Bilibili Inc.

Good day and welcome to the Bilibili 2021 First Quarter Financial Results and Business Update conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.

Thank you, Operator. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectation as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer Ms. Carly Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer. And I'll now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Thank you, Julia. And thank you, everyone, for participating in our 2021 First Quarter Results Conference Call. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. 2021 is off to an excellent start for Bilibili. On March 29, we successfully completed our secondary listing on Hong Kong Stock Exchange, three years after we listed on NASDAQ. We would like to take this opportunity to thank our supporting shareholders, as well as our talented content creators, loyal users, and the dedicated colleges that helped make this happen. With our secondary listing, we see an opportunity to broaden our investor base and attract more high-quality shareholders. We also gain more strength in the capital market, laying a solid foundation to better execute our growth strategy and tap into the massive video-based market in China in the coming years. After officially stepping into the 200 million MAU club in 2020, we continue the momentum further increasing our influence among China's Gen Z Plus cohorts, and expanding our user base. In the first quarter of 2021, our MAUs were up 30% to 223 million, and our mobile MAUs grew by 33% to 209 million, both on year-over-year basis. And our DAUs reached 16 million, up 18% year-on-year, This is particularly impressive given last year's remarkable high base. As a testament to our rich offerings and engaged community, our users spend an average of 82 minutes per day on our platform in the first quarter. During this time, we roll out more premium content and services and strengthen our commercialization capabilities while converting more traffic to paying users. Our MPUs grow to 21 million, increasing by 53% versus Q1 2020. And our paying ratio is a record high of 9.2%, compared with 7.8% from the same period last year. Our titlers are widely recognized in Bilibili as a destination to reach young generations. As a result, our ad revenue once again achieved accelerated growth, increasing by 234% year-over-year. On the back of this strong momentum, our total revenues reached RMB 3.9 billion, up 68%, and our gross margin improved to 24% from 23%, both compared with the same period of last year. Throughout the first quarter, We continue to enrich our content offerings and enhance our mindshare as the go-to video community for Gen Z Plus. Entering their 20s and 30s, Gen Z Plus is deeply influencing society and mainstream ideals, as well as driving all kinds of consumption in China. By offering diversified content in great brands and deeps, We aim to further increase our market share among these Code Gen Z Plus user base, while expanding our appeal to all video users. We are confident we are on the right track to achieve our three-year user target. One of the primary drivers for our next wave of growth is anchored by the increasing trend in visualization, where video has become the pervasive across many scenarios of daily life. As China's leading video community, we are the clear frontrunner in this transformative opportunity, and we are only at the beginning stages of this rapidly growing trend. According to our research, China's video-based market will comprise nearly 1.2 billion video users and more than 1.8 trillion in revenues by 2025. Over the next few years, We are committed to capturing this exciting market opportunity with visualization and detailing to our growth trajectory. With that overview, I would like to go through our operations for the period in a bit more detail, beginning with our content. Our PUGV community remains the center of our content ecosystem, representing 91% of our total video views for the first quarter. We had approximately 2.2 million content creators uploading 7.7 million videos per month, representing increases of 22% and 57%, respectively, both year over year. We strive to create an ideal home for all video creators, where they can improve their ingenuity, build a fan base, and monetize their talent. We continue to invest in algorithm improvements to ensure that our content creators can easily locate the audience who most appreciate their work. In the first quarter, the number of content creators with over 10,000 followers increased 54% year-over-year. At the same time, our advertising platform, Sparkle, continued to connect more content creators with advertisers, while cash incentive programs supported over 375,000 content creators in Q1. We also maintain an upbeat and encouraging community atmosphere that provides a supportive environment for lifelong content creation. As a full-spectrum video community, we aim to offer a wider and deeper range of content to meet the growing demands of our users. In the first quarter, The most viewed content verticals on our platform were lifestyle, games, entertainment, enemy, and