Welcome to the JOYY Inc. fourth quarter and full year 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 this event is being recorded. I'd now hand the conference over to your host for today, Mr. Matthew Zhao, IR director of the company. Please go ahead.
Thank you, operator. Good morning and good evening, everyone. Welcome to JOYY's fourth quarter and full year 2019 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY. CFO, Mr. Bing Jin, and COO, Ms. Ting Li. For today's call, management will first provide a review of the quarter and then we will conduct a Q&A session. The fourth quarter and full year 2019 financial results and webcast of this conference call are available at ir.joyy.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 apply 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.
[Foreign language]
Okay, let me do the translation.
Thank you.
Okay. Thank you, Matthew. Hello, everyone. Welcome to our earnings conference call today. Hope everyone stays safe and sound and healthy in this particular coronavirus period. On December 20th, 2019, our shareholders approved the name change of YY to JOYY, which stands for joyful and useful. This name change reflects our commitment to bringing joyful and useful experiences not only to those inside China, but also to those around the world, as we continue our global expansion. In line with our mission to connect people around the world and enrich their lives through video, we continue to make steady progress on both the domestic and international fronts in the fourth quarter of 2019, expanding our user base, upgrading our products, and further advancing our monetization capabilities.
[Foreign language]
Notably, our better-than-expected top-line performance for the fourth quarter and full year of 2019 has illustrated our success in driving growth both at home and abroad. In addition to this strong financial performance, our video-based product and services, including Likee, Bigo Live, Hago, YY Live and HUYA, have all become leaders in their respective markets. Such success is a result of our dual-engine expansion strategy, which enable us to pursue the simultaneous development of both our short-form video and live streaming business segment to construct a truly global video-centric social media ecosystem.
[Foreign language]
First, let me share with you the progress we have made in developing our short-form video growth engine, Likee, as we continue to supercharge Likee's growth through geographic expansion, product updates, and monetization enhancements. During the quarter, Likee maintained its robust user base expansion momentum, which was largely driven by the growing user base throughout Southeast Asia and developed world. Its total mobile MAUs swelled to 115.3 million, representing an increase of 208.3% on a year-over-year basis and 15.1% on a sequential basis. In addition, Likee continued to make headway in target markets such as Indonesia and Russia, capturing a substantial share of the markets during the period to catch up with the leading player in both countries.
[Foreign language]
Beyond growing our short-form video coverage through geographic expansion, Likee further enriched its features and content offerings to enhance its user stickiness. For example, we rolled out the Face Magic function during the fourth quarter to augment Likee user experience and stickiness. Face Magic was developed using our proprietary AI technology to provide users with both face swapping and image cropping features. The addition of Face Magic and other similar features enabled millions of Likee users around the world to create and share short-form videos with their friends. On the monetization front, Likee continued to make progress in the areas of brand partnerships and advertisement campaigns during the fourth quarter. In December, for example, Likee formed a partnership with a top Indian film studio to promote one of its most highly anticipated films.
As part of this campaign, Likee utilized its online distribution network to help promote the movie throughout India, garnering over 275 million views across social media. This initiative in a market with high growth potential is very encouraging, as it has not only enabled us to establish a unique cultural identity, but also created a valuable monetization case study, which we plan to promote going forward. In the same vein, we have completed the initial development and testing for Likee's advertising systems, which we plan to launch in the first quarter of 2020. Leveraging this system, Likee will enable advertisers to place ads within Likee short-form video feeds, allow content creators to promote their fee-based content across the platform, and ultimately unleash another stream of monetization, in addition to our live streaming virtual gift monetization.
[Foreign language]
[Foreign language]
Please allow me to share how we view overseas live streaming business, the second growth engine by expanding the global footprints of BIGO LIVE and HAGO in the fourth quarter. In addition to our success with short-form videos, we also continue to expand our global live streaming ecosystem through BIGO LIVE, our flagship international live streaming platform outside China. In particular, during the fourth quarter, BIGO LIVE maintained its remarkable growth trajectory in developed worlds around the world. As a result, the revenue generated by BIGO LIVE in developed markets such as the U.S., Japan, Europe, and other regions represented 31% of BIGO LIVE total revenues in the fourth quarter.
