COMUNICADO DED KONG ZHONG CORPORATION (1)

KongZhong Corporation Announces Unaudited Second Quarter Results for the Period Ended June 30, 2004

BEIJING, 10 Ago. (PRNewswire) -

KongZhong Corporation (Nasdaq: KONG), a leading provider of advanced second generation (2.5G) wireless value added services in China, today announced its second quarter (2Q04) diluted earnings of US$0.19 per ADS under generally accepted accounting principles in the United States (US GAAP), up from a diluted earnings of US$0.01 per ADS in the same period of the previous year (2Q03) and diluted earnings of US$0.11 per ADS in the first quarter of 2004 (1Q04). Net income in the second quarter was US$5.30 million, up from US$0.24 million in 2Q03 and US$3.14 million in 1Q04.

(The Company issued 8 million American Depositary Shares in early July as part of its initial public offering. Using the enlarged share count, the Company's earnings per ADS in 1Q04 and 2Q04 would have been US$0.09 and US$0.15 respectively.)

Commenting on the results, the Company's Chairman and CEO, Yunfan Zhou, said, "We are very pleased with our achievements in the second quarter. The Chinese market is continuing its transition from 2G to 2.5G wireless technology. We continue to witness very strong interest in our products and services that utilize the enhanced capabilities offered by the 2.5G network, particularly in our media related products. This strong demand allowed us to deliver very strong financial results across all segments of our business and has allowed us to remain China Mobile's top 2.5G service provider."

"In early July, we successfully completed our initial public offering and raised US$80 million under very challenging market conditions. We believe the proceeds, as well as the higher profile associated with being a publicly listed company, should help us to enlarge and enrich our mobile content offerings, expand our distribution network, and attract talented employees."

"We are confident of the 2.5G market's long-term prospects. As a leading 2.5G service provider in China, we believe we are well positioned to capture this long-term potential."

2Q04 Financial Highlights: -Revenue grew 876% year-over-year and 67% sequentially to US$11.97 million. -The Company's 2.5G revenue grew 950% year-over-year and 83% sequentially to US $9.61 million. -The Company's 2G revenue grew 655% year-over-year and 24% sequentially to US$2.36 million. -Net income increased 2,142% year-over-year and 69% sequentially to US$5.30 million. -Net margin was 44.3%, up from 19.3% in 2Q03 and 44.0% in 1Q04. Business Highlights: -The Company retained its number one position with China Mobile in WAP, MMS, and Java revenues. -The Company achieved three of the top five spots on China Mobile's games download ranking, including the number one position, in both revenues and the number of downloads. -The Company signed agreements with China Telecom and China Netcom to provide value added services to their fixed line and PHS customers. -The Company signed agreements with Amoi, CECT, DBTel, Panasonic, and Samsung to provide contents and services on their mobile phones for use on China Mobile's network. -The Company signed agreements with ACME, Gameloft, and Macrospace (leading Singaporean, French, and British publishers of mobile Java games, respectively) to distribute their mobile games in China. -The Company signed agreements with HI Corp and Superscape (leading Japanese and British publishers of mobile games, respectively) to distribute their 3D games. -The Company signed agreement with Net Village, a leading Japanese wireless value added service provider, to distribute its mobile games and WAP pictures. -The Company partnered with Warner Brothers to distribute MMS contents from the movie "Troy."

Second Quarter Financial Review

(Note: Unless otherwise stated, all financial statement amounts used in this press release are based on US GAAP and denominated in US dollars.)

Revenues

Revenues for the quarter totaled a record US$11.97 million, up 876% from the same period of the previous year and up 67% from 1Q04. By platform, revenues from 2.5G wireless value added services accounted for 80% of total revenues and revenues from 2G wireless value added services represented the remaining 20%, compared with 73% and 27%, respectively, in 1Q04.

Revenues from 2.5G services, which include services delivered using wireless access protocol (WAP), multimedia messaging service (MMS), and Java technology, grew 950% from 2Q03 and 83% from 1Q04 to US$9.61 million in 2Q04. Growth in MMS revenues accounted for the largest increase in 2.5G revenues. Revenue from 2G services, which include short messaging service (SMS), interactive voice response (IVR), and color ring back tone (CRBT), grew 655% from 2Q03 and 24% from 1Q04 to US$2.36 million in 2Q04. IVR revenues registered the highest growth rate in 2G revenues, primarily as a result of its small base in 1Q04.

By type, revenues from monthly subscriptions accounted for 91% of total revenues, and revenues from downloads accounted for the remaining 9%. During the quarter, the number of monthly subscriptions grew by 66% from 1Q04 to 12.81 million, and average revenue per subscription fell by almost 1%.

1Q04 2Q04 Subscription Revenue 93% 91% Download Revenue 7% 9% Total 100% 100%

By service category, the Company derived 47% of its revenues from interactive entertainment, 37% from media services, and 16% from community. 1Q04 2Q04 Interactive Entertainment 56% 47% Media 25% 37% Community 19% 16% Total 100% 100%

Expenses

Cost of revenues (COR) in 2Q04 totaled US$3.49 million, up 956% from 2Q03 and up 56% from 1Q04. Gross margin for the quarter was 70.8%, down from 73.0% in the same period of the previous year and up from 68.7% in 1Q04. The sequential margin expansion was attributed primarily to slower growth in transmission fees and content fees.

Total operating expenses in 2Q04 increased by 382% from the same period of the previous year and 80% from 1Q04 and represented 26.6% of revenues, compared with 53.7% and 24.7% of revenues in 2Q03 and 1Q04, respectively. Product development expense increased by 51% from 1Q04 and represented 9.1% of revenues. The increase was primarily due to higher headcount and the staff expenses associated with higher headcount. Sales and marketing expense increased by 188% from 1Q04 and represented 7.1% of revenues. The increase was primarily driven by higher promotion and business development expense, as well as costs associated with higher headcount. General and administrative expense increased by 63% from 1Q04 and represented 9.2% of revenues. The increase was primarily driven by higher salary & benefits as well as higher business tax. Overall, the Company's operating margin improved from 19.3% in 2Q03 and 44.0% in 1Q04 to 44.2%.

Company-wide headcount increased 29% from the end of 1Q04 to 405 at the end of 2Q04.

(Continua)