Weibo Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Weibo report's third quarter 2020 financial results conference call. At this time, all participants are in listen-only mode. After speaker's presentation, there will be a question and answer session. To ask questions during the session, you will need to press star 1 on your telephone. I would now like to hand the conference over to your first speaker today, Sandra Zhang. Thank you. Please go ahead.

Thank you, Operator. Welcome to Weibo's Third Quarter 2020 Earnings Conference Call. Joining me today are our Chief Executive Officer, Gaofei Wang, and our VP, Finance and Insurance Director, Fei Cao. The conference call is also being broadcasted on the internet, and it's available through Weibo's IR websites. Before the management remarks, I'd like to read the State Harbor Statement in connection with today's conference call. During today's conference call, We make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risk and uncertainty. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. We both assume no obligation to update a forward-looking statement in this conference call and elsewhere. Further information regarding this and other risks is included in the WABOR's annual report on 20F and other findings with the SEC. All the information provided in this press release is occurring as of the date here. WABOR assumes the obligation to update this information, except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures which includes stock-based compensation and certain other expenses. We use non-debt financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-debt financials include certain expenses, gains or losses, and other items that are not expected to result in future cash payments. or are not non-recurring in nature, or are not indicative of our core operating results as we all look. Please refer to our press release for more information about our non-gap measures. Slowing management prepare remarks. We'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gao Fei Wang.

Hello, everyone. Welcome to the Weibo call conference.

Thank you. Hello, everyone, and welcome to Weibo's third quarter 2020 earnings conference call.

On today's call, I will share with you highlights on Weibo's user, product, and monetization, as well as progress we made on our key initiatives in 2020. Let me start with our third quarter financial results. In the third quarter, our total revenue reached $465.7 million, flat share of the year.

Advertising and marketing revenues reached $416.7 million, an increase of 1% year-over-year. 90% of our air revenues came from mobile.

In terms of users, since the end of the third quarter, our monthly users have reached $5.1 billion, an increase of 3% year-over-year. Our daily users have reached $2.2 billion, an increase of 4% year-over-year. Our monthly and daily users have decreased by 2%. In the third quarter, On the user front, Weibo's MAU grew 3% year-over-year to $511 million in September 2020.

An average DA use grew 4% year-over-year to $224 million in September 2020, both representing a decrease of 2% quarter-over-quarter. 94% of Weibo's MAU came from mobile.

This quarter, with growing user base at a steady pace and enhancing user engagement and retention as our key strategies for user product operations, we put more emphasis on increasing consumption efficiency

and enhancing user social interaction.

In terms of user size, after August this year, due to the decline in investment in the entertainment industry this year and the impact of the high school opening season, the increase in user size in Weibo has increased. Users in September have also declined compared to June. Secondly, in terms of user activity, this year's short-term industry market is still in the investment period. The competition series has a negative impact on users' activity and the market of Weibo. Therefore, in the second half of the year, on the one hand, from the product and operation level, we have increased the investment based on social media and video, by strengthening the positioning of Weibo products to maintain our growth and market competitiveness. At the same time, in the channel and strategic cooperation, we have also gradually increased the investment and layout in the fourth quarter, keeping our user size covered.

That said, on the user skill front, post the summer break in August, Weaver's user number decreased in September compared with June. We had faced incremental headwinds in terms of user growth for the second half of the year, mainly due to negative impact from cutbacks in investments for variety shows and entertainment industries, as well as back to school seasonality. In addition, on the engagement front, Our user engagement and timestamp were also massively influenced by the intense competition in the user market, as sure video platforms are still aggressively investing in user acquisition. As such, for one thing, we have based up our investment in social attributes and video areas from both product and operation perspectives to solidify our market competitiveness and user growth. leveraging Weibo's unique platform positioning. For another, we have also set up our efforts in channel and strategic partnership since the fourth quarter, hoping to sustain our wider user coverage.

In terms of commercialization, this year, we have worked hard to improve the marketing mode of our brand and effect advertising, and have made appropriate business adjustments to strengthen Weibo's marketing competitiveness. On the monetization front, we have further emphasized brand-class performance at offerings among KA and SME advertisers from key industries.

and reinforce our competitiveness in the market through business restructure, which are determining factors for our business recovery post-pandemic. As a result, our top K-A industry sectors returned to the growth trajectory in the third quarter, entertained by the notable growth in the number of brand advertisers, which contributed to the stabilization of our ad business in the third quarter on a year-over-year basis.

Sanji, do you have any comments?

In discussing our operating updates for the third quarter, I will elaborate our progress in the areas of product and monetization.

