Ladies and gentlemen, thank you for standing by and welcome to Third Quarter 2020 Momo Incorporated Earnings Conference Call. [Operator Instructions] And please note, this conference is being recorded today.

I would now like to hand the conference over to your first speaker for today, Ms. Cathy Peng. Thank you. Please go ahead.

Cathy Peng - Director, Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us today for Momo's third quarter 2020 earnings conference call. The Company's results were released earlier today and are available on the Company's IR website. On the call today from Momo are Mr. Tang Yan, Chief - Executive Chairman of the Board; Mr. Wang Li, Chief Executive Officer of Momo; Mr. Wang Yu, Founder and Chief Executive Officer of Tantan; and Mr. Jonathan Zhang, Chief Financial Officer. They will discuss the Company's business operations and highlights, as well as the financials and guidance. They will be all - they will all be available to answer your questions during the Q&A session that follows.

Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to the events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and factors is included in the Company's filings with the US Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

I will now pass the call over to Mr. Tang. I will translate for him. Mr. Tang, please.

Yan Tang - Executive Chairman

[Foreign Speech] Good morning, and good evening, everyone. Thank you for joining our conference call today. As many of you know, I've already resigned as the Chief Executive Officer of the Company and remain as the Executive Chairman of the Board. Going forward, unless I have anything special to say, I probably won't participate in regular earnings calls on regular - on a quarterly basis. The jobs will be passed on to the long-time deputy, also the most trusted business partner of mine and now the new Chief Executive Officer of the Company, Mr. Wang Li.

[Foreign Speech] Although, I'm no longer the CEO, I'm still going to deeply - be deeply involved in setting the strategic priorities and directing new product and business initiatives for the Company that I built and still deeply committed to. As I'm not going to communicate with the investor community as often in the future as before, I would like to take this opportunity to share my views on what has taken Momo this far and where it is heading toward in the coming few years.

[Foreign Speech] Nine years ago, I started Momo with an idea to help people discover new relationships, expand their social connections and build meaningful interactions. This is a basic human demand that everybody needs regardless of geolocation and cultural background. But this is also something that we, Chinese people, particularly need because of the uniqueness we have here in China from economics, societal and cultural perspective.

Today, in retrospect, I'm glad to say that, in so many different respects, the mission has been accomplished. Every month, more than 100 million people are connecting, interacting and building romantic or otherwise meaningful relationships on our family of apps. At the same time, there has been and always will be opportunities for improvements in better satisfying user demands. That, obviously, is the ultimate driving force for the Company to grow. If we can keep doing a better job in addressing the demand that we were not able to serve well in the past, and at the same time, keep evolving ourselves as the users do, we will grow.

When the nearby people cannot meet all the user demand that we saw, we brought them interest groups and Nearby Posts. When text and picture-based information failed to satisfy all the user demand that we saw, we gave them live streaming, short videos, dinner party games and even virtual karaokes. When some people wanted a completely different social context and product mechanism, we added content to our family of apps. This is how, over the past nine years, we transformed Momo from a simple, single-function application to a multi-billion dollar company. This relentless focus on innovation encouraged to constantly reinvent and transform ourselves will continue to be the way we drive the Company forward in the future. Thank you for trusting Momo team and for being part of the journey.

Now, let me hand the call over to our Chief Executive Officer, Wang Li. Mr. Wang Li?

Li Wang - Director and Chief Executive Officer

[Foreign Speech] Good morning, and good evening, everyone. Thank you for joining our conference call today. This is my first earnings call as the Chief Executive Officer of the Company. I'm going to spend the first part of my speech on reviewing the operational and business update. After that, I'd like to share some of the priorities that I set for my teams for the coming few quarters.

[Foreign Speech] Firstly, a brief overview of the financial performance. For the third quarter of 2020, total revenue was RMB3.77 billion, down 15% year-over-year. The year-over-year decrease was mainly due to structural reform that we are currently undertaking within Momo core's live video business, as well as the fact that the financial condition of some of our high-paying users deteriorated versus 2019 due to the lingering impact from COVID. Of course, the pressure from those two factors were partially offset by the robust growth from Tantan.

Adjusted net income for the quarter was RMB654 million, representing a 17% profit margin. Excluding Tantan's net loss, adjusted net income - adjusted income for the core Momo was RMB721 million, or a 24% profit margin. In Q3, Tantan continued its strong momentum with total revenue reaching RMB729 million, up 135% on a year-over-year basis, driven by the growth momentum from its live streaming business, as well as the gradual recovery of its membership business. Although, Tantan stepped up its marketing spending in Q3 to capitalize on the post-COVID recovery, the strong top line growth still enabled us to narrow down the loss on the bottom line.

Adjusted net loss from Tantan was RMB66.87 million for the quarter, compared to RMB160 million for the year-ago period and RMB70.79 million from last quarter.