attack and knowledge. In recent quarters, we have seen increasing numbers of both content submission and video views about games, knowledge, and animal-related content. Moving forward, we plan to further explain our content offerings in relationships, fitness, and automobile. These categories reflect the interest of Gen Z+, while also expanding our appeal among a broader audience. Turning to our OGV content. Supplementing our video content ecosystem, our OGVs provide an effective gateway that reinforce our leading verticals and explore new For example, our investment in Chinese animation has become a huge boon for our ACG category, successfully attracting old users and new ones. Advancing our Chinese animation production capabilities, in January, we acquired Howling Earth Animation's lead, Huimeng Donghua, one of China's top anime studios. Its highly popular production Heaven Official's Blessing, Tianguan Sifu, launched in late 2020, continued to win over followers in the first quarter, reaching 370 million video views, over 6 million likes, and collecting around 4.5 million bullet charts. We also released multiple new original Chinese anime titles in April, including final chapter of Linkage, Ling Long, and Link Click, Shigong Dailiren, which were immediately hits, trending on social media for weeks. Turning to our documentaries, variety shows, and TV and movie categories, to satisfy users' diverse needs, we launched several hit productions in Q1. including our highly anticipated New Year Eve Gala, the most beautiful night of 2020, and the Bilibili Chinese New Year Gala. Our self-produced documentaries, Coca-Cola Foods, 吉时记, and The Little Gent, 小小少年, and our self-produced reality show, Shall We Eat at a House, 去你家吃饭好吗? all of which were welcomed by our Gen Z Plus users. In the second half of this year, we have plans to introduce two more self-produced music and dating themed variety shows. These shows are geared towards users with relevant interests and supplement the newer music and relationship series in our content ecosystem. Turning to our community, The bonds that we created with Bilibili and the community members remain strong, despite the spike in the interactions and use that we saw in 2020, making the comparable base quite high. Our first quarter community activities continue to be robust. Daily video views were up 47% to $1.6 billion, and monthly interactions increased by 35% to $6.6 billion, both compared with Q1 2020. By the end of first quarter, we had 112 million official members, up 38% year-over-year, and our 12-month retention rate remained around 80%. We are very proud of this matrix. as these demonstrate the strength of our model, bounding our users and community closer. Now, let's look at our commercialization progress. Our diversified monetization strategy is working, growing each of our commercial avenues in the first quarter. We now have a robust line of revenue stream formed out of a solid mobile game business, thriving vast business, as well as our rapidly growing advertising business. Starting with our games. Revenue from our mobile game business was RMB 1.2 billion in the first quarter, an increase of 2% year-over-year. At the end of April, we successfully launched another exclusive distributor of the mobile game, Guardian Tales, 坎公奇冠店. This thriving ACG title has won over millions of new followers, topping the iOS game download and the growth in charts for weeks after its release. Other existing games that we operate, including Fate Grand Order, Azula Land, and Princess Connect, remain popular among their followers during Q1. As for jointly operated games, Genshin Impact, Genshin, had another solid run in the first quarter. Derived from classic Animal IP, we also added Yu Jing Hong, You Xi Wang, to our jointly operated game library in January. With China's mobile games market expected to reach over RMB 500 billion in 2025, according to iResearch, we strategically invest in Xindong.com and the CMG Technology Group, further strengthening our position in the game industry. Turning to our game pipeline, 12 of the games we host exclusive license or have acquired approval for release. These include Artillery Gear, 機種戰機, Assuming ACG Title, and SWAT Art Online, 刀劍神域. and exciting MMORPG. Both are slated for launch in the second quarter. We continue to work with top developers to bring more jointly-operated games to Bilibili users. These highly-anticipated titles include Tencent's League of Legends mobile games, as well as Natty's Harry Potter . Turning to our vast business, our vast services soared in the first quarter. with our premium members reaching a record high and a robust growth in the LIBOR category. Revenues from our VATs grow to RMB 1.5 billion, an increase of 89% year-over-year. At the end of the first quarter, we had 16.1 million premium members, representing a year-over-year growth of 48%. This is particularly impressive, again, given the high base in 2020 for comparison. It also shows that our CoachingZ Plus demographics have spending powers and a high willingness to pay for high quality and premium content. As part of our video content ecosystem, we