Bilibili Inc.

Good day and welcome to the Bilibili First Quarter 2023 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 Juliette Young, Executive Director of Investor Relations.

Please go ahead.

Thank you, Operator.

During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions. and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and end 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 call 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. Kali 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, Juliet. And thank you, everyone, for participating in our 2023 First Quarter Conference Call. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. Our top priority for 2023 is to improve our commercialization efficiency and narrow our losses. Our first quarter results demonstrate that we are making solid progress on these goals. First, we delivered over 20% young year revenue growth from our advertising business. Our growth margin improved to 22% in the first quarter. Up from 16%, a year ago, driving gross profit to increase by 37% year-over-year. Second, we continue to take measures to strengthen the execution of our expense controls. As a result, we reduced the total operating expenses in the first quarter by 11% year-over-year. Specifically, we cut our sales and marketing expenses by 30% year-over-year while continuing to expand our DAUs. These actions are proving effective in strengthening our bottom line. In the first quarter, we narrowed our net loss by 72% year-over-year. The progress we have made gives us confidence that we are on the right track to achieve our break-even target. While we focus on improving our financial matrix, we continue to attract more users and enhance the engagement levels of our community. In the first quarter, Our DAUs grow by 18% year-over-year to 93.7 million, while our MAUs reach 350 million, driving our DM ratio up to 29.7% from 27% a year ago. Our users continue to value our involving and diverse content. with the average user daily time span on Bilibili reaching 96 minutes in the first quarter. This brought the total time span on our platform up 19% year-over-year. As we move through the year, we will continue to pivot our DAUs in a cost-effective manner, stimulate our organization, and improve our overall commercialization efficiency. In this way, we can better allocate our resources to areas that further solidify our community. Namely, we are working to expand our creator base and help our creators make more money. We will also continue to invest in commercialization capabilities, including improving our ad infrastructure, further integrating live broadcasting and video operations, developing high-quality in-house games. as well as exploring AIGC opportunities in our content community, all of which will help us build a tighter community and unleash more commercial potential of our platform. With that overview of our progress, I'd now like to provide a brief update on our three core pillars, content, community, and commercialization. Starting with content. Our content content creators are an essential component of our ecosystem. We are dedicated to building a community that enables them to recognize and be rewarded. As we provide more user-friendly editing tools, professional content operations support, and improve the traffic distribution mechanisms that favor long-term retail content creators, we can increase the volume of content creation and attract more creators to our platform. In the first quarter, the number of our daily active content creators increased by 42%, with a 79% increase in monthly content submissions, both on year-over-year basis. By further integrating our commercial channels within our content ecosystem, we continue to empower more content creators to realize their commercial value through diverse avenues. Different content creators can monetize their talent from what they are good at, such as advertising, live broadcasting, online paid courses, and workshops. Leveraging our platform and support, over 1.5 million content creators earned income through multiple channels in the first quarter, an increase of 50% year-over-year. Among them, the number of content creators who earned income by channels other than our Cash Incentive Program increased by over 55% year-over-year. Going forward, we will continue to develop more channels and products to enable our content creators to achieve their commercial value. Our multi-scenario products, such as Story Mode, also contribute to attract broad attention from our users and to certify their diversified video watching preferences. For the first quarter, our total daily video views increased by 37% to 4.1 billion. StoryMod's daily video views grew by 82% and PUGB video views were up 26% in the first quarter, both on a year-over-year basis. Solid consumption trends in StoryMod are ongoing and continue to present more opportunities for accumulating our DAUs, enhancing community engagement levels as well as increasing our commercialization potential. In addition, we are exploring the integration of AI applications into our content ecosystem. Utilizing AIGC can enhance both content creation efficiency and our user experience. We believe it holds great promise and a tremendous potential for the video industry. Leveraging these evolving technologies, we can further enrich our content supply, empowering our creators to bring their vision to life more easily and effectively. We are also beta testing new features powered by AIGC to further enhance user experience. As for our community, our user base remains sticky and highly engaged. As for our community, our user base remains sticky and highly engaged. The users' average daily time spent on Bilibili continue to show stability at 96 minutes. Monthly interactions would also up 15% year-over-year to $14.2 billion. Our co-user cohort of official members reached $205 million in the first quarter, showing a 29% increase year-over-year. The 12-month retention rate for official members also remained around 80%. Our royal and active community allow us to explore more diverse and community-based exclusive products and services, further opening up more commercial opportunities. Now, let's review our commercialization, where we are improving how we monetize our offerings to drive margin expansion and narrow our losses. For the first quarter, our total revenues reached RMB 5.1 billion, Specifically, revenue from advertising business increased by 22% year-over-year. We continue to take proactive steps to improve our commercialization efficiency to support our top line and increase our gross margin at the company level. Looking at this in more detail. First, revenue from our vast business increased by 5% year-over-year to RMB 2.2 billion for the first quarter. Mainly driven by the growth of our live broadcasting business, We continue to integrate our live broadcasting capabilities within our video ecosystem. As one of the primary ways for creators to monetize their talent, more creators are making the transaction to live broadcasting hosts. In the first quarter, the number of monthly active live broadcasting hosts increased by 34% year-over-year, and the number of live broadcasting paying users increased by 15% year-over-year. We have also improved the gross margin of live broadcasting on both sequential and year-on-year basis, and we expect the trend will continue. By the end of March, we had 20.2 million premium members. Over 80% of these were annual or auto-renewed package subscribers, which represents users' strong trust in our brand and content offerings. Turning to our advertising business, our ad revenues increased by 22% year-over-year to RMB $1.3 billion in the first quarter. largely resulting from our ad infrastructure improvements. Over the past year, we have expanded and optimized our ad product offerings. At the same time, we have been continuously building our commercial database and improving our ad algorithm to drive better ROI for our ad clients. The results are encouraging. Performance-based ads revenue record nearly 50% young year growth in the first quarter, while brand ads and native ads also record positive young year growth. Our top performing verticals for the first quarter were GAM, digital products and home appliance, e-commerce, skincare and cosmetics, and automotive. are showing increased spending power and diversified consumption needs as they grow to new life stages. This dynamic is attracting more advertisers from broader vehicles to our platform, such as automotive and home appliances. Looking now at our game business. Revenue for the first quarter will only be $1.1 billion. As the rate of game approvals begins to normalize, we welcome more titles into our pipeline. We plan to release eight new titles in the domestic market in coming quarters. These include Cygames' highly anticipated game Pretty Debbie, Shanyao You Jun Shao Nu, Yaoguang Lu, our first self-development game in the female romance genre, and our self-development ACG card game Yi Lu Xi Er. In addition, We successfully co-published the Hongkai Star Rail in April and reversed in May, demonstrating our strong distribution capabilities. Turning to our IP directives and others, previously known as e-commerce and others, revenues for the first quarter was RMB 510 million, a decrease of 15% year-over-year. the decrease in revenue was mainly due to a proactive strategy shift to focus on increasing profitability. In the first quarter, margin for IP directives and others improved meaningfully by this approach, and we expect it will continue to improve going forward. Lastly, we recently published our 2022 annual ESG report, which highlights the value we create and bring to young generations in China. We are committed to shattering our social responsibilities, fostering a welcoming community for our users and creators, and working towards a sustainable future for all. In summary, the actions we have taken are effectively improving our financial performance and operating capabilities. While we continue to grow our dynamic community throughout this year, we will further execute our strategy and continue to expand our growth margin and narrow our losses. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the first quarter of 2023 and our outlook for the year. Total net revenues for the first quarter was RMB 5.1 billion, flat compared with the same period last year. Our total net revenue breakdown by revenue stream was approximately 43% VAT, 25% advertising, 22% mobile games, and 10% from our IP directive and others. Our cost of revenues decreased by 7% year-over-year, driving our gross profit to RMB 1.1 billion, up 37% year-over-year, while our gross margin was 22% up from 16% from the same period last year. With our tightly controlled cost structure, we expect to show continued margin improvements throughout 2023. Our total operating expenses were down 11% year-over-year and fell to 1% quarter-over-quarter. We are maintaining tight control of our expenses while we work to increase our commercial prospects. We cut sales marketing expenses by 30% year-over-year while our DAUs grow by 18% year-over-year. As a percentage of total revenue, sales marketing was 17% compared with 25% in the same period last year. G&A expenses was RMB 572 million, up 7% year-over-year. IMD expenses was RMB 1 billion, representing a 2% increase year-over-year. We expect to continue to strictly control our operating expenses going forward. Our net loss and adjusted net loss was RMB 630 million and RMB 1 billion, narrowing by 72% and 38% year-over-year. respectively. Our net loss ratio in the first quarter was 12%, narrowed from 45% from the same period a year ago. Turning to our capital allocation and the liability measurement, we currently have three outstanding CBs that totaled $1.6 billion. Among these, a total principal amount of $746 million of 2027 CBs has an upcoming pool rise, which are accessible through June of this year. As of March 31, 2023, we had cash and cash equivalents, time deposits, and short-term investments of 19.4 billion RMB, or 2.8 billion US dollars. We believe this amount is sufficient to cover all of our remaining convertible CBs and fund our future operations. including the put rights on our 2027 CBs. With that in mind, we reiterate our expectation for net revenue for the full year of 2023 to be between 24 billion RMB and 26 billion RMB. Thank you for your attention. We would now like to open the call to your questions.

Operator, please go ahead.

Thank you.

Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. A third party interpreter will provide consecutive interpretation for management statement during the Q&A session. Please note that English interpretation is for the convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Please limit your questions to one at a time. If you wish to have a follow-up question, please rejoin the queue.

This will take a few moments. Now we're going to take the first question. And the question comes from the line of Daniel Chan from JP Morgan. Your line is open.

Please ask your question.

Thank you, Ms. Guan. Give me a chance to ask a question. I have a question about this user.

I also see that although we have a lot of sales fees in a quarter, there is still a lot of growth in the DAO. But I see that the MAU is actually a little bit down. But this DAO, I would translate myself. So I have a question related to the user growth. So we saw that we have under the situation of lower self-marketing expense in the first quarter, we actually have a sustainable growth of the active user in the first quarter and a higher DAU to MAU ratio in the first quarter. So could management maybe share a little bit on the future user growth outlook and also strategy? Thank you.

From last year to this year, I have communicated with all of you. Our strategy for user growth now is to value quality more. The quality here refers to DAU.

Like I said, on previous earnings calls, we have adopted a more quality-oriented approach to user growth. And by quality, I'm specifically referring to DAU growth.

At this stage, I think improving commercial efficiency should be one of the most important tasks of the company. And DAU's health growth is an important opportunity to promote commercial efficiency.

At this current stage, one of our top priorities is to improve the efficiency of commercialization. High-quality BAU growth and user engagement are the cornerstone of strengthening commercialization.

Yes, because we now have this more value-added user growth strategy, it will inevitably put our focus from the past MAU to the current BAU. So we can see that in the past, In the past few seasons, in our so-called marketing fees With the reduction of the past The growth of our DAU is continuous The last one is the first season Our sales and marketing cost decreased by 30% But our DAU growth is still 18% to 93.7 million

This quality-oriented user growth strategy means that we have to pivot away from MAU toward DAU. And over the last several quarters, we have achieved sales and marketing expense reductions while our DAU number continued to climb up. In Q1, sales and marketing expense was down by 30%, but our DAU increased by 18% to $93.7 million.

In my opinion, compared to MAU, DAU should be able to show a more active user, and it can also show the potential of commercialization brought by the B站's number of users. So I think our next strategy will still be to focus on the growth of DAU. We will further improve the flow rate and activity of users based on the stability of MAU, and continuously improve our DAU.

So compared to MAU, DAU is a better indicator of user engagement and commercialization potential. And our strategy will continue to focus more on DAU going forward. And we'll use this indicator to monitor our performance and drive up average user data time spent and DAU MAU ratio.

Q1, our DAU to MAU ratio has been increased to 29.7%. Moreover, the activity and yearning of our current users is also continuously improving. Our average daily usage of our users is 96 minutes. I think we will certainly maintain this trend in the future. We will continue to increase the proportion of DAU to MAU to maintain our current user yearning.

Building on a stable MAU, we now want to further improve retention and engagement. In Q1, DAU to MAU ratio grew to 29.7%, and average user daily time spent reached 96 minutes. Going forward, we expect to see further increase in the DAU to MAU ratio.

From the perspective of the future, I have always believed that Bilibili is a continuous positive cycle. to continuously enhance the content supply and quality of our platform, and then the quality content will attract more users, and the community will keep users and improve the activity of users, and then further encourage creators to provide richer and higher quality content, and then such a positive cycle will make our users continue to grow, so

I think Bilibili's business model is one of a virtuous cycle because the content creators, the content supply, and the quality of content here means that we're able to attract high-quality users. And the community here means that those users will stay and they will remain engaged. And then that creates momentum for the content creators to generate even better content. So this is like a virtuous cycle. That's why looking at our user growth trend, I think we'll be able to continue to grow our DAU in the future.

Thank you. Now we're going to take our next question. Please stand by.

Next.

And the next question comes from the line of Vivian Zhang from China Renaissance. Your line is open. Please ask your question.

Hello, Mr. Guang. Thank you for asking my question. I have a question about advertising. I see that in our industry, there is a 22% share rate in advertising, which is higher than the industry. I would like to ask the company to introduce us how to improve our advertising products and efficiency, and whether we can give a perspective and judgment to the 23-year advertising market. In the near future, what kind of strategy will the advertising business use in such a market? In addition, we have recently seen a lot of video and live broadcasts in the stock market. I would like to ask how the development of the other products is going. Thank you. My question is regarding the advertisement. You deliver 22% worldwide growth in ad revenue, which was faster than the industry average. Can you show more how we improve our ad products and efficiency? And what is our view on 2022 ad market? Correspondingly, what kind of strategy should we adopt in this market? And lastly, recently we observed many e-commerce exploration in either the video format or live streaming format. What is our latest progress there? Thank you.

Thank you. This year, in the domestic advertising market, we estimate that from the beginning of Q1, it will still be warmer than last year. It is estimated that the growth rate will still be close to double. Therefore, Bilibili achieved a 22% growth rate in Q1, which is higher than the growth of the entire market. In fact, we have also gained market share in the process.

In Q1, we saw that advertising marketing in China started to warm up and is expected to achieve double-digit growth. But at Bilibili, our growth in Q1 was 22%, which I believe is greater than the industry average. And of course, we managed to capture more market share. If you look at performance ads specifically, the young year growth for us was higher than 50%, 5-0. 在用户增长的刚才陈薇也提到,在我们DAU跟用户增长持续健康的大前提下,我们依旧对今年整体的广告保持持续增长是特别有信心的。 在此的话呢,其实我会特别的关注就是一横的弥重,以及社区内交易消费繁荣后带来的新的机会。 So just like Mr. Chen mentioned, in the context of healthy DAU growth, we're very confident that this will feed back into our advertising revenue growth. And specifically, I think our ad business is driven by both horizontal and vertical improvements, as well as by new opportunities that come with vibrant transactions in our communities.

One of them, in fact, I would understand as further attention to the technical capabilities and data capabilities of China and Taiwan, which will further enhance our advertising efficiency. First of all, in terms of the ability to calculate, we will continue to pay attention to the coverage of depth transformation. For example, in the game industry, we have increased the coverage rate of consumption by more than 35%. We can also see that the increase in ECPM inches is particularly obvious.

By horizontal improvement, I'm referring to strengthening technical and data capabilities on the middle platform for greater ad efficiency. First, algorithm optimization can help increase the ratio of so-called deep conversion, which commands higher ECPM than shallow conversion. Take game industry, for example, the ratio has now increased to 35%.

In addition, by increasing business traffic, we will start to pay more attention to increasing business traffic. Second, we want to increase the supply of commercial traffic.

User's commercial behavior is now one of the indicators we monitor for traffic management. We want to ensure a sound user experience while leveraging the user LTV model to make dynamic adjustments in the ad load.

The third point is data construction. We will pay more attention to establishing a scientific marketing methodology. Last year, we proposed the Mates model. Thank you.

Thirdly, data infrastructure is also essential. We've established a science-backed marketing methodology. In 2022, we put forward the MATES model, which helps clients refine their advertising plans prior to ad purchase and then help them measure the outcome afterwards. This model was further validated in the auto and FMCG sector in Q1. And lastly, AIGC will also contribute to ad operation and conversion efficiency. So that's what I'm talking about when I said horizontal improvement by the middle platform.

Yizhong will establish, we established six key vertical industries last year, that accurately match different industries in B站's advertising model. Here, I can give two more examples.

As a vertical improvement, starting last year, we've been building and creating tailored models for six key industries so that their ads can target the right users at B2B. Here are two examples. 第二例子是游戏。 B站是大家比较认知的国内最活跃,接着浓度最高,最高价值人群的一个游戏社区。

In Q1, we found that the number of users who can watch video games every day at the mobile end exceeded 40%. Therefore, we have deeply bound the business departments such as game content, game streaming, and game advertising. Now we can achieve the effect of the customer's depth transformation and brand promotion at the same time. For instance, gaming. Bilibili is known for our concentration of highly active, high-value gamers. In Q1,

More than 40% of our mobile users watched game videos or live broadcasting on a daily basis. And our teams responsible for game content, game distribution, and game advertising now work closely together towards shared goals, which paves the way for better than expected in-depth user conversion and branding outcomes. The video views for our latest game, Hong Hai Star Rail, in the initial two weeks is 3.7 times impact for the same time frame. And as a result, the game distribution and ad revenue are also higher than Jinshan Impact over that same time frame in the first week.

The second case is the e-commerce industry. We conducted in-depth data cooperation and advertising cooperation with Ali, Pinduoduo, and Jindong. The efficiency has been maximized. In Q1, we can see that the revenue has increased by more than 110%. Thanks to our data partnerships with Alibaba, PDD, and JD, ad efficiency has improved meaningfully, with Q1 revenue growing by more than 110%.

2018 Shopping Festival with a well-rounded marketing matrix including Sparkle, branding ads, e-commerce, and performance ads will project that our revenue could potentially triple or even quadruple. 除此以外的话,在数码快销包括汽车等等一站生态品类优势的领域,我们在未来的机会里面我们还是特别有信心能持续健康的增长。 And for our verticals, electronics, FMCG, and auto sector, we're confident that we'll be able to continue with the trend of healthy growth going forward.

之后的话,您也提及了视频跟直播带货, 其实在我们的角度更愿意把它思考成在社区里, 就是交易繁荣带来的广告收入的增量的机会, 以及给UP主的收入带来新的路径的机会。 At the beginning of last year, when all of our content platforms achieved B-Huan e-commerce, we chose and insisted on doing a big open ring. We started to involve all e-commerce platforms with Bilibili's eco-system at that time. The purpose is that we actually hope to build users in the Bilibili community to carry out consumption of a kind of mind and security in the Bilibili transaction of a kind of central stage ability.

