Renren Management Discusses Q3 2013 Results - Earnings Call Transcript

| About: Renren Inc. (RENN)

Renren (NYSE:RENN)

Q3 2013 Earnings Call

November 27, 2013 8:00 pm ET

Executives

Sam Lawn - Investor Relations Director

Joseph Chen - Founder, Chairman and Chief Executive Officer

Jian Liu - Chief Operating Officer and Director

Hui Huang - Chief Financial Officer and Principal Accounting Officer

Analysts

Timothy Chan - Morgan Stanley, Research Division

Jiong Shao - Macquarie Research

Alicia Yap - Barclays Capital, Research Division

Long Lin - Brean Capital LLC, Research Division

Cynthia Jinhong Meng - Jefferies LLC, Research Division

Eddie Leung - BofA Merrill Lynch, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2013 earnings conference call. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, the 28th of November, 2013. I would now like to hand the conference over to your first speaker today, Mr. Sam Lawn. Thank you, and please go ahead.

Sam Lawn

Thank you, and welcome to our third quarter 2013 earnings conference call. Joining me today on the call are Joe Chen, Chairman and Chief Executive Officer; James Liu, Chief Operating Officer; and Hui Huang, Chief Financial Officer. For today's agenda, management will discuss highlights for the third quarter of 2013. This will be followed by a question-and-answer session.

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. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings press release which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. I will now turn the call over to our Chairman and CEO, Joe Chen.

Joseph Chen

Thank you, Sam. Good morning, and good evening, everyone. Third quarter revenues of $47.6 million came within the range of our guidance. During the quarter, we continue to dedicate resources to our core social networking platform, highlighted by the recently launched communication-focused Renren mobile application. The new version is a unique social messaging tool specifically tailored for university students and the young generation aimed at fulfilling their social and campus life needs. If successful, it will further fortify our dominance in this demographic segment, which will be a highly lucrative consumer segment in the long run.

On the gaming front, we beta test -- beta launched the several pipeline games. I quickly realized that the games needed further fine-tuning and reiteration. In hindsight our gaming ambitions in recent quarters caused us to pursue multiple long-term initiatives, which ultimately led to dilution in our in-house gaming development. As a result, we decided to further concentrate our gaming efforts on developing high-quality titles. James will provide additional details on gaming restructuring in his remarks.

Let me now provide some details on the sub process behind our recent major developments. In the past few quarters, we have been focusing our attention to improving user experience in our Renren mobile app. As a result, despite a highly competitive environment, our user time spend continues to be steady and healthy. As we released multiple upgrades with enhanced features, we also came to recognize that communication is the largest feature difference between PC and the mobile SNS products.

Historically, Renren mobile chat functions were fairly basic, although not as prominent as our social networking functions. Also, users are now mostly on mobile. It became increasingly apparent that messaging and chat features were innate demands that we needed to satisfy to perfection. The new version dramatically highlights our messaging features, showing user habits to not only their news feed but also promoting a whole other level of chatting and socializing within groups. Features such as group chatting, location-based group searches and identification of chat functions are just a few examples. Therefore, our new Renren app, officially launched a few days ago, is by far the largest revamping effort we have done in our social networking platform.

As we turn our attention more to social messaging services, we also took a deeper review of our core user base demographics. Our Renren brand continues to be one of the most recognized brand among young and well-educated users. Our product reaches the hearts and minds of this generation. We're also fulfilling their social and communication needs. We want to continue this trend and further strengthen our dominance in China's college and adjacent markets as this is where Renren really stands out and understand its users. Renren has always been a must-have campus identity, and we want to cement our place among the young generation.

In conjunction with our product launch, we'll be launching a series of marketing campaigns to further support our efforts, although in the next few quarters we will be further engaged to our core demographies and increase their dependence on Renren's social messaging services.

Now let me quickly update you on our other business lines. As I mentioned last quarter, advertising for the remainder of the year remains soft due to a high level of mobile traffic, sector-wise slow adaptation in mobile advertising, as well as competition. We did begin to tap and sell mobile advertising towards the end of the third quarter, featuring banners, sponsor stories and news feed. We will continue to work on ways to manage our efforts on mobile advertising. We're also educating advertisers on how best to use mobile for their marketing and branding needs. That said, advertising will remain challenging until mobile advertising across industry starts to take off.

