The9 Establishes Another Joint Venture to Operate AI Mobile Advertising Business

Rhea-AI Summary

The9 (NCTY) has announced a new joint venture agreement with Shenzhen JiTuo Interactive Technology, an AI algorithms mobile advertising company in China. The9 will hold a 51% controlling stake in the venture, which will focus on AI-driven mobile advertising and marketing solutions for The9's upcoming games, including MIR M.

JiTuo has committed to achieving an annual profit of RMB20 million (US$2.8 million) in 2025, with a 50% yearly profit growth in 2026 and 2027. The9 will grant JiTuo 28,110,000 restricted shares (93,700 ADSs), unlocked based on profit achievement. The joint venture will leverage JiTuo's AI model and data algorithm system to optimize advertising placement and app store performance.

Positive

• Secured controlling stake (51%) in AI-focused advertising joint venture
• Partner committed to RMB20M profit in 2025 with 50% annual growth through 2027
• Quarterly dividend distribution based on shareholding ratio
• Partnership with established AppLovin and Apple Search Ads partner in China
• Consolidation of joint venture will contribute to The9's financial results

Negative

• Potential dilution from 28,110,000 restricted shares grant to JiTuo

Insights

Financial Analyst

This joint venture represents a strategic move into AI-driven mobile advertising with significant financial implications. The RMB20 million (US$2.8 million) guaranteed profit for 2025 with 50% annual growth commitments for 2026-2027 shows strong revenue potential. The performance-based equity structure, with 28,110,000 restricted shares tied to profit milestones, aligns interests effectively. Being a 51% controlling stakeholder allows The9 to consolidate the JV's financials, potentially boosting their bottom line. JiTuo's partnerships with AppLovin and Apple Search Ads add credibility to their capabilities in AI-driven mobile advertising optimization.

Tech Analyst

The technical synergies in this partnership are compelling. JiTuo's AI model specializes in advertising optimization, app store keyword enhancement and conversion rate improvement - critical capabilities for mobile game marketing. Their experience with AppLovin's Lion Studios and Apple Search Ads demonstrates proven expertise in major gaming markets. The GT Data intelligent promotion platform shows technical maturity in search traffic acquisition. This AI-driven approach to user acquisition and marketing efficiency could significantly reduce customer acquisition costs while improving ROI on marketing spend.

Joint Venture Partner Committed Annual Profit of RMB20 Million and 50% Annual Growth

SHANGHAI, Dec. 16, 2024 /PRNewswire/ -- The9 Limited (Nasdaq: NCTY) ("The9"), an established Internet company, today announced that its wholly-owned subsidiary Shanghai The9 Information Technology Co., Ltd. signed a Joint Venture agreement (hereinafter referred to as the "Agreement") with Shenzhen JiTuo Interactive Technology Co., Ltd. (hereinafter referred to as "JiTuo"), an AI algorithms mobile advertising company in China. JiTuo is a game development partner with AppLovin Corporation (Nasdaq: APP) in China. It is also an agency partner for Apple Search Ads in China.

The9 will hold a 51% stake and JiTuo will hold a 49% stake in the Joint Venture. The Joint Venture will become one of The9's consolidated subsidiaries to operate AI algorithms mobile advertising business, and is expected to provide marketing solution to The9's upcoming new games including MIR M.

Pursuant to the Agreement, JiTuo committed that it will utilize its advertising AI model and data algorithm system to assist The9's upcoming new games in optimizing advertising placement materials to enhance the conversion rate and accuracy of advertisements; optimizing the display effect and keywords in the app store to increase the conversion rate of app downloads and acquiring natural traffic. It also committed to The9 that the Joint Venture will have an annual profit of more than RMB20 million (approximately US$2.8 million) in 2025, with profit increasing by at least 50% annually in 2026 and 2027. All after-tax profits of the Joint Venture will be distributed as dividends every quarter according to the shareholding ratio of the Joint Venture partners.

The9 granted JiTuo The9 28,110,000 restricted shares (equivalent to 93,700 ADSs). These restricted shares will be unlocked in stages according to the actual achievement of the Joint Venture's 2025 profit as committed by JiTuo. If 2025 profit guarantee is achieved, The9 will grant JiTuo the second batch of restricted shares according to this mechanism. If the 2026 profit guarantee is achieved, The9 will grant JiTuo the third batch of restricted shares according to this mechanism.

"We have already established a Joint Venture with an AI algorithms marketing company TongZe. We are very optimistic about this new business line. Therefore, we are excited to enter into another Joint Venture agreement with JiTuo, an AI advertising algorithms and leading app stores search data optimization company in China. These Joint Ventures not only help us to promote our new games efficiently, but also contribute to The9's financial results of our new business line since we are consolidating these Joint Ventures," said George Lai, CFO and Executive Director of The9.

"JiTuo is a company that utilizes machine large-scale cluster algorithms and controls to optimize and enhance the effect of obtaining traffic through game app store keywords and uses AI models to analyze user behavior to optimize the conversion rate of mobile advertising promotion in app stores. We have successfully represented and distributed mobile games to the Japanese, European, and American markets, accumulating profound game operation and promotion experience. We have also developed multiple successful games for Lion Studios under AppLovin, thus accumulating rich game development experience.

"We have taken on the agency business of the Apple Search Ads and, by leveraging keyword data analysis and optimization technology, have developed the GT Data intelligent promotion platform to provide search traffic acquisition services for leading fintech companies, game companies, e-commerce companies, and AI large model companies in China. In the future, we will strengthen the combination of AI models and search optimization technology and initiate search ad optimization and promotion service businesses in support of the e-commerce direction." said Guo Yang, CEO of JiTuo.

Safe Harbor Statement

This current report contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond The9's control. The9 may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about The9's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: The9's goal and strategies; The9's expansion plans; The9's future business development, financial condition and results of operations; The9's expectations regarding demand for, and market acceptance of, its products and services; The9's expectations regarding keeping and strengthening its relationships with business partners it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in The9's filings with the SEC. All information provided in this announcement is as of the date hereof, and The9 does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

The9 Limited
17 Floor,
No. 130, Wu Song Road,
Hong Kou District,
Shanghai 200080, PRC

About The9 Limited

The9 Limited (The9) is an Internet company listed on Nasdaq in 2004. The9 is committed to become a global diversified high-tech Internet company and is engaged in online games operation and Bitcoin mining business.

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SOURCE The9 Limited

FAQ

What is the profit commitment for The9's (NCTY) new joint venture with JiTuo for 2025?

JiTuo has committed to achieving an annual profit of RMB20 million (approximately US$2.8 million) for the joint venture in 2025.

How many restricted shares will The9 (NCTY) grant to JiTuo in the joint venture agreement?

The9 will grant JiTuo 28,110,000 restricted shares, equivalent to 93,700 ADSs, which will be unlocked in stages based on profit achievements.

What is the ownership structure of The9's (NCTY) new joint venture with JiTuo?

The9 will hold a 51% controlling stake in the joint venture, while JiTuo will hold the remaining 49%.

What are the profit growth targets for The9's (NCTY) joint venture in 2026 and 2027?

The joint venture is committed to increasing profits by at least 50% annually in both 2026 and 2027.

How will profits be distributed in The9's (NCTY) new joint venture with JiTuo?

All after-tax profits of the joint venture will be distributed as dividends every quarter according to the shareholding ratio of the partners.