Welcome to YY Inc.'s first quarter 2019 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. I'd now like to hand the conference over to your speaker host today, Mr. Matthew Zhao, IR Director of YY. Thank you, sir. Please go ahead.
Thank you, operator. Good morning, and good evening, everyone. Welcome to YY's first quarter of 2019 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of YY, Mr. Jin Bing, CFO of YY, and Ms. Ting Li, COO of YY. For today's call, management will first provide a review of the quarter. Then we will conduct a Q&A session. The first quarter of 2019 financial results and webcast of this conference call are available at ir@yy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi.
I will now turn the call over to our Chairman and CEO, Mr. David Xueling Li. Please go ahead, sir.
大家好，欢迎参加我们2019年第一季度的财报电话会议。我们在开始讨论本季度业绩之前，可能大家也注意到了，我最近被董事会重新任命为YY的CEO。在代理了两年的CEO之后，我非常高兴有机会能够回来再重新领导YY、虎牙和Bigo业务组成的新的YY集团。Thank you, Matthew. Hello, everyone. Welcome to our earnings conference call for this first quarter.
Before we start to discuss this quarter's performance, I should mention, as some of you may have already noticed, that I've been recently appointed as the CEO of YY by our board. After almost two years as the company's Acting CEO, I am very excited and honored to lead the new YY Group, which consists of our YY, Huya, and Bigo business.
在过去的四年中，其实我们做了很多的事情，那么现在也是有机会跟大家汇报一次。在这个完成对Bigo的全资收购之后，在2019年的第一季度，YY已经成长为一个拥有4亿的视频和直播月度活跃用户的全球化的社交平台。尤其是我们有超过75%的用户来自于海外地区，显示了我们整个全球化布局的初步完成。我们4亿的视频和直播用户有着丰富的多样性，其中短视频加直播的用户的月活跃达到了1.9亿，这使得我们得以继续巩固在全球短视频和直播行业的领导地位。除此之外，我们还有2.1亿的月活用户来自于全球视频通讯应用imo。所以展望未来，凭借全球战略，并专注于人工智能技术的提升，我们有信心将YY集团带入一个新的发展阶段，夯实我们作为全球化的社交媒体平台的行业地位。After the completion of the Bigo acquisition, YY has become a global social media platform with over 400 million in global video and live streaming average mobile MAUs in the first quarter of 2019.
Among these MAUs, more than 75% came from markets outside of China, which demonstrates the progress that we have achieved in our globalization strategy so far. Additionally, the composition of our user base is very diverse. Of our over 400 million average MAUs, 192.4 million come from our short-form video and live streaming services. This large proportion of users has enabled us to strengthen our leadership in both short-form video and live streaming sectors around the world. In addition, 211.8 million MAUs came from imo, a global video communication application. Going forward, with a global strategy and focus on AI technology, we are confident in our ability to bring YY Groups into a new stage and solidify our position as a global video-based social media platform.
我们通过强劲的Q1业绩为2019年开局。由于第一季度我们完成了对Bigo的收购，因此我们从2019年3月4日开始将Bigo的财报纳入合并范围。本季度的总收入同比增长47.1%，达到人民币47.8亿。去掉Bigo业务的并表贡献，也超过了之前我们给的指引范围的高限。我们的直播业务收入同比增长47.9%，到人民币44.9亿。我们的游戏直播子公司虎牙的收入同比增长93.4%，达到人民币16.3亿。We started 2019 with a strong first quarter result.
Upon completion of the acquisition of Bigo on March the 4th, 2019, we began to consolidate its financials. Our total revenues increased by 47.1% year-over-year to RMB 4.78 billion during the quarter.
Excluding the consolidation of Bigo's financials, our top-line results still outperformed the high end of our previous guidance range. Revenue from our live streaming business grew by 47.9% year-over-year to RMB 4.49 billion. Revenue from our game live streaming subsidiary Huya increased by 93.4% year-over-year to RMB 1.63 billion.
Q1 的强劲增长是因为我们致力于，第一，全球扩展我们的业务。第二，不断丰富和升级我们的内容。第三，持续地提高了我们的 AI 能力。
These strong growth numbers were a result of our commitment to the following: First, rigorously expanding our global operations. Second, continually enriching and upgrading our content offerings. Three, consistently improving our technology capabilities, especially our AI know-how.
