DouYu International Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 18, 2023

There are 6 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DU International Holdings Limited First Quarter 2023 Earnings Conference Call. I will now turn the call over to the 1st speaker today, Ms. Lingling Kong, IR Director at Douyu. Please go ahead, ma'am.

Speaker 1

Thank you. Hello, everyone. Welcome to our Q4 2023 earnings call. Joining us today are Mr. Shao Jie Chen, Chairman and Chief Executive Officer Mr.

Speaker 1

Memin Su, Chief Strategy Officer and Mr. Hao Cao, Vice President of Finance. You can refer to our Q4 2023 financial results on our IR website at ir. Doyu.com. You can also check a replay of this call when it becomes available in a few hours on our IR website.

Speaker 1

Before we start, please note that this call may contain forward looking statements made pursuant to the Safe Harbor provision for Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward looking statements. All forward looking statements are expressly quantified in their entirety by the cautionary statement, risk factors and detail of the company's filing with the SEC. The company undertakes no duty to revise or update any forward looking statements for select events or circumstances after the date of this conference call. I will now speak on behalf of our Chairman and CEO, Mr.

Speaker 1

Xiaojie Chen. In 2023, we plan to continue implementing our cohort strategy of building a comprehensive game centric content ecosystem and to prioritize our focus on fostering a vibrant and healthy gaming community. In the Q4, we made persistent efforts to produce premium gaming content and highlight our platform's gaming features by refining our operations and optimizing community interactions. These initiatives continue to lay a solid foundation for our long term sustainable development. With that in mind, we proactively adjusted our revenue generation and marketing strategies with a sharp focus on enhancing our user quality and maintaining stable business performance.

Speaker 1

In the Q4, our mobile MAUs were 50,200,000 with the total number of paying users at 4,500,000 and our adjusted net profit was RMB25,800,000. To begin with, our average mobile IMUs for the quarter were 50,200,000, a year over year decline of 8.9%, which was in line with our expectations. The main reasons for the changes include: 1st, in the Q4, we shifted our operating strategy to focus on improving user quality, which significantly reduced our marketing expenses for user acquisition. On a year over year basis, the lack of user acquisition from promotional channels led to a notable decline in MAUs in the Q4. We made this change in strategy because we discovered through data analysis that channel promotions resulted in low user retention and conversion despite a short term increase in user numbers.

Speaker 1

That is to say, as users' needs grow more than words, marketing alone is not a sustainable means of user acquisition. As such, we cut back on our low ROI marketing spending and strove to attract and retain users through continuous investments in high quality content and cooperation with game developers, essentially advancing our growth with a content driven approach. 2nd, our membership business, which we launched in collaboration with game developers, contributed to user growth, partially offsetting the year over year decrease in MAUs due to the adjustment we made in our marketing strategy. By upgrading and promoting our membership business based on game features, we met the gaming needs of more users, gaining traction among both new and existing users. Moving to our content ecosystem.

Speaker 1

Throughout our many years of operation, we have emphasized the development of our game centric interactive content ecosystem. Our existence on content centered approach allows for continuous improvement in the quality of our content based on game features while providing innovative services and driving enhanced interactions in our community. Ultimately, this contributes to a healthy ecosystem with rich content and extensive interactions. In parallel with content optimization, in the Q4, we introduced new content display formats and interaction options to meet different users' needs across more diversified content consumption scenarios, which elevated overall user engagement and stickiness on our platform. In the Q4, we continue to improve our diversified self produced tournament system and organized almost 90 ecore tournaments.

Speaker 1

This included collaborative events that have been held for several years in a row and are already integrated into the game's professional tournament system, such as the League of Legends, Teamfight Tactics Tournament on DongNi's platform. We also produce tournaments based on our existing IP with participation coming primarily from streamers, including the Peacekeeper Elite, Mount Haruna Cup and Lugones Cup for Naraka Blade Point and the CS GO, which we held for female streamers. In addition, we organized even more interactive and engaging mass tournaments, such as the OnOff Kings, Mako Tournament and the Peacekeeper Elite For Lower contest among others. By providing both professional and leisure events, our multilayered tournament system not only met gamers' need for watching diverse competitions, but also encouraged more users to take part in mass tournaments. In addition to produce tournaments for existing games, we also debuted new tournament content that caters to the feature and user base of new games.