[Foreign Speech] Now, a deeper dive into other aspects of the quarter. First, on operating metrics. Number of MAU grew 2.1 million during the quarter to 113.6 million in September. The continuous post-COVID recovery trend, together with our product and operational efforts, were the primary driving forces for the quarterly net add-on Momo. Total number of paying users across Momo reached 9 million for the quarter, representing a 100,000 net addition from the quarter ago.

[Foreign Speech] Now, turning to Tantan. Tantan's paying users for the third quarter totaled 4.1 million, a 200,000 increase from the previous quarter. The net addition was a general reflection of the post-COVID recovery in user engagement, partially offset by the gradual rollout of SVIP in mid-September timeframe. The merchandising strategy we adopted has resulted in a slight lift in average subscription price for the SVIP, as compared with the previous, See Who Likes Me and Flash Chat, which were packaged into SVIP and fees to be offered as separate value-added services after the introductions of SVIP package. Such a strategy was designed and tested to optimize for total revenue, but were negative to the number of paying users when tested and initially launched, due to the pricing list element in it. Without the launch of SVIP, the paying user count could have already exceeded the 4.2 million seen in Q1 2020. Wang Yu will have more details for you later in his remarks.

[Foreign Speech] It's worth calling out that since mid-Q3, we've been seeing an elevating trends in user acquisition costs, specifically with the paid marketing channels, as a result of aggressive marketing investment from some of the online education companies and game publishers. It has caused the net addition in MAU and paying users to be more moderated in Q3 versus Q2 for Momo. And in Tantan's case, slowed down the recovery process from late August. Now, it looks like that the user acquisition environment might remain competitive in Q4, with e-commerce players joining the battle. Our short-term tactic here is to focus on ROI and try to be opportunistic in how we approach the marketing campaigns in Q4. If the competition for marketing channels remain challenging in December, the user and paying user growth on Momo may continue to be moderate in Q4. Tantan's paying user could be under some pressure because it also has the continuous effect from larger scale as SVIP rollout in Q4.

[Foreign Speech] Despite the short-term challenges on the user acquisition side, we still see plenty of opportunities to drive growth through various product and operational efforts across our family of apps. This remains the top priority of the Company in the foreseeable future. I will elaborate more on our views and plans in this area in latter part of my speech.

[Foreign Speech] Now, turning to a quick review across our key business lines. Firstly, on live broadcasting: total revenue from live broadcasting business for the third quarter 2020 was RMB2.37 billion, down 27% from the same period last year and 9% from last quarter. The sequential decrease was largely due to the structural reform that we've been undertaking in Momo core's live streaming business, partially offset by the rapid growth from Tantan's live streaming service. Wang Yu will share more details in his remarks later, so I will be mainly focusing on the core Momo.

[Foreign Speech] Momo core's live streaming revenues totaled RMB1.98 billion for the third quarter, down 40% from the same period last year and 18% from last quarter. As many of you know, since early August, we have been implementing a series of measures in order to revise the long tail - mid- to long-tail content ecosystem and to make sure that live streaming will continue to grow steadily, healthily, and in a sustainable manner in the new external environment.

The new structural - the structural reform involves a series of product and operational efforts, touching many different areas within the live streaming business. In Q3, we're mainly focused the efforts on three areas: first, making adjustments to certain interactive features and related operational policies that can be a strong stimulator for top [Phonetic] spending, but may not be beneficial for the content ecosystem; second, holding a series of promotional events to revise the mid- to long-tail content ecosystem; and third, redesigning the KPI system for agencies and broadcasters, as well as reinventing the competition events with the purpose to focus less on meeting revenue targets, but more on content and supporting new talents.

[Foreign Speech] The product adjustment was made in early August. As we called out in the last earnings call, such adjustment was expected to cause severe short-term pain in revenues, but it is critical in getting rid of the bad apples that are harmful for the long-term healthiness of the business. Revenue, as expected, experienced a pretty significant decline during early August. Towards mid-August, we were able to see stabilization and a step-up in revenue from the very bottom, which means that the worst of the short-term negative impact from the reform was behind us.

More importantly, during the past few months, we have been seeing some positive signs for improvement in content ecosystem, such as a decrease in concentration level and an upward trend in the number of internal DAU and their respective viewing time, as well as the total broadcasting time of the professional performers. These are critical metrics for us to gauge the healthiness of the ecosystem. As the content ecosystem gradually improved, the - in mid-November, we were able to see another meaningful step-up in daily revenue during the non-event days. It gave us the confidence that our live streaming business has entered into a virtuous cycle of gradual revenue recovery, supported by a sustainable content ecosystem.

[Foreign Speech] The other important task of ours in recent couple of months is to make sure we have a secured supply of high-growth in broadcasters. For the mid- to high-grossing performers and the performers with high potential to become future stars, the platform usually secure these core performers with exclusive contracts called Golden broadcaster contracts. These Golden broadcasters represent 70% of Momo's live broadcasting revenues, making them the key to ensure the stableness of our content supply.

