Yang Xiao

Yang Xiao inquired about the unit economics of the Shopee VIP membership program, its eventual penetration, and the timeframe to reach breakeven, given potential initial negative gross margins for E-commerce. Yang also asked Forrest Li to elaborate on his recent media comments regarding AI potentially powering Sea Limited to become a trillion-dollar company, specifically addressing potential actions and investor concerns about massive AI CapEx.

Answer

Management, primarily Tony Hou (CFO), explained that the VIP program is in early stages, showing strong user growth and engagement, with members spending 40% more. He noted that while initial investment is required, the focus is on retention, which has significantly improved, and leveraging digital finance (SPayLater) for continuous payments. Forrest Li (Chairman and CEO) expressed deep excitement for AI as a fundamental technological revolution, emphasizing Sea Limited's focus on applying AI to transform consumers' daily lives and small businesses in its markets, rather than developing foundational large language models or building data centers. He highlighted practical AI uses in Shopee, such as improving advertising conversion, product discovery, seller listing quality, and customer service, which are already yielding positive results without massive CapEx.

Yang Xiao from Barclays sought a better understanding of the Shopee VIP membership program, asking about its unit economics, eventual member penetration, and the timeframe to reach breakeven, noting the recent decline in e-commerce gross margins. His second question addressed Forrest Li's recent comments on AI potentially powering Sea Limited to become a trillion-dollar company, asking about specific AI initiatives and addressing concerns about massive AI CapEx.

Answer

Forrest Li, Chairman and CEO, explained that the VIP program is in its early stages, showing strong user growth and GMV penetration in the teens, with potential for much higher. He emphasized focusing on good economics through partnerships and closely monitoring retention, which has significantly improved. Tony Hou, CFO, added that early investment is required but they are working on retention, including through SPayLater. Regarding AI, Li expressed deep excitement for its potential to unlock value in underserved markets. He clarified that Sea Limited focuses on practical applications, such as improving advertising conversion, product discovery, seller listing quality, and customer service (where AI chatbots handle the majority of interactions with high satisfaction), rather than developing large language models or building data centers, preferring to collaborate with big tech.