The9 Establishes Joint Venture to Operate AI Algorithms Marketing Business

Rhea-AI Summary

The9 (Nasdaq: NCTY) has announced a joint venture with ShaoXing TongZe Network Technology Co., to operate an AI algorithms and big data marketing business. The9 will hold a 51% stake in the joint venture, which will become one of its consolidated subsidiaries. TongZe has committed to reaching over 100 million pan-MIR tag users and 30 million paid MIR users, projecting an annual profit of more than RMB100 million (approximately US$14 million) in 2025.

The9 will grant TongZe restricted shares worth RMB 42.5 million, to be unlocked based on the joint venture's 2025 profit achievement. The partnership aims to utilize AI technology and big data for more efficient marketing of online games, particularly for The9's upcoming new MIR game, MIR M. TongZe's CEO expressed confidence in achieving the committed profit target for the joint venture in the next year.

Positive

• Joint venture expected to generate RMB100 million (US$14 million) annual profit by 2025
• The9 will hold a 51% controlling stake in the joint venture
• AI-driven marketing approach aims to reach over 100 million pan-MIR tag users and 30 million paid MIR users
• Joint venture to provide marketing solutions for The9's upcoming MIR M game
• Partnership with TongZe expected to improve marketing efficiency and reduce costs

Negative

• Issuance of restricted shares to TongZe may lead to potential dilution for existing shareholders
• Joint venture's success heavily dependent on TongZe's ability to meet committed user acquisition and profit targets

Insights

Financial Analyst

This joint venture announcement is significant for The9 (NCTY). Key points include:

Financial Impact: The committed annual profit of RMB100 million (~US$14 million) for 2025 is substantial, especially considering The9's current market cap of $65.9 million. This represents potential earnings growth of over 20% relative to market cap.

Strategic Expansion: Entering the AI algorithms and big data marketing space diversifies The9's business model and could enhance its game marketing capabilities, particularly for the upcoming MIR M game.

Equity Structure: The9 will hold a 51% controlling stake, allowing for revenue consolidation. The performance-based restricted share issuance to TongZe aligns interests and mitigates risk.

Market Reach: TongZe's commitment to reach 100 million pan-MIR tag users and 30 million paid MIR users could significantly boost user acquisition and revenue potential.

While promising, investors should monitor execution risks and the actual performance against these commitments.

Tech Expert

The partnership between The9 and TongZe represents a significant technological leap in game marketing:

AI-Driven Marketing: Utilizing AI algorithms and big data for user targeting is a cutting-edge approach in the gaming industry. This could drastically improve marketing efficiency and ROI compared to traditional methods.

User Targeting: The ability to reach 100 million relevant pan-MIR tag users and 30 million paid MIR users demonstrates sophisticated data analytics capabilities. This precision targeting could lead to higher conversion rates and lower customer acquisition costs.

Integration with Tech Giants: TongZe's existing collaborations with ByteDance, Tencent, Alibaba and Baidu provide access to vast user data pools and distribution channels, potentially amplifying the reach and effectiveness of The9's marketing efforts.

Scalability: The capacity to reach 10 million people daily and generate 15,000+ new registered users per day showcases the scalability of this AI-driven approach, which could be pivotal for rapid user acquisition in the competitive gaming market.

Joint Venture Partner Committed Annual Profit of RMB100 Million in 2025

SHANGHAI, Oct. 9, 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 ShaoXing TongZe Network Technology Co., Ltd. (hereinafter referred to as "TongZe"), an AI algorithms and big data marketing service provider in China. The9 will hold a 51% stake and TongZe will hold a 49% stake in the Joint Venture. The Joint Venture will become one of The9's consolidated subsidiaries to operate AI algorithms and big data marketing business, and is expected to provide marketing solution to The9's upcoming new MIR game: MIR M.

Pursuant to the Agreement, TongZe committed that it will utilize its AI algorithms and big data to reach more than 100 million relevant pan-MIR tag users and more than 30 million paid MIR users. It also committed to The9 that the Joint Venture will have an annual profit of more than RMB100 million (approximately US$14 million) in 2025. 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 will grant TongZe The9 restricted shares. The amount will be RMB 42.5 million / US dollar to RMB exchange rate on the date of issuance / NCTY share price on the date of issuance. The restricted shares will be issued within 10 working days after the Joint Venture is established. These restricted shares will be unlocked in stages according to the actual achievement of the Joint Venture's 2025 profit as committed by TongZe.

"We see that AI technology and applications have begun to bring new ideas to the traditional marketing of online games in China, which is too costly and inefficient. Our cooperation with TongZe will utilize its mature AI algorithms and big data to reach potential tagged MIR game users directly for our new MIR game," said George Lai, CFO of The9.

"We are dedicated to providing precise marketing services using AI algorithms and big data. Through our proprietary accurate traffic distribution platform, we help our customers to achieve high user return, increase user stickiness, reduce operating costs and increase efficiency. We are cooperating with leading Internet companies such as ByteDance, Tencent, Alibaba and Baidu, to cover millions of tag users in different categories according to customers' needs. We can reach more than 10 million people per day, providing an average of 15,000+ new registered users per day for customers across the industry. We believe our joint venture with The9 will bring MIR M to next level and we have 100% confidence the joint venture can make our committed profit of RMB100 million in next year," said Cai Guo Qing, CEO of TongZe.

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 AI investment businesses in different industries.

View original content:https://www.prnewswire.com/news-releases/the9-establishes-joint-venture-to-operate-ai-algorithms-marketing-business-302271294.html

SOURCE The9 Limited

FAQ

What is the profit commitment for The9's new joint venture in 2025?

TongZe has committed that the joint venture will have an annual profit of more than RMB100 million (approximately US$14 million) in 2025.

How many MIR users does the joint venture aim to reach for NCTY?

The joint venture aims to reach more than 100 million relevant pan-MIR tag users and more than 30 million paid MIR users.

What is the ownership structure of The9's new AI marketing joint venture?

The9 (NCTY) will hold a 51% stake in the joint venture, while ShaoXing TongZe Network Technology Co., will hold a 49% stake.

How will The9 (NCTY) compensate TongZe for the joint venture agreement?

The9 will grant TongZe restricted shares worth RMB 42.5 million, which will be unlocked in stages based on the actual achievement of the joint venture's 2025 profit commitment.