首先我想跟大家分享一下YY在全球化方面的战略和近期的发展。YY的全球的4亿视频和直播移动月活跃用户有着丰富的多样性，其中包括直播、短视频、视频通讯等各种产品和服务形态。这里面有2.1亿的月活用户来自于imo。通过提供高质量的视频通话和其他功能，imo积累了一个年轻很高并且非常喜欢消费视频内容的群体，主要覆盖中东、南亚等地区。根据2019年第一季度的数据，imo的日均视频通话次数超过了6500万次。人均单日视频通讯的时长为40分钟。imo既满足了用户在家庭娱乐和企业会议等不同场景下的视频通讯需求，也在同类产品中具有非常好的竞争力。未来imo的发展方向将会变成一个super app，我们会嵌入各种不同类型的内容、功能和服务。最近我们已经开始在imo中嵌入了短视频和视频朋友圈的这个服务，未来我们还要嵌入直播等其他的服务类型。因此，imo的视频会议用户本身也有巨大的商业价值。2019年的第一季度，在imo中每天发起的三人或三人以上的视频会议数量达到了20万次。这个数量级也可以比肩市场上主流的To B业务的视频会议服务系统。未来我们也希望能够在这个领域继续投入，能够使它具有更大的商业化变现潜力。总之，随着我们继续发展YY各项业务线之间的协同效应，我们将能够生产更加丰富的社交媒体内容，并且为我们全球用户提供一流的用户体验。
First, I would like to highlight YY's global expansion strategy and our progress to date. As mentioned earlier, YY's user base is very global and diverse, including users from segments in live streaming, short-form videos, video messaging, and our other products and service offerings. Out of our over 400 million average mobile MAUs in the first quarter of 2019, 211.8 million were from imo. Imo has developed a large user community, mainly in the Middle East and South Asian markets, by offering high-quality video communication tools and services. Additionally, imo's community is highly engaged and attracted to video content. Imo's video communication services were used over 65 million times per day on average, and each user's daily average usage time for video communication was about 40 minutes in the first quarter of 2019.
Imo's core competitiveness comes from its ability to fulfill the video communication needs of users in a variety of scenarios, including home, entertainment, and business. Moving forward, we plan to further develop imo into a more powerful super app by providing increasingly diverse content, functions, and services to our users. Recently, we started to embed a short-form video feed and video moments into imo that allow users to access high-quality content. Going forward, we will consider embedding live streaming and other types of content into imo as well. In addition, the users of imo's video conferencing services also have significant monetization potential. In the first quarter of 2019, on average, over 200,000 video conferences featuring three or more participants are initiated on imo every day. This level of usage represents significant future monetization opportunities for imo.
In fact, it puts imo on equal footing with the major business-oriented video conferencing service providers on the market today. Generally, as we continue to cultivate synergies between our different business units, we will create more diverse social media content and best-in-class user experience for our global user community.
另外，第一季度我们的海外短视频和直播的用户也取得了快速的增长。Bigo的短视频及直播服务的平均月活。
Excuse me, this [Foreign language] operator, I do apologize, we've got some problem with the speaker line. You will be on mute while fixing this concern. Thank you so much.
Hello operator.
Hi, you are now back online, thank you, please go ahead.
OK, yes, we are back to the conference, thank you.
不好意思，电话系统出了问题，希望能够尽快地用到imo的conference call system。然后我再重讲一遍。另外就是第一季度我们海外的短视频和直播用户也在快速成长。Bigo的短视频及直播服务的平均月活跃用户增长了160.6%，到了7870万。Likee是第一季度用户增长的主要驱动力。Likee最初专注于帮助用户通过特效等工具制作短视频内容。在2018年下半年，我们开始把这些制作的内容post到我们自己的平台，从而转身变为一个短视频的社交平台。我们认为全球的短视频市场竞争还在初期，存在着巨大的机会。目前市场上的短视频内容，不论是UGC还是PUGC，都是以娱乐和生活类的短视频为主的。但是我们同时也发现，短视频未来是非常适合传播专业知识，很多知识、技能、生活窍门也能够通过短视频的方式对用户进行教育和传播，体现出了短视频巨大的商业价值和社会价值。近期Likee开始推出扶持高质量PUGC和自媒体的计划，为未来提供更加丰富的内容，并是通过业内顶尖的人工智能和算法团队的努力，进一步提高用户的粘性和消费体验。另外，我们的海外直播业务Bigo Live在第一季度保持了健康的用户增长，进一步提升了商业化能力，继续巩固了我们的全球领先的地位。由于Bigo Live在海外多年的深耕，在直播变现方面积累了大量的经验，所以相对于其他的短视频平台，Likee我们会具有更丰富的直播变现经验，可以给内容提供者提供更好的经济回报，从而鼓励他们在平台上提供更优质的内容。因此我们有信心通过有价值的内容和优质的生态系统，使得我们获得全球更大的市场份额。
In addition, our overseas short-form video and live streaming user base also continued to expand rapidly in the first quarter, as the average MAU for Bigo short-form video and live streaming services increased by 160.6% year-over-year to 78.7 million.
This increase was primarily driven by user-Like. Originally, Like was a short-form video editing platform that allow users to add special effects into their original video works. In the second half of last year, Like has developed into a leading global short-form video social platform. We believe that we are still at the early stage of the competition in the global short-form video market, which has tremendous growth opportunities. Currently, the majority of short-form video content in the market, whether generated by users called UGC or professionally called PGC, is mostly in entertainment or lifestyle categories. We also realize that short-form video is an efficient way to help people acquire knowledge in the future. In fact, a variety of knowledge, skill sets and lifestyle tips can be taught and learned through short-form video effectively. This reflects the tremendous commercial and social value of short-form videos. Recently, Like started a program to support high quality, talented PUGC or we media performers to further enrich the content offerings. Moreover, through the efforts of industry leading AI experts and algorithm specialists, Bigo has further enhanced user stickiness and viewing experience. In addition, our overseas live streaming business, Bigo Live, maintained healthy user growth and further improved its monetization system, which cemented our global leadership in the first quarter. Bigo Live has accumulated extensive monetization experiences in its live streaming offerings through years of successful operation in the international markets. This operational experience will set Like apart from the competition by enabling it to monetize through live streaming offerings. Since it is able to give content providers better economic results and returns, it also encourage them to provide better quality content. We are well positioned to capture higher global market share by leveraging our valuable content and vibrant social media ecosystem.