We are facing an increasingly intense market competition for the second half of the year.

In response to this, it's crucial that we optimize our use of product to further enhance Weibo's uniqueness and core competitiveness in the social media sector. And meanwhile, we'll step up our investment in video and user community in vertical areas, aiming to enhancing user acquisition capability to cultivate in users' habit of content consumption in this area.

In terms of topic production, we publish opinions and open discussions on Weibo, which is one of the core services of Weibo. We are also one of the key competitors in acquiring new users and supporting users in the market. In addition to production, discovery, and discussion, To extend the consumption of these contents, we have always maintained a focus on investment. In the third stage, the daily use of consumer topic content must be maintained at the same time to maintain double growth. The trend of opening discussions in the opinion published on Weibo is also increasing. Later, at the topic production level, we will guide optimization of the release function, continue to intensify the user's mind to publish new things at any time, and improve the production efficiency of the content through the discovery of content and the growth system of the topic. In terms of operations, we will use open-source topics to encourage media and professional QRs to create topics and participate in the discussion of topics, so that there will be plenty of topics to discuss on the platform. In terms of content consumption, we will use the hot topics and main scenes of the topic to optimize the network of topic boards and social networking platforms, and cooperate with mobile phone manufacturers on many platforms to output the content of Weibo to strengthen the continuous discussion of users.

On topic products, it's our core function to serve the public expression and discussion around topics, which help to bring new users and enhance user engagement on the platform. And thus, we cap our investment in the content generation, discovery, and discussion around topics, as well as extend the related content consumption. In the third quarter, DAUs who consume topics continue to grow double-digit year-over-year, and user discussion around topics grew nicely as well. Moving forward, on the product front, we will optimize post features to encourage users to post and reinforce content discovery and the topic distribution mechanism to improve the efficiency of content generation. On the operations front, We will further encourage media outlets and KOLs to create topics and participate in topic discussion, which enrich content offering around topics. On content consumption side, we will further enhance user consumption and discussion around hot topics through more quality content offering within the discovery zone. It is achieved through optimized algorithm mechanism of hot topic chart and hot search functions. and collaboration with platforms, including health and manufacturing.

In terms of social, our core goal is to strengthen the social nature of the product to promote our production and relationship interaction. One is the relationship flow. We will enhance the interaction behavior of users based on the content of the relationship by optimizing the algorithm and enriching the interaction form. For example, we will increase the weight of the social content by using the relationship distribution algorithm, by increasing the weight of the social content by increasing the weight of the social content to strengthen the social content and interaction of the relationship. The interaction is to strengthen the interaction behavior of users on the current comments and forwarding functions, and to optimize the form of the display product, and to try to expand the mode of interaction between people, such as this time in other people's left and right messages, etc. The other is to copy these community products in the group of fans. We will improve the interaction between the group of fans based on the structure of sexual and social relationships, and to replenish the improvement of the relationship and social age. For example, in the third quarter, Moving on to social.

It's our focus to enhance product social features to drive content offerings and social interaction. First, for relationship-based feeds, we have further upgraded distribution mechanisms and launched new features to facilitate user interaction in the feed. For instance, we reinforced selected content distribution in relationship-based feeds to beef up social content offerings, such as enhancing traffic social to post users might have missed and post that was heatedly discussed among users who follow. Additionally, on top of our commentary and reposted features, we added social features to enhance direct interactions among users, such as enabling users to leave message on others' main page. Second, for community products such as Sanskrit and Super Topics, we have further enhanced the social attributes and promoted dense social relationship build-up and their interactions around interests, which in turn drives users' social sickness in a relationship-based theme. As a result, in this quarter, the use of Super Topic and a number of posts interaction and relationship build-up in Super Topic all grew double-digit year-over-year. and nearly 60% of the top KOLs have created their super topics. We believe the progress we have made to strengthen the competitive edge of our community products will enable us to tap into the growth of the overall self-media market, attracting more self-medias to Weibo, and driving user engagement.

The above two aspects are the progress we have made in the product core. Next, I will talk about the video aspect. In early July, We launched the video number plan to surround the video number to continue to optimize the platform mechanism priority to solve the content of the video number of the amount of distribution of fans to increase the growth of the video number in the QA and user side of the brand recognition is our record of this work. As of November, the number of new users has exceeded 750,000. More than 1,000,000 fans have exceeded 13,000. The more active the video is, the more the number of daily video posts and daily broadcasts is increased by more than 30% in the same period. We see that through these strategies, it promotes the head user of Weibo to be more video-oriented, and it also leads more platform-based YouTube video creators to enter Weibo's opening accounts, attract fans, and maintain activity. This growth in Weibo K2 rules is a strong supplement, and it has further promoted the development of Weibo content. The follow-up work focus is That concludes our remarks on health events and social attributes as Weibo's core competitiveness.