Speaker 1

For example, we unveiled the Walarent overseas tournament to build momentum for this new game segment along with the opening of the game for domestic pre registration. We're offering streamers more opportunities for participation and exposure. This offers streamers with a wider growth path and provided a channel to professional Esports teams to subsequently select professional player candidates. With respect to copyrighted tournaments, as copyright pricing gradually retaining to a reasonable range, we purchased some core tournaments uprights again this year, including the League of Legends, Pro League and LOL World Championship Tournament. These purchases were in consideration of the broad influence of core karate tournaments and our rich experience in operating such content.

Speaker 1

In the Q4, we broadcasted over 20 large scale official events such as the spring tournaments of LPL, KPL and the PEL, further elevating user engagement and stickiness in our game segments through differentiated derivative content and diverse operating activities. For example, in LPL, by leveraging our top tier streamer resources, we selected 12 streamers to do a co streaming of the tournament events, which achieved good results. The DAUs on our top streamers' live streaming channel were on par with that of the official game's official channel. In addition, the number of bully chats exceeded those from the game's official channel by several times. In terms of community interaction, our goal is to augment the level of user engagement on our platform by exploring a broader variety of content formats.

Speaker 1

To that end, we consistently upgraded and rolled out new bullet chat formats and as bullet chat has proven to be an important form of live streaming interaction. Specifically, we provided different colors, emoji pictures and in game roles for users to customize their bully comments, further complemented by identity tags that can be used as usernames prefixes to diversify the interactive experience. Furthermore, we designed different booty chat formats that varied according to users' membership levels and identity settings on our platform, thus offering users better interactive experience. Between live streaming sessions, our game centric community became the primary hub for communication between streamers and users and among users themselves. As such, we continue to explore different interactive formats within our community channel.

Speaker 1

For example, we observed that organizing team gaming activities through our community channel was an effective way to enhance user activity, addressing our users' gaming needs, while highlighting our platform's game oriented features. Moving on to our monetization strategies. Our total number of paying users in the 4th quarter was 4,500,000 with a quarterly ARPU of RMB 314. The reasons for the change in the number of paying users are 3 fold. First, we continue to execute on the strategy we introduced in 2022 of increasing our operating efficiency, which included canceling marketing activities for new paying users with low rates of return.

Speaker 1

2nd, beginning in the Q4 of 2023, we preactively reduced our low gross margin marketing activities by cutting back on the promotions of certain virtual gifts. 3rd, the decrease in our OO user base was partially a result of reduced marketing spending. To some extent, these adjustments affected our users' willingness to pay, including both new users and price sensitive users, resulting in an overall decline in paying users. Nevertheless, we devoted more operational resources to maintaining our co paying users. Internal data show that in the 4th quarter, our co paying users maintained stable spending habits as reflected in our quarterly ARPU, which rose both year over year and quarter over quarter.

Speaker 1

Apart from traditional virtual gifting, our membership business also represents a sustainable source of revenue, which is essential for maintaining co users. Since 2022, we have consistently improved and promoted our platform wide membership service with upgraded membership features and privileges to reinforce the companionship attribute of our product and amplify interactions between streamers and members. In the Q4, we further optimized our paying user ecosystem through various member privileges and operational activities, facilitating a steady increase in members' renew rates for several consecutive quarters. On top of that, this year, we plan to focus on expanding our game specific membership services. We will design and promote customize the game membership services tailored to each game to meet users' diversified needs for in game items.

Speaker 1

Meanwhile, we will work closely with game developers to explore more commercialization channels based on gamers' habits and consumption characteristics. Overall, the development of our membership business has not only strengthened our user's business, but also promoted our revenue diversification and sustainability, demonstrating the long term value of Douyu's game centric ecosystem. In terms of our product R and D and functionality innovation, as a gaming content platform, we continue to launch new content production tools. In the Q4, we provided more convenient editing and display tools in our PC based live streaming application for streamers, enabling them to quickly add gaming images, their personal images, words and advertisements as live streaming inputs to improve live streaming quality and efficiency. Thanks to the user friendly interface of this content aggregation tools, more long tail streamers were able to employ them and enjoy an enhanced live streaming experience, which can help to improve their long term retention rate.

Speaker 1

In conclusion, we remain committed to executing our core strategy of fostering a vibrant game centric content ecosystem with a focus on maintaining the scale and quality of our core users. We will strive to build a healthy platform by attracting more high quality users to our diverse and growing content and fortifying user interaction and stickiness through innovative operations. Looking forward, we will continue to explore more commercialization channels and new growth avenues, while maintaining our leading position in the domestic game live streaming industry. With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Cao to go through the details of our financial performance in the quarter.