continue to build our game and entertainment content, addressing our users' diverse needs. We have won a number of high quality esports content contracts including live broadcasting rights of League of Legends World Championship and more recently acquired League of Legends Pro League in China. Additionally, our VTuber and other entertainment live broadcasting continue to draw young users' attention. As we explore more ways to integrate live broadcasting content with our video platform, we see great potential to expand this business even further. Last but not least, let's review our advertising business. Beginning with the success of our 2020 New Year's Eve Gala, a wider variety of advertisers come to Bilibili to reach their desired audience of young generation. Revenue from our advertising services was RMB 750 million, up 234% year-over-year, representing our eighth quarter of accelerated growth. for the first quarter. The top five leading advertising verticals were games, digital and 3C products, food and privilege, e-commerce, and skincare and cosmetics. Increasing improvements to ad distribution algorithms also supported our advertising business growth. As we continue to enhance our brand awareness, increase our influence among the Gen Z plus demographic and improve our ad products. We are confident that advertising dollars are sure to follow. Building on the momentum of last year, we are off to a great start in 2021. Our financial and operational accomplishments across our content, community, and commercialization to Q1 place us on a firm footing of achieving our next phase of growth. We entered a new era when the transformation to visualization is taking shape as we speak. As a full-spectrum video community and the go-to platform for the Gen Z Plus demographic, we have reached a new starting point from which to grow. Riding the visualization wave, we will continue to invest in our content ecosystem and enhance our brand among the rising and massive video market. where we establish the leaders and continue to get market share. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the first quarter of 2021 and outlook for Q2. Total net revenues for the first quarter will be 3.9 billion, up 68% from the same period of 2020. we continue to see a more balanced and diversified revenue mix. Our total net revenues breakdown by revenue stream were approximately 30% mobile games, 38% VAS, 18% advertising, and 14% e-commerce and other business. Cost of revenues increased by 66% year-over-year to $1.3 billion. Revenue sharing costs A key component of cost revenues were 1.4 billion, also a 58% increase from the same period in 2020. Gross profit increased by 77% year-over-year to 937.9 million. Our gross margin improved to 24% in the first quarter, compared with 23% from the same period last year. Total operating expenses were RMB 1.97 billion, up 83% from the same period in 2020. Selling and marketing expenses were RMB 1 billion, representing a 65% increase year-over-year. The increase was primarily attributable to the increased channel and marketing expenses associated with our app and brand, as well as the increase in sales and marketing personnel. By allocating resources to build our brand and appeal among a broader audience, we achieved substantial growth in 2020. We believe the effects that will be even further reaching, with positive impact to the market over the long run. This is a continuation of the momentum we achieved in 2020, and we can already see the benefits of strategy. Through our broader user base demographics, content, and overall industry leadership. We plan to continue building on this track in 2021 to further strengthen and expand our venture's growth cycle. GMA expenses were the RMB $389 million, representing a 127% increase year-over-year. The increase was primarily due to increased headcount in general and administrative personnel increased share rent-based compensation expenses, higher rental expenses, and other GNN expenses. R&D expenses were RMB 580 million, representing a 95% increase year-over-year. This increase was primarily due to increased headcount in research and development personnel and increased share-based compensation expenses. Net loss was RMB905 million for the first quarter of 2021, compared with RMB539 million in the same period of 2020. Adjusted net loss, which is a non-GAAP measure that excludes share-based compensation expenses and amortization expenses and income tax expenses related to the intangible assets acquired through business acquisitions, was RMB666 million compared with RMB 475 million in the same period of 2020. Basic and diluted net loss per share were RMB 2.54. Adjusted basic and diluted net loss per share were RMB 1.87. As of March 31, 2021, we had cash and cash equivalents, time deposits, as well as short-term investments of RMB 27 billion. compared to RMB 12.8 billion as of December 31, 2020. With that in mind, we are currently projecting net revenues for the second quarter of 2021 to be between RMB 4.25 billion and RMB 4.35 billion. Thank you for your attention. We would like now to open the call to your questions. Operator, please go ahead.