Notably, this revenue growth was driven by a 50% increase in Bigo Live's paying user base in developed countries in December 2019 as compared to June 2019, resulting from our focus on the cultivation of the platform's operational efficiency, localization capabilities, and cultural sensitivity in regional markets. During the fourth quarter, Bigo Live also focused on promoting social features to enhance user engagement. In particular, our efforts to develop Bigo Live's party produced encouraging results, with 22% of users on Bigo Live using that feature in the fourth quarter. Beyond short-form video and live streaming, Hago, our casual game-oriented social media platform, also maintained its healthy growth trajectory through the introduction of new games and enhancement of social features. During the fourth quarter, Hago continued to enhance user stickiness and foster new social interactions between users on its platform.
For example, HAGO's interest-based user groups have become a key feature for users to initiate social interactions on the platform. The average daily penetration rate of HAGO's interest group function improved by 22% on a sequential basis in the quarter. Meanwhile, the highly social nature of the platform has enabled us to accelerate the development of our innovative monetization capabilities, as seen in our virtual gifting features for both voice chat rooms and interest-based user groups. As a result of these monetization upgrades, HAGO recorded a 20% plus increase in revenues on a sequential basis in the fourth quarter. Importantly, India has become HAGO's second largest market to date.
Going forward, we expect that HAGO's monetization capabilities will continue to grow in 2020。
[Foreign language]
As we closely monitor users constantly evolving demands and preferences for live streaming environments, we further uncovered the growing user preference for variety shows with celebrities. Beyond our partnership with Wang Qiang, Da Zhang Wei, which we mentioned on the previous earnings call, YY Live hosted 28 shows with other celebrities in the fourth quarter. Additionally, we also hosted our 2019 YY Annual Awards in Shanghai in January. This event collected more than 24.2 million views, with an average user viewing time of 63.9 minutes and a total of 180 million bullet comments sent throughout the event, further showcasing the strength and scale of our live streaming social media ecosystem. Notably, we utilized our experience from the past seven years and replicated the success of our YY Annual Awards in overseas. BIGO Gala Awards 2020 in Singapore in January served as a prime example.
This event featured the attendance of approximately 1,000 of Bigo Live's top performers from around the world, and successfully attracting more than 1.6 million fans who tuned in to watch the event online
[Foreign language]
Importantly, this expansion strategy has enabled us to transition from a leading live streaming platform in China to a global video-based social media platform in domestic and international markets. As we continue to cultivate synergies between business segments, upgrade our products through cutting-edge technology, and enhance our localization capabilities, we are supercharging the network effect of our product metrics. Our ability to attract, create, distribute, and monetize content both at home and abroad will continue to blossom, further enabling us to deliver long-term value for our shareholders. With that, I will now turn the call to Bing Jin, our CFO, to go through the details of our financial results.
That concludes David's prepared remarks. As JOYY CFO, I will talk about the financial results. We maintained our strong momentum and delivered our robust financial and operating metrics during the fourth quarter of 2019.
Our total net revenues for the fourth quarter increased by 64.2% year-over-year to CNY 7.62 billion, exceeding both the high ends of our previous guidance range consensus. In particular, our live streaming revenues for the fourth quarter increased by 62.7% year-over-year to CNY 7.15 billion, driven by CNY 5.51 billion in live streaming revenues from both our YY and HUYA segments, and a CNY 1.64 billion contribution from Bigo. Other revenues in the fourth quarter increased by 89% to CNY 471.6 million, driven by higher advertising revenues from HUYA and Bigo. Cost of revenues for the fourth quarter increased by 69.3% year-over-year to CNY 5.1 billion.
Revenue sharing fees and content costs increased to CNY 3.73 billion in the fourth quarter from CNY 2.56 billion in the same period of 2018, which was in line with the increase in live streaming revenues. Bandwidth costs increased to CNY 505 million from CNY 246.5 million in the same period of 2018, mainly reflecting the continued expansion of our global user base. Gross profit for the fourth quarter increased by 54.6% year-over-year to CNY 2.52 billion. Gross margin in the fourth quarter of 2019 decreased to 33% from 35.1% in the same period of 2018. The decrease in gross margin was primarily caused by the fact that HUYA and BIGO segments have lower gross margins, but contributed a significantly greater portion of our net revenues in the fourth quarter of 2019 as compared to the corresponding period of 2018.
Operating expenses for the fourth quarter increased to CNY 2.3 billion from CNY 931.2 million in the same period of 2018, primarily due to the increase in sales marketing expenses, which reached CNY 1.03 billion in the period. The increase in sales marketing expenses was primarily attributable to our increased efforts in sales marketing activities in overseas markets, as well as the impact of depreciation and amortization related to the consolidation of BIGO. Our R&D expenses for the first quarter increased to CNY 802.3 million from CNY 332.5 million in the same period of 2018, mostly due to the increase in salaries caused primarily by the consolidation of BIGO. Our GAAP operating income for the fourth quarter was CNY 362.2 million compared to CNY 718.6 million in the same period of 2018.
