。
I will divide our content on our platform into two brackets. One is the core ACG-related content, including anime, comics, and games. The second part is more general entertainment-related content that includes lifestyle and entertainment, pop culture, celebrity related.
在这两方面我们都会加强。在核心的ACG内容方面，我们发现ACG的用户仍然是有着一个很快的增长。比如说国产动画的爱好者在中国越来越多；虚拟UP主的爱好者也越来越多；电竞正成为越来越流行的一个全民的爱好。
Okay. First of all, in the core ACG content target users, they themselves are growing bigger and bigger. That includes, for example, for the domestic animations, we have more and more viewers who are interested in domestic animations, and more and more users are starting to accept and grow fond of YouTubers. Esports, nevertheless to say, it's become a country-wide sensation.
我们在核心的ACG内容方面我们有很强的优势，我们会保持这个优势，并且我们会在这方面变得更强。
We have a core competency in terms of ACG content. In the near future, we'll continue to invest and keep our leadership position in this content category.
同时在一些更广泛的一些兴趣爱好的内容方面，我们的增长是非常快的。从我们公布的数据大家也可以看到，这一块它增长的相对速度甚至高于我们的核心ACG的内容。
As for the more general entertainment content, we actually offer a very wide array category of content that can also be seen from the data we show to our investors, the number of video views. In terms of video views, entertainment content ranked number one.
比如说我们中国风的音乐、舞蹈和演奏的内容，比如说我们对于数码科技的评测方面的内容，比如说现在在我们的平台上越来越多的vlog的内容。
For example, there are a lot of traditional Chinese type of music are getting more and more popularity. A lot of digital product review sessions are now available and gaining popularity as well. We are also seeing vlog as an important content category that's attracting more and more users.
我刚才提到的，无论我们的核心内容还是这种更广泛的一些内容，它们的受众其实是有共同点的，它们都是基于自身的兴趣和爱好驱动的，它们都喜欢UP主做的这种有创意的、专业的内容，同时它们也和UP主有着非常强的粉丝情感。
From all those content mentioned above, they have one thing in common: that is, all of those fans, they follow those content based on their own interests and habits, and they love those high-quality content produced by our content creators. They also have established strong emotional bond and connection with those content creators.
所以对于这些不同的内容，我们是有着一个统一的社区文化，那就是内容质量优先，创作优先，以及粉丝对于UP主的正向的激励和反馈。
In terms of different content categories within our community, we have one practice, which is we put the content quality at top priority, the original content creation at priority. We also value the positive feedback our user has been given to the content creators.
我觉得正是这种统一的社区文化，才能让这些有着不同的特长、有着不同的内容品类的这些UP主，还有他们的用户，他们能够自豪地说我是个哔哩哔哩的UP主，或者我是一个哔哩哔哩用户，因为这是一个统一的社区文化。
That's why the community culture is one thing in common amongst those different content categories, that our users will pride themselves for being a Bilibili user. Our Bilibili content creators will also pride themselves for being content creators on Bilibili.
然后我们也会在产品的设计方面，会让整个的一个社区体现出一个去中心化的一个特质。不同的用户他看到的是不同的哔哩哔哩的内容，每个人在B站的界面上，他看到的都是自己感兴趣的内容。
From a product design perspective, the whole Bilibili ecosystem is a decentralized system. Each user will see a different Bilibili. They only see the content that they are interested in.
对，因为基于我们在人工智能推荐方面的一个进步，虽然我们的社区在越长越大，内容在越来越丰富，越来越多，但是用户始终是觉得，这里都是他感兴趣的内容，以及他看的都是他感兴趣的UP主。
Thanks to the big data-driven AI power efficiency improvement, even though we have more and users coming in our platform, more and more content submissions, our users can still always find their favorite content.
而且我们也在不断地改进我们社区产品的一个体验。比如说我们的哔哩哔哩 Moments，就是我们动态的这个功能，用户可以更近距离、更频繁地与他喜欢的UP主以及和他志同道合的这些用户产生互动。
We are also improving our product experience by adding new functionalities that allow the content creators and the fans and like-minded friends to connect better. For example, the Bilibili Moments function, essentially it's a Weibo and Instagram-like product where people can post and share their day-to-day life through picture and text and a short video form, long video form content.