Speaker 2

Thank you, Lin Lin. Hello, everyone. In the Q1, based on refined strategy to achieve healthy and balanced growth, we focused on the development of healthy margin business and operations. With our further adjustments to revenue generating activities and reduced our marketing spendings, we generated an adjusted net profit for the quarter amid the short term impact on revenues. Let's now look at our financial performance in more detail.

Speaker 2

Total net revenues in the Q1 of 2023 decreased by 17.4% year over year to RMB1.48 billion. Live streaming revenues were RMB1.37 billion, a decrease of 20.7 percent from RMB1.73 billion in the same period of 2022. The decrease was mainly attributable to our continued operational adjustment on live streaming revenue, such as significantly reducing low margin promotional activities on virtual gifts. As a result, those adjustments impaired willingness to pay of new paying users and price sensitive paying users, together with decreased user base cost by reduced marketing spending, resulting in a year over year decrease in the number of paying users. However, the paying behavior of our core paying users remains relatively stable, leading to a year over year increase of 16.5% in quarterly up to RMB314 in the Q1, up from RMB270 in the same period last year.

Speaker 2

Advertising and other revenues were RMB114.1 million, an increase of 66.6 percent from RMB68.4 million in the same period of 2022. The year over year increase was primarily attributable to the increase in other revenues contributed by game specific membership services. Cost of revenues in the Q1 of 2023 was RMB1.31 billion, a decrease of 15.8 percent compared with RMB1.55 billion in the same period of financial year. Revenue share fees and the content costs decreased by 19.1 percent to RMB1.08 billion from RMB1.34 billion in the same period of 2022. The decline was primarily driven by the following two factors.

Speaker 2

1st, the decrease in revenue share fees was mainly in accordance with the decrease in live streaming revenues. In addition, the lower revenue sharing ratio, which was achieved through our continued operational efficiency improvement, led to a further reduction in revenue sharing fees. 2nd, content costs also decreased largely attributable to better managed self produced content cost benefited from less operating activities with low margin as well as controlled payments to streamers. The decrease was partially offset by increase in copyright costs as a result of the purchase of LPL tournament copyright. Bandwidth costs in the Q1 of 2023 decreased by 18% to RMB124.5 million from RMB151.9 million in the same period of 2022.

Speaker 2

The decrease was mainly due to improved efficiency of peak bandwidth usage. Though the peak bandwidth usage increased year over year due to the growing tournament viewing demand, We managed to control bandwidth costs through dynamic bandwidth allocation and other optimization measures. Gross profit in the Q1 of 2023 was RMB176 500,000 compared with RMB243.8 million in the same period of 2022. The decrease in gross profit was mainly attributable to the decrease in net revenues and the increased other costs. Other costs include the cost of game specific membership service, which grew largely in line with the increase in other revenues.

Speaker 2

Gross margin in the Q1 of 2023 was 11.9%, compared with 13.6% in the same period of 2022. The decrease in gross margin was mainly attributable to the increase in other costs as a percentage of revenues, which was partially offset by the decrease in percentage of revenues attributable to revenue sharing fees and the content costs. Sales and marketing expenses in the Q1 of 2023 were RMB90.7 million, a significant decrease of 51.3 percent from RMB186.4 million in the same period of 2022. This was mainly attributable to a decrease in both marketing expenses for user acquisition and branding expenses. Research and development expenses in the Q1 of 2023 were RMB72.3 million, representing a 37.8% decrease from RMB116.3 million in the same period of 2022.

Speaker 2

This decrease was primarily due to a decrease in personnel related expenses. General and administrative expenses in the Q1 of 2023 were RMB59.8 million, a drop of 33.6 percent from RMB90.1 million in the same period of 2022. The decrease was primarily due to decreased share based compensation expenses as the vast majority of shares and our share incentive plans were fully vested. Loss from operations was RMB 27,300,000 in the Q1 of 2023 narrowed significantly from RMB 101,200,000 in the same period of 2022. Net income in the Q1 of 2023 was RMB14.5 million compared with net loss of RMB86 point 9 million in the same period of 2022.