Operating margin for the fourth quarter decreased to 4.8% from 15.5% in the prior period as a result of a lower gross margin, the impact of depreciation and amortization related to the BIGO's consolidation, and other overseas expansion initiatives. Our non-GAAP operating income for the fourth quarter, which excludes share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, as well as gain on deconsolidation and disposal of subsidiaries, was CNY 781.3 million compared to CNY 888.5 million in the same period of 2018. Our non-GAAP operating margin for the fourth quarter was 10.3%, compared to 19.1% in the same period of 2018. GAAP net income attributable to controlling interests of JOYY Inc.
for the fourth quarter of 2019 was RMB 172.8 million, compared to RMB 694.7 million in the same period of 2018. Net margin was 2.3% in the fourth quarter of 2019, compared to 15% in the corresponding period of 2018. Non-GAAP net income attributable to continuing interests of JOYY Inc. was RMB 600.8 million, compared to RMB 846.9 million in the same period of 2018. Non-GAAP net margin in the fourth quarter of 2019 was 7.9% compared to 18.2% in the same period of 2018. Diluted net income per ADS in the fourth quarter of 2019 was RMB 1.87 compared to RMB 10.54 in the same period of 2018. Non-GAAP diluted net income per ADS was RMB 6.7 compared to RMB 13.03 in the same period of 2018. Turning to our results for the full year of 2019.
Our total net revenues increased by 62.2% year-over-year to CNY 25.58 billion, driven by the same factors that led to this quarterly increase. Our net income attributable to controlling interest of JOYY Inc. for the full year of 2019 was CNY 3.45 billion, compared to CNY 2.21 billion in 2018. Our non-GAAP net income attributable to controlling interest of JOYY Inc. for the full year of 2019 was CNY 2.25 billion, compared to CNY 3.27 billion in 2018. Non-GAAP net margin for the full year of 2019 was 8.8% compared to 20.8% in 2018. Diluted net income per ADS for the full year of 2019 increased by 69.5% year-over-year to CNY 43.01 from CNY 25.38 in 2018. Non-GAAP diluted net income per ADS for the full year of 2019 was CNY 27.11 compared to CNY 15.07 in 2018.
Looking forward to 2020, we are faced with immediate challenges of COVID-19 epidemic.
In response to the outbreak, we announced a cash donation of CNY 22 million to procure medical supplies and equipment from all over the world for the hospitals in Hubei and Guangdong provinces that were involved in the treatment of COVID-19 patients. Our hearts goes out to all those who have been impacted by this epidemic. Especially in times like this, we remain fully committed to our mission of connecting people and enriching their lives through video. Beyond entertainment, many of our users are utilizing our live streaming services for regular, casual, and work-related communication purpose during this epidemic. We are formulating a support program to help our hosts and other performers to weather this challenging environment. We plan to continue leveraging our video-based social media platform to help mitigate the impact of the disease, rally charitable support, uplifting people's spirits, and enrich their lives.
At the current stage, we expect our net revenues in the first quarter of 2020 to be between CNY 6.75 billion and CNY 6.85 billion, representing a year-over-year increase between 41.2%-43.3%. We currently have limited visibility surrounding this epidemic's long-term impacts on our business and the markets in which we operate. Therefore, this forecast only 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 up the call to questions.
Thank you so much, presenters. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, please press star one on your telephone now and please wait for your name to be announced. To cancel your request, you may press the pound or hash key. Once again, it is star one to ask a question. Your first question comes from the line of Thomas Chong from Jefferies. Your line is now open, Thomas.
Hi. Good morning. Thanks management for taking my questions and congratulations.
Hey, Thomas. Sorry, could you just please ask your question in Chinese firstly, then translate into English? Thank you.
Sure.
[Foreign language]
I have a question about the 2020 outlook for BIGO, in particular, the revenue and the user trend across different geographies. Also, any expectations in terms of the timeline for leveling the losses and achieving break even, and how should we think about the spending for BIGO across different geographies during the year? Thank you.