Next, let me share some color on the progress of video account program. Since the launch of the program in July, we have been focusing on optimizing our platform mechanism to better facilitate traffic distribution and sense accumulation around video accounts, as well as strengthen our brand recognition among video KOLs and users. As of November, we had over 750,000 content creators participating to video account program on Weibo. among which over 13,000 already had fan base over a million. Taking the November metrics as an example, the number of daily video submissions and daily video viewerships increased over 30% year-over-year for those monthly active video accounts. We are encouraged to see a notable trend among Weibo's top content creators to shift toward video, leveraging the introduction of video account programs. And meanwhile, video account programs also attract talented video content creators from other platforms to join and accumulate social assets on Weibo, which will supplement our current KOL network and enrich our content ecosystem. Going forward, for one thing, we'll lower the entry barrier for opening video accounts, enabling more KOLs to join and benefit from traffic support from video account programs. For another, we will reinforce video content distribution based on social recommendation within the video community, hoping to nurture youth mindset to visit the video community and thus further drive video content consumption around video accounts.

To sum up, on top of channel investment amid market competition, first we'll solidify our advantage in topic and social media functions.

to grow our user base and improve user engagement, so as to enhance our competitiveness in the user acquisition. Second, we will focus on increasing user time span and frequency, mainly through improvement of consumption experience of video and community products, and thus enhance our competitiveness in the market.

In terms of commercialization, with the improvement of the overall marketing environment and our effective promotion of commercialization,

On the monetization front, we continue to reinforce our competitiveness in the advertising market and depend on overall ad demand recovery internally and solid progress on the monetization system reform internally. As a result, we put advertising revenues have almost returned to the same level last year, or increasing 22% quarter over quarter.

From an industry perspective, the revenue of the fast-growing industry continues to increase. The number of customers has increased significantly. In fact, the growth of the mobile phone industry, which is a hot topic, is really good. Income has also increased by more than three times. The industry that is more seriously affected by the epidemic, film and television, culture and entertainment, is also gradually warming up in this area. Although the income of the industry has not recovered to the same level as last year, these positive signs, in addition to the overall external marketing environment warming up, are also prominent in the brand industry. Weibo has two different marketing advantages. First of all, Weibo is the top IP for most people. For example, it is used to ask questions about variety shows, TV shows, and fans, and to broadcast content and interact with them. This has given us the opportunity to attract IP content and attract customers. It has achieved the price transfer of content traffic flow and developed new sales resources. In addition, we are targeting brand customers this year. Our KAA revenues increased 12% year-over-year, or 33% quarter-over-quarter. The robust growth was mainly driven by a notable increase in the number of brand customers, which reached historical highs this quarter.

From an industry perspective, the FMCG category saw a growth acceleration, benefiting from a considerable increase in the number of customers. Although enhanced industry, including bother transactions, also took a solid double-digit growth. Entertainment, previously hit hard by pandemic, started to come back this quarter, although still feel short of the same level last year. On top of the overall ad demand recovery, we also attributed such robust growth to our differentiated value proposition to brand customers, mainly on two fronts. First, leveraging our unique strengths in the distribution and discussion around top IPs, such as blockbuster shows and source events, we managed to open up incremental ad inventories by curating content around these IPs. IP-based marketing would enable us to tap into a broader customer base, as well as drive monetization through content operation. Second, we focus on offering integrated brand-class performance as a solution to KA customers to capture higher ad-wise, especially with auto and FMCG sectors.

In terms of effective advertising, in the third phase, we will reduce 15% of the revenue of the effective advertising industry. 20% increase in revenue. Although there is still a certain gap in revenue, what we see is that we are breaking through the industry of games and education this year. The key is to strengthen the commercial advertising and product transformation capabilities of these two industries, and the operating capabilities of brand marketing activities, so that these two industries become the core growth drive of Weibo's overall commercial advertising. In addition, the revenue of these two industries still maintains a three-digit increase. For example, we have launched a new product delivery program for the gaming industry. In addition to the high school and high school education, we also launched a marketing plan for the key education levels, effectively promoting customers, promoting new products, and promoting the sales performance of major business centers. This has helped us expand the coverage and sales budget of industry customers. In addition, in other areas of the sales industry, we are still optimizing customer structure and expanding customer size this year, and improving customer sales quality is our main goal. Moving on to SMEs. SMEs are up in secret 15% year-over-year and increased 20% quarter-over-quarter.