另一个在全球化方面取得的进展是以小游戏为导向的网络社交平台Hago。Hago保持了一个快速的增长。在本季度通过推出更多的小游戏内容，Hago保持了非常高的用户粘性，用户单日的平均使用时长超过一个小时。此外，我们还在Hago推出了具有虚拟礼物功能的语音聊天室，使得用户在享受小游戏的同时，也很方便地互相交流，并且给Hago未来的商业化打下基础。Hago在印度尼西亚和越南等Google Play市场保持最流行的应用之一。根据Sensor Tower的数据显示，Hago在第一季度位列全球社交应用下载榜排行榜前十。
Another progress on the globalization front is Hago, while its casual game oriented social network platform, which also maintain its rapid growth trajectory. During the first quarter of 2019, Hago continued adding more casual games to its portfolio. As a result, it maintained a very high level of user engagement as the daily time spent on Hago per user exceeded one hour in the first quarter. In addition, we also introduced voice chat rooms with virtual gifting features on Hago. These chat rooms and their features enable users to interact with each other while enjoying casual games. We believe these features will serve as a solid foundation for Hago to develop its monetization capabilities. Hago also consistently ranked as one of the top applications on Google Play in Indonesia and Vietnam. According to Sensor Tower, Hago ranks among top 10 by downloads in the social networking apps worldwide in the first quarter of 2019.
另外一个就是本季度我们继续推出创新的玩法，能够提升PUGC的内容质量。例如我们将直播与社交推理游戏相结合，允许用户同时观看六位主播实时参与的社交游戏，用户可以使用一系列交互功能来支持他们喜欢的主播。至于高质量的PUGC内容，例如顶级主播摩登兄弟在直播间与他们的粉丝观众一起观看由摩登兄弟参加的真人秀电视节目。这种新颖的内容形式吸引了45万在线观众参与。我们相信这些内容创新会持续加深我们直播社区用户的忠诚度。
Secondly, we continue to introduce innovative features and high quality professional user generated content. For example, we started a new show by combining live streaming with a social deduction game, which allow users to watch six hosts play the game live while utilizing a series of interactive features to support their favorite hosts. Regarding our high quality PUGC, we introduced a reaction show featuring our top host, Modern Brothers. The show attracted over 450,000 viewers who joined the live show room and watched Modern Brothers live streaming their own TV reality shows. We believe that these types of innovations will continue to expand and strengthen the loyalty of our live streaming community going forward.
第三，通过实施和整合人工智能技术，我们在加强技术能力方面取得了坚实的进展。在内容推荐方面，我们提高了AI驱动的内容分发引擎的效率。通过这一改进，我们为用户创造了最佳体验，也确保他们比以往更快更轻松地找到更想看的内容。在主播推荐方面，我们升级了现有的机器学习模型。这些模型以前主要是根据其预估的点击率对主播进行排名。现在我们利用深度的神经网络构建了推荐算法，可以同时估算和评估主播的点击率、平均用户观看时长和转化率等多个指标。随着我们提高推荐的准确性和有效性，我们第一季度新用户使用时长相对前一个季度提升了25%。
Thirdly, we have made solid progress towards enhancing our technology through the application and integration of artificial intelligence. For content recommendation, we improved the efficiency of our AI-powered content distribution engine. Through this improvement, we have created an optimal experience for our users by ensuring that they find their most desired content faster and easier than ever before. For host recommendation, we upgraded our existing machine learning models, which previously ranked hosts based on their estimated click-through rates only. By utilizing our deep neural network technology, we built recommendation algorithms that can simultaneously estimate and quantify metrics such as host click-through rates, average user time spent, and conversion rates. As we improve the accuracy and effectiveness of our recommendations, our new users on average spend 25% longer on our platform in the first quarter compared to the previous quarter.
总之，我们在第一个季度继续坚定地执行我们的全球化战略，给我们带来了强劲的财务表现。我们还专注于创新我们的直播内容，并帮助我们的主播增加用户。展望未来，我们将继续致力于扩大我们在国内和国际市场的领导地位。随着我们继续在内容和AI技术创新方面的加大投入，我们相信我们将进一步提升用户的粘性和商业化能力。
In summary, we continue to execute our global expansion strategy firmly, which help us to achieve strong growth in the first quarter. We also maintain our focus on innovating our live streaming content offerings and helping our hosts to grow their audiences. Looking forward, we remain committed to strengthening our market leadership, both domestically and internationally. As we continue to invest in our content offerings and AI technology innovations, we believe we can further enhance user engagement and monetization going forward. That concludes David's prepared remarks. Now, as YY's CFO, I'll talk about the financial results. We continue to deliver solid financial and operating metrics during the first quarter of 2019. Our total net revenues for the first quarter increased by 47.1% year-over-year to RMB 4.78 billion.