Thanks, Thomas. First, on the trend for monetization under different markets. BIGO has different components. Let me talk about Bigo Live first. Bigo Live has enjoyed tremendous user growth and monetization in 2019, and we expect the similar pattern to continue in 2020. The key driver coming from the developed markets. As you can see from the fourth quarter number, the developed markets accounts for more than 31% of the total revenue on the Bigo Live. That compared with 26% in the third quarter and 22% in the second quarter. You can see obviously, a continuous increasing trend. We expect that trend to continue across different developed markets, including U.S., Europe, Japan, Korea, and other parts of the world. One of the beauty for those developed markets is that the paying ratio and ARPU tend to be very high.
We have demonstrated that the paying ratio in the developed world has increased by 50% in December 2019 compared with June 2019. That in itself is very encouraging. We expect Bigo Live will continue to focus on developed worlds in 2020. That's on Bigo Live. On the Likee business, we have also achieved a balanced approach, meaning traditionally we are very strong in South Asia, particularly in India. Starting from last year continuously into 2020, we will be more balanced approach, meaning we'll focus more on developing into other non-India markets, including Russia, Indonesia, where we are performing very well and catch up very quickly with the leading player. We are continually expanding other parts of the world, including developed world as well. That's on the user growth for Likee.
On the monetization of Likee, we will also ramp up the live streaming capability as BIGO's live streaming, as I said, it's a middle-end capability. It can be replicated in different parts of the apps. Likee will benefit from Bigo Live's monetization efforts and ramp up the live streaming capability. On top of live streaming, we have also mentioned just now that Likee has built up its own advertising network and system. We expect to introduce feed-based advertising campaigns within Likee, and hopefully advertising will also gradually contribute more and more to Likee's ecosystem. I think that's a long answer to your question. In terms of the spending, I think we have communicated with the market before that this year, 2020, we are looking at a net loss on the total BIGO segment basis is $150 million loss.
As we can see that BIGO's total revenue is growing faster than expected before. Before we had telling market that the revenue will grow 50% in 2020. Now we are forecasting more than 60% year-on-year growth. As a result, the net loss margin will be narrowing compared with we communicated before. In terms of the break-even point, we expect that total BIGO will be break-even on a single month basis by end of this year. That remains to be the same. I want to mention that we tend to be focusing more on ROI of the money spent, and we tend to focus more on profitability, because I think that's one of the key differentiator for our overseas business compared with some of the leading players, because we know how to monetize the existing and new space across different parts of the world. Thanks.
Thank you.
Once again, to ask a question, you may press star one from your telephone keypad. When you ask a question, please state your question in Chinese first, then immediately translate your question in English. Your next question comes from the line of Lei Zhang from Bank of America Securities. Please go ahead. Your line is now open, Lei.
[Foreign language]
I will translate myself. First I want to follow up the overseas, especially on the Likee's user trend. How should we look at user and monetization balance, and what's your target for Likee user in 2020? Secondly, on the competitive landscape of domestic live streaming, how do we think the competitors like short video platform, even QQ Music? Can you give us more color on the updated competition? Thank you.
Thanks, Lei. Let me address the questions. On the global expansion strategy for Likee, as I mentioned, we are focused both in terms of the user growth and monetization. I don't think your comment is right in a way that if we focus too much on monetization, we will focus less on the user growth. As I said, we focus on ROI. The user retention, meaning the 30-day, 15 user retention rate is good in some of the markets. We will continue to spend money. After we spend money, we also need to make sure that the user we attract can be converted to live streaming users. We also pay particular attention in terms of the conversion of live streaming within the short video users, in terms of the time span, in terms of the gifting, et cetera. That's for sure.
You will also expect in terms of user growth, you expect similar pattern that we have seen in 2019. If you track our quarterly performance, you can see that Likee is adding 15 million-20 million users on a per quarter basis. We expect similar pattern will continue. As I said, we also need to make sure that the ROI makes sense, and we will generate decent profitability for Likee business. That's the answer to the first question. The answer to the second question, domestic competition is not a new thing. We have been operating under a highly competitive live streaming business in China for several years. We still continue to grow. If you look at the prospect of 2020 YY Live segment, I would say the revenue will continue to grow at a low single digits.
The reason why it's low single-digit, because we cut down some of the business, including the PC game business, which we sold, and also we have scaled down the domestic small lending business, given the uncertainty, particularly in the online lending business. With those two business scaled back and scaled down, the YY Live's revenue, the growth rate will be down a little bit. As we told people before, it used to be 5%-8% year-on-year growth. Now we're looking at low single-digit growth, reflecting the close down of those two business. For the main domestic live streaming business, I think it's still solid. YY Live, you can treat it as a traditional kind of PC game where the user base is very sticky and they continue to come back.