Notwithstanding the gaps to the overall revenue level last year, we are pleased to see gaming and online education sectors become the core growth driver of our SME business. This year, we have achieved breakthrough with these two sectors as we based up our efforts to drive conversion and enhance our operation capabilities. Consequently, our revenues from gaming and online education sector continue to book triple-digit growth on an annual basis. For example, we roll off industry-specific ad solutions for these two sectors. More specifically, ad product called Big Day to serve customers' new game release marketing needs, as well as iSolution targeting high school and college examination for online education customers. Ad product like this effectively fulfills customers' marketing needs around product launch and key timing, leading to broader customer coverage and a higher ad wallet for us in return. With respect to other sectors, we continue to focus on optimizing customer mix, expand customer base, and improve ad quality this year. During this quarter, we took steps to optimize on areas where we frequently receive negative user feedback by setting higher ad quality standards. Despite the short-term revenue loss, we believe the improvement of the overall ad quality will benefit us in expanding our customer base and optimizing ad performance in the long run.

Customers need to quickly cover target users. In response to this demand, we have targeted a series of strategies. In addition to the original target audience, we have reached out to more relevant target audiences, which has clearly improved the sales efficiency of customers. We have also obtained more宣发预算, and at the same time helped us to form an industry-based program, which has become a marketing standard for game customers to make new games and宣发. On the other hand, for the optimization of the network of the network, it is our key job for the next period of time. For example, our download experience in the network service field and the success rate have been greatly improved. Through the download of ER and the registration of success rate, the operating cost of key customers has been reduced by more than 50%. Finally, we are focusing on customers such as education, e-commerce, beauty, and so on. This time, customers are building ads in our building system. At present, the performance of the customer transfer rate of the building system has increased by 50%. We believe

Finally, let me share some color on the progress with our ad products and technologies. First, we took a targeted approach to improve ad algorithm and traffic distribution strategy. A good example is the game Rise of Kingdoms, a blockbuster game. In view of customers' goal to reach targeted user groups rapidly upon release, we refined our attribution and back-end system to accommodate such marketing needs, allowing this customer to reach incremental targeted users beyond the original group and gain higher conversion. As a result, we could better fulfill customers' new game release goals while helping the customer enhance its marketing efficiency significantly. significantly enable us to capture incremental ad budget. Built upon such a success story, our next step is to put together an industry-specific ad solution and make the standard ad offering for the gaming industry. Second, we will focus on tech optimization around our full funnel marketing in the next few quarters. For example, with the internet service sector, we advanced our app technology to deliver better app download experience and completion rate through optimization on the download and registration process. We successfully lowered the app activation cost by over 50%. Third, to address customer lead generation needs, especially with education, e-commerce, cosmetic surgery industries, et cetera, we facilitated easy buildup of our landing page using our own CMS. Currently, customers who use our CMS show their conversion rate improving by over 50% upon the adoption. With solid execution of the adopt initiative, we are well positioned to capture higher performance at wallet in the market.

With that, let me turn it over to Fei-Chao for financial review.