A quick update on our social commerce business, Nuomi. Nuomi continues to do well in the third quarter with encouraging mobile growth. This transaction to sell 59% of Nuomi to Baidu was closed in late October. I want to take this opportunity to thank everyone at Nuomi for their great work and their contribution in the past 3 years, in building this business from a start-up to industry leader. Nuomi is now well-capitalized and ready to execute on its long-term ambitions. As a minority shareholder, Renren will continue to provide strategic support to Nuomi's business. We believe that with additional operational and strategical backing by Baidu, Nuomi's prospect in becoming the market leader is now stronger than ever.

Turning quickly to 56 for online video business. I'm happy to report that our UGC strategy with minimum investment in professional content continues to drive 56's popularity among users. For example, the average number of daily unique visitors on 56 increased over 80% in the third quarter compared to the same period last year. As a unique player in the online video space, 56 will continue to execute on its lean strategies and further expand upon its UGC services.

In summary, this is the time for us to shape our efforts towards our strengths and solidify upon what we have historically done best. We'll reposition -- we have repositioned Renren from social networking to a social messaging service. We're leveraging our core strength of real-name SNS with a focus on mobile communication targeting young and educated users. Connecting with the young generation is what we do best here at Renren. For gaming, we're focusing back to developing high-quality games and in improving profitability. Meanwhile, 56 continues to execute on its UGC strategy and growing its popularity among users.

With that, I'll pass the floor to James to discuss the business from an operational perspective.

Jian Liu

Thank you, Joe. Let me begin first with an update on details of our mobile metrics. Our frequent Renren mobile updates and improved features continue to help engage our users as our monthly average user time spent remains a healthy level at close to 8 hours. Accumulated activated user now has also reached over the 200-million mark on our platform. However, strong competition, particularly from Weixin or WeChat indeed challenges our user growth. As a result, the year-over-year growth for our monthly user at the end of quarter slowed down.

Now let me update you on our gaming business. At the end of the quarter, we had 16 in-house titles and 51 third-party games in operation. Similar to last quarter, our top 5 games are all in-house developed. 2013 has so far been a challenging year for our gaming efforts as the first half of the year we ran into delays on our Android preparation. As Joe mentioned earlier, during the past quarter, we started beta testing a few of our pipeline games but quickly realized further fine-tuning was necessary to reach the level of engagement we wanted. We will continue to address and develop on our more promising titles to meet our user demands.

Meanwhile, we also recognized we have become over extended in building up several long-term gaming initiatives as we were preparing for a more competitive mobile gaming environment. While those initiatives are important to bring our gaming business to another horizon in the longer run, they are not imperative to the current priorities of our gaming business, which ultimately is to develop play games. Therefore, we have decided to correct the situation and make sure we get the basics right first, that is to launch a few successful titles in the mobile market before anything else. Our short-term goal now is to solely focus our gaming resources to our studios and ensure a higher success rate of good-performing titles. The focus of our gaming efforts in the next few quarters will be very clear and very simple, and the recent organizational changes of our gaming business reflects that.

Finally, a brief update on 56. User engagement further improved in the third quarter on the back of ongoing investments and dedication to user experience. Our focus on user-generated content and partner-generated content helped to drive growth in our traffic and advertisers. We note that other players in the online video sector increasingly turn to UGC and PGC to cater to viewer demand, cost control and reaching economies of scale. We have started to monetize 56's growing traffic and saw encouraging results this quarter.

Meanwhile, we expect to further expand on 56's mobile app services as more users are now adopting mobile video. This concludes my operational update. Before I turn over to Hui for the financial review, I want to reiterate that Joe -- what Joe communicated earlier, and that is the company is dedicating its entire focus back on its strength, the Renren SNS, with focus on the younger generation where we shine the brightest. For gaming, our focus is on developing great games before anything else. And for 56, we're focused on its UGC strength, and we will continue to progress in that direction.

Now let me pass it to Hui to discuss our financial review.

Hui Huang

Thank you, James. Hello, everyone. Let me now provide you the financial highlights for the third quarter of 2013. Our total net revenues for the third quarter were $47.6 million, representing a 5.6 million (sic) [5.6%] decrease year-over-year.

Now let me walk you through the major revenue components and the trends. First, Renren net revenues, which includes games, other IVAS and advertising revenues were $41.1 million, representing a 9.9% decrease year-over-year. Online gaming revenues were $20.1 million for the third quarter of 2013, a 16.9% decrease from the same period last year. The decrease was due to our launched games reaching mature stage. Other IVAS revenues were $6.1 million for the third quarter of 2013, a 32.1% increase year-over-year. This increase was largely due to the increasing popularity of our virtual talent show service, Woxiu, provided on 56.