Speaker 2

Adjusted net income, which excludes share based compensation expenses, the share of loss or income in equity method investments and the impairment loss of investments was RMB RMB25.8 million in the Q1 of 2023 compared with adjusted net loss of RMB52.5 million in the same period of 2022. For the Q1 of 2023, basic and diluted net income per ADS were both RMB0.05, while adjusted basic and diluted net income per ADS were both RMB0.08. As of March 31, 2023, the company had cash and cash equivalents, restricted cash and short term and long term bank deposits of RMB6.6 billion compared with RMB6.81 billion as of December 31, 2022. Going forward, we will maintain the stable operation of our core business and further improve revenue quality while continuing to optimize costs and expenses in order to deliver sustainable profitability. We will also strive to explore more commercialization channels and enhance the monetization capabilities to support the long term healthy development of our platform.

Speaker 2

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Li Zhang from Bank of America. Please go ahead.

Speaker 3

Thanks management for taking my question. Two questions here. Firstly, we know that the co user group is keen to our platform. So can you help us to understand our co user group and how we can retain and expand our co user group? 2nd delay, we know that we have so many new games launching this year.

Speaker 3

So do you see this new game can drive our user and the streaming business? Thank you.

Speaker 1

Mr. Chen will take the first question. User constitute the most valuable resources on our platform. Co users refer to users who have high level of engagement and activity with long viewing hours and high retention rate. They are basically game users who have played a key role in building the gaming community on our platform.

Speaker 1

They are also the foundation of our business development. As such, we have kept upgrading our content and product formats based on changes in users' needs. We have also taken various measures to maintain our core users while acquiring new users through an enhanced platform ecosystem. Our first software, we value content quality and user experience. That's why we have continuously optimized our product features and interface and strengthened our platform's game attributes to enforce our appeal to users.

Speaker 1

We have continued to invest in content upgrades, establishing a multilayered gaming content system covering official tournaments, self produced tournaments and programs. Meanwhile, we met users' needs for long term fragmented and interactive content through different content formats, such as live streaming, videos and communities respectively. 2nd, regarding product formats, we optimize our video and community access based on users' habits. We also changed the content display priority in different game segments according to game characteristics and user preference to facilitate content consumption. Notably, in game segments such as LOL Team Fact Tactics and Jing Qing Impact, video content such as game strategies has a higher viewership compared to traditional game segments.

Speaker 1

In the newly launched x party segment, users can team up through our community channel leading to stronger user engagement and appeal in this channel than in traditional game segments. 3rd, we strengthened our user operations and services, enhancing our user experience and stickiness through personalized recommendations and innovative services. For example, for users with continuous consumption habits who follow our streamers, we recommend platform wide membership to fortify their interactions with streamers. As for users who play games, we roll out game specific membership services to meet their need for in game items. Therefore, based on the data we have accumulated over the years, our efforts have ensured our core user satisfaction and stickiness, thereby maintaining user loyalty in the long run.

Speaker 1

The stability of our core users is not only the foundation of our gaming community, but also the starting point of our exploration for new growth models that can benefit the long term healthy development of our platform.

Speaker 4

Let me answer your second question about new game. As approval for new game titles resumed at the beginning of this year, casual games have been gaining popularity. The public testing, pre launch promotions and official launch of some large scale games have given us more opportunities to attract users through higher quality new game content and innovative platform operations. Take Energy Party as an example, as is our casual game with strong social attributes, We enhanced our community channel operations, encouraging users to team up through our community Another example is Valorant FPS game to be launched soon for domestic market. As users typically enjoy and watch such competitive games, we produce highly engaging tournament content to attract the attention of both streamers and users.

Speaker 4

Thanks to our high quality streamer pool and self produced tournaments, users viewing time grew significantly in the Valorant segment after the opening for domestic pre registration. On top of providing streamers and the content offerings, which is our common practice for new games, We also offer suitable gaming content and display formats based on game characteristics. In addition, we work with game developers to acquire more new gamer benefits and promote the games in conjunction with our platform's game content. In this way, new games can attract more new users in the early stages of their launch. Among the games to be launched this year, we believe Honkai, Stereo and Justice Online Mobile will be the focus of our operations as Honkai stereo is not a great fit for live streaming compared with competitive games, we leveraged its ACG attributes for content operations such as inviting popular AOL players who are also fans of Jinsheng Impact to showcase the new game through live streaming.