With regard to video and live broadcasting e-commerce, I think of it as incremental growth opportunities for both ad revenue and content creators' incomes. This is the result of vibrant transactions in our community. Since last year, as all the other content platforms were building closed-loop e-commerce systems, we have remained committed to building an open ecosystem that is connected with all the other e-commerce sites out there. It is about shaping the user's mindset to view Bilibili as a place for shopping and to foster their capacity for transactions here.

Q1, we can see that there are more than 10 million users in Japan in terms of consumer goods. We also have a product that is a commercial product with two effects. Q1 can see that the advertising income brought by this is 30% of the advertising income in terms of effect.

The performance in Q1 exceeded our expectations. In Q1, there were over 10 million users placing e-commerce orders on Bilibili every day, and we also launched a dual performance product that facilitates both wishlisting and transactions, which accounted for about 30% of our performance ads in Q1. 同时,贷货其实也是

up to show you that you don't seem to look in现在的平均每个月有超过五万的up主常是在b站上进行交易消费带货的尝试在品类上我们也初步跑通了美妆食品的数码品类等在b站上的投放广告形态的模式未来的话在b站的生态持续繁荣的情况下 我们也会进一步的释放交易跟消费的势能。 以上就是刚才最后您提到的视频跟直播带货, 我们怎么看这个问题。 E-commerce is also a new income stream for content creators.

About 50,000 content creators engaged in e-commerce sales on a monthly basis in Q1, and there's now a smooth e-commerce workflow for categories such as cosmetics, food, and electronics. Going forward, the momentum for consumption and transactions will get even stronger at B2BD. So that's my take on how video and live broadcasting e-commerce will evolve on the platform.

Thank you. Now we're going to take our next question.

Go ahead.

Just give us a moment.

And the next question comes from Lan of Lincoln Cone from Goldman Sachs. Your line is open. Please ask a question.

Hello, thank you, Mr. Guan. My question is about the live broadcast. We can see that the growth of the live broadcast business is relatively fast. Can you share with us the future strategy and outlook of the live broadcast business? How do you see the fusion between live broadcast and live broadcast? And we also talked about the continued improvement of the efficiency of live broadcast. What kind of trend will we see in the future? Thank you very much for taking my question. So the question is about the live streaming business. We've been seeing a relatively quickly growing business for live streaming. How should we think about the future strategy and outlook, especially in terms of the integration of our live streaming and on-demand, as well as the overall gross margin trend for the live streaming business? Thank you.

We've always said that live streaming is a natural extension of our video ecosystem. So operationally, we have always considered live broadcasting as an integral whole of our total operations. Yes, our live broadcasts and our videos always have the same number of users, and their categories of distribution are also highly overlapping. Moreover, our live broadcasts are the main streamers of our live broadcasts. Therefore, because of these characteristics, in the past year, the focus of our live broadcast business has been to constantly strengthen

So live broadcasting and videos on Bilibili sometimes often target the same demographics and there is a lot of overlap in category as well. And a lot of times the live broadcasters are video creators. And last year, I think last year, we have been focusing on the fusion and integration between live broadcasting and videos so as to empower the live broadcasting business with momentum from the video ecosystem.

I think the results of the live broadcast business are largely due to the progress of our live broadcast and video business integration. We can see that in Q1, the number of people who are both our video uploader and live streamer has increased by 38%.

I think the success we have been able to achieve with live broadcasting is precisely due to the efforts we have put in to integrate video and the live streaming ecosystems. In Q1, the number of video creators who also do live streams increased by 38%, and 90% of new live streamers were either average users or video creators.

Yes, so our video ecosystem has given our live streamers continuous vitality and rich new content. Our live streamers in Q1, the active number of live streamers, increased by 34%. The video ecosystem is a source of vitality and content for our live streaming business. And in Q1, the number of active live streamers increased by 34%.

and the number of MPUs grew by 15%. That's how we are empowering live streaming through our video ecosystem.

One more thing that our ecosystem has contributed to live streaming is the category. As you all know, Bilibili is a very, very rich video category platform. So this also makes our live streaming category very rich. For example, our virtual app owner category. This should be one of the characteristics of Bilibili. We are now a platform with the highest number of virtual app owners in China. It is the second-dimensional category of our video. It gives us such a motivation. Our virtual app owners have become one of the very important categories of our live broadcast. It is also an important source of our live broadcast income.

So Bilibili boasts very diversified categories of video content, and this has also contributed to the diversity of our live streaming content. One hallmark of that is our VTuber, which Bilibili is now home to the largest group of VTubers in China, and this is a natural extension of our ACG content from the video side. And today, VTubers are an important source of income for live streaming.

Yes, our virtual anchor is very active on the platform. And I think with AIGC technology, there will be more and more vivid virtual images appearing on our platform. And we can think that virtual anchors can be more humanized by interacting with users. I am very optimistic about this field.

The YouTubers are a very active group of live streamers on Bilibili, and with the help of AIGC, I think they will be able to generate even more vivid and lively images and content for the users, and the whole experience can be more interactive for the users as well. So I'm personally very optimistic about the prospects.

Yes, there are also some vertical areas and industries, for example, that may not have occurred to everyone, that is, the lawyer is very active in this live broadcast on the B station, that is, we have some lawyers on the B station, he is online to answer some legal questions about users. That is, if you look at it from the side, you will find it very interesting. There are all kinds of weird questions about the law. In Bilibili's live broadcast, our lawyers can give the audience a very professional answer.

And Bilibili also aims to be diversified and cover as many verticals as possible. And you wouldn't believe that, but lawyers and legal matters is a very popular category on Bilibili. Some lawyers, they also double as live streamers, our platform, answering legal questions to the viewers. Sometimes they have to answer very insignificant, inconsequential, tiny questions, whatever the viewers want to ask them. And it's also something that Bilibili offers.

For example, there are thousands of professional players in China. Many of them are doing live broadcasts on Bilibili. It may seem like a small hobby to everyone, but there are many players and fans of Bilibili in Bilibili. Even many players in Taiwan will interact with the audience on Bilibili.

Another example would be Go. We have roughly thousands of Go players in China, and the vast majority of whom have already joined the Bilibili community as live streamers. And even though it's a very niche hobby, they somehow ended up together on our platform. We even have a lot of Go players from the province of Taiwan interacting with our users on the platform.

I want to explain these examples Bilibili's live broadcast is a very rich and active content ecosystem. For us, it is not just a revenue business. It actually has a rich content and a very large potential. As we grow and grow in the field of video, our live broadcasts will also grow and grow.

These examples go to show that live streaming itself is very dynamic and diversified on BDBV. It's not just another revenue stream for us. It actually has a lot of content to offer and holds tremendous potential. And as our video business grows stronger and bigger, I believe our live streaming, live broadcasting business will also be able to expand and improve.

I said at the press conference that Bilibili's live broadcasts still have room for growth. I can still say that Bilibili's live broadcasts There is still more than double the growth space at this time. Because I think our video and live streaming can be further enhanced. In theory, every video user should be a live streamer. Every video uploader should be a live streamer. We can also see from the current data that more and more uploaders have earned income through live streaming. In the first quarter, we already have 700,000 video uploaders who have earned income through live streaming.

During previous earnings calls, I've said that live streaming business could potentially at least double. And I could say that again at this call, I believe live streaming has at least the potential to double at BPPB. And the diffusion between video and live streaming will continue to enhance. Theoretically, every user can be a video viewer as well as a live stream viewer. And every broadcaster can generate video content as well as live streaming content. And this is now also an important income stream for creators. In Q1, 700,000 creators were able to make the income from live streaming.

And I think live streaming and video are fully integrated, which also helps to increase the efficiency of our live streaming, which reduces our cost. As more and more video app owners and ordinary people become our anchors,

And fusion between videos and live streaming could also drive up our growth margin and reduce cost. As more ordinary users are doing live streams on their own and the cost of bandwidth being spread out even further, we believe the growth margin for live streaming business will continue to improve.

好,谢谢。 Thank you. Now we're going to take our next question.

Just give us a moment.

And the next question comes from the line of Lei Zhang from Bank of America Securities. Your line is open. Please ask your question. 管理层,晚上好。谢谢给我提问的机会。

Thank you very much for taking my question. I want to ask mainly about the monetization of the content creator, which we noticed that previously have some widely discussion on the internet. So can you share us more color on how we can improve either the total income or the commercial value for the content creators on Bilibili? Thank you.

What you said is actually an article in the media in April. The so-called stop-gap trend of Bilibili, I have been interested in reading this article. What I want to say is that I think this article is basically misleading. It says it's a stop-gap trend, but it mentions three stopgaps. First of all, Bilibili has millions of active stopgaps. He mentioned three of them. The second is that the three of them he mentioned, in fact, after he finished writing the manuscript, two of them are still continuing to update. That is, the three people he mentioned, two of them are still updating. So I think his article is very attractive on the title anyway, and it also triggered the transfer of other media. But his conclusion must be a mistake.

Well, I think you're referring to an article released in April about many, you know, the article claims that many creators on Bilibili stopped uploading new content to the platform. I read it myself, and I think this article is nothing but misleading. And this article mentioned three content creators who paused their video content updates out of, you know, millions of content creators we have on Bilibili, the article mentioned only three, and two of those three actually have released new content since then. And so I think even though the article has a quite clickbait title, the content and the reasoning in this article was misleading.