As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Limit your question to one question at a time, and you may press star one again if you have a follow-up question. Thank you. Your first question comes from the line of Alex Poon of Morgan Stanley. Please ask your question.

谢谢管理层接受我的提问,恭喜很强劲的业绩。 我的问题是关于广告业务的。 过去连续八个季度,我们都看到这个U over year的加速到234%在一季度。 想问一下背后的这个驱动力是什么原因? The question I have is regarding advertising business. We have seen continuous acceleration in year-over-year growth for eight consecutive quarters. Could management share with us the drivers behind this growth and how should we think about the growth in the next one to three years? Thank you very much.

But the easiest way to do this is to quickly convert ads into content, so that we can make more money and buy more content. This is the flow model of the Internet that we are familiar with. Bilibili is more about building a city, bringing together young people with common interests, so that they can enjoy themselves here. Bilibili provides them with different consumer scenarios, such as games, live broadcasts, video content, IT promotion, offline activities, and so on. The more they like this city, the more they fall in love with this city, and the more they want everyone around them to enter this city. This may be slow, but the potential is still huge.

Okay, I'll briefly translate for Ms. Colley-Lee. So we think the value of platforms advertising business actually equals the values of the user itself. A not so accurate metaphor would be many other platforms out there, they are running a rental or a tourist model. You never know when your user will come, when they will go. So the easiest way is to leverage advertising to quickly achieve monetization and use the money that they make to buy more content. This is the traditional internet model. But for Bilibili, what we are trying to do is to build a city. We are trying to gather the young users with similar interests, ask them to become a resident of the city. We provide different type of consumption scenarios to them to cater to their needs, including such as games, live broadcasting, movie and content and derivative products and even offline activities. And they will grow fond of the city and even fall in love with it. And they will invite more friends to join the neighborhood. And for this process, it might start really, probably start really slow, but once the momentum is built, it will accelerate and has great potential.

So what is the value of advertising in the city of Bilibili? Because half of the young people here live in China, their average age is 22.8 years old. 86% of the users are under 35 years old, mainly in the city of Bilibili, accounting for 50%. They have absolute consumer rights, and at the same time, they are also the core consumer group. So Bilibili is also the group of users and people that advertisers are most eager to reach. So what does the Bilibili's advertisement potential is? Look at the residents. We have captured near half of China's young generation.

On our platform, the average age of our user is about 22.8 years old, and 86% of our user is age 35 and below. And our user, about 50% of them live in the first and second tier city. They are deeply influenced by mainstream ideals, and they are the key driving force for all kinds of consumption. and they are the most wanted cohort that chased by all advertisers. So we believe in the next few years, as Bilibili continues to grow its brand awareness and expand the boundary of our content offerings, we will be welcoming more diverse and more dynamic type of user to join our city. and continue a very healthy and fast growth.

Secondly, we believe that a good ad can be a good content, and a good content can be a good ad. Based on this, users never reject ads. We prioritize choosing more high-quality and potential brands to form a deep collaboration and create case studies. So we are quite confident that pretty much all of the brands, they will be looking, turning to Bilibili and become part of our community.

And secondly, we think a good advertisement could also be a good content. And for a user, they never repel good content. So on the customer side, we'll continue to work with high-quality brand and potential brand to establish deep collaboration and to build very successful cases for all the KA accounts. And we'll also continue to improve our product, our resume efficiencies, and launch more creative and interesting integrated marketing solutions across multi-scenarios and multi-devices.

最需要补充的一点是,其实未来UP主的创意,其实我们也没有他们更多的去对接到品牌方。 And additionally, we think there's a very big portion of the creativity that we could leverage our content creators.

we are working with content creators to pick their brand, to pick their mind, to ask them to work with our brand advertisers together. And on the Sparkle advertising platform, currently we already have over 10,000 content creators join this platform, and the overall performance is exceeding our expectations.

The last one is also the most important. We will continue to build a strong Bilibili business platform system to continue to improve its conversion efficiency, so that the ability of advertising can not only be reflected in advertising revenue, but it can also serve other internal businesses of Bilibili, such as game communication, which is equivalent to the efficiency of game advertising. The same goes for live broadcast and e-commerce.

So last but not least, it's also very, very important is that we'll continue to enhance our middle platform capabilities and continue to improve our ad product, including the integrated marketing solutions that combines both brand ads and performance ads. And our advertising power will not only be reflecting on the increase of our advertising revenue, but also on many of our two customer business, such as the efficiency of our jointly operated games and live broadcasting, et cetera.