Thank you, Dolphy, and hello, everyone. Welcome to REIT's third quarter 2020 earnings conference call. Let's start with user metrics. In September 2020, REIT was MEU, reached 511 million, representing a net addition of approximately 14 million users on a year-over-year basis. REIT was average DEU, reached 224 million, representing a net addition of approximately 8 million users on a year-over-year basis. Let's turn to financials. As a reminder, my prepared remarks would focus on non-GAAP results, and all the comparisons on a year-over-year basis are unlike otherwise noted. Now, let me walk you through our financial highlights for the third quarter of 2020. We bought third quarter 2020 net revenues were $465.7 million. or a decrease of 4% on a constant currency basis. Exceeding the high end of our guidance, operating income was $179.4 million, representing an operating margin of 39%. Net income attributable to Libor was $152.9 million, and the diluted EPS was $0.66. Let me give you more color on revenues. We both advertising and marketing revenues for the third quarter 2020 increased 1% to $416.7 million. Mobile ad revenues were $376.1 million, contributing approximately 19% of total ad revenues, up from 87% last year. Moving on to K8. In the third quarter, Weibo's key ad revenue reached $221.2 million, an increase of 12% year-over-year and 33% quarter-over-quarter. Leveraging a nice rebound in domestic consumption and ongoing digital transformation, our key business demonstrated great recovery momentum with the number of brand advertisers spending with us this quarter hitting record highs. We are delighted to see a growing number of brands recognizing Weibo's unique value proposition in connecting to younger generations, leveraging KOL's influence, as well as delivering on brand plus performance goals. This quarter, on top of traditional branding budgets, K customers notably allocated higher budgets to performance-driven products. such as feed and the QL marketing offerings, to drive users all the way down the funnel, which presents us with opportunity to capture incremental ad wallet in the long run. Industry-wise, the strength in our key business was relatively broad-based this quarter, with growth fueled by key sectors, such as FMCG, automobile, and luxury category, et cetera. On the flip side, entertainment, travel, and real estate sectors remained on the negative growth trajectory. But we are seeing early signs of recovery following ease up of restrictions on theaters and tourism. Turning to SMEs, in the third quarter, with SME ad revenues reached $166.4 million, a decrease of 15% and an increase of 20% quarter-over-quarter. The descending trend of our SME business was mainly attributable to two factors. First, the recovery pace of offline merchants continued to lag behind the overall SME sector and weighed down the growth of SME ad revenue. And second, as we mentioned last quarter, our initiative to clean up low quality customers and add creative also negatively impacted on SME value. On aspect, gaming and education sectors continued to book triple data growth year over year, fostered by further improvement around the bidding efficiency and performance. In September, We officially launched our revamped ad-leading system, 2-person 2.3, featuring a series of updates, an optimized CTX, video, and the KOL ad offerings in the hope of driving ROI for customers through multi-reg response features, better ad relevancy, and the higher ad placement efficiency. Ad revenues from Alibaba for the third quarter increased 52% to $29.2 million. The momentum of ad spend from Alibaba reflects our strengthened cooperation in driving value for brands and merchants to achieve branding plus performance purpose through integrated ad campaigns on both platforms. That said, ad spend from Alibaba highly correlated to its own business operation, especially its marketing strategies, which may change from time to time. As such, we cannot ensure that such robust growth will be sustainable in the future. Value-added service revenues decreased 11% to $49.1 million in the third quarter primarily due to decrease of live streaming revenues, partially offset by the increase in membership revenues. Turning to cost and expenses, total cost and expenses for the third quarter increased by 3% to $286.4 million. The increase was primarily due to the higher by-debt provision and the personnel relief costs. partially offset by decreased marketing spend. Our operating income in the third quarter was $179.4 million, representing an operating margin of 39% compared to 41% last year and 31% in the second quarter. Turning to income tax and the debt measure, income tax expense for the third quarter was $30 million, compared to $31.4 million last year. Net income attributed to Weibo in the first quarter was $152.9 million, representing a net margin of 35% compared to 38% last year and 30% in the second quarter. Turning to our balance sheet and the cash flow items, as of September 13, 2020, Weibo's cash cash equivalents and short-term investments totaled $3.2 billion compared to $2.4 billion as of December 31, 2019, mainly due to net proceeds of $714.3 million received from Wayward Senior Note offering in July 2020. In the third quarter of 2020, cash provided by operating activities was $235.2 million. Capital expenditures totaled $10.7 million. And depreciation and amortization expenses amounted to $7.7 million. Now let me turn to financial outlook. We anticipate our fourth quarter 2020 net revenues to increase by 1% to 3% year-over-year on a constant currency basis. These forecasts include revenue estimates of an interactive entertainment company which was acquired and consolidated to our company in November 2020 and represents approximately 2% of our revenue estimate this quarter. This forecast reflects Weibo's current and preliminary view and is subject to change. With that, let me now turn the call over to the operator for the Q&A session.

Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. We have the first question from the line of Alisa Yap from Citigroup. Please go ahead.

Thank you. The first is that the trend of advertising has improved with the Chinese economy. But recently, the epidemic around the world is still quite severe. So I don't know if the management thinks that the entire recovery of advertising will be affected. uh uh Next year, we can see the bottom line. If the product line is further optimized, can we reverse the competition pattern? I will translate it myself. Good evening, management, and thanks for taking my questions. I have two questions related to advertising. Number one is related to the overall ad budget sentiments and recovery trend in China. It seems China is on track for a decent recovery, but given the seriousness of the pandemic outbreaks in other countries, have you seen or do you think it will affect the ad budget? onto the worrisome of the outbreak in other countries in terms of the ad sentiments. And then second is related to the competition. It seems that management continue to mention the intensified competition from the short video companies in terms of the ad subject allocation. So not too sure will this intense competition continue into next year, or do you think given Weibo products is recovering, I mean, it's, you know, improving, should we see the competitive landscape be actually moderate and improving over time? Thank you.