We have seen a very sticky time span and user behavior on our platform, both from the ticker perspective and from the broadcaster perspective. I think, even with amid this domestic competition, YY Live will continue to grow.
Okay. Thank you. Can I have two follow-up? First, on the Hago side, given you shared more color in the prepared remarks, can you remind us where is the Hago revenue booked, is that under YY Live, right? If Hago growth dropped in 2020, if that means the YY Live domestic live streaming actually down on year-on-year basis? Also on the Hago side, what's the key content and the top of users skill about Hago? Secondly, also on the domestic side, I know that e-commerce live streaming is quite popular right now, and even some of your competitors actually ask the host to do e-commerce related live streaming. I know we have e-commerce related initiative, can you share more color with us on the e-commerce live streaming side? Thank you.
Sure, Ting Li. On the Hago, it is booked under YY Live segment. Given the absolute scale of Hago's revenue is still very small compared with the total YY domestic live streaming. In terms of absolute dollar, it is not contributing that much yet. If you strip out Hago, YY Live domestic market, I think the business is still stable. I put it that way. For e-commerce, we have been doing e-commerce live streaming for a while. Again, our strategy is different from the others. Our e-commerce is more focused on non-standard products, meaning jewelries, arts product, et cetera, calligraphies. We focus on introducing high quality broadcasters to help improve the productivity of the traditional non-standard product value chain. Hopefully we will create a win-win situation for both the seller and for the users.
That part of business is ramping up very quickly. At the right time, we will start disclosing the right metric to the external investor. At this point, we still think that business relatively early.
Okay. Thank you. Thank you so much. Very clear.
Thank you.
Your next question comes from the line of Brian Gong of Citigroup . Once again, please ask your question in Chinese first, then immediately translate your question in English. Brian, you may ask your question.
Okay, I will translate myself. For Likee, wondering how should we see the competitive dynamics with TikTok in different regions? I think Likee probably made very limited contribution to BIGO's revenue in 2019. I'm sure we want to see how much revenue contribution from Likee to BIGO for the beginning 2020. Thank you.
[Foreign language]
[Foreign language]
Sorry, let me do the translation first. This is David. Let me answer your question of the Likee business as well as the short-form video competition in the global wide. Firstly, as a company and a founder of the management, we really look in favor of the short-form video's future, right? If you look at the past few years, we actually committed to continue invest into the Likee business. Rather than the profitability, we think that the positioning as well as the market share for the short-form video is more important for us. In the past several years, although we continue to suffer the loss from the Likee business, but after our effort, we actually already get the entering tickets for the short-form videos, especially in the outside of China.
At the beginning times, in terms of the technology as well as the investment scale, we are much less than our competitors. After two years effort, currently we actually at in the similar kind of level as our close competitors. I actually believe the Likee business will enter to the 2nd stage, which means more healthy and more balanced develop of the stage. As we mentioned in the prepared remarks, so this year Likee will focus on the monetization. Hopefully at the end of this year, the overall BIGO business will achieve the single month break even. If that goal could be achieved, it means in the future we can more dynamically to control of the investment cycle, especially in terms of the marketing or the user acquisition cost for the Likee business.
That will help us to build up more healthy business model compare with our peers, and that can help us for the next 5-10 years long-run competition for the short-form video business global wide. Thank you.
[Foreign language]
Yeah. Let me handle that question. I think we are still observing the progress, but I think at this point it's somewhere around 10% of BIGO's total segment will be coming from Likee. That number can be changed depending on the progress. Yeah.
OK, got it. Thank you very much.
Your next question comes from the line of Daniel Chen of JP Morgan. Your line is now open, Daniel.
[Foreign language] I will translate myself. I have a housekeeping question regarding cash. We have a very healthy balance sheet and a very rich net cash of over $1 billion. What is our key strategy in cash management in 2020? Thank you.
Let me address the question. Thanks, Daniel. In terms of cash optional, we have around $900 million, which we put into different chunks of savings and investment, I think it generate a decent return. Meanwhile, we are also observing the latest market turmoil, obviously our stock recently is very undervalued, particularly in the recent turmoil continue to go down. We will seriously consider share buyback and other methods of returning some of the cash to the shareholders. Yeah.
Thank you.
Once again, to ask a question, you may press star one from your telephone keypad. Your next question comes from the line of Lei Zhang from Goldman Sachs. Your line is now open, Mr. Zhang.
[Foreign language] I'll translate myself.