Speaker 4

We also launched a game Q and A challenge in our community channel to inspire user interactions. Although we cannot accurately predict the schedule for the game scotch, We have already conducted detailed evaluation of the new games. And accordingly, we have made thorough plans for their operations. This is to ensure that we can quickly deploy and integrate resources upon the game's launch and provide promotional and operational support. Thus, seeing the opportunity to acquire more users during the game's promotional phase.

Speaker 4

Thank you. Please, next question.

Operator

The next question comes from Thomas Chong from Jefferies. Please go ahead.

Speaker 1

So my question is that, so in recent years, we have made some adjustment on operational strategies. So how should we measure or evaluate the effectiveness of new strategies? Thanks. As we face a consistently evolving industry landscape and more diverse gaming consumption needs, we are prioritizing long term sustainable development as a leading game centric content platform in China, While stabilizing and optimizing our traditional business, we are also exploring new business growth opportunities. Speaking of our traditional game live streaming business, we are seeking to improve user quality while also pursue growth in user scale By delivering high quality content, upgrading our product structure and strengthening our interactive features, we've been able to enrich our platform's game centric community ecosystem and enhance our user experience and retention rate.

Speaker 1

I will elaborate on the strategic adjustments we made over the past years and still ongoing along with discussing the effectiveness of our evaluation metrics. First, I will discuss changes in our user acquisition strategy. At present, the scale of China's gaming market is essentially stable, Given users' evolving needs in the current market, the ROI of channel promotion has been declining. As such, we stick to a content driven approach to growth by continuously investing in high quality content and cooperating with game developers to acquire new users. We've also built a diverse product system to meet user different needs and enhance user stickiness, gradually forming a positive cycle of content production and user growth.

Speaker 1

The most straightforward metrics for improvements in our ecosystem include user activity, time spent and retention rate. 2nd, on the revenue front, over the period of time, we've reduced our marketing activities that target revenue growth. The purpose is to improve our platform's consumption ecosystem and make it easier and more likely for users to engage in paying behavior in order to promote our platform's long term healthy development. Regarding our traditional virtual gifting business, we further reduced low ROI investments during the Q4, such as various promotions and developed products more suitable for current consumption trends. While adjusting our virtual gifting revenue mix, we also optimized our cost and expense structures.

Speaker 1

As a result, with virtual gifting still our major source of revenue, we focus on revenue stability and improvements in both gross margin and net adjusted net margin. 3rd, in terms of exploration of new monetization model, we explore value added services that can consistently satisfy gamers' needs with a focus on platforms' game attributes. For example, based on our user cohorts, we launched our platform membership business with companionship oriented products and the game membership services for gaming users. This unique and sustainable product can not only bring new users to our platform, but also improve our revenue structure. Although the current revenue contribution of membership services is relatively small, we believe it has a great potential and it has demonstrated the feasibility of our new models.

Speaker 1

On the whole, compared with revenue and expense adjustments, it will take time and patience for our content investments and new model exploration to pay off with improvements in our operations. Accordingly, with revenue scale expansion under pressure in the short run, we will more on refined operations and cost and expenses controls to maintain our long term profitability as we continue to make the adjustments mentioned earlier. Thank you. Next question please.

Operator

Next question comes from Richie Sun from HSBC. Please go ahead.

Speaker 5

I will translate this myself. Thank you for taking my questions. I have 2. So first of all, can though you actually have resumed the procurement of LPL, can management share how does the return of this tournament contribute to the platform? 2nd of all, can management share our MAU as well as paying user trends for this year?

Speaker 5

Thank you.

Speaker 4

Let me answer your first question about tournaments. We believe the core copyrighted tournaments are still of great value. And as price levels gradually return to a reasonable range, we repurchased some co copyright tournaments in 2023, such as the LPL and the LOL Watch and Shaver tournaments. While LPL's return brought us some incremental growth in traffic in the LOL segment, but it couldn't offset the decline in user scale, resulting from significantly reduced promotional expenses. These developments were all within our expectations.

Speaker 4

It is worth mentioning that the tournament's return elevated over all user activity in the LIO segments. There have been clear quarter over quarter improvement in average daily viewing hours and the number of budget chance per user. In particular, as mentioned in our CEO's remarks, this year, we leveraged our top tier streamers and official tournament commentary for a co streaming of the tournament's events. The topics covered in this live streaming session affect the widespread addition and in prior discussions on and off our website. This demonstrated once again our enduring influence as an established game live streaming platform.