Of course, through this article, we also see another good thing, that is, everyone is indeed Because after this article was published, there was a lot of discussion. A lot of users were discussing this issue, and a lot of the media also used this article to discuss it, and then also pushed it to the hot search bar on Weibo. Of course, we also discussed some of the relevant things. But what I want to say here is that in fact, The commercialization of Bilibili has been greatly enhanced over the past year, and this can be reflected in the data.

I think this article was able to start a heated debate as proof that people are paying attention to BDBD very closely. And some media even went on to write derivative reports on this article. And that discussion ended up on the hot topic list of Weibo. And internally, we have been making a lot of efforts to improve commercialization for content creators at BDBD. And we have numbers to back that up.

In the past year, we have actually done a lot of work to help our app owners earn money through Bilibili. Through Bilibili, they can achieve their commercialization. In the first quarter of this year, there are 1.5 million app owners. 1.5 million app owners get income through Bilibili. This is 50% of the same growth as last year. Moreover, they get We have done a lot of work to help our content creators monetize.

In Q1 alone, 1.5 million content creators earned an income on Bilibili up by 50% year-on-year, and the amount they're making from advertising, live streaming, and also user payment has also increased meaningfully.

In the media article, he mentioned that our creative experience Compared to the past, it's not as much as it used to be. And then this will trigger a lot of ups and downs. In fact, this is also a misguidance. That is, we are with that one. That is, the outside world has also said many times that this creative incentive is actually used to give those who are not capable of earning money. We let him have a little income. This is a platform for him. You can think of it as a subsidy for him. Then we are mainly facing those less than 10,000. And the less than 10,000, he gradually we are helping him to find a way to fight the regime. So that's what I think. This is also a misguidance of that article. In fact, the creative opportunity for the income of our mainstream abu group. He has no impact.

And in this article, it is also said that BDBD is cutting incentives for content creation, which could have some ramifications. This is, again, very misleading because the incentive programs we have is only for content creators with fewer than 10,000 followers. Basically, we provide them the subsidy to help them tide over the initial period of content creation when they did not have the ability to generate an income for themselves. And for the content creators that have more than 10,000 followers, we help them find the tools to make money on their own. So this incentive program doesn't really matter for the vast majority of the creators on our platform.

Of course, I think the money earned by the app owners Our company's most important job is that in the past, whether it was in the fire system, which is to help the owner of the app to receive business orders, including the one we mentioned just now, is that we let more of the video of the owner of the app become the anchor, so that the live broadcast can bring them income. It is in these works that we will continue to strengthen, because I have always thought that it is only to let Helping our creators monetize has always been a priority in our work. We have established a SPARQL system to help content creators get commercial deals.

We have also been empowering video creators to switch to live streaming so that they can make an income there. So this effort will never stop. We'll step up our efforts to help them make an income. That's because we believe only when those content creators don't have to worry about money, they will be able to invest more energy into generating high-quality content.

Finally, I would like to say that this time, The discussion about this media article actually represents that our users really care about our app owners and like our app owners. Of course, it also represents their concern for Bilibili. Actually, Bilibili, I think everyone still believes in Bilibili. In the past ten years, Bilibili has been able to gather so many excellent app owners. It's actually because we've been We insist on high quality content. We always believe in the creator's power. This is the guiding principle that we have been using for a long time. It is also because of this that so many app owners can gather here with us. Because we are good enough to these app owners, because we know these app owners well enough, we can gather such a high quality content ecosystem. So this article is able to trigger such a discussion and shows that users actually care a lot about the creators and the Bilibili platform.

And the reason why we're able to have such a high concentration of high caliber creator is because we believe in the value of high quality content and the power of creators. This has always been and will always be a guiding principle in our operation. We have always treated creators nicely because we understand their needs and we are going to spare no effort in supporting those creators and helping them earn an income that they deserve. This is a work we'll carry out continuously.

好,谢谢。 谢谢瑞总的分享。 Thank you. Thank you. Now we're going to take our next question. Just give us a moment.

Next question, please.

And the next question comes from the line of Xue Ting Zhang from CICC. Your line is open. Please ask the question. 关于前晚上好,这些是我提问。

Good evening, management. Thank you for taking my question. And my question is mainly about the game building. You mentioned in your prepared remarks that BD has some newly approved games. So can management share with us the game pipeline and what's your game's strategy and outlook? Thank you.

This year is indeed a big year for games. Because the domestic version is being released every month. And the imported version has been released twice since last year. So, in this way,

This year is going to be a big year for the gaming industry. Licenses for domestic games are now issued regularly every month. For imported games, two batches of licenses have been handed out since last year, which is great not just for our game distribution business, but also for advertising and live broadcasting as well.

In the next several quarters, we have 13 games to be launched at home and abroad, eight of which have acquired domestic game licenses and will be published in China.

Five of them will be published overseas.

And then we have two more self-made games that will meet you in the summer. One is a vintage female-like game called Yaoguang Road, and the other is our self-made 20 yuan card game Slud.

We are now preparing for the launch of a high-profile game we distribute called Pretty Derby, and we are now working around the clock to finish the last bits of localization work for this game before launch. And we also have two self-developed titles, Alkaline Records, which is a female romance game, and also Eruso, an ACG card game, which will be published later this summer.

Because there is a lot of supply of games this year, so we will also find that the advantage of Bilibili in terms of launch and shipping should be further reflected. It also reflects that we are the most gathered Chinese young users and the most gathered platform for players in the second dimension. For example, in April, the first day of Bilibili's Miha Oil's Honkai Star Railway download was 2.8 million points. Bilibili is home to the largest group of ACG gamers and fans and also boasts a very young user base, which makes us the core channel for distributing ACG games.

Since the beginning of the year, we've successfully distributed many ACG titles, proving our worth once again. Honkai Star Reel by Nihayu is a great example of that, which achieved a whopping 2.8 million first day download on Bilibili, setting a new record for our game distribution business. And just yesterday, our distribution game, Reverse 1999, was published with great initial feedback.

A lot of people are also concerned about the progress of our self-produced games. As I mentioned earlier, there are two games that we are about to launch, which are the self-produced games, and we are also preparing for the next batch of self-produced games. But for self-produced games, you should know that the most important thing for games now is to go with the premium strategy. to go with the gold standard. So the development cycle for the self-made games will be longer. Basically, a self-made game will still take three years. So the next batch of self-made games will have to be released at least in the second half of the year. Then we will meet with everyone. As for the self-made games, we will stick to the gold standard that we proposed two years ago. It's a global strategy. In terms of self-made games, we will focus on the high-quality games. Then we will create a strategy that is the first in the segment category, and stick to the long-term operation. So we will work hard on this.

Many people are interested in our self-developed games. Two examples I mentioned just now are our Capeland Records and Eruso, and we have more pipeline games under development. but since self-developed games, we only want to be delivering high-quality games, so the cycle will be relatively long, and each game will take about three years for development, and the next self-developed game will probably be published around the year after next. We will stick to the strategy of self-developed quality games and global distribution. In terms of game genres, we will focus more on our forte, such as ACG card games, Our goal is to develop top-ranking games in niche segments and manage them well over a long life cycle, and we're putting the hard effort needed to achieve that success on this front.

Thank you.

Thank you. Now we're going to take our last question. Please stand by. And the question comes from the line of Felix Liu from UBS. Your line is open. Please ask your question.

Thank you, Ms. Guan, for accepting my question.

I would also like to congratulate our company on the significant improvement and reduction in labor costs. I would like to ask what measures the company has taken in terms of operation Thank you management for taking my question and congratulations on the notable improvements on GDP margin and overall bottom line. Can management elaborate a little bit what measures you have taken? and more drivers for future GDP margin and loss-narrowing drivers. Thank you.

This is Sam. I will take your question. Our focus of this year is very clear to improve the growth margin. In the same time, we will reduce our net loss. So in the first quarter, our growth profit year-over-year growth grow about 37%, and net loss narrowed considerably about 72% year-on-year and 58% quarter-over-quarter. From the revenue side, we continue to improve the quality of the revenue. The advertising business, as we mentioned, grows by 22% year-over-year, so it's a high-margin business. And as a cost end, we still keep improving our operational efficiency and achieve a year-on-year decrease of 7% of total cost. And so that results, the GP increased by 37%, and the GP margin improved to 22% compared with 16% last year. So, we use the technology upgrading to operational management. The band-wide costs, for example, continue to decline, down about 16% year-on-year and 12% quarter-over-quarter. And other fixed costs, for example, labor and other operational costs, also fall about a certain percent year-on-year and quarter-over-quarter. From the expense side, you already saw the overall operating expenses decrease significantly, about 11% year-over-year, and DAOs increased by 18% year-over-year. We will keep actively controlling our operating expenses, especially the marketing expenses, which are already down about 30% year-over-year in Q1. I think that trend will continue. in the foreign quarters. So we are quite confident that we've controlled their cost and expense. Our gross profit margin will improve quarter-over-quarter many of this year. And the operating expenses will also show a meaningful year-on-year decline and to achieve a further narrowing of our net loss. Thank you.

Thank you. Thank you.

And that concludes that question and answer session. Thank you once again for joining Bilibili's first quarter 2023 financial results and business update conference call today. If you have any further questions, please contact Juliette Young, Bilibili's executive IR director or PR center financial communications. Contact information for IR in both China and the US can be found on today's press release.