从我们的统计数据上来看，我们有超过1/3的活跃用户会去使用哔哩哔哩 Moments的这个功能。
Our data suggests over one-third of our MAUs will visit the Bilibili Moment function.
而且我们2018年平均每个注册用户是关注20个UP主，这个跟之前相比同比增长35%。所以这个也可以看出，在我们的内容越扩越宽、用户越来越多的情况下，我们的社区体验其实是在提升的。
In 2018, every registered user on average followed 20 content creators. This number is up 35% year-on-year. This is another evidence showing that the connection within our community is becoming deeper and deeper.
OK。
魏总先回答第三个问题，我们游戏pipeline和版号的问题。
好，那我就先回答第三个问题吧。我们大家都看到的一个好消息是，游戏版号在去年12月底开始恢复发放，而且哔哩哔哩也在第一批版号发放的名单中。
As for the game approval process, we are delighted to see that the process was resumed in December 2018. Bilibili also are in the first batch of the approval list.
对，在独代游戏方面的话，我们在Q4是推出了基于我们自己站内IP改编的那个游戏《时之歌》，这个也是获得了很好的用户口碑。
In the fourth quarter, we launched an exclusively licensed game, Song of Time, that is based on our Bilibili IP that has been well received.
在未来准备的那个游戏的储备当中，我们准备了超过30款独家代理的游戏。
As for our pipelines, we have over 30 exclusively licensed games in our pipeline.
其中有三款游戏是已经拿到了版号，我们计划于第二季度上线。
Thank you. I'm sorry, we haven't finished answering the question. We have 30 games in our pipeline that's exclusively licensed, and one game already obtained approval and is scheduled to release in the second quarter. Two jointly operated games also obtained approval and will be scheduled to release in the second quarter.
对，因为之前我们也都提到，我们有多款的，在日本的grossing榜上排名前列的游戏，我们其实已经在准备了。
As we discussed in the past, we have a number of games in our pipeline that have been ranked in the top charts in the Japanese iOS app stores, and we are actively preparing for the game license.
除了独代游戏之外，我们也准备了超过100款的联运游戏。
In addition to exclusively licensed games, on the jointly operated games, we also have hundreds of games in our pipeline.
刚才提到的，我说三款，有一款是独代，有两款是联运。联运的游戏包括跟盛大联运的《RWBY》、以及现在很受用户关注的《明日方舟》。
In terms of the licensed game that has already obtained game approval and scheduled to release in the second quarter, one of the games is called RWBY, that we will co-publish with Shanda Games. Another game is called Arknights, a very highly anticipated ACG RPG.
跟腾讯在手游上的深度联运的合作，也会让我们联运的名单更丰富。
Our collaboration with Tencent in terms of jointly operating more Tencent games, will also help us to diversify our game offerings.
基于瑞总之前提到的比较活跃的用户跟高留存的用户，也有很好的社区，所以在内容层面上我们还是会持续投入的。
Based on what Mr. Chen has mentioned earlier, because we have a very tight community and very highly engaged sticky users, we'll continue to invest in our content.
持续18年的经验，会从采购更多地转向自制出品。
Based on our experience accumulated in 2018, we will invest more in the self-produced content categories.
会更多地选择用户喜欢的垂直领域，例如动画片、纪录片等领域进行持续的投入。
We'll focus on several verticals that have a lot of attractions from our users, for example, animation and documentaries.
这不单止有利于用户或者新增用户对我们内容的黏度，同时也会让大会员的数据有持续的增长。
This will not only help us to attract and retain users, this will also help us to promote our premium membership program.
其实我们更关注的还是这类自制内容的IP沉淀的长尾价值。
More importantly, the value of those IPs from those self-produced shows.
它会对B站的内容消费生态产生比较长远跟重要的意义。
This will give us profound values of the whole Bilibili ecosystem.
As a percentage of the total amortized content cost with our total revenue, the percentage will be around 15% in this year, not including our investment in comic business. That does not include the comic content costs.
Thank you so much. That concludes the question and answer session. I would like to turn the conference back over to the management for any additional or closing comments.
Thank you once again for joining us today. If you have any further questions, please contact myself, Juliet Yang, Bilibili Senior IR Director, or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found in today's press release. Have a great day.
That does conclude our conference for today. Thank you for participating. You may all disconnect.