Thank you management for taking my question. I have two questions regarding the impact of the COVID-19 in overseas markets for BIGO. The first question is, have you observed any similar surge in user time spent or engagement in the development markets given the fast spread of the virus? The second question is on whether that will give us any refreshed thoughts on user growth strategy or new monetization methods. Thank you very much.
[Foreign language]
This is David. Let me answer your question. Firstly, in terms of the COVID-19's impact for outside of China, we can look at the package in China for the last quarter. For YY's business in China, we don't see that significant of the negative impact from the COVID-19 outbreak in China. From the China's practice, we actually forecast the overseas business also won't see any of the significant impact from the COVID-19 in the short term period. Bigo Live currently in the very healthy growth stage. As I mentioned in the prepared remarks, rather than the monetization, actually BIGO also focus on the social features, especially its community operation has become one of the key focus for the Bigo Live in the recently stage. 42% of the users have started to use BIGO's SPA or the friends moments of the functions within of the platform.
Going forward, except for the rapidly revenue growth, BIGO Live also will see continuously user growth in the future. For Likee business, as I mentioned before, except for the very rapidly user number growth, we also will be more focused on the monetization for this year. If the two parts can build up a more healthy cycle for the business, definitely we will be more confident for the overall overseas business development for the future. Thank you.
Thank you very much.
Once again, to ask a question, you may press star one from your telephone keypad. It's star 1 to ask a question. When you ask a question, please state your question in Chinese first, then immediately translate your question in English. Your next question comes from the line of Thomas Chong from Jefferies. Your line is now open, Thomas.
[Foreign language] Thanks management for taking my follow-up questions. My question is about the domestic market. Given a lot of our peers are entering into the lower tier cities. Have we thought of developing other applications to penetrate into tier 3 and tier 4 cities going into the future? Thank you.
Thomas, thanks. Let me address your question. You are right that on top of YY Live as a main app, we are also developing different products. For example, we have audio-based live streaming products, several of them, that focus on 3rd-tier cities and even to 5th-tier cities. We also have, as you said, e-commerce live streaming products. We're also developing other social media products, all based on our video and audio base, because that's our core competence. We are trying to penetrate into different demographics, and trying to penetrate into different cities. Some focus on low-tier cities, some focus on the 1st-tier cities. Many of those products are in initial stage, so we haven't systematically disclosed to the actual investor about the matches, but we will do so at the right time. You are right. We do have strong different products.
By the way, I also want to mention that we have continued to partner with other big traffic platforms, such as Xiaomi, and we have right now partnered with two and three additional big traffic platform, with they call export our core live streaming competence, and then revenue share with those traffic platforms. With that, I also hope that we can continue to enhance our monetization capabilities through our different platforms.
Thank you.
Next question comes from the line of Yue Ang from CICC. Your line is now open, Yue Ang.
Thanks, management. I'm on behalf of Na talie Wu. We have two questions. The first one is that, could management share some color on the promotion of Likee? What's their plan for the investment in content and user acquisition this year? The second question is, could the management share some color on the margin outlook for the domestic live broadcasting business of YY Live Core this year? Thank you.
Thank you. Let me address those questions. First, in terms of the sales promotion for the Likee. Regarding content, as we said before, Likee focus on UGC, user-generated content. By nature, we encourage the user to voluntarily create and upload their short form video content. As a result, we don't tend to spend that much money to acquire the PGC. We'll do so in some of the key markets to partner with some celebrities to produce, but I don't think that will cost that much money. We will also partner with some copyright owners, to sign a long-term contract so that live broadcasters can live broadcast the songs, etcetera. That will cost some money. In terms of the direct user acquisition, again, we'll closely tracking the KPI, meaning user retention rate.
Typically in those markets, they are much lower than in China in terms of per user acquisition cost. Plus, after user is attracted, we had to convert them to machine learning to realize, as we said many times, to realize the monetization for machine learning business. That will create a constant loop for the user account value. That's on Likee. On the domestic margin, if you look at in 2018, our operating margin for domestic YY Live, actually this is around 24%-25%. 2020, we're looking at somewhere above 20%. There might be some further decrease of the margin for YY Live. Again, it's not only about domestic, but because YY segment also showed a bit of responsibility of Hago and other overseas expansion.
We will continue to do some of the sales marketing, plus we'll continue to recruit some of the high caliber AI expert technologies with R&D as a percentage of revenue, and sales marketing as a percentage of revenue will increase a little bit, resulting to somewhere like 20-something% for the margin, operating margin of domestic, for margin acceptance.
Thanks again for sharing.