Shirley Hu: Gross margin is 35.7% in Q3, increased by 4.1% year-over-year due to the factors as follows. First music subscription revenues had a significant growth expansion in paying user space and improvement in multi-ARPPU, both had a positive impact on our gross margin. Second, the robust growth of advertising revenues also has a favorable impact on gross margin. Third, we gradually ramped up our self-owned content, which benefit our gross margins. Fourth, we optimized the content cost model of ROC and increased ROC requirement of content costs. Our online music revenues growth ratio was faster than net ratio of content costs. Five, license cost of long form audio decreased at a year-over-year basis. And sixth, after the adjustment to live streaming business, the proportion of revenues from rising membership and advertising in social entertainment revenues have increased, which had a favorable impact on our gross margin.
And seven, the optimized technology and operation strategy related to brand – and short capability and improved utilization of our service and equipment. Our gross margin has improved for six consecutive quarters. Looking forward to Q4, we expect subscription revenue and advertisement revenue will continue to be strong growth. On the cost side, we expect our in-house made content will have a positive impact on gross margin continuously, and we will continue to increase our operational efficiency and monitor cost items by our model. Despite the live streaming revenue will be decreased in Q4, we expect our gross margin will be increased sequentially and look forward in next three – to next year, we expect our gross margin will be increased, but the increased degree will be stable – will be later than this year.
Operator: Okay. The next question comes to the line of Lincoln Kong from Goldman Sachs. Lincoln, please.
Lincoln Kong: Thank you, management for taking my question. So my question is about the online music business, the subscription business. So first of all, can you management elaborate a bit more how this business in terms [indiscernible] on doing in the third quarter, so including advertising, supply chain, digital outcome, etcetera? We’re particularly interesting, the enterprising investment trend into the fourth quarter as we just passed a single stay. So how do we see the enterprising ramping up for the year or for this fourth quarter. And when we think about 2024, what are areas we think have – still have growth potential [indiscernible] we see?
Shirley Hu: Thank you very much. And thanks for your question. In Q4 of this year, and we do believe we’re going to maintain a good growth for the subscription business as long as what we’ve seen performed in Q3 of this year. Well, regarding the advertising business because in Q4 of the year, we’re going to have the Double 11 shopping festival. So we do believe the Q4 performance would outperform Q3. Well, regarding the outlook of 2024. And in 2024, we believe our subscriber base will continue to grow, but maybe the growth rate would be slowed down compared with 2023. Well, regarding the subscription business model in 2024, besides working on the mobile solutions, we’re also going to intensify our efforts in the in-car application and IoT application.
We’re also going to step up our efforts regarding the Super VIP business, providing additional functions like the effect of the music and – music and we’re also going to continue to roll out household or the family membership and couple membership and continue to grow our app. Well, regarding the revenue from the advertising business, and for next year, in 2024, we still would like to keep a positive over the total economy brands. So, we are going to maintain our revenue growth target of advertising business in 2024, the same as 2023. Well, regarding the growth for next year, and besides what we mentioned in the ad-supported mode, we are also going to intensify our efforts regarding the commercial promotion, and we are going to leverage the promotion along with flag events and concerts because us doing in, we will be able to make sure we find a deep bond between our commercialization and offline events.
This would also be a great growth driver for our next year advertising business.
Operator: The next question comes from Thomas Chong from Jefferies. Thomas, please.
Thomas Chong: Hi. Good evening. Thanks management for taking my questions. My question is relating to AI and LLM. Given we have been seeing AI is so important on content creation and also supporting our musicians and also driving the user engagement, just wanted to get some color with regard to our 3-year strategies in LLM and AI. And what kind of – what level of spending should we expect over the next couple of years?
Ross Liang: Thank you very much. Thanks for the question. Well, regarding the AI-related question, I believe we are going to and by ways what has been provided by our parent company, Tencent, we do believe AI is going to be a very strong and robust driving force for the next few years. Well, due to our relationship with Tencent Group and for some basic models, actually we are not going to do dive in for more research because Tencent Group has already released its system, and we are also going to leverage the program produced by Tencent Group to continue to deepen our business with their model. Actually, our business is more application driven. So, what we are going to do in the near future is to leverage the existing LLM to fully support the solution with great integration.