Have a great day. you Thank you. Thank you.

Good day and welcome to the Bilibili first quarter 2023 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 Juliette Young, Executive Director of Investor Relations.

Please go ahead.

Thank you, Operator.

During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and end this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with 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 call 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. Kali 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, Juliette. and thank you everyone for participating in our 2023 first quarter conference call. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. Our top priority for 2023 is to improve our commercialization efficiency and narrow our losses. Our first quarter results demonstrate that we are making solid progress on these goals. First, We delivered over 20% young year revenue growth from our advertising business. Our gross margin improved to 22% in the first quarter, up from 16% a year ago, driving gross profit to increase by 37% year-over-year. Second, we continue to take measures to strengthen the execution of our expense controls. As a result, we reduced the total operating expenses in the first quarter by 11% year-over-year. Specifically, we cut our sales and marketing expenses by 30% year-over-year while continuing to expand our DAUs. These actions are proving effective in strengthening our bottom line. In the first quarter, we narrowed our net loss by 72% year-over-year. The progress we have made give us confidence that we are on the right track to achieve our break-even target. While we focus on improving our financial matrix, we continue to attract more users and enhance the engagement levels of our community. In the first quarter, our DAUs grew by 18% year-over-year to 93.7 million. while our MAUs reached 350 million, driving our DM ratio up to 29.7% from 27% a year ago. Our users continue to value our involving and diverse content, with the average user daily time spent on Bilibili reaching 96 minutes in the first quarter. This brought the total time spent on our platform up 19%, year-over-year. As we move through the year, we will continue to pivot our DAUs in a cost-effective manner, stimulate our organization, and improve our overall commercialization efficiency. In this way, we can better allocate our resources to areas that further solidify our community. Namely, we are working to expand our creator base and help our creators make more money. We will also continue to invest in commercialization capabilities, including improving our ad infrastructure, further integrating live broadcasting and video operations, developing high-quality in-house games, as well as exploring AIGC opportunities in our content community, all of which will help us build a tighter community and unleash more commercial potential of our platform. With that overview of our progress, I'd now like to provide a brief update on our three core pillars, content, community, and commercialization. Starting with content. Our content, content creators are an essential component of our ecosystem. We are dedicated to building a community that enables them to recognize and be rewarded. As we provide more user-friendly editing tools, professional content operation support, and improve the traffic distribution mechanisms that favor long-term retail content creators, we can increase the volume of content creation and attract more creators to our platform. In the first quarter, the number of our daily active content creators increased by 42%, with a 79% increase in monthly content submissions, both on year-over-year basis. By further integrating our commercial channels within our content ecosystem, we continue to empower more content creators to realize their commercial value through diverse avenues. Different content creators can monetize their talent from what they are good at, such as advertising, live broadcasting, online paid courses, and workshops. Leveraging our platform and support, over 1.5 million content creators earn income through multiple channels in the first quarter. an increase of 50% year-over-year. Among them, the number of content creators who earn income by channels other than our cash incentive program increased by over 55% year-over-year. Going forward, we will continue to develop more channels and products to enable our content creators to achieve their commercial value. Our multi-scenario products, such as Story Mode, also contribute to attract broad attention from our users and to satisfy their diversified video watching preferences. For the first quarter, our total daily video views increased by 37% to 4.1 billion. StoryMoth daily video views grew by 82% and the PUGB video views were up 26% in the first quarter. Both are year-over-year basis. Solid consumption trends in storage mode are ongoing and continue to present more opportunities for accumulating our DAUs, enhancing community engagement levels as well as increasing our commercialization potential. In addition, we are exploring the integration of AI applications into our content ecosystem. Utilizing AIGC can enhance both content creation efficiency and our user experience. We believe it holds great promise and a tremendous potential for the video industry. Leveraging these involving technologies, we can further enrich our content supply, empowering our creators to bring their vision to life more easily and effectively. We are also beta testing new features powered by AIGC to further enhance user experience. As for our community, Our user base remains sticky and highly engaged. As for our community, our user base remains sticky and highly engaged. The users' average daily time spent on Bilibili continued to show stability at 96 minutes. Monthly interactions would also up 15% year-over-year to 14.2 billing. Our co-user cohort of official members reached 205 million in the first quarter, showing a 29% increase year-over-year. The 12-month retention rate for official members also remained around 80%. Our loyal and active community allowed us to explore more diverse and community-based exclusive products and services, further opening up more commercial opportunities. Now, let's review our commercialization, where we are improving how we monetize our offerings to drive margin expansion and narrow our losses. For the first quarter, our total revenues reached RMB 5.1 billion. Specifically, revenue from our tithing business increased by 22% year-over-year. We continue to take proactive steps to improve our commercialization efficiency to support our top line and increase our growth margin at the company level. Looking at this in more detail. First, revenue from our vast business increased by 5% year-over-year to RMB 2.2 billion for the first quarter, mainly driven by the growth of our live broadcasting business. We continue to integrate our live broadcasting capabilities within our video ecosystem As one of the primary ways for creators to monetize their talent, more creators are making the transaction to live broadcasting hosts. In the first quarter, the number of monthly active live broadcasting hosts increased by 34% year-over-year, and the number of live broadcasting paying users increased by 15% year-over-year. We have also improved the gross margin of live broadcasting business on both sequential and year-on-year basis, and we expect the trend will continue. By the end of March, we had 20.2 million premium members. Over 80% of these were annual or auto-renewed package subscribers, which represents users' strong trust in our brand and content offerings. Turning to our advertising business, our ad revenues increased by 22% year-over-year to RMB $1.3 billion in the first quarter, largely resulting from our ad infrastructure improvements. Over the past year, We have expanded and optimized our ad product offerings. At the same time, we have been continuously building our commercial database and improving our ad algorithm to drive better ROI for our ad clients. The results are encouraging. Performance-based ad revenue record nearly 50% young year growth in the first quarter, while brand ads and native ads also record positive young year growth. Our top performing verticals for the first quarter were GAN, digital products and home appliance, e-commerce, skincare and cosmetics, and automotive. Users are showing increased spending power and diversified consumption needs as they grow to new life stages. This dynamic is attracting more advertisers from broader vehicles to our platform, such as automotive and home appliance. Looking now at our game business. Revenues for the first quarter will only be $1.1 billion. As the rate of game approvals begins to normalize, we welcome more titles into our pipeline. We plan to release eight new titles in the domestic market in coming quarters. These include Cygames' highly anticipated game Pretty Debbie, Shanyao Youjun's Shaonyu, Yaoguanglu, our first self-development game in the female romance genre, and our self-development ACG card game, Yi Lu Xi Er. In addition, we successfully co-published the Honkai Star Rail Ben Huai Xin Qiong Tie Dao in April and reversed 1999, Chong Fan Wei Lai 1999 in May, demonstrating our strong distribution capabilities. Turning to our IP directives and others, previously known as e-commerce and others. Revenues for the first quarter was RMB 510 million, a decrease of 15% year-over-year. The decrease in revenue was mainly due to a proactive strategy shift to focus on increasing profitability. In the first quarter, margin for IP directives and others improved meaningfully by this approach and we expect it will continue to improve going forward. Lastly, we recently published our 2022 annual ESG report, which highlights the value we create and bring to young generations in China. We are committed to shattering our social responsibilities, fostering a welcoming community for our users and creators, and working towards a sustainable future for all. In summary, the actions we have taken are effectively improving our financial performance and operating capabilities, While we continue to grow our dynamic community throughout this year, we will further execute our strategy and continue to expand our growth margin and narrow our losses. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the first quarter of 2023 and our outlook for the year. Total net revenues for the first quarter was RMB 5.1 billion, flat compared with the same period last year. Our total net revenue breakdown by revenue stream was approximately 43% VAS, 25% advertising, 22% mobile games, and 10% from our IP directive and others. Our cost of revenues decreased by 7% year-over-year, driving our gross profit to RMB 1.1 billion, up 37% year-over-year, while our gross margin was 22% up from 16% from the same period last year, With our tightly controlled cost structure, we expect to show continued margin improvements throughout 2023. Our total operating expenses were down 11% year-over-year and fell to 1% quarter-over-quarter. We are maintaining tight control of our expenses while we work to increase our commercial prospects. We cut sales and marketing expenses by 30% year-over-year while our DAUs grow by 18% year-over-year. As a percentage of total revenue, sales marketing was 17%, compared with 25% in the same period last year. G&A expenses was RMB 572 million, up 7% year-over-year. R&D expenses was RMB 1 billion, representing a 2% increase year-over-year. We expect to continue to strictly control our operating expenses going forward. Our net loss and adjusted net loss was RMB 630 million and RMB 1 billion, narrowing by 72% and 38% year-over-year, respectively. Our net loss ratio in the first quarter was 12%, narrowed by 45% from the same period a year ago. Turning to our capital allocation and liability management, We currently have three outstanding CBs that totaled $1.6 billion. Among these, a total principal amount of $746 million of 2027 CBs has an upcoming pool rise, which are accessible through June of this year. As of March 31, 2023, we had cash and cash equivalents, time deposits, and short-term investments of 19.4 billion RMB or 2.8 billion USD. We believe this amount is sufficient to cover all of our remaining comparable CBs and fund our future operations, including the put rights on our 2027 CBs. With that in mind, With that in mind, we reiterate our expectation for net revenue for the full year of 2023 to be between 24 billion RMB and 26 billion RMB. Thank you for your attention. We would now like to open the call to your questions.

Operator, please go ahead.