Thank you.

So for the next one to three years, as we continue to grow our content ecosystem and extend the boundary of our content offering, we're quite confident to maintain a healthy and fast advertising dollar growth.

Your next question comes from the line of Lei Jiang of Bofa Securities. Please ask your question.

Because in the second half of last year, there were some weak indicators. But in this year's EQ, we see some key indicators, such as time span, interaction, and ratios of DAU to MAU. So we want to see how we can improve. Thank you for taking my question. My question is mainly about user engagement. We noticed that some key indicators like DAU versus MAU interaction and type span, so sequential improvement. So wondering, can you share with us what's the trend going forward and what is your plan to further improve your engagement? Thank you.

First of all, we can see that since last year, we have indeed seen the proportion of DAU versus MAU. So indeed, from last year, we see a temporary job for the DA to MAU ratio. And we have to look into the reason behind it. And the reasons are not, it's not because there's some matrix decline.

But for the certain period of time, the growth rate of our MAU exceeded significantly of our DAU.

So this phenomenon is a stage problem in the process of user growth. Because last year, we increased the speed of new user growth. Last year, we proposed to use user growth as the center. Then a large number of new users were introduced. After they were introduced, In fact, their increase in activity depends on two things. The first is how much they are integrated into our community. The second is how we can fully explore their consumer interest. These two things actually take some time. It also takes time for them to integrate into our community because they need to pay attention to more and more app owners. They need to interact with our app owners and other users. So we think the temporary job is absolutely normal given that

Last year, we have raised our MAU target, and we're really focusing on growing our overall users. And during that process, I think this is just a temporary effect, given that when the user joins the community, it really takes time for them to become a part of the community. We need time to cultivate user habit and establishing community behavior, such as following different content creators. They have to get in touch with the content creator and other users in the community. And if they come to Bilibili for one specific interest point, they also need time to establish and expand their interest points unbelievably. So all of that takes time and there will be some black during the process.

Actually, the activity of Bilibili users compared to the same type of product, I think is still good. Yes, because that is our model of this community, including us, there is a very rich supply of high quality content. I think it is from a stage point of view, when the MAU is rapidly increasing, So we think for product like Bilibili, we actually stand a pretty good DAU to MAU ratio in terms of the community product. And because we also have very vast content offering,

We think during a fast user growth period, a temporary drop of the engagement ratio is absolutely normal. And as long as we see the ratio starting to bounce back and we continue to maintain a very fast user growth pace, it should be fine.

Of course, we will continue to enhance our strategy. to increase the activity of the users. I just mentioned the two points that we always pay attention to. The first point is whether users can integrate into our community faster and become active members of our community. This helps to increase the activity of the users, which is to make them pay more attention to the app group,

And we'll definitely continue to be very focused on elevating the engagement level. And there are several ways. One is to whether we can help our users to become part of the community a little bit quicker. And the measurement would be help them to connect with more content creators, allow them to follow more content creators that fits their interests, allow them to establish more engagement between content creators and other users.

The second thing is whether our recommendation strategy can dig out more of his interests. If we can dig out more and more of his interests, and match the same content with his interests, then his activity will also improve.

And secondly is on our AI-powered recommendation system, we will continue to improve the recommendation efficiency to allow our algorithm to discover more interest points for certain users and to push more relevant content that fits to different users need and for that we'll continue to invest in R&D in our algorithm to improve our AI powered recommendation system. So those above mentioned points will be our constant areas for improvement.

Okay.

Your next question comes from the line of Ji Jing Liu of UBS. Please ask your question.

未來會不會考慮更多的併購? 那我翻譯一下。 Thank you management for taking my question. I have one question. Recently, we see Billy has quite a few investment deals on other game-related companies. What's the reason behind? Are we going to consider more acquisition or investments in this space for coming quarters? Thank you. 首先,我一直说游戏是B站的主业之一。 我们做游戏并不是把它作为一种变现的手段, 而是我们是在做游戏的内容。

So I've always say that a game is one of the most important business for Bilibili because for us

it's not only just a monetization, it's also a very important component of our content. And there's just great synergies between our game offerings as well as our video game-related video content. And for Bilibili, for this particular game business, It's just very natural as long as we're starting to offer better content, the monetization just happens very naturally.