Online advertising revenues were $14.9 million for the third quarter of 2013, representing a decrease of 11.2% from the same period in 2012. Second, Nuomi net revenues were $6.5 million, representing a 36% increase year-over-year.

Now gross profit. Gross profit in the third quarter was $30 million, a 3% decrease year-over-year. Operating expenses in the third quarter was $65.5 million, a 27% increase year-over-year. The increase in total operating expenses was mostly due to increased headcount and personnel-related expenses for Nuomi sales team, as well as marketing expenses relating to the promotion of our games.

Next, loss from operations in the third quarter was $35.5 million compared to a loss of $20.6 million in the same period of 2012. The increase in loss from operations was primarily due to the increased investment in our gaming business, as well as Nuomi's expansion. Our net loss in the third quarter was $24.6 million compared to a net loss of $15.4 million in the same period 2012.

Adjusted net loss, a non-GAAP financial measure, was $19.7 million for the third quarter of 2013 compared to $12.1 million adjusted net loss for the third quarter of 2012. Adjusted net income or loss is defined as income or loss from continuing operations, excluding noncash share-based compensation expenses, amortization of intangible assets and impairment of intangible assets. As of September 30, 2013, the company had cash, cash equivalents and short-term investment of approximately $909 million.

Now let me provide you a quick update on our share buyback program. During the third quarter of 2013, the company repurchased approximately 3.7 million ADS shares.

Finally, let me provide you our top line guidance for the fourth quarter of 2013. Our fourth quarter guidance will be lower than expected, primarily due to lower revenues from gaming and the seasonal weakness of advertising. In addition, please also note that our revenues in fourth quarter will only include 1 month of Nuomi in which we are now a minority shareholder. For the fourth quarter of 2013, we currently expect to generate revenues between $29 million to $31 million, representing a 36% to 41% year-over-year decline. On a pro forma basis, excluding Nuomi revenues, our guidance represents a 32% to 37% year-over-year decline. This forecast reflects our current and preliminary view which are subject to change. This concludes our prepared remarks. Now, we would like to open the call for questions.

Operator, please go ahead.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Timothy Chan from Morgan Stanley.

Timothy Chan - Morgan Stanley, Research Division

I have 2 questions. The first one would be regarding your new Renren mobile application, which has a focus on the communication features. Could you maybe talk about the differentiation of this app from other mobile chatting apps that are popular in the market? And I have a follow-up.

Joseph Chen

This is Joe. Regarding the Renren mobile app, so this is basically the -- this is the result of 2 quarters or 3 quarters of intensive R&D, as well as a continuous iteration, earlier version that we launched. This series of new versions that we launched in the past 2 quarters see basically evolutionary path into a more messaging-centric interface. So we're probably going to continue to evolve this even further towards communication-centric interface because our mobile -- as I indicated in the call, the biggest differentiation of SNS, PC versus mobile, is communication. On PC, the news feed and the content sharing, photo sharing is primarily the -- predominantly the main activity on PC. But on a mobile, we think communication is more important. Communication, well, how do you describe communication? It's basically one-to-one chatting and photo sharing, which basically Snapchat in the U.S. has been doing. And then in China particularly, there's group chatting communication. So Renren launched the group at a group function in the latest version that actually combines feed, news feed, which is primarily content sharing and photo sharing, together with group chat and with animated gamification emojis as well. So from that perspective, it's quite differentiated. We are probably the first major social networking service in the world that's embracing communication in a massive way. And I actually see that continuing to evolve as well.

Timothy Chan - Morgan Stanley, Research Division

My second question would be regarding your game strategy. So currently, you are talking about launching some new games in the market. And how would you actually balance the need of being a game developer or you want to be a game platform going forward?

Jian Liu

Thanks, Tim, for the question. As we mentioned earlier, our gaming -- the core part of our strategy of our gaming business has always been, and will continue to be, developing -- spending our best part of the efforts to develop very high quality games and especially games for the mobile platforms. Right? So over the past couple of quarters, we have extended our efforts beyond this core and went into the other -- some of the other initiatives, right? The other initiatives, even though they are very helpful in the longer term, they actually are not current imperatives and could be totally delayed. So going forward, we have done some restructuring. We are now refocusing back unto our strategy, which is to really focus our R&D efforts on developing high-quality games.

Operator

Your next question comes from the line of Jiong Shao from Macquarie.