In mid-September, we kicked off the Golden broadcasters contract renewal process. The goal is to lock down the big majority of Golden broadcasters whose contracts are to expire within one to two years by offering a new incentive program. Up to last week, we've already secured a big majority of the targeted performers by multiple year exclusive contracts. At the same time, I'm happy that the team are able to optimize the cost structure, so that the incremental cost of the new program is quite manageable. Zhang will have more details about this in his remarks.

[Foreign Speech] Overall, we are well poised for continuous content improvement in Q4. Our goal is to actually this year with solid progress in reshaping the long-tail content ecosystem, so that we can focus on driving revenue growth next year and take the live streaming business back to the growth track in 2021.

[Foreign Speech] Now, turning to VAS. Revenue from value-added services reached RMB1.33 billion, up 25% year-over-year. Again, I'll be focusing on Momo's VAS business and leave Tantan's part to Wang Yu a bit later. Revenue from VAS on an ex-Tantan basis reached RMB999 million for the third quarter of 2020, up 32% year-on-year. On a sequential basis, VAS revenues on the core grew 14%, driven by the continuous recovery of user engagements, as well as the growth momentum from some of the key paying experiences within VAS.

[Foreign Speech] During the third quarter, the audio and video social entertainment experiences continued to generate robust growth for VAS, driven by innovative product and operational ideas from the team. The new experience we brought into the chatroom last quarter, such as Friends Trade, continued to generate momentum. At the same time, we're also grew exceptionally well after we revamped the experience last quarter, making it the biggest sequential growth driver for Q3.

[Foreign Speech] As the overall traffic and user engagement continues to recover, in Q3, we also introduced a bunch of new gifting experiences into the traditional gifting categories, such as interest groups and greetings. As a result, revenues from this bucket grew pretty robustly as well. The growth that we had with Werewolf and interest groups shows that even for some of the very mature and established use cases, as long as we continue to innovate on consumer and paying experiences, there is always going to be opportunity to drive growth. We will continue to go down this path in Q4.

[Foreign Speech] Now, quickly on the new bucket. In Q3, person [Phonetic] matchmaking continue to see gradual improvement, both in terms of user engagement and revenue. In addition, we are also working on a number of other new experiences for the projects in the new bucket. For the projects in the new bucket, the near-term focus will be on improving user experience and retention, we will push the revenue button at some later stage when we deem fit.

[Foreign Speech] Now, briefly on other business lines. Mobile marketing revenue was RMB50.42 million, down from RMB81.89 million the same period last year. The decrease was a reflection of both macro condition and our strategy to underweight the line in terms of resource allocation this year. Mobile gaming business continued to trend down in Q3 due to its immateriality, we won't be commenting too much on it until we have anything new here.

[Foreign Speech] These are the business updates. Now, I'd like to close my speech today by laying out three priorities for the Company in the coming few quarters.

[Foreign Speech] My biggest priority is to take the core business back on to the growth track. I have full confidence here because of the fundamentals of Momo as a social platform are very solid, as you can see from the steady pace of user and paying user growth after COVID. The solid fundamentals of the platform provide a firm foundation for continuous revenue growth on top of it. The healthy and steady growth of VAS business stands as the proof of that. The challenges that we've been seeing this year was largely due to the lingering economic impact from COVID, as well as the structural reform within live streaming business. So the worst impact from those two factors are already behind us. Q4 will still be a transition period where we largely focus on the reform.

Next year, we're going to be fully geared toward revenue growth. One of the key directions here is to more strategically manage the traffic allocation across different monetization efforts on the core. In late Q3, we did a reorganization by putting live streaming business under commercial product team, who is now overseeing all the monetization efforts of the Company, including live streaming, VAS, mobile marketing and gaming. Such an adjustment paves the road for us to maximize the efficiency in monetizing the traffic across the various business lines. We're going to break the barrier between live streaming and VAS and be recommending different experiences to users purely based on the individual preference, which will lead to higher propensity to pay and better ROI in utilizing the traffic for monetization.

[Foreign Speech] My next priority is to drive higher level of collaborations between Momo and Tantan, especially on the marketing front. [Technical Issues] still a great deal of opportunities to improve the top of the funnel efforts, as well as the conversion methodologies. I'm seeing a lot of synergies that we can drive by enabling closer collaborations between the core and Tantan. Seeing results here is the top priority for me in the coming few quarters.

[Foreign Speech] Third area of focus is to build new drivers for the next five to 10 years. It's now very clear that Momo is going to be a healthy and steady growing cash cow business for the Company. As - Tantan with revenue becoming increasingly sizable and bottom line continuing to improve, it's going to be the new engine for the coming three to five years. However, beyond Momo and Tantan, we are still seeing opportunities in the social space that, if captured, will become future drivers for a longer-term horizon. Innovation is deeply rooted in Momo's DNA. Over the past two years, we have learned lessons, but also accumulated some valuable experience in building new applications. This is an area where I'd like to see us move a little bit faster in the coming few years.