Specifically, our live streaming revenues for the first quarter increased by 47.9% year-over-year to RMB 4.49 billion, accounting for 93.8% of our total net revenues this quarter. Even excluding the effects of the consolidation of Bigo, we exceeded the high end of our previous guidance range by over 5%, due to the strong financial performance for both YY and Huya segments. In the first quarter, mobile contributed 69.6% of our live streaming revenues, while mobile live streaming MAUs of YY Live plus Hago increased by 65.6% to 59.8 million as compared to the same quarter in 2018. Live streaming paying users of YY increased by 17.1% to 4.1 million in the first quarter of 2019. Cost of revenues for the first quarter increased by 66.8% year-over-year to RMB 3.16 billion.
Revenue sharing fees and content costs paid to the performers, guilds, and content providers increased to RMB 2.52 billion in the first quarter, reflecting the growth of live streaming revenues of YY, Huya, and Bigo. In addition, bandwidth costs for the first quarter increased to RMB 297.4 million, primarily reflecting continued overseas user base expansion. Gross profit for the first quarter increased by 31.4% year-over-year to RMB 1.62 billion. Gross margin was 33.9% compared to 38% in the prior year period, primarily due to the increase in revenue sharing fees and content costs. The decrease in gross margin was also attributable to the impact caused by the relatively low gross margin of the Huya segment as its contribution to our net revenues increased significantly year-over-year.
Operating expenses for the first quarter were RMB 1.2 billion compared to RMB 649.1 million in the prior year period, primarily due to our increased effort in sales marketing activities as we continue to expand in overseas markets, as well as the increase in staff related expense for AI research and development personnels. Sales and marketing expenses for the first quarter were RMB 534.2 million or 11.2% of total revenue compared to RMB 235.7 million or 7.3% of total revenue in the prior year period. Our R&D expenses for the first quarter of 2019 were RMB 404.7 million or 8.5% of total revenues compared to RMB 249.5 million or 7.7% of total revenues in the prior year period. G&A expenses were RMB 276.4 million or 5.8% of total revenues in the first quarter of 2019 Compared to RMB 164 million or 5% of total revenues in the prior year period.
Our GAAP operating income for the first quarter was RMB 473.6 million, compared to RMB 596.4 million in the prior period. Operating margin for the first quarter was 9.9%, compared to 18.4% in the prior period, primarily due to the decrease in gross margin and the increase in sales marketing expenses, which is partially related to the acquisition and consolidation of Bigo. Our non-GAAP operating income for the first quarter, which excludes share-based compensation expenses, impairments of goodwill and investments, amortization of intangible assets from business acquisitions, as well as gain on deconsolidation and disposal of a subsidiary, was RMB 717.3 million, compared to RMB 727.3 million in the prior period.
GAAP net income attributable to the controlling interest of YY for the first quarter was RMB 3.1 billion, compared to RMB 963.5 million in the prior period, mainly due to the remeasurement gain of YY's previously held interest in Bigo, amounting to about RMB 2.7 billion, which was included as part of the gain on fair value change of investments. Non-GAAP net income attributable to controlling interest of YY was RMB 653.5 million, compared to RMB 730 million in the prior period. Non-GAAP net margin in the first quarter of 2019 was 13.7%, compared to 22.5% in the prior period. Diluted net income per ADS in the first quarter of 2019 was RMB 44.55, compared to RMB 6.86 in the prior period. Non-GAAP diluted net income per ADS was RMB 9.32, compared to RMB 10.96 in the prior period.
Looking forward to the second quarter of 2019, we expect our net revenues to be between RMB 6 billion and RMB 6.2 billion, representing a year-over-year increase of 59%-64.3%. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change. That concludes our prepared remarks. Operator, we would now like to open the call to questions.
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 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Also, please ask your question in Chinese first, then translate it into English, and please limit your question to one at a time. Again, it's star 1 if you wish to ask a question. Our first question comes from the line of Daniel Chen from J.P. Morgan. Daniel, your line is now open.
早上好，管理层。恭喜业绩非常的强劲。我有一个问题是关于AI这边的。我们现在其实全球有4亿的用户，国内然后海外都有海量的用户，用户数据的积累也是非常多的。我想问一下，咱们现在是有什么样的计划去应用这些用户的数据？因为我们其实这两年也有不少的AI然后科技这块的投入。谢谢。I will translate myself. Congratulations on a very solid quarter.
My question is on the AI. We now have about 400 million global user base, which is huge, and there's a lot of user data globally. How are we going to utilize this data for our global products in the next few years? Thank you.
非常感谢你的问题。我觉得AI一直是公司的两大战略之一。我们的两个战略，第一个就是全球化，第二个就是AI化。所以我们其实从2018年开始，大量的业务已经慢慢地由人工运营转化为人工智能AI运营。所以大概AI我们在几个领域取得了很好的突破。第一个就是内容管理领域。内容管理领域其实涵盖了短视频的内容推荐，短视频内容的集合，也包含了直播的内容集合，也包含了这种新的小游戏的匹配和游戏用户的匹配，包括主播之间的匹配，这些都是整体使用了AI能力。除了这个以后，我们对基础的AI也做了很多的研发，比如说人脸识别、肢体识别。大家也知道我们也有很多的监管需求的这些AI能力，其实这都是我们一直以来比较坚持研发的领域。我想在未来一两年的时间内，可能大家能够看到的技术应用最直接的一个领域，应该就是短视频方面的内容管理。因为大家都知道，短视频其实本质它是一个片段型的内容，如果能够把一些片段型的内容能够连接起来，比如说一个用户看一个小时到两个小时的时候，他能有一个整体的感觉。
这样的技术挑战我觉得还是会非常大的。所以在未来的这一两年内，我们会比较专注在这个领域。另外一个就是其实公司整个集团，我们照昨天统计了一下，我们直接从事算法研究的工程师已经到了230人。所以我们在整个中国，在整个算法的领域的投入规模还是相当大的。其实很少有公司的仅算法工程师就能够到这个规模的。谢谢。
This is David. Let me answer your question. Thank you for your question regarding to the AI technology. AI technology actually is one of our major strategies for the corporation among two of your strategy, which is one, globalization; secondly, AI technology. Starting from 2018, actually we have applied a lot of effort to apply AI technology into the daily operations for the company. Firstly, we actually use AI technology into the content management. That part not only including short-form video, but also including live streaming as well as mini games and etc. We actually using the AI technology to better match of the users when they play games from our Hago platform, also watching live streaming content in our YY Live or other live streaming platforms. In conclusion, the content management definitely will be using the AI technology to apply into that.