Jiong Shao - Macquarie Research

I have a few. Could you first talk about -- could you remind us how many mobile games -- your in-house mobile games you have? And how many third-party mobile games you run and split, or how many are on iOS and how many are Android?

Jian Liu

Thanks for the question, Jiong. We have -- today, we have in total 16 in-house games, and we have about roughly 51 third-party games. For the third-party games, most of them are -- a large part of them are web-based. So very, very few mobile games. And for the 16 in-house games that we currently operate, most of them have mobile version, right? So remember, in previous quarters, we discussed our cross-platform strategies. So our games, in-house developed, operate both on web and on mobile. The focus is really on mobile. And most of these games are available both on iOS and Android. Starting from the early part of this year, we started adapting our mobile games from iOS into the Android platform. So today, most of them are Android-enabled as well.

Jiong Shao - Macquarie Research

Okay. So as you reshape your gaming business, if you look at your mobile game pipeline, what kind of genres you have in your mobile game pipeline for the in-house developed games?

Jian Liu

Yes. So we have a number of genres. In the past, we have quite a bit of success, especially in one category, which is the SLG and SLG plus RPG area. In the pipeline, as we look at it, we have largely 3 categories. One is the so-called battle card game, card battle games, right? The casual card battle games. This is a particularly popular genre on mobile in a large part of the world. So we have quite a few titles in this particular genre. We have SLG. And specifically, we have some action SLGs as well. We also have quite a few RPGs, including some MMORPGs.

Jiong Shao - Macquarie Research

Okay. Now, as you mentioned earlier, most of your mobile games are sort of the mobile version of your web games. Going forward, do you see that changing to more sort of stand-alone, just purely mobile games? And could you also talk about what you have observed in terms of the paying ratio for the gamers to play -- playing your mobile games?

Jian Liu

Yes. Going forward, we will continue to stick our existing strategy, which is a cross-platform games. Right? So for most of the games we have in-house, including the one that we will start promoting today, we have web version, as well as mobile and -- mobile phone and pad version, right? Because we have realized that users need -- users want to have the flexibility to access the game from different terminals at different points of time throughout their life. And therefore, we want to provide that flexibility to the users. That will continue to be our strategy. In terms of the paying ratio, it remains -- it depends on what kind of genre you're talking about. If you're talking about relatively more casual games, more social games, the paying ratio is much, much lower. But if you're talking about the more hardcore games, the paying ratio is actually -- it's similar to what you observed for PC. So for our games, we have -- the game for instance we are launching -- officially promoting -- starting promoting today, it's more casual. So we expect the paying ratio to be slightly lower before what we described via SLGs to action RPGs. It will be similar to those PC comparables.

Jiong Shao - Macquarie Research

Okay. My last question, sorry for so many questions, my last question in this mobile games side is other than using your own Renren app as a distribution platform, what are the other distribution and marketing sort of venues or channels you're using or plan to use to distribute your mobile games?

Jian Liu

Yes. So other than the Renren app as a distribution platform, we're doing a number of things. Right? So we talked about Ader as one of the advertising networks in our gaming business. We continue to operate that Ader initiative. So Ader has already become one of the gaming promotion channels for our own games, as well as some third-party games. Meanwhile, we also worked very closely with some of the leading app stores on Android, for instance, 91 and UCWeb, right? We work with these partners very closely as a great distribution platform for our games.

Jiong Shao - Macquarie Research

Okay, great. Could I -- sorry, could I follow-up one last question? I promise. Could you please expand a bit on your rationale for selling Nuomi and the rationales for still holding 40%, I think roughly, of Nuomi? One, why sell to -- why not sell the whole thing?

Joseph Chen

Well, because we're bullish on this business and we want to increase the probability that this will become a dominant player. So by selling a majority to Baidu, and we'll get a capital infusion as well as traffic infusion, that I think will greatly increase the possibility of this asset becoming a leading player. And by retaining a good portion in that business, we hope to appreciate higher capital gains from this business.

Operator

Your next question comes from the line of Alicia Yap from Barclays.

Alicia Yap - Barclays Capital, Research Division

I have a couple of questions. So first question is when should we start to see some potential turnaround and could see the revenues to regain growth? What are our future strategies? And given that we still have $900 million in cash, so what are some of the things that we can do? Is there any like business that we can get into to drive our future growth?