[Foreign Speech] These are the things I'd like to cover on this call. Now, here is Wang Yu to talk about Tantan's product and business development. Mr. Wang, please.

Wang Yu - Founder and Chief Executive Officer of Tantan

Thanks. So, let me briefly review Tantan's operational and business development in the past quarter and our next plans. First, on user trends and related metrics. Total paying users reached 4.1 million for the quarter, that's 200,000 net addition from 3.9 million for the previous quarter. The increase in the number of paying users was a general reflection of the recovery in Tantan's domestic DAUs and user engagements, partially offset by the introduction of SVIP, which is a new subscription package that was getting gradually rolled out in the middle of September. I'm going to elaborate a bit more about this new monetization endeavor and how the dynamics may impact short-term and long-term paying subscribers in different ways a bit later in my remarks. Without the launch of SVIP in mid-September, the number of paying users would have already exceeded Q1's level.

Now, I'd like to echo the early comments from Wang Li about some of the recent trends that we've been seeing in terms of user acquisition. Towards late August, we started seeing a significant increase in user acquisition costs, as a result of aggressive marketing spending from some of the education companies and mobile game publishers. As our marketing strategy focuses heavily on ROI, we prefer not to acquire users when it's heavily overpriced. Our current view is that, the user acquisition unit price might remain high in Q4. If that turns out to be the case, our short-term strategy is to time the marketing campaigns opportunistically to avoid unreasonable increase in user acquisition costs. As a result of this short-term strategy, we expect Q4's marketing cost to see a meaningful decrease from Q3's level. And to some extent, that could also affect the pace of sequential revenue growth in Q4. We believe the current high pricing in the channel market is largely due to the fact that education and gaming companies have been extremely aggressive in seizing the post-COVID market surge. But we think things will ease up after Chinese New Year. We're planning to use that window [Phonetic] opportunity to push the marketing button in a bigger way. Meanwhile, we are working to improve our marketing efficiency and we are confident that we will see solid results by Chinese New Year.

Now, briefly on overseas development. As previously mentioned, we have adopted a strategy to temporarily pull back from the developing countries in Asia and shift the focus to higher ARPU markets. Overseas revenues have been seeing a steady increase since the beginning of this year due to growth of some of the higher ARPU areas that we have entered. However, the number of paying users has trended down as we cut back the spend in developing countries, where users are big, but ARPU is extremely low. Looking beyond Q3, we may delay some of our overseas marketing plans due to the situations around the global pandemic. But overseas expansion remains a critical part of our growth plan over the longer run.

Now, briefly on revenues. Total revenues for the third quarter reached RMB728.9 million, up 135% year-on-year and 41% quarter-on-quarter, driven by the continuous momentum from the live broadcasting business, and to a lesser degree, the post-COVID recovery of the membership of the business. Average revenue per paying users, or ARPPU, reached RMB178 in Q3, compared to RMB69 for the same period last year, and RMB133 last quarter. The substantial increase in ARPPU was again, primarily driven by the growth of the live streaming business. As said many times before, we believe Tantan still has a great deal of potential in driving ARPU growth. However, in the near-term, ramping up the ARPPU too fast may not be healthy for the dating ecosystem. Therefore, we like to manage the pace of growth a little bit in the coming couple of quarters.

Now, let me give you an update on the progresses that we made on a number of other strategic fronts in Q3. First of all, improving product experience. In the third quarter, we continued to push forward on two strategic fronts: one, enhancing the core dating experience; and two, enabling the users to connect and interact in new ways on top of the core swipe and match system. During the quarter, we revamped the core swiping experience with an enhanced card display format. We also redesigned the clicked in profile page, making profile picture and other personal information more prominent. In addition, providing a safe and trustworthy environment for users to date, always stays on top of our agenda. Verifying the authenticity of the user information is a critical step on that front.

Last year, our real photo verification effort has played a very positive role in improving the dating ecosystem, and keeping spammers away. This quarter, we took the verification effort a big step forward by beginning to provide real name verification service to the users. Users who have been verified with ID information will be prioritized in our recommendation engine. The initiatives have been well received by the users, so we plan to keep pushing on it to increase the adoption rate.

On the front of enriching the product experiences, we've now begun a very small scale testing of a video, audio dating experience. While it's still at an early experimental phase at this point, it represents an important direction that we're moving towards. Of course, perfecting live streaming service is another important endeavor on that front as well. I'm going to elaborate a little bit more in my review of the monetization efforts.

Now, turning to business updates. In mid-September, we began to gradually rollout the new subscription package called SVIP. The new package includes some of the popular existing value-added services items such as See Who Likes Me, Flash Chat, and unlimited right swipes, as well as brand new premium features that, according to test results, can add meaningful value to users. For example, one of these new features give users access to an advanced filter that could be set to get more desirable recommendations. Another new feature allows the users to customize the privacy setting to address the privacy demand that we're seeing from the users. We also give the SVIP subscribers one opportunity per day to directly message someone they are interested in without being matched.