Okay. 我先回答第一个问题吧, 就是从Q3的情况可以看到往前, From a brand perspective, we believe that the impact of the pandemic has not been too much on our company. However, in terms of the effect of the ad, we will see a big impact on our business. So let me give you the answer for the very first question. So let's talk about the data of Q3.

Let's divide it into the brand and also SME. First of all, talking about the brand ad, you can see that because Weibo is a very large company. So I don't think the pandemic is impacting the ad revenue or budget of the brand so far. But talking about the SME, I think that in the first half of 2020, we really had a big impact because previously our SME budget previously focused on offline, primarily speaking. and especially those kind of industries like O2O and also finance. So I think that we made some changes on the SME side. So this year, we move further to the online business, and especially the online education, e-commerce, and gaming, etc. 具体到品牌方面,你也知道,

China's entire advertising volume is still relatively small in the entire advertising market. And we have always been focusing on the main industry and the top customers in the industry. So you will see that in terms of brand industry, our number of customers and some existing industries are still growing well. In 2021, we also made some additional adjustments. For example, we put some of our regional brand customers So second of all, I would like to say that in terms of our strategy focusing on the brand customers,

You know, currently speaking, our brand revenue or our ad revenue from the brand customers is relatively small compared with the other big companies. So because previously and also as of now, we pretty much focus on the top companies and also top brands. So you can see that, of course, we have a very steady growth of our number of customers, especially the brand customers. And also in 2021, we had some kind of changes and also adjustments over our strategy. For example, now we are going to enlarge and expand the name list of those brand customers, especially focusing on the inclusion of regional brands and also those national fashionable brands as well. So you can see that in the next one, two years, we are going to see that more revenues or we're going to see more revenues coming from those middle and brand customers.

Uh, Last year, due to the epidemic, some of our customers were hit hard, for example, some of them were thieves. Some of them are because of the changes we have made. Decisions are not made by the industry. The industry we are in, for example, the financial industry, including the medical industry, has also made some adjustments this year. These declines are more obvious. As a whole, our strategy is to use the original team to promote the entire team to online customer brands, such as education and games. This is also a good reason for growth this year. Next year, our core is still Next, I would like to say that talking about the SME part,

So because I think that SME is really a kind of a sector in our business that is heavily impacted by the pandemic because previously we pretty much focused on the O2O business and also there's wedding dress and photographing and also e-commerce or financial industry. So you can see that the O2O Because of the pandemic impact, this was heavily dropped and declined. And also, second of all, we willingly dropped out some of the customers, for example, in the financial industry or cosmetic surgery industry. So the SME side, we have a strategy that we are going to leverage the abilities of the existing team to focus more online, especially online education and also gaming as well. So that is the reason why we are seeing a very good result of growth. And also next year, our focus will be using the same SME team to further optimize the online business and also to prioritize our services provided to those online clients and customers, and especially focusing on the SMEs. network service app downloading service for example and also because that this year we had big growth on the gaming industry so that's why we are now pretty much more focused on the provisional services to those app downloading and other relevant areas.

There is a situation of indirect transmission, because the short-term business platform first competes with the long-term business platform. The long-term business platform, including this year's investment in the entertainment industry, when the flow of the long-term business platform goes down, in fact, a part of the customer's brand budget will be spent on the image of the hospital, Weibo, and social media platforms such as Bilibili or Xiaomushu. This is a relatively advantageous stage for us.

So second, talking about the impact from the competition landscape of the short video. So you can see that we have, first of all, the indirect impact from this particular competition for the brand customizing specific or brand ad, if you like. So if we're talking about this competition, we are talking about the indirect competition, first of all, from the long video side. But you can see that this year because of this pandemic and also the lower down investment going to the entertainment sector, we can see that those brands are now preferring to invest their money into making videos on Weibo, Bilibili, or Red instead of those traditional platforms of making long videos. So I think that is a favorable trend toward this.

Yeah. Yeah. Yeah. Yeah. Yeah. And also I want to say that in the SME sector, we still feel a little bit stressful.

confronting the competition from the short video platform. Because comparing with the text and also image like Weibo, we do see the advantages maintaining in the short video platform. But also what we have to do is that we want to focus on the service provision as well as the optimization of our algorithm for the ad as well. So you can see that this year we're doing a very good job on gaming, especially Q3. So you can see that it is hopeful for us to get more budget from those brands and also customers. Also, next year we're going to focus on getting more budget from the other famous customers in those cosmetic surgery area or e-commerce or internet service, etc. So that it is very much hopeful for us to get more budget from those short video platforms as well. But overall speaking, in a short run, I still believe that short video platform is very much advantageous in terms of making ads over the text and image-oriented platform like Weibo.

in order to create more storage and storage in our videos. The effect of this aspect has been improved relatively quickly. Another issue is that in terms of the core field, we will not only provide the customer with the service of storing the effect, but also the main method of getting customer budget. For example, in the field of education, we often convert the brand plus the effect into a major method of competing with other platforms for budget. Currently, this year's main growth is due to this kind of integrated marketing model.