Joseph Chen

Alicia, this is Joe. This is a very good question, and I think it's a very philosophical one. And basically, for us, the -- in addition to keep on driving profitability from our gaming and advertising business, I think the #1 priority for us is to keep on growing asset because mobile is big opportunity and communication is such a big opportunity for social networking to morph into. So I think that if we can successfully grow our user base 2x or 3x, I think that the future earnings of the asset will be much, much bigger. So because we have a lot of cash resources, we do plan to support or apply our efforts with marketing on the ground and online. So we already launched a round of the RENN campaign as the first portion of these marketing efforts last week. And depending on how well the users respond to those campaigns and to our new products, we'll look -- but -- we'll continue to fine-tune that program. But the bottom line is that historically, we have not spent a lot of money on marketing on Renren, mainly depending its growth on what amounts, but our competitors spend a lot of money on marketing and so -- historically. So we think that marketing do have a positive effect on growth, particularly if you combine that with a very good product. So I think that we are getting ready for that growth phase. So to answer your question, we will focus on monetizing our existing assets but most important thing is grow the user base on mobile. And the last point is that is -- for us, our existing business model, because most of the revenue on Renren is coming from advertising directly and the -- I recently met some advertising agency heads in a formal setting. And basically, the mobile ad movement still has not yet started among the clients and among agencies. So I think that even though we can grow our mobile asset at very large percentages and let the industry term on the spending side, we were cautious on monetization. But on the other hand, a lot of companies that are doing really well in a mobile communication stage, such as Snapchat, such as LINE and WeChat, are getting worried. Even though they make a lot of money or lose money, they -- hopefully, the expectation then that the future earnings potential is huge. So I think that, that's our strategy.

Alicia Yap - Barclays Capital, Research Division

I see. So to -- Joe, to follow up on the marketing campaigns that you just launched, can you share with us a little bit more detail in terms of -- is that more on the offline marketing campaign or is it more for, like, the pre-installations for the app?

Joseph Chen

It's both. It's both on Internet, on mobile app stores. Actually, the largest app stores in China are simultaneously promoting the new Renren app, which were rare -- which is really rare. Typically, they only support -- only one of them would -- typically, it's mutually exclusive in this business but because of the popularity and high marks of this app, so we're getting a lot of support. So I think that the next 2 or 3 quarters, we're going to have more results to show how well or communication-centric app is doing. This is a major DNA change that I've been talking -- I start talking about it in Q1. Now it's really happening.

Alicia Yap - Barclays Capital, Research Division

I see. I see. And then my second question is on your 56.com, the video business. So can you give us a little bit more detail? Is it mainly is on the advertising revenue for the videos, right? Is there any potential that we can evolve or develop into non-advertising-related type of business? Or like maybe, is there any potential other business model that can evolve on that part?

Jian Liu

Alicia, thanks for the question. This is James. For 56, there are 2 types of revenue streams today. The first one, obviously, is that as you mentioned is the advertising revenue. We continue to sell brand advertising on our user-generated videos. The second stream of revenue is one that started developing over the past few quarters and is really picking up recently in the latest quarter, as Hui mentioned earlier, has contributed to a large part of the growth of our value-added services, if you will, right? So that part of the business is the so-called virtual talent show, so we have these show hosts singing songs and talking with audience, and that has been growing decently over the past few quarters.

Alicia Yap - Barclays Capital, Research Division

I see. I see. And in terms of all your brand advertising, what are some of the advertiser group category, like what verticals? Is that more like fast-moving consumer goods type of advertisers or can you just give a little bit more colors on that?

Hui Huang

Sure. Alicia, this is Hui. For the advertising customers for 56, it's -- it has lot of fast-moving consumer brands and the daily cares. For example, the large customers include Pienergy [ph], Henyayakao [ph] [indiscernible]. And in particular, given 56 is headquartered in Guangzhou, so -- and South China tends to have more consumer brands. So naturally, a significant part of 56 advertising customers are in that category.

Alicia Yap - Barclays Capital, Research Division

I see. I see. Got you. And then last question, if I may. It's just that since that we no longer consolidate Nuomi, so how should we look at the operating expenses line, given we could have some savings on that, given Nuomi is a little bit drag on the profit? So how should we look at the overall profitability time line?