The second part is the base capabilities related to the AI technologies. For example, like facial recognition, audio recognition and etc. For that part of purpose, not only it's better to manage the content, but we also had some of the requirements from the content censorship as well as content management. We actually using the AI technology to better censor as well as manage our content in all. In the next one to two years, we think and we truly believe the major battlefield for the AI technology improvement will be focused on the short-form video content management. Because for the short-form content, most of them it's quite fragmented, coming from the different kind of topics.
If we can use the better AI technology to provide users a better experience in the one to two years time period with a united theme or a united topic, which is the life-related content. Definitely that will be further improve the stickiness for our short-form video content. As I mentioned, in the future, definitely the short-form video will be one part. We will put on more focus in terms of the improve of the AI capabilities. The second part is worth to mention is in terms of our AI-focused personnels. For the whole YY Group, this year, we actually has accumulate and attracted more than 230 of the engineers and AI expert, which is focused on the algorithm as well as AI capabilities.
In terms of the scale of the AI teams, we are actually one of the biggest ones within all the China internet companies. In the future, we will further leverage of those talents capabilities to continue improve our algorithm capabilities. There has one correction, is our AI team's total people is 3,020. Sorry, 320, not 230. Sorry. Thank you.
Thank you so much. Our next question comes from the line of Aileen Zhang from Deutsche Bank. Aileen, the line is now open.
Thank you very much, management, for taking my question and congratulations on the strong quarter.
Aileen，请用中文提问。Aileen，请用中文提问，谢谢。
好，谢谢冠城接受我的提问。然后先恭喜公司的这个业绩。我有两个问题，第一个是可不可以给我们一个第二季度指引的breakdown，就是Bigo和YY Live这边的一个revenue的breakdown。然后第二个问题可能是更偏重于Bigo运营上面的一些color。能不能给我们大概分享一下，比如说付费用户，还有ARPU上面的一个水平，然后在它重点的这两个产品，Bigo Live和Likee方面的话，全年的，我们看到monetization的走势应该是什么样的一个outlook？包括收入的增长水平，还有我们margin的话，应该去怎么看？然后我就先翻译一下。My question is mainly on the second quarter guidance.
Can management give us a breakdown of how much is from Bigo and YY Live? The second question is more on Bigo operating metrics. Can we have more color on key metrics such as paying users and ARPU? Also for the both key products, Live and Likee, what is the outlook for the full year revenue growth and margin outlook, and also the monetization plan? Thank you very much.
Yeah. Aileen, thank you. Let me address those questions. The first question regarding the breakdown of the second quarter guidance. We provide guidance CNY 6 billion-CNY 6.2 billion. That includes both YY, Huya, and BIGO. For YY's number, I think you can refer to the Bloomberg consensus
I think also last week we have announced their result and also their guidance, you can refer that and then you deduct Huya from the guidance that will give you the number for BIGO, right? That's the breakdown. For BIGO's operating margins, they have different product, obviously. The main monetization comes from Bigo Live. In terms of the paying ratio for Bigo Live, it's still relatively lower compared with YY Live in China, because a lot of markets are still in the early stage. In terms of ARPU, actually, it's very high. Because a lot of the donors, they are from Middle East, and obviously, Middle East, very high purchasing power. The ARPU in Middle East is very high. The ARPU in other emerging markets such as Southeast Asia and other parts of the world, tend to be low.
We do think there will be a lot of room for growth for both paying ratio and ARPU. For the revenue margin, as we told the investors that last year BIGO generate close to $500 million revenue. This year, we're still seeing very high growth rates. For the margin, we also mentioned previous that last year BIGO was loss-making. This year, I think BIGO will continue to be loss-making. Be careful that Bigo Live is already making handsome money. Bigo Live has handsome margin. LIKE, as David mentioned, that's still in the early stage of short-form video market, there will continue to be more content upgrade and sales marketing and branding effects. The key focus for LIKE is to grow user base. That's why we will continue to spend money. That's why the margin for LIKE itself will be negative.
Another big component for BIGO part is called imo, which we haven't publicly discussed that before. Right now we disclose the imo user number to be over 211 million MAU. We'll continue to add more features, including short-form video and live streaming, to enable better user experience for video conference and video communication. For monetization, we also gradually ramp up the monetization in the imo business, including both the advertising and also, going forward, the live streaming. We do foresee that in short term, we'll continue to invest in terms of content and in terms of sales marketing. I think putting all these together, for BIGO business, it will be loss-making still this year. We do have a clear path to profitability, which we can go further detail later.