Yes, and I think especially the future development and growth of this industry will be a big thing. I think in the next few years, the space of this industry is likely to be increased.

So second of all, we think for game industry, there's still plenty of room for growth. I believe that in the next few years, there could be multiple times growth for this segment. So I personally take great care and put in a lot of efforts in looking into this market.

It has always been one of the top three in terms of games. In the field of live streaming, it has always been one of the top three in terms of games. For example, most of the game developers in our industry have a collaboration with us. They are collaborating with us in the field of streaming and advertising. So, many of our departments are working in the game industry.

And for Bilibili, it's not just game department is dealing with or facing the game industry. It's across all business department, and it's through our whole company. For example, game-related video content has always been our top three content verticals. And for our live broadcasting, game-related live broadcasting is our number one content on our platform. And we are also working with the majority of the game content developers in this industry, establishing close partnerships.

Of course, the most important thing for us now is that we are launching this business. Now we actually have a very large income from the company. It is also a business that we are currently doing more maturely.

And for the game distribution business, currently it's playing a very important role in our business and it's also contributing a very decent portion of our revenue.

Yes, so why do we want to invest in this field? It's actually for strategic cooperation. As I just mentioned, many departments and businesses in our company have various types of cooperation with the gaming industry.

So why we want to invest in this area? Because we wanted to establish strategic collaborations. Like I mentioned, there's multiple departments that's currently working in the game space. So the reason why we invest in this area is hoping to further enhance our partnership across different legs of our business.

Yes, for example, our investment initiative is because we have some good partnerships in the field of game distribution and game product distribution. Therefore, all the investments we make in the field of games are actually based on strategic cooperation

So for example, the investment we made in Shindong is because we see a lot of synergy and collaboration in terms of game distribution. So all of the investment that we make has a prior... prior purpose of establishing strategic collaboration.

And that goes with the same with our investment in other area.

The purpose is hoping to achieve business collaboration and achieve business synergies across different park departments.

Your next question comes from the line of Daniel Chen of J.B. Morgan. Please ask your question.

I would translate myself. My question... is on the, I would say, more on the product side and also content side. So as we target to reach 400 billion MAU by 2023, just wondering what's our plan in 2021 in terms of product feature innovation and content genre expansion. Thank you.

Bilibili's user growth is driven by the content ecosystem. That is, through us, So Bilibili's growth model is content ecosystem driven, and essentially is through our content creator producing

more and more high-quality content across different content verticals and attract more users. And what we are, what we have been constantly doing is to build such platforms to keep attracting more content creators.

In the past few years, we have been making more and more young people interested in this kind of product. We are making more and more advantages. For example, from the earliest from animation games to life, entertainment, and knowledge, including digital products. And then, step by step, our products are getting richer and richer, and the content in these products is getting better and better. So, in the future, we will also think like this. We will expand the richness of the products, improve the quality of the content, and then expand the number of creators.

So what we have been doing is to focus on the categories that can attract young users, can resonate with young generations. And over the year, we have established unparalleled leadership in categories like games, lifestyle, entertainment, knowledge, and digital products. And step by step, we continue to build more and more diversity of content and more and more high quality content. As we move forward, we'll be focusing on improving the diversity of that content and continue to select out more high quality content and to attract more wider range of content creators.

In 2021, in addition to continuing to increase, we already have advantages, such as the knowledge category, such as the content of food and life, we will also further expand the emotional category, such as the category of cars, such as the category of animals, including the category of fitness and health. Because these are also what we think And move forward for this year, while we continue to enhance our leader categories such as knowledge and pan-lifestyle related content,

We aim to further expand our content offering in categories like relationship, automotive, animal-related, fitness, and health. Those categories that fit the Gen Z plus interest points and also open up us to more wider demographics.

Okay.

Your next question comes from the line of Jalangshi F. Nomura. Please ask your question.