Hui Huang

Yes. Alicia, you are right that starting from the fourth quarter, we will not consolidate Nuomi anymore at all. We do still need to pick up 1 month in fourth quarter, given the deal was closed in late October. So going forward, Nuomi will be treated as equity investment, and we will only pick up the pro rata losses or profit of Nuomi below the operating line. So that, indeed, will help savings on the operating expenses for the entire group. However, for our other business, particularly our core business such as Renren, as Joe mentioned, in this quarter and very likely in the next 1 or 2 quarters, we will be launching our marketing campaigns to support our new mobile app and also to help us further refresh and strengthen our dominance in our core demographics, i.e. the college students and young generations. So we will potentially see increased marketing expenditures for that effort. And for gaming, as James mentioned early on, we are refocusing gaming effort on in-house game development and we'll continue to launch some titles when they're ready. So once the new titles of games will be launched, again, the function of that will be from the promotion and the marketing expenses to support a new game launch. So overall, as Joe mentioned earlier on, our current priority is continue to grow the assets. That's absolutely the first and foremost priority. So Renren user growth continue to grow, game development becomes a force. So that's our first priority for the near term.

Operator

Your next question comes from the line of Long Lin from Brean Capital.

Long Lin - Brean Capital LLC, Research Division

I have 2 questions. My first question is a follow-up on your mobile games. So for those cross-platform games, just wondering, like how much time users spend on mobile devices versus on PC right now? Also for your new titles to be launched you just mentioned, just wondering, are those game will be like cross -- all of them will be like cross-platform games?

Jian Liu

Thanks for the question, Long. So to your first question, the split between -- the split of time between PC and mobile is roughly 50-50. So we see users -- a lot of users actually start the game from mobile but then start spending time, split their time between PC and mobile. To the second question, for the games that we have in the pipeline, some of them will be mobile only like the card battle games. The card battle games are built and perfect for the mobile user experience. But for the MMORPGs, for strategy RPGs, for some action RPGs and for SLGs, they will be cross-platform. So users can play both on PC and on mobile. So large part of our games will still be very much cross-platform.

Long Lin - Brean Capital LLC, Research Division

Okay, that's very helpful. My second question is about the mobile advertising. Can management talk about the initial test results of mobile advertising, like any operating metrics that can be shared, like maybe, like number of advertisers? And what are those advertisers, from what verticals and also some of the pricing trend? And if you can also talk about what percentage of your ad revenue from mobile right now?

Hui Huang

Long, in terms of mobile advertising, for the fourth quarter, approximately 10% of our advertising revenues will be coming from mobile. So that's actually quite a progress compared to previous quarters in terms of mobile percentage for the advertising. However, from the absolute dollar perspective, it's still not as sizable as we wish yet. As Joe mentioned early on, one of the challenges for mobile advertising right now is the sector-wide -- the ecosystem to support a larger takeoff of mobile advertising is not there yet. A lot of the agencies and third-party vendors, they're talking about the mobile advertising. But in terms of actual budget allocation as well as measurement system, it's still lagging behind. And also, I think the difference from more developed market such as the U.S., where some of the major and the leading Internet companies are driving mobile advertising effort such as Facebook, such as Google. Here in China, we are one of the major business companies but the other ones, WeChat currently has not started monetization effort through mobile advertising yet. WeChat has tested our games and other monetization but not advertising. And then for SINA Weibo, they're monetization is probably through their collaboration with the Alibaba and the portal on the PC. So there's a lack of major collective effort from the industry players in sector to drive for mobile advertising really moved fast. And this is, I think, a sector-wide situation. So that said, we did launch mobile advertising in the past quarter. We have probably more than a couple of dozens of customers who have tried and reasonably happy with the results and the effectiveness of mobile advertising. But overall, the absolute dollar amount is not that significant yet.

Operator

Your next question comes from the line of Cynthia Meng from Jefferies.

Cynthia Jinhong Meng - Jefferies LLC, Research Division

I have one question about fourth quarter guidance. Can you give us some more color on the softness of both advertising and games despite the de-consolidation of Nuomi? What is the reason that we see weaker growth of both advertising and games? And I have a follow-up question.

Hui Huang

Sure, Cynthia. This is Hui. Thanks for the question. Yes, as we mentioned in our prepared remarks earlier on, we did acknowledge that the fourth quarter revenue guidance is weak. If you look at our major revenue components, advertising and gaming, for advertising, historically, fourth quarter is always our seasonal weak quarter, given a large portion of Renren's advertising customers are in FMCG, sportswear, outerwear and daily care categories. And then those customers tend to spend much less in winter season. So in the past 3 to 4 years, fourth quarter is always a seasonal low season for us and this year is the same and coupled with the challenges from traffic migration to mobile. So this has led to a weak advertising revenue in the fourth quarter. So that's for advertising. The other major component of our revenue is gaming. Again, I think both Joe and James mentioned in their previous remarks, gaming, we recently went through some restructuring and our new game launch has been delayed. But on the other hand, the previous launched older games have reached a mature stage. So the revenue contribution from older games are flattening or slightly going down, and the new games have not start to contribute meaningful revenue yet and that has impacted our near-term gaming revenues. So as a result of this, both gaming and advertising, therefore, we currently have a relatively weak guidance for the fourth quarter. And then for Nuomi, again, for the fourth quarter, we will only pick up 1 month of Nuomi's revenue, given the transaction with Baidu was closed towards the end of October. So it's not a apple-to-apple comparison exactly for Nuomi revenue versus previous quarters.