On high level, I want to mention that this year's focus for YY Group is to grow the user base. As you all see that we have over 400 million MAU. That put us into one of the world-leading social media platform. We hopefully will re-accelerate our user growth and drive a much better exciting story.
Thank you very much.
Thank you so much. Once again, ladies and gentlemen, please ask your question in Chinese first, then translate it into English. Please limit your question to one at a time. Our next question comes from the line of Ashley Zhu from CLSA. Ashley, you may now ask your question.
I'll translate myself. I have two questions. One is on YY Live. We see that first quarter shows a better result than expected. Want to have management guidance for the full year on YY Live. What's Hago's monetization progress? Do we have any target for the full year as well? Second question is on recent credit rating drop by S&P. It's reported that the drop is on company's request. Just want to check the background of this. Thanks.
Yes, that's those question regarding the full year prospect for YY Live core business. As you see that the first quarter, our revenue on YY Live grows more than 10%. That is better than we expect, because I think there are several reasons. One is, due to our operation expertise, we do have a better edge compared with some of competitors, particularly in the first quarter, the government tend to be very stringent in terms of content screening. That affects some of the smaller players, but it actually benefits the big platform like YY, because we have been very stringent in the content screening and monitoring. The ecosystem, the expertise really helps. Secondly, after Chinese New Year, Spring Festival, we do see a very healthy returning pattern for the users and hosts.
We continue to benefit from that, I would say, recover of the user demographic and host demographic. Looking ahead, for the rest of the year, we do think that the similar pattern will continue. That's the full year kind of prospect. Secondly, you asked about the dropping of the rating. I think there are several reasons. One is, we have a public credit rating from S&P since 2015, we maintain a regular dialogue with the rating agency. Given we don't have immediate plan for fixed income product or bond offering in near term, we don't think there's an emergent need for continuing a public credit rating. That's the first reason. Secondly, our business has been growing very fast. Particularly recently, we acquired BIGO.
In terms of this, in context of this fast-growing business, constantly upgrading, updating agencies can take a very meaningful share of management time resource.
As such, we believe that it's more efficient to withdraw our credit rating at this point, that we can focus effort on our business to optimize resource. That's the key reason. Thanks.
Thank you so much. Once again, ladies and gentlemen, if you wish to ask a question, it is star and one on your telephone. As a reminder, please ask your question in Chinese first, then translate it into English, and please limit your question to one at a time. Our next question comes from the line of Natalie Wu from CICC. Natalie, your line is now open.
晚上好，非常感谢这个机会。我是Marty。我们有一个简单的问题关于imo的。我们看到这个用户已经快接近超过200个million。然后我们第一个问题想问下这个的增速大概是什么情况？然后第二的是这个管理层介绍过，我们会在这个app里面加入一些short video跟直播的功能，然后我们想问一下这个长期这个app的定位，它是更偏向一个工具类的，还是更偏向一个娱乐型的？然后我们该怎么想它的这个future的变现的这个模式？
I will translate myself. We have a question on the imo, which actually has a huge user base already. The first question is the growth of the user. The second has mentioned to include short video and live broadcasting feature. Wonder how should we think about the ultimate positioning of this product, whether it is more like a utility app or independent app, and how should we think about the future monetization model of them?
好，我回答一下这个问题。我觉得第一个就是说，imo以前一直是一个特别简单的应用，主要实际上是做我们叫Android上的video call的这个业务，你可以把它理解成为一个Android上的FaceTime。这样的话，它的应用的本身内容是非常单一的，但是它吸引的用户的规模是特别大的，因为Android对Android用户你只能用imo，可能苹果对苹果用户使用FaceTime稍微多一点，但是苹果用户跟Android用户之间的通讯，和Android用户对Android用户的通讯基本上都要依赖像imo这样的应用。所以imo在整个市场上取得了一个非常好的桥梁作用。因此，imo的用户的整个的规模，我觉得已经进入到了一个比较稳定的时期。这是第一个。第二个就是因为imo长期没有增加新的功能和服务，所以也给了我们一个巨大的机会，因为我们在做super app这方面的经验非常丰富，所以我们未来会对接大量的这个内容和服务进到imo平台，使得imo从一个单一的工具类的产品转向一个全面社交类的产品。imo其实有一个好处，就是imo的平均用户在imo停留的时间要长达40多分钟，所以我们有特别多的机会使得imo平台化成为一个强大的社交平台。另外一个，从未来看，我觉得imo对整个集团的贡献，实际上是imo完成了我们在用户流里的一个闭环的布局，就说我们的短视频的内容可以快速地分享到imo，到了imo以后能够快速地在imo的朋友圈扩展，在imo的朋友圈扩展以后又可以快速地再拓展到比如说我们未来的群服务，还有其他的，也可以快速地向其他外面的平台延伸。最后又把新的用户拉回到我们的短视频应用。所以它是我们整个的社交链条里最核心的一个闭环组成成员。因为我们以前Likee都是以内容为核心驱动的，但是imo天然是以人与人的关系为核心驱动的。所以我觉得这是一个强大的闭环。同时，我们其实看到了在目前的imo这个产品上，短视频的渗透率已经高达了30%，也就是说每天的日活用户里有30%的用户是使用了这种短视频的朋友圈类似的这些功能。这个对我们在短视频的行业做竞争也会带来巨大的帮助。所以，其实我们公布的像短视频的用户规模，其实都没有算上在imo里边本身有30%的短视频渗透率的用户规模。所以当你把这几个世界连在一起后，我们发现我们在整个视频领域内的布局变成了一个非常完整的闭环。我们有短视频前端的抢流量的，然后有imo这样的扩散流量和发散内容的社交平台。我们也有直播内容这样的一些变现的能力。我觉得这三者连接起来以后，使得我们变成一个跟YouTube完全不一样的取向的一个以短视频为核心竞争力的公司。所以反过来，通过这几点的数字，大家也能看出来，我们在短视频领域的发力其实也才刚刚开始。我们有很多潜在的用户和潜在的短视频使用规模还没有完全被市场看到。
Thank you for your question. This is David. imo at the beginning, it actually has very simple functionality, which is focused on the video call, especially targeted into the Android phones. You can think actually imo is kind of the FaceTime into the Android phones.