Also, I have to say that talking about the specific competition with the short video platform on the SME side, first of all, we are going to further invest into making more high-quality short videos on our side. You can see that we have been always focusing on investment on this area. This year, we are also building up more inventories of the advertisements as well at the same time based on short videos. And second of all, not only we are trying to focus on the content, but also we would like to focus more on the customer's conversion rate by putting ad and budget over our platform. So you can see on the education side, we're pretty much focusing on not only doing ad, but also making the conversion rate increase for them. So this is actually a kind of a hybrid way for us to contact or for us to overcome the challenges from the short video platforms.

Okay, thank you.

Thank you.

Thank you. Next question comes from the line of Tian Hao from TH Capital. Please ask your question.

Hello, Director. I hope you can hear me. Okay, then I'll continue. I just want to ask about this short video. From last week, we started talking about short videos. I remember last time we said we had 50,000 subscribers. And then there are some people who have a lot of fans. So I was thinking, for this number itself, what kind of development will there be at the end of the third quarter? And then when next year comes, will the company management have any schedule? For example, we... It's a question It's continued on the short review. The company has made great progress on the short review. The last quarter we mentioned the company has about half a million authors already opened their short review accounts. So I wonder how many of them opened accounts by the end of Tuesday. And in 2021, what is the company's goal in terms of how many accounts do we plan or work on to open? And for the advertising revenues generated by short reviews, what's the percentage total does the company expect that to be? That's my question. Thank you.

First of all, I just talked about this situation. The number of opening users for the current video account is more than 700,000. The number of fans is more than 1.3 million. This increase is relatively fast. But this number is relatively small compared to the size of the entire Weibo media account.

so first of all in our previous presentation i mentioned a little bit about it so let's just recap from it so first of all um overall speaking we have over 700 000 accounts already opened on the video account and also talking about those accounts having over 1 million followers we have 13 000 of them already so the growth rate is very good and glad so of course um that And having said that, that is still relatively way smaller comparing with the number of we media that we have or self media that we have on Weibo.

首先他会看到就是整个视频的创作者跟原来Weibo的这种图文的创作者 因为视频的创作难度比较大 所以说这种规模其实在未来来讲的话 也应该是整个Weibo创作者中间一个比较小的比例

So given the fact that creating the content of video is way more difficult than that of creating a text and image like we traditionally did in Weibo. So in the future, I think the number of video accounts will be still remain relatively small against the total number of accounts that we have.

First of all, from the production point of view, we use the video number strategy. The core is to allow those who are capable of producing videos on Weibo to transfer videos as quickly as possible. For example, our media, including celebrities, including some food-related authors, including fashion-related authors. These authors are capable of producing videos. By adding such a mechanism, they can both obtain the volume of Weibo itself and also obtain to increase the number of videos. Secondly, we will see that in China's entire video marketing market, the short-term video marketing market is also developing rapidly. Through such a strategy, we can attract most of the video authors outside of the station, such as Bilibili, Xigua, and Douyin, and add Weibo. These authors, in fact, we more hope that they will publish videos on Weibo at the same time as they publish the video, to publish some deep-seated pictures, including interactions with fans. And second of all, let's talk about our strategy, which is very clear already in our group. So first of all, in terms of production,

First, of course, we are going to emphasize more on encouraging those capable authors to create more high-quality videos on our site. So by those capable authors, I mean the media or KOLs or those food or delicious food accounts and also those fashionable brands or fashionable accounts or those cosmetic KOLs as well. So not only they can get the traffic from the video itself, but also they can gain extensive traffic or feed from the Weibo itself, from those text and image users. And second of all, the strategy is that we are going to attract more external account or external creators to join Weibo to publish their short videos at the same time. For example, we're going to attract those people from Bilibili or Watermelon or TikTok, etc., So at the same time, not only they can generate videos on Weibo video account, but also they can actually at the same time publish some text and image to show their attitude and sometimes interact with their followers by commenting, etc. So you can see that this particular part, the hybrid model, is the one that we enjoy the most growth or the biggest growth this year.