Cynthia Jinhong Meng - Jefferies LLC, Research Division

My follow-up question is actually on the newly released mobile app that you have -- you released 2 days ago. What is the strategy with this new release and how is the repositioning from social networks to SNS? Can you give us some more color on that? And lastly, is there any outlook for -- from management point of view in terms of advertising environment for the 2014, as well as games?

Joseph Chen

Yes. So I have talked about this earlier. It's -- our new mobile app is basically social networking adapted for mobile age with communication features and the functions, predominantly featured on the app. And probably, even in the future more dominant than SNS because this is indeed a major, major feature differentiation between PC and mobile. I'll give you one example, right? So in the PC SNS area, users are quite happy communicating with friends around them by sharing the photos. And -- but on mobile, being a much, much more private, personal device, as well as being a communication-centric device, naturally, users want to do a lot of communication within that social networking environment. So for example, a new feature, group, is -- one of the new features that we offer, which is very popular in China as a product category, starting from more than 5 years ago, and that's one example of the fusion of product DNA's between the 2 categories, communication versus SNS. So you could have very small group, communicating among 5 of them, and you can share photos and photos will always be there. And you can comment on those photos and always stay within the group. But on the other hand, you can also chat Renren things in a big chat room. So that provided a brand-new way for small groups to interact in a social networking environment privately as well. So what they talk about, what they share, only the members of that group know. So that answers your first part of the question and -- yes, so for the advertising, I think -- I mean, obviously, I think there's 3 drivers, right? Bring the mobile -- I think the mobile ad will be, in the medium term -- the long term, definitely will be the main revenue resource for Renren mobile app. But the industry is picking up much, much slower than how fast the smartphone industry is growing in China. So we do have that -- I think we're going to have 1 or 2 years of mismatch of having a large mobile asset but not be able to picking up significant mobile advertising revenue. Having said that, I think there are a dozen global leaders who are in the mobile messaging space, they figure out a way to monetize their asset already. For example, LINE and Kakao Talk in Korea were able to monetize their assets through gaming, especially social mobile gaming, as well as stickers and value-added service. So we think that we have not yet comprehensively attacked this front. But so as -- or our new mobile app gaining traction among users and attracting users will start to move on that front because people already figure out how to make money on this. We just need to follow.

Operator

Your next question comes from the line of Eddie Leung from Merrill Lynch.

Eddie Leung - BofA Merrill Lynch, Research Division

Just a couple of follow-up questions on your advertising business. Hui, you mentioned that there has been a transition of traffic from mobile, so could you share with us in terms of traffic, roughly speaking, how much time your users on the Renren spend on mobile? And then my second question is about the revenue mix of your brand advertising. Could you give us some color on how much 56.com represents your brand advertising? And how is the trend between your social network advertising and the video or 56 advertising into fourth quarter? Are we seeing similar seasonality or different?

Hui Huang

Eddie, thanks for your question. The first one, regarding the mobile traffic percentage, actually, as Joe mentioned early on, mobile right now has represented over 80%, 8-0, of our total media time. So in essence, the super majority of our users spend their time on mobile. And that means the PC inventory for advertising actually is under pressure and while on the other hand, mobile advertising has not taken off yet. So super majority, over 80% of our user media time is on mobile. As regards to the second question, actually, apologies, I didn't catch it very well. Do you mind repeating your question again?

Eddie Leung - BofA Merrill Lynch, Research Division

I'm just wondering how much, if there's any, material revenue from 56 in terms of advertising? And as in -- how about the outlook into the fourth quarter, are we seeing -- you mentioned that there's a seasonal weakness of your brand advertising. So just wondering whether there's any difference between your social network advertising seasonality and 56 seasonality?