Because the app has very simple functionalities, it has accumulated a very significant user base. Because between Android phones as well as between iPhone and Android phones, the people were using imo to have video calls to each other. That is a major reason imo has accumulated a large user base. Now, our monitoring is that imo's user base has entered a more stabilized phase. In the next step, that also actually provides us a lot of opportunities to continue bringing more different kinds of services, as well as content into imo's product to enable imo to continue evolving into a super app. Another thing that is worth mentioning is, within the app, actually the user stickiness was very high. Per user spends over 40 minutes in imo every day.
That also provides us a lot of opportunities to expand into all the different kinds of content as well as services in the future. From the higher end, we truly believe through imo, we actually help the YY Group to complete the user closed loop. We actually already had the large short-form video platform, which is Likee, that provides a huge amount of short-form video content on a daily basis. Through imo's platform, we actually can have better distribution through video moments, as well as other functionalities embedded into imo to better distribute the short-form video content into imo, as well as other external social media platforms. After the users have accumulated a lot of popularity, it also will encourage the users back to our platform, such as Likee, to generate more content. That will complete our users loop within our platform.
Also, another thing that is worth mentioning is, if you look at imo's current daily active users, actually more than 30% have already converted into short-form video users. In the future, we truly believe this ratio will continue to improve, which means within imo, there are more and more users continuing using more short-form video content. In the future, connect all the things together, we will make YY Group very unique of the video players, which is quite different compared with other video players within the market. Through Likee, it will be helping us generate a huge amount of content. Through imo to help us distribute those kind of short-form video content. We can use live streaming to better monetize those kind of short-form video content.
That will make YY quite different from the players compared with the mainstream video players in the market, such as YouTube. In conclusion, imo will play a very important role in our future, the overall group's video strategy. Thank you.
Okay, thanks. Very helpful.
Your next question comes from the line of Herman Chan from Citigroup. Please ask your question.
Thank you for taking my question. My first question is on the overseas strategy for Bigo. Could management share more on the localization and marketing strategy going forward? Also on the bottlenecks or challenges that we face so far in some of these overseas markets. Regarding imo super app strategy, could management share more on the new features to be introduced in the second half of this year? Thank you.
Thank you for your question. First of all, regarding Bigo, you may be referring to Bigo Live. I believe that Bigo Live basically follows the method of slowly building user communities, relationships, and stickiness globally. We have actually entered each country one by one. This mainly relies on our live streaming experience at YY, our understanding of the live streaming community, and our understanding of building the entire ecosystem. In fact, we have been making relatively steady progress in various countries. I think Bigo is no longer just in developing countries. We are actually slowly penetrating developed countries as well. Now, if you add up our revenue in the U.S. and Europe, about 14% comes from Europe. Revenue from first-line developed countries accounts for 20% of the total revenue.
So this also shows that the live streaming business model can actually slowly penetrate developed countries. imo 这个功能呢，我想 imo 的本质其实还是社交。我们其实更多的是推动 imo 在 distribution，就是分发内容的这样一个领域的功能。所以 Likee 未来定位的核心其实是生产和消费，然后 imo 在短视频领域的定位其实就是分发。我们是通过各种各样的人与人之间的关系去分发我们的内容。所以 imo 在下半年，我觉得我们可能重点做的内容还是群。我们会对从比如说三五个人的 group 到几十人的 group，到几万人的 group，几十万人的 group，我们都会做非常好的支持。这样的话，就使得 imo 的用户能够有非常多的、新鲜的点，可以接触到新鲜的内容。当然 imo 本身也具备一部分类似于微信朋友圈的功能，这个功能对我们内容的扩散也是有巨大的帮助的。所以我们也会加强于一个个人的空间，或者说个人朋友圈的这个业务，也会更大地加强群的业务。当然群组业务应该还是我们最重点的业务。
Thank you for your question. This is David. Firstly, I think your first question is more related to the Bigo Live business. For Bigo Live business, which is our leading live streaming platform in overseas, we truly believe going forward our major goal is to focus on to build up the global users community as well as users relationship into the one by one different country or regions.