On the pricing side, we adopted a dynamic pricing mechanism that some of our peers started adopting long time ago. After the rollout of SVIP, we ceased to offer See Who Likes Me and Flash Chat as separate value-added service items. Such a replacement in this [Indecipherable] strategy collectively led to a de facto price rate effect, which was well expected based on testing results. Price rate affect will cost SVIP when launched to be negative to the number of paying users. As a result, we expect Q4's paying users decrease from Q3's level as we rollout SVIP to larger scale. Our strategy is to through testing, make sure that the initial launch is positive to the grossing. And for the users to choose not to migrate from the previous subscription to SVIP, we're going to use different pricing wall tactics, as well as new added value services to board them back over time. Such a strategy could actually expand rather than limit the headroom for us to grow the paying user base in the future.

Now, turning to live broadcasting business. In Q3, we focused on optimizing the products and services within the live broadcasting business. Another priority is to make sure that the new service integrates well with the dating ecosystem without causing any unwanted results. So far, we are progressing well on all of those priorities.

Now, Tantan has been roughly nine months into live streaming. So it's probably time to share some of my early thoughts about what role it is playing and how I would like to steer this service and business going forward. Live streaming for Tantan is, of course, a powerful monetization tool. It allows the Company to increase ARPU and make the financial model work, so we have bigger leverage and grow the user scale and keep investing for future drivers. At the same time, live streaming is also a consumer experience. In that respect, our main goal is to make live streaming a complementary service to the core dating experience, and contribute positively to user engagements. The key to that goal is to stick to the social attributes of this consumer experience. In order to achieve that goal, we need to carefully place its development at the monetization feature to avoid going top-heavy too fast.

Tantan's paying structure right now is still very long tail-driven. Showrooms are small, but learning interactive, which is critical in making live streaming a gratifying user social experience. We would like to keep it that way in order to best leverage advantage of Tantan as a social platform.

Those are the key things that I'd like to cover for today.

Now, let me pass the call over to Mr. Jonathan Zhang for a financial review. Jon, please?

Jonathan Xiaosong Zhang - Zhang Chief Financial Officer

Thanks. Hi, everyone. Thank you for joining our conference call today. Let me briefly take you through the financial review. Total revenue for the third quarter of 2020 was RMB3.77 billion, down 15% year-on-year, or 3% quarter-over-quarter. Non-GAAP net income attributable to Momo was RMB653.8 million, compared RMB1.09 billion from the same period 2019, or a 40% decrease year-over-year.

As the revenue lines have been covered comprehensively by Wang Li and Wang Yu earlier, let me just jump into the cost and expenses items directly. Our non-GAAP cost of revenue for the third quarter of 2020 was RMB2.0 billion, compared to RMB2.18 billion for the same period last year. The non-GAAP cost of revenue as a percentage of total revenue was 53%, an increase from 49% from Q3 last year.

Non-GAAP gross profit margin for the quarter was down 4 percentage points from a year ago. The decrease was attributable to the following four factors in the order of magnitude of their respective impact: number one, higher payout ratio from live streaming business due to the promotional events that we held to revive mid- to long-tail content ecosystem, the incentive program that we offered to Golden broadcasters to stabilize our content supply, and higher revenue contribution from agency's representative broadcasters; number two, higher payout ratio from VAS services, due to the strong momentum coming from the audio and video social entertainment business, a big part of which involved third-party professional moderators; number three, lower gross margin from Tantan, as its live broadcasting business is becoming increasingly sizable; and number four, certain fixed nature cost items, such as headcount and depreciation of fixed assets related impacted the gross margin negatively as the total revenue declined, and these items represent a higher percentage of total net revenue.

On a sequential basis, the non-GAAP gross margin dipped by 1 percentage point, better than we originally expected. One thing worth mentioning here is that, as Mr. Wang Li said, in September, we started a program to renew the exclusive multi-year contracts of Golden broadcasters by offering an additional incentive to revenue sharing. The incremental cost incurred was partially offset by a reduction of subsidies for operational events in Q3. We expect the ongoing gross margin impact from the contract renewal program to be from 1 percentage point to 2 percentage point. Together with a bonus we have budgeted for the year-end gala, the gross margin in Q4 is expected to be down a couple percentage points from Q3 level.

Non-GAAP R&D expenses for the third quarter was RMB252.3 million, relatively flat compared to RMB254 million for the same period last year, representing 6.7% and 5.7% of total revenue, respectively. The increase in R&D expenses as a percentage of revenue was mainly due to the decrease in revenue. We ended the quarter with 2,396 total employees, of which 760 are from Tantan. The R&D personnel as a percentage of total employees for the Group was 58%, compared with 54% of Q3 last year.