Speaker 4

Even if we stop the live streaming some COVID-nineteen tournament for a year.

Speaker 2

I will answer the second question about the user and paying user trends. Our operating strategy prioritizes long term sustainable development that is exploring growth from new businesses, while stabilizing and optimizing our traditional businesses. As our traditional businesses account for a large share of our total revenue, adjustments in these businesses will impact operational and financial performance of the whole platform. The most direct adjustments this year lie in our marketing strategy of user acquisition and live streaming activities. These adjustments affected our platform's user scale and our number of paying users, which explained the year over year and quarter over quarter declines in MAUs and paying users in the Q1.

Speaker 2

A significant reduction of channel promotional expenses was the main reason for the decline in MAUs. Our MAU performance in the Q1 was in line with our expectations, namely most of the last MAUs were short term users from platform. So this strategy won't affect our content operations or our monetization efficiency. In comparison, our core user base has remained relatively stable. For instance, users with above average viewing hours have a retention rate that almost doubles the average retention rate and paying users next month's retention rate exceeds the average retention rate by over 50%.

Speaker 2

We will continue to execute our strategy of reducing channel promotional expenses. On that basis, we expect MAUs in 2023 to remain on the same level as in the Q1 with small quarterly fluctuations. The decline in paying users is attributable to 2 factors. One is that our adjustments in revenues generating activities affected some users' willingness to pay. The other is that the overall decrease in our user scale.

Speaker 2

Guided by the operating principle of improving use quality, we will devote more operational and other resources to maintaining our core paying user stickiness and willingness to pay through more interactive products and innovative membership services. So far, our paying user base has reached a relatively stable range. We believe our operational adjustments will allow us to concentrate our resource on content, which is more sustainable despite a longer payoff cycle. It will take time before we can see the results of these adjustments. Meanwhile, we have been following the progress and we'll provide updates in due course.

Speaker 2

Thank you. Next question.

Operator

The next question comes from Rafael Chen from Bank of China International. Please go ahead.

Speaker 5

Thanks management for taking my question. I only have one question regarding the bottom line, but could management share some color on the bottom line or margin outlook in the next few quarters? Thank you.

Speaker 2

Starting last year, as we kept adjusting the live streaming business to drive its healthy growth. Our overall operational efficiency has improved through fine tuned operations and increasing ROI. We have achieved good results with our net loss has gradually narrowed. In the Q1, by continuing to adjust and reduce our low margin operations, we achieved net profitability and both non GAAP and GAAP, echoing our goal of maintaining prudent operations in traditional business in 2023. Working towards this goal, we remained committed to executing our strategy of fostering a comprehensive game centric content platform.

Speaker 2

We increased the investment in quality tournament content, adding the copyright LPL tournaments this year and continuing to invest in KPL tournaments and other top notch copyrights. Furthermore, we also actively promoted innovative businesses such as game specific membership services. To address increased costs of copyrights and innovative business, we adopted a flexible approach to control of our costs through content management and strategic operations. Regarding revenue share fees, as we actively fostered a healthy and sustainable live streaming ecosystem and reduced low margin operational activities, The overall revenue sharing ratio remained at current low level. In terms of content costs, we strengthened content management and operations.

Speaker 2

On the one hand, we elevated the production efficiency of our self produced content for ROI improvements. On the other hand, we reduced low margin promotional activities. As a result, the cost of self produced content and operational activities have been notably reduced year over year. On the whole, we expect overall cost of revenues in 2023 as a percentage of revenues to remain flat year over year. In terms of operating expenses, we adhered to a content driven approach to user growth, vastly cutting our channel related user acquisition expenses.

Speaker 2

We expect a major reduction in full year marketing expenses year over year. Meanwhile, we will actively optimize operating expenses and further refine our employee streamlining to improve operational efficiency. Cost control measures certainly help us strengthen our traditional live streaming business, leveraging on the competitive edge of traffic and gaming content we build from our traditional live streaming business, we put more efforts on exploring and developing innovative growth avenues, which in turn supported our platform's long term sustainable profitability and development. Thank you.

Operator

Thank you. That's all the time we have for questions. I will now turn the call back over to management for closing remarks.

Speaker 1

On behalf of the management, thank you for joining our call. We look forward to speaking with everyone of you next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation.

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Earnings Conference Call
DouYu International Q1 2023
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