Thank you.

Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. A third party interpreter will provide consecutive interpretation for management statement during the Q&A session. Please note that English interpretation is for the convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Please limit your questions to one at a time. If you wish to have a follow-up question, please rejoin the queue.

This will take a few moments. Now we're going to take the first question. And the question comes from the line of Daniel Chan from JP Morgan. Your line is open.

Please ask your question.

Thank you, Mr. Guan. Give me a chance to ask a question. I have a question about this user.

I also see that although we have a lot of sales fees in a quarter, there is still a lot of growth in the DAO. But I see that the MAU is actually a little bit down. But this DAO, I would translate myself. So I have a question related to the user growth. So we saw that we have under the situation of lower self-marketing expense in the first quarter, we actually have a sustainable growth of data active user in the first quarter and higher DAU to MAU ratio in the first quarter. So could management maybe share a little bit on the future user growth outlook and also strategy? Thank you.

From last year to this year, I have communicated with everyone. Our strategy for user growth is to pay more attention to quality. The quality here refers to DAU.

Like I said on previous earnings calls, we have adopted a more quality-oriented approach to user growth. And by quality, I'm specifically referring to DAU growth.

At this stage, I think improving commercial efficiency should be one of the most important tasks of the company. And DAU's health growth is an important opportunity to promote commercial efficiency.

At this current stage, one of our top priorities is to improve the efficiency of commercialization. High-quality BAU growth and user engagement are the cornerstone of strengthening commercialization.

Because we now have this more value-added user growth strategy, it will inevitably put our focus from the past MAU to the current BAU. So we can see that in the past, In the past few seasons, in the case of our sales fees and the reduction of the past, the growth of our DAU has continued. In the first quarter, the cost of sales and marketing decreased by 30%, but the growth of our DAU is still 18% to 93.7 million.

This quality-oriented user growth strategy means that we have to pivot away from MAU toward DAU. And over the last several quarters, we have achieved sales and marketing expense reductions while our DAU number continued to climb up. In Q1, sales and marketing expense was down by 30%, but our DAU increased by 18% to $93.7 million.

In my opinion, compared to MAU, DAU should be able to show a more active user, and it can also show the potential of commercialization brought by the B站's number of users. So I think our next strategy will still be to focus on the growth of DAU. We will further improve the flow rate and activity of users based on the stability of MAU, and continuously improve our DAU.

So compared to MAU, DAU is a better indicator of user engagement and commercialization potential. And our strategy will continue to focus more on DAU going forward. And we'll use this indicator to monitor our performance and drive up average user data time spent and DAU MAU ratio.

QE, our DAU to MAU ratio has increased to 29.7%. Moreover, the activity and yearning of our current users continues to increase. Our users use 96 minutes per day on average. I think we will continue to maintain this trend in the future. We will continue to increase the proportion of DAU to MAU to maintain our current user yearning.

Building on a stable MAU, we now want to further improve retention and engagement. In Q1, DAU to MAU ratio grew to 29.7%, and average user daily time span reached 96 minutes. Going forward, we expect to see further increase in the DAU to MAU ratio.

From the perspective of the future, I have always believed that Bilibili is a continuous positive cycle. to continuously enhance the content supply and quality of our platform, and then the quality content will attract more users, and the community will keep users and improve the activity of users, and then further encourage creators to provide richer and higher quality content, and then such a positive cycle will make our users continue to grow, so I think our future DAU will definitely have a trend of continuous growth in the next few years.

Going forward, I think Bilibili's business model is one of a virtuous cycle because the content creators, the content supply, and the quality of content here means that we're able to attract high-quality users. And the community here means that those users will stay and they will remain engaged. And then that creates momentum for the content creators to generate even better content. So this is like a virtuous cycle. That's why looking at our user growth trend, I think we'll be able to continue to grow our DAU in the future.

Thank you. Now we're going to take our next question. Please stand by.

Next.

And the next question comes from the line of Yiven Zhang from China Renaissance. Your line is open. Please ask your question.

Good evening, Ms. Wang. Thank you for answering my question. I have a question about advertising. We have 22% of the same rate in advertising in the first quarter, which is higher than the industry. I would like to ask the company to introduce how we can improve our advertising products and efficiency, and can we give a perspective and judgment on the 23-year advertising market? My question is regarding the advertisement. You delivered 22% worldwide growth in ad revenue, which was faster than the industry average. Can you show more color on how we improve our ad products and efficiency? And what is our view on 2020 3S market? Correspondingly, what kind of strategies shall we adopt in this market? And lastly, recently we observed many e-commerce exploration in either the video format or live streaming format. What is our latest progress there? Thank you.

Thank you. This year, in the domestic overall advertising market, we estimate that QE will still be warmer than last year. and it is estimated that the growth rate will be close to double. Therefore, Bilibili achieved a growth rate of 22% in Q1, which is higher than the growth of the entire market. In fact, we have gained market share further in this process. Among them, we can see that the growth rate of the advertising in the effect category is also close to 50%.

So in Q1, we saw that advertising marketing in China started to warm up and is expected to achieve double-digit growth. But at Bilibili, our growth in Q1 was 22%, which I believe is greater than the industry average. And of course, we managed to capture more market share. If you look at performance ads specifically, the year-on-year growth for us was higher than 50%, 5-0.

在用户增长的刚才陈玥也提到,在我们DAU跟用户增长持续健康的大前提下,我们依旧对今年整体的广告保持持续增长是特别有信心的。 在此的话呢,其实我会特别的关注就是一横的移种,以及社区内交易消费繁荣后带来的新的机会。

Mr. Chen, just like Mr. Chen mentioned, in the context of healthy DAU growth, we're very confident that this will feed back into our advertising revenue growth. And specifically, I think our ad business is driven by both horizontal and vertical improvements, as well as by new opportunities that come with vibrant transactions in our community. 其中一横呢,其实我会理解为就进一步重视中台的技术能力跟数据能力,

This will further improve our advertising efficiency. First of all, we will continue to pay attention to the coverage of deep conversion on the ability to calculate. For example, in the game industry, we have increased the coverage rate of this consumption by more than 35%. We can also see that the increase in ECPM inches is particularly obvious.

By horizontal improvement, I'm referring to strengthening technical and data capabilities on the middle platform for greater ad efficiency. First, algorithm optimization can help increase the ratio of so-called deep conversion, which commands higher ECPM than shallow conversion. Take gaming industry, for example, the ratio has now increased to 35%. 其次的话,在增加商业流量,我们会开始重视增加商业流量的供给。

Second, we want to increase the supply of commercial traffic.

User's commercial behavior is now one of the indicators we monitor for traffic management. We want to ensure the sound user experience while leveraging the user LTV model to make dynamic adjustments in the ad load.

The third point is data construction. We will pay more attention to the establishment of scientific marketing methods. Last year, we proposed the Mates model. Thank you.

Thirdly, data infrastructure is also essential. We've established a science-backed marketing methodology. In 2022, we put forward the MATES model, which helps clients refine their advertising plans prior to ad purchase and then help them measure the outcome afterwards. This model was further validated in the auto and FMCG sector in Q1. And lastly, AIGC will also contribute to ad operation and conversion efficiency. So that's what I'm talking about when I said horizontal improvement via the middle platform.

Yizhong will establish, we established six key vertical industries last year, that accurately match different industries in B站's advertising model. Here, I can give two more examples.

As a vertical improvement, starting last year, we've been building and creating tailored models for six key industries so that their ads can target the right users at B2B. Here are two examples. The first example is games.

B2B is the most active and highly valued gaming community in China. In Q1, we found that the number of users who can watch video games every day at the mobile end exceeded 40%. Therefore, we have deeply bound the business departments such as game content, game streaming, and game advertising. Now, it can be realized that customers can make the above-expected effect at the same time in user depth transformation and brand promotion. For instance, gaming. Bilibili is known for our concentration of highly active, high-value gamers. In Q1,

More than 40% of our mobile users watched game videos or live broadcasting on a daily basis, and our teams responsible for game content, game distribution, and game advertising now work closely together towards shared goals, which paves the way for better-than-expected in-depth user conversion and branding outcomes. The video views for our latest game, Honkai Star Rail, in the initial two weeks is 3.7 times that of Jinshan Impact for the same timeframe. And as a result, the game distribution and ad revenue are also higher than Jinshan Impact over that same timeframe in the first week.

The second case is the e-commerce industry. We have worked with Ali, Pinduoduo, Jindong, and other brands for in-depth data and advertising cooperation. We have maximized the efficiency. In Q1, we saw that the revenue grew by more than 110%. During this year's 618, we have completed the further marketing path with the collaboration of flower and fire brands, delivery and effect, and so on. We still expect to achieve three to four times the revenue growth.

As for e-commerce, thanks to our data partnerships with Alibaba, PDD, and JD, ad efficiency has improved meaningfully, with Q1 revenue growing by more than 110% year-on-year. During the June 18th Shopping Festival, with a well-rounded marketing matrix including Sparkle, branding ads, e-commerce, and performance ads, we project that our revenue could potentially triple or even quadruple.

For our verticals, electronics, FMCG, and auto sector, we're confident that we'll be able to continue with the trend of healthy growth going forward. In the end, you also mentioned video and live streaming. In fact, from our point of view, we are more willing to think of it as an opportunity to increase the amount of advertising revenue brought by trading prosperity in the community, as well as an opportunity to bring new paths to the income of the up group. In the beginning of last year, when all of our content platforms realized the e-commerce, we chose and insisted on opening up. With regard to video and live broadcasting e-commerce, I think of it as incremental growth opportunities for both ad revenue and content creators' incomes.