Based on our in the past decades of experience in China, we actually have a deep understanding in terms of the live streaming content as well as the live streaming ecosystem. Going forward, we will continue to leverage of those kind of experience into the overseas expansions. Another thing is worth to mention is, what we monitor is the live streaming content is not only popular within of the developing countries, but also is very popular within of the developed world. For example, our revenue contribution coming from American plus European has been increased into 14% waterfall of the total revenues in the first quarter of this year. The total overall Tier 1 countries revenue contribution has been reached to 20%. That is also demonstrating in the Tier 1 or the developed world, we also have a strong demand for the live streaming content from the user base. Going forward, in conclusion, for Bigo Live, we will continue to focus on live streaming expansions from global wide. Your second question related to imo. The imo's nature is we truly believe is still focused on the social communication as well as social relationships. In the future, as I mentioned before, the imo's major role, still how we can better distribute our short-form video content through of the imo's platform. We actually gave the different kind of roles for our different kind of product. For example, Likee, which is a short-form video platform, going forward, we will continue to focus on producing and consume of the short-form video content. By contrast, imo will be more focused on the distributing of the short-form video content. Going forward, we think one of the key focus for better develop of the social relations within imo, we will continue to focus on the development of the group functionalities. The group will starting from the people size around three to five people, then extend to dozens, then even into over 100 or even thousands. We will trying to build up the better relationship within those kind of different interest-based group, and we can better distribute our short-form video content within of those kind of groups. That is our thinkings in terms of the imo's future strategies. Thank you.
这是林总、Matthew还有Maggie。谢谢。
Thank you so much. Our last question comes from the line of Chen Hao from PH Capital. Chen, your line is now open.
[Foreign language] 林 总 、Matthew 早 上 好 。 问 题 是 ， 我 们 在 海 外 扩 张 的 时 候 ， 的 确 是 有 很 大 空 间 ， 但 是 这 个 扩 张 跟 我 们 在 中 国 的 时 候 不 一 样 ， 比 如 说 我 们 中 国 做 一 个 广 告 ， 中 国 这 么 大 ， 大 家 都 有 机 会 看 到 。 但 是 去 国 外 ， 每 个 地 方 很 小 ， 一 个 国 家 一 个 国 家 ， 那 是 不 是 我 们 在 费 用 上 ， 费 用 的 效 果 上 会 比 在 中 国 差 一 点 ？ 那 今 年 我 们 的 利 润 率 会 是 什 么 样 的 一 个 水 平 ？ 能 不 能 给 一 些 指 导 ？ 我 稍 微 翻 译 一 下 哈 。 Going abroad is a great thing because the users are really haven't started to adopt what we have already so familiar with in China. However, those countries are much smaller than in China, the marketing effort has to be country by country, different than when you were doing that in China. One advertisement can be seen or accessed by millions of youngsters in China. In that case, the marketing efforts must be difficult than when you were in China. How do you envision the marketing efforts going abroad, and also how your margin is going to be throughout the year.
Thank you.
I will first answer a marketing question. First, our marketing costs, specifically brand marketing costs, are relatively low. We only do brand marketing in large countries and regions. As for smaller regions and areas, we mainly use effective advertising to cover them. Our effective advertising is also becoming increasingly fully AI-driven, with AI assessment and AI-based optimization of channel strategies. In this area, with the improvement of our automation, everything is basically controlled and output by machines. Thus, our efficiency will continue to grow, and effectiveness will also increase.
This is David. Let me answer your first question. In terms of our sales marketing expenses in the overseas market, firstly, as you may notice, in terms of the sales marketing directly related to the brand promotions, it actually is quite low as a percentage of total sales. We only have some of the branding content in the major countries with large populations. For most of the smaller countries, we actually major using the performance-based advertisement as a major channel to promote our product. Another thing worth to mention is currently, we're actually also using the AI technologies to monitor and manage the overall performance from the performance advertisement platforms. Going forward, as our AI technology continue become more mature and comprehensive, we truly believe that can deliver our better ROI through of the AI managed of the performance-based product promotions. Thank you.
Also, I want to add two additional points. One is in some of the foreign markets, actually, the ROI for advertisement can be better than in China because in China you have a lot of advertising agencies, each of them take a cut from the total budget. In foreign market, they're basically Google Play and Facebook, it's relatively transparent. As David mentioned, we'll use AI to closely monitor the ROI. That's the first thing. Secondly, you asked about the margin profile for Bigo. As I mentioned before, Bigo has different business units. Bigo Live definitely is making a profit. Like will be a key area for sales marketing because we do see Like's user base doubled in the last half year, and we see even more great opportunities.
We need to make sure that when we spread the content globally, we need to make sure that more and more audience are aware of this product. Now, for imo, even though it has over 211 million MAU, it actually doesn't do a lot of sales marketing. It has very little sales marketing spending before. The users basically come organically, as David mentioned, because imo provide very seamless video communication tool and environment. Going forward, as we implant more content, we might also do some of the sales marketing and branding for imo as well. Those are the two spending area for Bigo. In total, Bigo will still be loss-making, but I think we're very encouraged by the future prospect of this business. Thanks.
Thank you.
Thank you so much. I'd now like to hand the conference back to the management team for the closing remarks.
Thank you, operator. Thank you all for joining us today. That close our call today. We're looking forward to speaking with you in the coming quarters. Thank you.
Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating. You may all now disconnect.