Lei Jin: Hi. This is Lei Jin. I would like to add two more points in financial aspects here. The first one is, we will continue to seek profitability and the positive cash flow from the learning services in the long-term, as implied before, we are more focused on behalf of the business and the side, we have reached a new high record on gross margin of the to around 58% and achieved profit from this segment. Another point is we are having the great opportunity to continue lower our costs and improve the efficiency via AI technology as mentioned by Doctor, and Su Peng, although we still have faced competition from peers face challenges from uncertainty of operating environment, but we are playing a leading role in the rapid advancement of large language models and the application in education, which give us great advantages. So, we are very confident in our learning services on a going forward basis, which is helpful. Thank you.
Caini Wang: Thank you for the comments. That’s very clear. Thank you.
Operator: The next question is from Thomas Chong with Jefferies. Please go ahead.
Thomas Chong: Hi, good evening. Thanks management for taking my questions. My question is about online marketing. Can management comment about the key driver behind the substantial growth of online marketing services in the third quarter? Thank you.
Lei Jin: Hi, Thomas. This is Lei Jin. Thank you for your question. As for our online marketing services, the net revenue has grown over 50% year-over-year for the past four quarters, the Q4 last year. Moreover, the growth of the growth rate has jumped to around 100% for the last two quarters, the primary driver behind this growth is the growth of our AI technology. A key contributor in Q3 was the upgrade in our real-time API, that’s [RTA] (ph) capabilities. We began to use RTA in our advertising business at the end of the last year. After ongoing improvement, we have received the recognition from our clients and partners. The proportion of RTA application keeps increasing, and in Q3, the overall conversation rate of RTA improved by three or four times.
The online entertainment and the gaming industry also played an important role for our growth. There’s a huge increase in demand for advertisers in this field. The RTA upgrade leads to over 100% year-over-year increase of net revenues from the entertainment industry in this Q3. And on top of that, the summer season was an important promotion period to this time, further boosting our advertising performance. We have been trying various methods to further enhance the advertising effectiveness to our clients with our data and AI technology. I believe it will help us provide better ADS services to our clients and achieve a sustainable growth of our advertising business. Thank you.
Operator: The next question is from Yuchen Zhan with Citi. Please go ahead.
Yuchen Zhan: Hi, management. Thank you for taking my question. My question is about the learning devices. So what is the user feedback on the Dictionary Pen X6 pro, are there any plans to introduce new SKUs before the end of the year? Thank you.
Feng Zhou: Thank you for the question. So, let me first talk a little bit about business operations and then user feedback. So, as I discussed in the prepared remarks, Q3 smart devices sell out RMB amount actually increased by over 10% year-over-year. So, sellout is a key, our sales metric we focus on internally because when we gauge our business progress and healthiness. So, basically it is the value of goods sold to end users through our channels, all of our sales channels. I mentioned this because we are adjusting currently experiencing a kind of adjusting period of our sales channels. And so, the sellout amount and the final revenue amount, they are a little bit different when you look at the trend. The revenue is actually done for this quarter.
So, through the sellout metric, we can see that our devices are selling well to the end users, despite the current headwinds displayed by the financial metrics. So, this is because we, again, we cut back on some sales channels that are providing not very good return on investment for us, and this will have the effect of reducing sales channel inventory. So, that’s kind of a fuller picture of the device business operations. And now let’s talk about user feedback. So, X6 pro was a hit among users, owing to standout features like English grammar, instruction, digital human language coach and an impressive 100-day standby time. The first two features I just mentioned are based on large language models. The most important metric we look at is engagement.
So, the introduction of these large language model features significantly boosted user engagement with X6 pro, it actually exhibits over 50% higher usage frequency than the other product, S6, which doesn’t have large language model features in Q3. So notably, both the English grammar instruction and digital language coach are powered by our Ziyue our language model and just to explain in the future a little bit, when a user scans a multiple choice, a question with X6 pro, our large language model will analyze the question and generate step-by-step audio explanations. So, these explanations cover key points, Chinese translations and choice analysis of the question, and the pauses between these different stages, just as a teacher would explain the question in a classroom setting.