Hui Huang

Yes. For 56, the advertising revenue contribution in the third quarter, 56 contributed approximately up to USD 3 million to our advertising revenues. So roughly 19% of the total advertising revenues came from 56. And this is quite a significant increase for 56 compared to same period last year. As James mentioned early on and also in our previous quarters, since the acquisition of 56 in the past 2 years, we were more focused on investing in infrastructure and increasing traffic. And now, we see quite encourage growth in 56 traffic and then we'll start to monetize that traffic increase originally and a result, we see the increased advertising revenues from 56.

Joseph Chen

There's third question. There's a third question.

Eddie Leung - BofA Merrill Lynch, Research Division

It's about the -- our outlook and kind of like the guidance in the fourth quarter about the seasonality between your 56 advertising and Renren social network advertising. Because you mentioned that there should be some weakness in terms of seasonality into the fourth quarter. So just wondering whether we are seeing similar trends on SNS advertising, as well as like video advertising.

Hui Huang

Right. For Renren's advertising seasonality, as I mentioned early on, fourth quarter is a historically our low season, given a majority of Renren's advertising customers are in the categories that tend to spend more during the summer instead of winter. Because those customers are typically in FMCG, daily care, outdoor sportswear [indiscernible]. For 56, again, a big part of their customers are also in the FMCG and the daily care categories, particularly given it's in South China. So they share similar seasonality. But given the low base of 56 advertising customers, the magnitude of seasonality for the quarter for 56 is relatively smaller than Renren's. But they do have seasonality in fourth quarter as well.

Operator

Your next question comes from the line of Jiong Shao from Macquarie.

Jiong Shao - Macquarie Research

I also have a question on 56 as well. I understand that 56 is very strong in UGC. But longer term, from positioning-wise, do you want to position this platform as sort of very, very heavy UGC or still produce the original content or even try something like a few of your peers are doing, such as YY's music program? What do you see sort of differentiate -- in 2, 3 years, what do you want to differentiate 56 from all the other peers in the video space?

Jian Liu

John, thanks for the question. 56 -- you mentioned YY, right? Actually, as we said previously, similar to YY, we're also providing those virtual talent shows by leveraging our very strong traffic that we have built on the site. So 56 started out as a UGC-centric video service from those very early days on. And up until today, it's still one of the -- it's probably one of the very, very few video services that continues to focus laser sharp on user-generated content, right? We believe, today, if you look at the landscape of the video industry, almost every existing player, as well as new incoming players, they spend a large part of their time and efforts focusing on movies and TV series. We have reviewed this overall video strategy and we believe that there's not a whole lot of differentiation by us also doing a me-too type of strategy by adopting videos and movies and TV series, going into this already very crowded space. But at the same time, our UGC does stand out, right? Our UGC content, for instance, works extremely well on the increasingly popular social platforms. So on Renren, for instance, 56 now in terms of video distribution and sharing, is ranked #1 amongst all of the video services. And as far as we know, on SINA Weibo's platform, we're actually ranked one of the top 2 video services in terms of video sharing even though from an absolute size standpoint, we're still lagging behind the #1 or #2 players in the video space. But on the social space -- in the social platforms, we really stand out. And as we believe social is a huge phenomenon on mobile, 56 is going to shine in the mobile video space going forward. Having said that, we are doing all kinds of explorations of how to tap into the user base, how to tap into all the of the video viewership to monetize the traffic. And virtual talent show is certainly one of them.

Jiong Shao - Macquarie Research

Is 56 embedded in your latest Renren app?

Joseph Chen

No, no, so 56 is not embedded. So old -- we will use old video services in China, Renren being an open-video platform. So if their users share the content to Renren, then we show their video using the Renren app. But we don't have embedded the 56 video app there. Because typically on mobile, you want to make things simple.

Jian Liu

In the next few releases, Jiong, though, Renren is going to work very closely with 56. So for instance, one of the -- a lot of -- one of the sources of user-uploaded UGC videos will be coming from Renren in the next 1 or 2 releases of Renren on the Renren app. Other than uploading pictures and uploading your status on Renren app, your users will be able to upload user-generated video and that's going into 56. That's going to be tightly integrated with 56.

Jiong Shao - Macquarie Research

Okay, that sounds great. Because video sharing is pretty common these days, so video sharing is probably going to be the next interesting thing.

Operator

There are no further questions at this time. I would now like to hand the conference back to your presenter today. Mr. Sam Lawn, please continue.

Sam Lawn

We would like to thank all of you for your participation on the call today. Feel free to contact us if you had any further questions. Operator, this now concludes our call.

Hui Huang

Thank you. Thanks, everyone.

Joseph Chen

Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.

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