Question-and-Answer Session
Operator
(Operator Instructions)
The first question is from Mr. Dick Wei from JP Morgan in Hong Kong. Please go ahead.
Dick Wei - JP Morgan
I have a few questions. The first question is what do you think are the key growth drivers going into 2007, particularly which area do you expect to see high growth or you will put more focus on?
The second question is if you can break out the deferred revenue, where does the deferred revenue come from? Is that mainly from subscription, or maybe there is some amount coming out from Stockstar or Genius?
Jun Wang
For 2007, we see the growth drivers of our revenue mainly comes from the subscription services provided to individual customers. That is where we will see the drivers of our business for 2007.
For deferred revenue, in my comments, we did not actually separate the deferred revenues between Stockstar versus jrj.com, but I can confirm that in the deferred revenues, most of the deferred revenues, I would say almost all deferred comes from subscription service fees paid by the individual customers. The reason is just because of our business model. For subscription services provided to individual customers, they pay the entire subscription up front for the entire specified period, say 12 months. For this reason, we have no account receivable risk.
For our other business, for example, advertising or wireless related and also for subscription services provided to institutional customers, we do not have the advantage of collecting cash in advance. So in this sense, deferred revenue mostly comes from subscription services provided to individual customers.
Regarding your question of the breakdowns of deferred revenue between Stockstar and also jrj.com, I am sure you are also concerned about whether and how we actually separate the revenues from subscription revenues for the individual customers between Stockstar and jrj.com. The reason we did not actually separate the revenues and also deferred revenues between Stockstar and jrj.com are actually because of a couple of reasons.
First, prior to the acquisition of Stockstar, the Stockstar subscription business was very weak. Based on our due diligence, its net revenues from subscription business is typically less than $100,000 per quarter. So put it this way; Stockstar’s software subscription business is almost negligible compared to jrj.com, which is well above $1 million per quarter.
When we started to integrate Stockstar’s subscription business, we literally rebuilt the entire practice by sending our best people to run their operations, recruiting and training their sales reps and customizing jrj.com’s products and developing new products for Stockstar, and also building a new call center for them. Also, the headcount increased of their sales force in the fourth quarter.
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