Non-GAAP sales and marketing expenses for the third quarter was RMB696 million, or 18.5% of total revenue, compared to RMB701.7 million, or 15.8% of total revenue for the same period last year. The year-over-year decrease in sales and marketing expenses was mainly due to the lower marketing spending from Momo, which was partially offset by higher spending from Tantan. On a sequential basis, the non-GAAP sales and marketing expenses as a percentage of revenue was up 3.2%. The increase was attributable to our step-up user acquisition efforts from Momo and Tantan to capitalize the post-COVID recovery.

Non-GAAP G&A expenses was RMB105.8 million for the third quarter 2020, compared to RMB150.4 million for the same quarter last year, representing 2.8% and 3.4% of total net revenue, respectively. The year-on-year decrease in G&A expenses was mainly due to the reduction of service costs related to our experimental project DAU launched last year and less bonus accruals during the third quarter of 2020.

Non-GAAP operating income was RMB737.6 million, a decrease of 38% from Q3 2019, representing 19.6% non-GAAP operating margin for the quarter, down 7 percentage points from the same period last year.

For the interest of timing, lastly, let me talk about the business outlook. We estimated our fourth quarter revenue to come in the range of RMB3.65 billion to 7.75 - RMB3.75 billion, representing a decrease of 22.1% to 20% year-on-year and a decrease of 3.1% to 0.4% quarter-over-quarter. Such estimation is based on the assumptions that Momo core revenue will be slightly down from Q3 level. There are two things worth mentioning here. Firstly, although the daily grossing during the non-event days have been stabilized and meaningfully improved from the bottom seen in early August, July, as a pre-restructuring month, set a high base for Q4.

Secondly, Q4 is still a transition period where the focus is still on the content ecosystem. As a result, we're adopting a conservative principle for running the year-end competition events by not setting KPIs for the team in terms of revenue that comes out of it. Therefore, we expect the incremental revenues from the upcoming year-end gala to be much less comparing to that in the previous year. Given these two factors, we expect Momo's live broadcasting revenue to decrease slightly from Q3 level. Obviously, it is going to be partially offset by the continuous growth from our VAS services.

We also expect Tantan's revenue growth will be impacted by the following two factors. Number one, as mentioned earlier, the temporary intense competition in the marketing channels has put some pressure on new user acquisition and paying user growth. Number two, Tantan team is purposely managing the cadence of our people expansion in live streaming services at current stage in order to make sure there is nothing negative that impact the dating ecosystem.

Please be mindful that the forecast represents the Company's current and the preliminary view on the market and operational conditions, which are subject to change. That concludes our prepared portion of today's discussion.

With that, let me turn the call back to Cathy for Q&A. Cathy, please.

Cathy Peng - Director, Investor Relations

Actually, just a quick reminder. For those who can speak Chinese, please ask the question in Chinese first, followed by English translation. And also, please limit the number of questions to one or two.

With that, operator, we're ready for questions.

Question & Answers

Operator

Thank you. [Operator Instructions] First question comes from the line of Thomas Chong of Jefferies. Please go ahead.

Thomas Chong - Jefferies - Analyst

[Foreign Speech] I have two questions. Thanks management for taking my questions. I have two questions. My first question is about the update on ARPU to be [Phonetic] a couple of big trend among the high paying users up to November and how we should think about the initial revenue outlook in 2021?

And my second question is on Tantan. Can management also comment about the live streaming revenue versus the membership trends in 2021? Thank you.

Li Wang - Director and Chief Executive Officer

[Foreign Speech] Okay. Let me translate the first part first. The structural reform that we are currently implementing within the live streaming business at the very beginning indeed had some negative impact on the spending from the high paying users. We are hoping that by taking this short-term pain, we could remove some of the bad stuff from the system that is going to be harmful for the content ecosystem over the long-term. At the same time, gradually changing a very top-heavy sort of model is also going to increase the safety level of our overall business structure in the new policy environment, and this is to make sure that Momo's live broadcasting business is going to grow healthily and steadily in the future several years.

If you look at the data over the past several months, we can say with confidence that we are progressing very well in executing that goal, because of management's commitment and the persistence from the team, we've successfully eradicated the bad apples from the system. And the other thing is that, if you look at the metrics reflecting the healthiness of the content ecosystem, things like DAU, their respective time spent and also their respective viewing time and also the total broadcasting time of the professional performers, as we entered into November, all of these metrics have been showing very positive trends. At the same time, so far, the team has largely completed the contract renewal process with the Golden broadcasters with a pretty manageable incremental cost. We've successfully locked down the big, big majority of the broadcasters whose contracts are set to expire in the coming couple of years. And the renewed contracts are going to cover another, at least three years. This is a very, very critical step in solidifying the content ecosystem, which provides a solid foundation for - which provides a solid foundation on the supply and for Momo's live streaming business to grow healthily and steadily over the future several years.