This is the result of vibrant transactions in our community. Since last year, as all the other content platforms were building closed-loop e-commerce systems, we have remained committed to building an open ecosystem that is connected with all the other e-commerce sites out there. It is about shaping the user's mindset to view Bidibidi as a place for shopping and to foster their capacity for transactions here.

Q1, we can see that there are more than 10 million users in Japan who are consuming goods at a low price. We also posted a commercial product with a double effect of planting and trading. Q1 can see that the advertising income brought by this is 30% of the advertising income as a result.

The performance in Q1 exceeded our expectations. In Q1, there were over 10 million users placing e-commerce orders on Bilibili every day, and we also launched a dual performance product that facilitates both wishlisting and transactions, which accounted for about 30% of our performance ads in Q1. 同时,贷货其实也是

up to show you that you don't seem to look in现在的平均每个月有超过五万的up主常是在b站上进行交易消费带货的尝试在品类上我们也初步跑通了美妆食品的数码品类等在b站上的投放广告形态的模式未来的话在b站的生态持续繁荣的情况下 我们也会进一步的释放交易跟消费的势能。 以上就是刚才最后您提到的视频跟直播带货, 我们怎么看这个问题。 E-commerce is also a new income stream for content creators.

About 50,000 content creators engaged in e-commerce sales on a monthly basis in Q1, and there is now a smooth e-commerce workflow for categories such as cosmetics, food, and electronics. Going forward, the momentum for consumption and transactions will get even stronger at B2BD. So that's my take on how video and live broadcasting e-commerce will evolve on the platform.

Thank you. Now we're going to take our next question.

Go ahead.

Just give us a moment.

And the next question comes from Lan of Lincoln Cone from Goldman Sachs. Your line is open. Please ask a question.

Thank you, Mr. Wang. My question is about the live broadcast. We can see that the growth of the live broadcast business is relatively fast. Can you share with us the future strategy and outlook of the live broadcast business? How do you see the integration of live broadcast and live broadcast and the continued improvement of the efficiency of live broadcast? What kind of trend will you see in the future? Thank you, Wenjun, for taking my question. So the question is about the live streaming business. We've been seeing a relatively quickly growing business for live streaming. How should we think about the future strategy and outlook, especially in terms of the integration of our live streaming and on-demand, as well as the overall gross margin trend for the live streaming business? Thank you.

We've always said that live streaming is an actual extension of our video ecosystem. So operationally, we have always considered live broadcasting as an integral whole of our total operation. Yes, our live broadcasts and our videos always have the same number of users, and their distribution categories are also highly overlapping. Moreover, our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts are our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our live broadcasts and our

So live broadcasting and videos on Bilibili sometimes often target the same demographics and there is a lot of overlap in category as well. And a lot of times the live broadcasters are video creators. And last year, I think last year, we have been focusing on the fusion and integration between live broadcasting and videos so as to empower the live broadcasting business with momentum from the video ecosystem.

I think the results of the live streaming business are largely due to the progress of our live streaming and video business integration. We can see that in Q1, the number of our live streamers and our video uploaders increased by 38%. And 90% of our new streamers are from our video uploader and our regular users.

I think the success we have been able to achieve with live broadcasting is precisely due to the efforts we have put in to integrate video and the live streaming ecosystem. In Q1, the number of video creators who also do live streams increased by 38%, and 90% of new live streamers were either average users or video creators.

Yes, so our video ecosystem has given our live broadcasts continuous vitality and rich new content. Our live broadcasts of Bilibili's live broadcasts in Q1 increased by 34%, and the live broadcasts of MPU increased by 15%. So this is our...

The video ecosystem is a source of vitality and content for our live streaming business. And in Q1, the number of active live streamers increased by 34%, and the number of MPUs grew by 15%. That's how we are empowering live streaming through our video ecosystem.

The other thing that our ecosystem gives the live broadcast a negative energy is the category. Because everyone knows that Bilibili is a very, very rich video category platform. So this also makes our live broadcast category very rich. For example, our virtual app owner category. This should be one of the characteristics of Bilibili. We are now a platform with the highest number of virtual app owners in China. It is one of the two-dimensional products of our video. It brings us such a motivation. Our virtual app has become one of the very important products of our live broadcast. It is also an important source of our live broadcast income.

So Bilibili boasts very diversified categories of video content, and this has also contributed to the diversity of our live streaming content. One hallmark of that is our VTuber, which is Bilibili is now home to the largest group of VTubers in China. And this is a natural extension of our ACG content from the video side. And today, VTubers are an important source of income for live streaming.

Yes, our virtual anchor is very active on the platform. And I think with the spread of AIGC technology, there will be more and more vivid virtual images appearing on our platform. And we can think that the virtual anchor can be more humanized by interacting with users. I am very optimistic about this field.

The YouTubers are a very active group of live streamers on BDBD. And with the help of AIGC, I think they will be able to generate even more vivid and lively images and content for the users. And the whole experience can be more interactive for the users as well. So I'm personally very optimistic about the prospects.

Yes, there are also some vertical areas and industries, such as the one that you may not have thought of, which is the lawyer on the B station. This live broadcast is very active, which is that we have some lawyers on the B station. He is online to answer some legal questions about users. If you look at it from the side, you will find it very interesting. There are all kinds of strange and strange legal issues. In Bilibili's live broadcast, our lawyers can give a very professional answer to the audience.

And Bilibili also aims to be diversified and cover as many verticals as possible. And you wouldn't believe that, but lawyers and legal matters is a very popular category on Bilibili. Some lawyers, they also double as live streamers, our platform, answering legal questions to the viewers. Sometimes they have to answer very insignificant, inconsequential, tiny questions, whatever the viewers want to ask them. And it's also something that Bilibili offers.

For example, there are thousands of professional players in China. Many of them are doing live broadcasts on Bilibili. It may seem like a small hobby, but many of our players and fans are in Bilibili. Even many players in Taiwan will interact with the audience on Bilibili.

Another example would be Go. We have roughly thousands of Go players in China, and the vast majority of whom have already joined the Bilibili community as live streamers. And even though it's a very niche hobby, they somehow ended up together on our platform. We even have a lot of Go players from the province of Taiwan interacting with our users on the platform.

I want to explain these examples. Bilibili's live broadcast is a very rich and active content ecosystem. For us, it is not just a revenue business. It actually has a rich content and a very large potential. As we get bigger and stronger in the field of video, our live broadcasts will also get bigger and stronger.

These examples go to show that live streaming itself is very dynamic and diversified on BDBV. It's not just another revenue stream for us. It actually has a lot of content to offer and holds tremendous potential. And as our video business grows stronger and bigger, I believe our live streaming, live broadcasting business will also be able to expand and improve.

Taiwan. there is still more than double the growth space. Because I think the combination of video and live streaming can be further strengthened. In theory, every video user should be a live streamer. Every video uploader should be a live streamer. We can also see from the current data that more and more uploaders have earned income through live streaming. In the first quarter, we already have 700,000 video uploaders who have earned income through live streaming.

During previous earnings calls, I've said that live streaming business could potentially at least double. And I could say that again at this call, I believe live streaming has at least the potential to double at B2B. And the diffusion between video and live streaming will continue to enhance. Theoretically, every user can be a video viewer as well as a live stream viewer. And every broadcaster can generate video content as well as live streaming content. And this is now also an important income stream for creators. In Q1, 700,000 creators were able to make an income from live streaming.

And I think live streaming and video are fully integrated, which also helps to increase the efficiency of our live streaming, which reduces our cost. As more and more video app owners and ordinary people become our anchors,

And the fusion between videos and live streaming could also drive up our growth margin and reduce cost. As more ordinary users are doing live streams on their own and the cost of bandwidth being spread out even further, we believe the growth margin for live streaming business will continue to improve. Okay, thank you.

Thank you. Now we're going to take our next question.

Just give us a moment.

And the next question comes from the line of Lei Zhang from Bank of America Securities. Your line is open. Please ask your question.

Hi, good evening. Thank you for giving me the opportunity to ask a question. Thank you very much for taking my question. I want to ask Minglei about the monetization of the content creator, which we noticed that previously have some widely discussion on the internet. So can you share us more color on how we can improve either the total income or the commercial value for the content creators on Bilibili? Thank you.

What you're talking about is actually an article in the media in April. which is the so-called Tim Geng Chao of Bilibili. I'm interested in reading this article. What I want to say is that I think this article is basically misleading. It says it's Tim Geng Chao, but it mentions three subordinates. First of all, Bilibili has millions of active subordinates. It mentions three of them. Second, it mentions these three subordinates. In fact, after he finished writing the draft, two of them are still updating. The three people he mentioned are still updating. So I think his article is very attractive on the title anyway. And it also triggered the transfer of other media. But his conclusion must be a mistake.

Well, I think you're referring to an article released in April about many, you know, the article claims that many creators on Bilibili stopped uploading new content to the platform. I read it myself, and I think this article is nothing but misleading. And this article mentioned three content creators who paused their video content updates out of, you know, millions of content creators we have on Bilibili, the article mentioned only three, and two of those three actually have released new content since then. And so I think even though the article has quite a clickbait title, the content and the reasoning in this article was misleading.