Thanks. Good evening, management. Thanks for taking my question. So my question is about the live broadcasting service. Can you give us some colors on the growth trend for your live broadcasting service? We saw an industry-wide slowdown in this live broadcasting revenue since last year. I just wonder what is the outlook for your live broadcasting service this year or the next few years I would like to ask about the live broadcast business. We saw that last year, the live broadcast industry in China had a significant slowdown. I would also like to ask about the latest trend of our Bilibili live broadcast business. How do you see the future of the live broadcast business this year and the future? Thank you.

I remember two years ago, I said that our live broadcast business will have a high-speed growth in the next few years. The reason I said that is because Bilibili's live broadcast is actually part of our PUGV content ecosystem. It is a natural extension of our PUGV content ecosystem. To a certain extent, I think for Bilibili, live broadcast is part of the video.

So two years ago, I forecasted our live broadcasting business will keep a very high growth rate. The reason why I said that is because I believe Bilibili's live broadcasting has always been a part of the PUGV content ecosystem. It's a natural extension of video content. And as a matter of fact, live broadcasting should be part of the video product.

So

Once again, that live broadcasting is a natural extension of Bilibili's overall content ecosystem. We don't need to deliberately expand the content categories. We don't necessarily have to pay extra high price to attract live broadcasting hosts. All of the content offerings is growing out of our content ecosystem. It's based on our content creators. It's based on the popular content on our video platform.

Yes, for example, I just mentioned that our game category is the top three in our video category. It's also the top three in our live broadcast category. Our game category's streamers and our game video's uploader have more than 40% overlap.

So like I mentioned earlier that on our video platform, game is our top three content verticals, and it's the number one content verticals on our live broadcasting business. And for the game categories, the live broadcasting host and the video content creator has 40% overlap.

And lifestyle and entertainment-related content is also very popular. And entertainment live broadcasting is also our second most popular live broadcasting content. Yes, so for Bilibili, our uploader is our streamer, and our streamer is also our uploader. In fact, live streaming can enhance the interaction between our video uploader and our fans. At the same time, the video can increase the flow of live streaming, and live streaming can solve In many cases for Bilibili, our content creators is our live broadcasting host and the video content, it's a mutual beneficial relationship.

We think the live broadcasting can help our content creators to establish better interaction with their followers, and their video submission can feed back to their live broadcasting traffic. And on the other hand, we think live broadcasting is a good avenue for content creators to monetize their traffic. So on Bilibili live broadcasting and video, they are born to be together. They have great synergies.

Actually, in my opinion, Bilibili's live broadcast is still in the early stage. It still has a great potential in the future. We now have more than 2 million subscribers. In my opinion, these more than 2 million subscribers should all become streamers.

So from my perspective, I think Bilibili's live broadcasting is still at the early stages and has great potential to grow. Currently, we have over 2 million monthly active content creators. In my view, pretty much everybody could potentially become our live broadcasting post. So there's great potential. great growth route ahead of us.

So I think the nature of live broadcasting was never just about monetization.

It's more of an ability. It's ability of a platform. It's also ability of a content creator. For the content creator, they can leverage live broadcasting to connect with their followers, to improve their relationship, and also they can gain monetary rewards.

This kind of ability, in my opinion, is very popular in the future. Just like each of our app owners will write a video introduction, each of our app owners will make a video cover.

So I believe for this type of capability should be widely adopted in the future. It's like how our content creator can write an introduction of the video, can create a cover page for a video. And probably in the next few years, every content creator would have the ability to do live broadcasting.

So I think Bilibili's live broadcast business is an internal one. It is a business that grows in our own content ecosystem. It has nothing to do with the competition of the outside world. Regardless of whether the competition of the live broadcast of the outside world is more intense, or how to develop it. We do not develop our live broadcast industry by grabbing the live broadcast of the outside world. We do it through our own content ecosystem.

And our live broadcasting business is really internally grown. It's growing from our content ecosystem. So the external environment would not really have any impact on our live broadcasting business because we don't need to acquire live broadcasting host from other platform. Everything is organically grow within our ecosystem.

Okay.

And that concludes the question and answer session. I would like to turn the conference back over to management for additional or closing comments.

Thank you once again for joining us today. If you have further questions, please contact me, Julia Young, Reliability Senior IR Director, or TPG Ambassador Relations. Our contact information for IR in both China and the U.S. can be found on today's press release. Have a great day. Bye-bye.