[Foreign Speech] Now, on the things that you guys are probably most concerned about, the revenue recovery. If you look at the average daily grossing on non-event days and compare that data with what we saw in early August when things were at the bottom, we are seeing a pretty stable RMB3 million to RMB4 million per day increase between the two time slots, and the increase came in two separate step ups: one seen in mid-August timeframe, and the other one seen in mid-November timeframe. That's a reflection of gradual recovery in the content ecosystem. We currently expect that the average grossing during non-event days to sort of remain at that level, of course, the year-end competition events is going to bring in some incremental revenues. But as I said, the focus for the whole team in Q4 is going to be on the content after taking that big surgery on the product side. Revenue is actually not one of the things on the priority list. And that same principle also applies in running the competition - year-end competition events, in that we're not setting rigid KPIs for the team and that conservative strategy has also been reflected in the guidance.

[Foreign Speech] For Momo's live –. Now, it's a little bit too early to talk about the outlook for 2021, but big picture-wise, here are some trends that I can share. For Momo's live broadcasting business, I think we are going to complete a whole transition period in connection with the structural reform by the end of this year. So next year, we're going to be shifting the focus more toward growing the revenues. I think other than the traditional seasonal fluctuations that we're going to see in Q1, I'm confident that revenue will see a steady improvement from Q4's level.

[Foreign Speech] For Momo's VAS business, I think this year, overall, the team has been rather disciplined in running different operational efforts to drive revenue. At this point, we're also seeing very steady growth opportunities on the chatroom experience, and we are also testing a few new paying experiences as well. So, I think next year, this is going to be an area where we're going to see a pretty solid continuous growth.

[Foreign Speech] For Tantan, as you guys can see, since Q2 this year, Tantan's revenue has been growing very strongly. The temporary slowdown in Q4 is mainly due to two factors: one is, due to considerations around keeping the content ecosystem safe. The team purposely wants to control the pace of monetization a little bit, especially the ramp up of ARPU. And the other factor is that, the intensive competition in the user acquisition market in Q4, specifically the high-pricing in the per user acquisition cost is indeed putting some pressure on the growth of new registrations, as well as the paying user - the growth of the paying users. However, if you take a year-over-year sort of perspective, in Q4, Tantan will still be growing at 90%-something versus same period last year. That sort of growth rate is a pretty satisfactory level, given the current stage of development of Tantan, and that is also a safe and prudent sort of growth rate in keeping the dating ecosystem healthy.

As we move into next year, there is no doubt that Tantan going to continue to grow its user base and improve its ARPU. So I think revenue is still going to see very rapid growth, as compared with the year 2020, and Tantan is still going to be a very important revenue engine for - revenue growth engine for the whole Group.

[Foreign Speech] And lastly from me, we have another key objective for next year, which is also going to be a long-term trend that we're going to see happening on the core - on the Company's level, and that is the VAS to live streaming revenue ratio is going to see a continuous increase in a pretty meaningful way. I think that ratio in the year 2019 was somewhere around 30%. This year, depending on which quarter, it's going to be 40% to 50%. At this point, we are definitely seeing more growth potential in offering richer value-added services in the social space versus in the live streaming space. My goal is that, in 2021, the VAS to live broadcasting revenue ratio should grow to above 60% to closer to 70%. That way, the overall revenue - the overall business structure of the Company is going to reach a pretty safe and stable state, and that is also going to be more resilient and defensive against the external risks, and that is also the right sort of revenue structure for Momo as a social company.

I think there is a second question about the revenue outlook for Tantan, specifically between live streaming and VAS [Indecipherable], Wang.

Wang Yu - Founder and Chief Executive Officer of Tantan

So regarding the revenue outlook. We haven't started the budgeting process for the period beyond Q4 yet. So it's too early to share anything too specific. But here are some of the drivers that we're looking at. First of all, the users are going to continue to grow versus this year, and that will translate into paying user growth. We do not guide on user and paying user growth, but I'm confident that it will be meaningful against this year, as COVID gets behind, and with the efforts in improving the product and marketing efficiency.

Second, next year on the VAS side, we're going to continue to optimize SVIP. Currently, we also have a few other membership features that we're testing and targeted to launch next year. One thing about next year is that, we are looking to build a new monetization feature around video dating experiences, and that we're currently testing. The new monetization will be a la carte model. So if we're successful, it can be a meaningful ARPU driver as well.

Thirdly, on live streaming, in the second half of this year, we largely focused on improving the product experience. Currently, I feel that we still have a lot of areas that need to be improved. We sampled [Phonetic] the recommendation engine, the in-channel experience and the way live video is connected to core products. So, we've been holding back on the ARPPU-driven efforts since September. As we improve the overall user experience with live video, we are certain on [Phonetic] going to pull some of these revenue levers next year. So overall, I think both paying users and our people will see very meaningful growth in 2021. Thank you.

Cathy Peng - Director, Investor Relations

Operator, please get to the next question.