Of course, through this article, we also saw another good thing, that is, everyone really cares about Bilibili. Because after this article was published, caused a lot of discussion. A lot of users were discussing this issue, and a lot of the media also used this article to discuss it, and then also pushed it to the hot search bar on Weibo. Of course, we also discussed some of the relevant things. But what I want to say here is that, in fact, the commercialization of Bilibili, the second owner of Bilibili, has been greatly strengthened in the past year.

I think this article was able to start a heated debate as proof that people are paying attention to B2B very closely, and some media even went on to write derivative reports on this article. And that discussion ended up on the hot topic list of Weibo. And internally, we have been making a lot of efforts to improve commercialization for content creators at Bilibili, and we have numbers to back that up.

We actually did a lot of work in the past year to help our app owners make money through Bilibili, through Bilibili to realize their commercialization. In the first quarter of this year, there were 1.5 million app owners. We have done a lot of work to help our content creators monetize.

In Q1 alone, 1.5 million content creators earned an income on Bilibili up by 50% year-on-year, and the amount they're making from advertising, live streaming, and also user payment has also increased meaningfully.

In the media article, he mentioned that our creative experience Compared to the past, it's not as much as it used to be. And then this will trigger upsets and so on. In fact, this is also a misguidance. That is, we are with that one. That is, the outside world has also said many times that the creative incentive is actually used to give those upsets who have no ability to make money. We let him have a little income. This is a platform for him. You can think of it as a subsidy for him. And then we're mainly facing up to 10,000 people. And up to 10,000 people, he gradually we are helping him to find a way to make money through Bilibili. So that's the one. I think this is also a misguidance of that article. In fact, the creative motivation for the income of our mainstream up group is not affected by it.

And in this article, it is also said that BDBD is cutting incentives for content creation, which could have some ramifications. This is, again, very misleading because the incentive programs we have is only for content creators with fewer than 10,000 followers. Basically, we provide them the subsidy to help them tide over the initial period of content creation when they did not have the ability to generate an income for themselves. And for the content creators that have more than 10,000 followers, we help them find the tools to make money on their own. So this incentive program doesn't really matter for the vast majority of the creators on our platform.

Of course, I think the money earned by the app owners one of the most important jobs in our company. In the past, whether it was in the fire system, which is to help the app owners receive business orders, including what we just mentioned, which is to let more video app owners become anchors, so that live broadcasts can bring them income. In these areas of work, we will continue to strengthen, because I have always believed that only by allowing our good app owners Helping our creators monetize has always been a priority in our work.

We have established a SPARQL system to help content creators get commercial deals. We have also been empowering video creators to switch to Livestream so that they can make an income there. So this effort will never stop. We'll step up our efforts to help them make an income. That's because we believe only when those content creators don't have to worry about money, they will be able to invest more energy into generating high-quality content.

Finally, I would like to say that this time, The discussion about this media article actually represents that our users really care about our app owners and like our app owners. Of course, it also represents their concern for Bilibili. In fact, Bilibili is the reason why I think everyone still believes in Bilibili. In the past ten years, Bilibili has been able to gather so many excellent app owners. It's actually because we've been insist on this quality content. We have always believed in the creator's power. This is the guiding principle that we have been operating for a long time. It is also because of this that so many app owners can gather here. Because we are good enough to these app owners, because we also understand these app owners enough, we can gather such a quality content ecosystem. So this article is able to trigger such a discussion and shows that users actually care a lot about the creators and the Bilibili platform.

And the reason why we're able to have such a high concentration of high caliber creator is because we believe in the value of high quality content and the power of creators. This has always been and will always be a guiding principle in our operation. We have always treated creators nicely because we understand their needs and we are going to spare no effort in supporting those creators and helping them earn an income that they deserve. This is a work we'll carry out continuously.

Thank you. Thank you. Thank you. Now we're going to take our next question. Just give us a moment.

Next question, please.

And the next question comes from the line of Xue Ting Zhang from CICC. Your line is open. Please ask the question.

Good evening. This is Xue Ting Zhang from CICC. 我的问题主要是关于游戏业务的。 其实刚才有提到我们今期有几款游戏获得了版号, 那想请公司分享一下后续游戏的pipeline, 以及我们当前游戏战略整体的展望是怎么样的。 谢谢。 Good evening, management. Thanks for taking my question. And my question is really about the game building. You mentioned in your prepared remarks that BD has some newly approved games. So can you mention and share with us the game pipeline and what's your game's strategy and outlook? Thank you.

This year is indeed a big year for games. Because the domestic version is being released every month. And the imported version has been released twice since last year. So in this way, This year is going to be a big year for the gaming industry.

Licenses for domestic games are now issued regularly every month. For imported games, two batches of licenses have been handed out since last year, which is great not just for our game distribution business, but also for advertising and live broadcasting as well.

In the next several quarters, we have 13 games to be launched at home and abroad, eight of which have acquired domestic game licenses and will be published in China.

Five of them will be published overseas.

From the latest game we are going to release, we are now actively preparing an agent game, Shining Girls. The localization work of this game is in the final stage. We are working on it. And then we have two more self-made games that will meet you in the summer. One is a vintage female-like game called Yaoguang Road, and the other is our self-made 20 yuan card game Slud.

We are now preparing for the launch of a high-profile game we distribute called Pretty Derby, and we are now working around the clock to finish the last bits of localization work for this game before launch. And we also have two self-developed titles, Alkaline Records, which is the female romance game, and also Eruso, an ACG card game, which will be published later this summer.

Because there is a lot of supply of games this year, so we will also find that the advantage of Bilibili in terms of launch and shipping should be further reflected. It also reflects that we are a platform that is the most gathered of Chinese young users and players of the second dimension. For example, in April, Mihaylo's Honkai Star Railway's download on the first day of Bilibili was 2.8 million points. Bilibili is home to the largest group of ACG gamers and fans, and also boasts a very young user base, which makes us the core channel for distributing ACG games.

Since the beginning of the year, we've successfully distributed many ACG titles, proving our worth once again. Honkai Star Reel by Nihayu is a great example of that, which achieved a whopping 2.8 million first day download on Bilibili, setting a new record for our game distribution business. And just yesterday, our distribution game, Reverse 1999, was published with great initial feedback.

A lot of people are also concerned about the progress of our self-produced games. As I mentioned earlier, there are two games that we are about to launch, which are the self-produced games, and we are also preparing for the next batch of self-produced games. But for self-produced games, you should know that it is very important for games to follow a high-quality strategy. So the development cycle of the game will be relatively long. Basically, it still takes three years for a game to be developed. So the next batch of self-produced games should be released at least in the second half of the year. Then we will meet with everyone. Then in terms of self-produced games, we will insist on what we proposed two years ago, the global release of self-produced games. In terms of self-produced games, we will focus on high-end products. Then we will create a strategy that is the first in the segment category and stick to the long-term operation. So we will work hard on this.

Many people are interested in our self-developed games. Two examples I mentioned just now are our Capeland Records and Eruso. And we have more pipeline games under development. but since self-developed games, we only want to be delivering high-quality games, so the cycle will be relatively long, and each game will take about three years for development, and the next self-developed game will probably be published around the year after next. We will stick to the strategy of self-developed quality games and global distribution. In terms of game genres, we will focus more on our forte, such as ACG card games, Our goal is to develop top-ranking games in niche segments and manage them well over a long life cycle, and we're putting the hard effort needed to achieve that success on this front.

Thank you.

Thank you. Now we're going to take our last question. Please stand by. And the question comes from the line of Felix Liu from UBS. Your line is open. Please ask your question.

Thank you, Ms. Guan, for accepting my question.

I would also like to congratulate our company on the significant improvement and reduction in labor costs. I would like to ask what measures the company has taken at the operating level to achieve Thank you management for taking my question and congratulations on the notable improvements on GDP margin and overall bottom line. Can management elaborate a little bit what measures you have taken? and more drivers for future GDP margin and loss-narrowing drivers. Thank you.

This is Sam. I will take your question. Our focus of this year is very clear to improve the growth margin. In the same time, we will reduce our net loss. So in the first quarter, our growth profit year-over-year growth grow about 37% and net loss narrowed considerably about 72% year-on-year and 58% quarter-over-quarter. From the revenue side, we continue to improve the quality of the revenue. The advertising business, as we mentioned, grows by 22% year-over-year, so it's a high margin business. And as a cost end, we still keep improving our operational efficiency and achieve a year-on-year decrease of 7% of total cost. And so that results, the GP increased by 37%, and the GP margin improved to 22% compared with 16% last year. So we use the technology upgrading to operational management. The band-wide costs, for example, continue to decline, down about 16% year-on-year and 12% quarter-over-quarter. And other fixed costs, for example, labor and other operational costs, also fall about a certain percent year-on-year and quarter-over-quarter. So from the expense side, you already saw the overall operating expenses decrease significantly, about 11% year-over-year, and DAOs increased by 18% year-over-year. So we will keep actively controlling our operating expenses, especially the marketing expenses, which are already down about 30% year-over-year in Q1. I think that trend will continue. in the foreign quarters. So we are quite confident that we've controlled their cost and expense. Our gross profit margin will improve quarter over quarter many of this year. And the operating expenses will also show a meaningful year-on-year decline and to achieve a further narrowing of our net loss. Thank you.

Thank you. Thank you.

And that concludes that question and answer session. Thank you once again for joining Bilibili's first quarter 2023 financial results and business update conference call today. If you have any further questions, please contact Juliette Yang, Bilibili's executive IR director or PR center financial communications. Contact information for IR in both China and the US can be found on today's press release. Have a great day.