From the consumer side, we can see that, on the one hand, through a large number of video users, they not only publish video content on Weibo, but also publish some picture content. We can see that, by paying attention to these active account users, their average market can increase the response rate and return rate of our entire Weibo users. Most of the users, most of the users with consumer video content, their market is nearly twice that of other users. So,

I'm also talking about the consumption side. The first thing is that for those creators of videos, not only they are publishing their videos, but also at the same time, text and images as well. So if we're talking about the followers of those KOLs, you can see that the average time spending is like two times higher than that of the time spent on text and image only. So this kind of average time spending can help us to improve our activities. And also, second thing is that We can see that in Weibo, we can create such kind of an independent space for the advertisements and also for the video-based consumption behavior as well. So this is really helpful for us to gain more budget and gain more revenue from the ad part. And also, we can build up a very good inventory of high-quality video and also advertisements as well.

In terms of the goal, we have been focusing on investment for the past two years. That is to say, we do not pursue that all video creators can continue to contribute positive traffic to us on Weibo. For example, our investment is likely to be greater than the advertising output they created for us. But we hope that through these two years of investment, we can turn some of the creators in Weibo into videos and continue to contribute positive content. And finally, let's talk about the objective that we have. Of course, in the short run, we're going to focus on the investment-driven strategy.

which is to say that we are not saying that all the creators of the videos should actually give us more consumption payback higher than our investment, not necessarily speaking. So that is to say it's pretty much the case that in the short run, we're going to invest more than the revenue coming from those creators. So we have actually, of course, two aims. The first is that we are going to encourage more text and image creators to convert to the high-quality video creators. And second of all, we are going to attract more external creators from other platforms to arrive on Weibo video account to create more videos and at the same time, interactive content based on images and text. So that is a very good strategy for us to further differentiate Weibo from other platforms and also give us a sustainable revenue contribution from the ad part and video side as well.

Thank you.

Thank you. Your last question comes from the line of Miranda Chuang from Bank of America. Please ask your question. Thank you, operator, and good evening management. Thanks for taking my question. Can you please share with us your preliminary outlook for the advertising business in next year, in particular the expense settlement of your advertisers in the various industries? Thank you. What do you think about the budget trend of other advertisers next year? Thank you. I think the whole industry is looking forward to next year.

From this year's Weibo strategy, you can see that we can talk about this. Whether it's K or SME, we try to make our customer service industry. This is a trend. And then put our industry brand and effect

So overall speaking, talking about the industrial outlook, so continuously we're not going to only focus on KA, but also SME at the same time. And also we are now trying to focus more on each different verticals. And also second, combine the brand together with effectiveness and conversion of that particular ad. So this is a very comprehensive and holistic strategy for this business.

So you can see that in the future we can see that by doing that

we are going to increase the branding and also increase the SME side as well, or effectiveness as well. So you can see that we are going to focus more on the verticals like automotives, gaming, and also FMCG as well. So for example, gaming. This year, we pretty much focus on those new games published this year. And also, they have a huge demand of getting a very good effectiveness of more gamers and also high-quality contents of games as well.

So, after we have these two features this year, we will see that our service customers will actually be more and more, in the first industry, there will be more and more, but in the industry, the quality of the customer and the customer's budget will be more and more centralized. For example, in the field of games, maybe our service customers, such as Libis, including Ali Games, including Tencent, have a relatively good growth. Those previous pure online games Um.

And also let's talk about the industry of gaming, for example. So because that now we are trying to focus on the quality or the quality oriented customers. So that is to say on the gaming side, now we can see that we are primarily very much, very well collaborated with a Harley game, Tencent or Libis, for example, and they are making high quality, games at the same time. So they're pretty much gaining more traffic from Weibo. But if you are continuously making some of the games like the webpage game, etc., which does not necessarily need to build up the brand, but only focusing on the effectiveness kind of advertisement, I don't think that they are going to get further traffic from Weibo. So that is to say that we are going to see a very good growth on those concentrated verticals, especially those top-ranked concentrated areas, but not that distributed or scattered area.

So now, after the business plan is completed, we will see that our service should be in some industries that can continue to contribute to the market. In the industry, we will choose those industries So, overall speaking, while we finish our monetization strategy implementation, we're going to see that in the future, we are going to continuously focusing on those customers that are

investing more into their high-quality area. So especially in the future, if the brand, not only the brand customers, but also SME, if they have more budget, focusing on the online advertisements, we are going to collaborate and also attract those ads.

Thank you.

Thank you. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.