Operator

Yes, thank you. Next question is from the line of Tian Hou of TH Capital. Please go ahead.

Tian Hou - TH Capital - Analyst

[Foreign Speech] So, lots of guys compare Momo with Match Group or Tinder. However, if we look at how they grow during the COVID, seems like there is a big diversion. So I wonder in China - in the Chinese culture environment, what is the best way to grow the dating and social networking business? And what is the ceiling [Phonetic], how big the market can be? Also, what's the Company's strategy for the next five to 10 years? Are you guys going to continue to operate in the dating market? Or are you going to bring the live broadcasting to the new areas, such as e-commerce, like a lot of other live broadcasting vendors are doing? Also, related to the next several years strategy, you guys have a lot of net cash. How are you going to use the cash to advance your strategy? Thank you. That's all my question. [Foreign Speech]

Li Wang - Director and Chief Executive Officer

[Foreign Speech] First of all, we believe there are still huge growth potential in China's open social space and the general dating market. According to some official statistics that I've seen, in China we have from 200 million to 300 million single adult population. Right now, we are also seeing some new and rising trends. For example, the late time for marriage, the rising divorce rates and also the fact that the younger generation are becoming increasingly receptive toward the idea of online dating, and we are also actually seeing increasing dependence on the online dating services. All of these will lead to a continuous expansion in our addressable market.

With the current status of China's economic development and the overall consumption power of China's Internet - mobile Internet population, I think open social business and the dating business should have huge potential for monetization and profitability. Momo and Tantan, we are all playing in that open social space with different but very complementary positioning. So we're all going to be benefiting from that growing demand. Other than Momo and Tantan, we are also actively pursuing the growth opportunities via new applications in the social and entertainment space. Momo's team has proven capabilities in product innovation. So, overall, I'm extremely confident in the long-term growth potential for such product portfolio approach.

[Foreign Speech] More specifically about the growth outlook for the Momo application, I think through how quickly the traffic of Momo recover from the COVID, we can actually see that the fundamentals of the social platform is, they are very solid, but at the same time, Momo is also a longstanding and mature - a relatively mature social brand. So when we talk about user growth, we need to seek growth opportunities and try to build growth on top of pretty stable user base. At this point, we are still seeing pretty evident growth opportunities in penetrating into lower-tier cities. But unfortunately, this year, a lot of our plans on that front got stuck in the system due to restrictions in different geolocations to keep the virus under control. But next year, I think we're going to continue to push hard on - push forward on that front. So besides user growth, the team is also going to continue to push harder and go deeper on the monetization side. I actually, am seeing - still seeing a great deal of potential on that front for Momo for the core, especially in better utilizing the commercial traffic.

I think what we need to do here is to be doing things more strategically and try to build a holistic traffic management system that goes across different business lines, including VAS and live streaming. Previously because of the organizational structure that we had in the past, sometimes we could be putting in artificial barriers between VAS and live streaming that blocked traffic from flowing from one line to another, that actually led to significant lower - significantly lower ROI utilizing the commercial traffic. And next year, with the new work structure, we're going to break that sort of system and be adopting a pure ROI-driven approach to allocate the commercial traffic in between different lines. We believe that Momo is going to continue to grow steadily and can be - can also be very solid long-term contributor to the bottom line and to the cash flow of the Group.

[Foreign Speech] Tantan is - its brand name is much younger and its product mechanism is also more geared towards young people in China. So we do believe that, as compared with Momo, Tantan is facing greater growth opportunities in growing its user base. We believe that in China alone, Tantan should be able to, at least double the size of its user base from where it is right now, where it can be potentially much bigger than that. Beyond China, Tantan is also facing a very good revenue timing in the overseas market but, of course, the team needs to be working very hard towards these goals. We are confident that through improvements on the product side and improvements on the user acquisition side, we're going to continue to approach these targets. So that's the answers to the first question. [Foreign Speech]

[Foreign Speech] You are right in saying that we have a lot of cash. Currently, the Company has, I think, close to 16, RMB1-6 billion in cash sitting on the balance sheet, and that number is still rapidly growing. Other than returning cash to the shareholders in the form of dividends and share buybacks, in terms of capital allocation, one of the other things that we are considering is, of course, the M&A opportunities that can strengthen the Company's leadership and build future drivers. I would say that, on the M&A front, the Company's approach tend to be fairly prudent in evaluate - in analyzing and evaluating any potential targets. But if we do see opportunities as promising as Tantan, we are going to go in very aggressively without hesitation.

Tian Hou - TH Capital - Analyst

Thank you. Thank you, Wang. Thank you, Cathy.

Cathy Peng - Director, Investor Relations

Okay. Okay. It seems like this call has overrun pretty significantly. Operator, in the interest of time, I think this is going to be the end of this conference call. Thank you, guys, for participating. And thank you for the interest in Momo and Tantan. We'll see you next quarter. Thank you. Bye-bye.

Operator

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Q3 2020

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