Weibo Corporation

Good day and thank you for standing by. Welcome to the Weibo Report's second quarter of 2021 financial results conference call. At this time, all participants are in listen-only mode. Now for the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. And please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. And I'd like to hand the conference over to the first speaker for today, Ms. Flores Sun. Thank you. Please go ahead.

Thank you, Operator. Welcome to Weibo's second quarter 2021 earnings conference call. Joining our call today are our Chief Executive Officer, Gao Fei Wang, and our Chief Financial Officer, Fei Cao. The conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management remarks, I'd like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. We will assume no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 29 and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. We will assume no obligation to update such information except as required under applicable law. Additionally, I'd 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-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payment. or non-recurring in nature were not indicative of our core operating results and our work. Please refer to our press release for more information about our non-GAAP measures. Following management prepared remarks, we will open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Zaofei Wang.

Thank you. Hello, everyone. Welcome to the Weibo Caibao phone call meeting.

Thank you. Hello, everyone, and welcome to Weibo's second quarter 2021 earnings conference call.

本次财报会,我向大家重点介绍2021年Q2 Weibo的用户、产品以及商业化方面的进展。 On today's call, I will share with you highlights in Weibo's user products and monetization in the second quarter of 2021. 在用户方面,截至二季度末,我们的月回用户达到5.66亿,月回用户规模同比竞争约4,300万。 On the user front, Weibo's MAUs reached 566 million and average DAUs reached 246 million in June 2021, adding approximately 43 million and 16 million users year-over-year and quarter-over-quarter respectively.

which represented the highest net addition number among the recent four quarters. In June, 94% of Weibo's MAUs came from mobile.

In terms of commercialization, with our optimization of the key industry promotion strategy and advertising products, in the second quarter, Weibo's total revenue reached $5.75 billion, which increased by 48% year-on-year. Among them, advertising revenue reached $5.02 billion, which increased by 47% year-on-year. Advertising revenue reached 94% year-on-year.

On the monetization front, leveraging further optimization in our competitive strategy and ad product offerings for key industries, our total revenues reached 574.5 million in the second quarter, an increase of 48% year-over-year. Advertising and marketing revenues reached 502.3 million, an increase of 47% year-over-year. 94% of our ad revenues came from mobile. Our non-GAAP operating income in the second quarter reached $223.2 million.

接下来,我具体向大家介绍一下微博在财务运营和商业化方面的情况。 Next, let me elaborate on our progress made in the areas of products and monetization in Q2. 2021年开始,我们在财务运营方面, On the product front,

Starting from 2021, we further enhanced Weibo's differentiated competitiveness in key features such as social functions and hot trends. Coupled with effective channel strategies, we have further grown our user base and engagement. Meanwhile, we beefed up investments in video products to reinforce users' mindset of using Weibo for video posting and consumption, so as to enhance our product competitiveness.

In terms of channels, Our focus is to make use of the advantages of Weibo in terms of user acquisition costs, expand the coverage of channels, and increase the investment on the mobile channel that can be effective in attracting users to the active channel. At the same time, we enhance the functionality and social relationship of the subsequent content consumption to build efficiency, improve activity and storage. As we improve our channel user consumption experience and storage, in the second quarter, we have increased the cooperation with manufacturers and operators in the areas of social media, hot spots, categories, and other advantages. On the channel front, we stepped up our channel investment with focus on improving user engagement, leveraging Weibo's advantage in user acquisition cost.

Meanwhile, we reinforced the synergy between channel investment and subsequent content consumption, and thereby improving user engagement and retention. With better consumption experience and retention of our channel users, we set up cooperation with major channel partners, such as handset manufacturers and operators in the areas of social features, how trends, and vertical content in the second quarter. Built upon such partnership, will not only increase Weibo's user acquisition scale from major channels and elevate our brand influence, but also create synergies to both parties' ecosystems, which enabled us to further strengthen our partnership. As a result, the number of users we acquire from channel partners more than doubled in June year-over-year, with nice user engagement levels.

In terms of products, I would like to share with you some important work on Weibo's information flow and video products. In terms of the information flow, our overall direction this year is to strengthen Weibo's social core functions, enhance the connectivity and interaction of Weibo core user groups, and ensure the competitiveness of Weibo in terms of user core functions. In terms of the relationship flow, in the second quarter, we further strengthened the excavation and distribution of high-quality social media, improved the diversity and consumer experience of the relationship flow, and strengthened the social attribute. The interaction rate of users in the relationship flow has increased significantly, and effectively promoted users' consumption and circulation. At the same time, the size of the daily active users of psychological social products is continuing to grow rapidly in the second quarter, especially in the field of games, dramas, and schools. As a result, we have seen a strong need for users in the field of psychological social, and it has also improved the social ageing of users on Weibo, which has provided us with more development directions for optimizing new products in the second half of the year. In terms of recommendation flow, in the second quarter, we are strengthening the technology of the recommendation system, and on the basis of the improvement, the distribution system is clear to the video content,

On the product front, I would like to share with you our key initiatives on Weibo's information fees and video. On information fees, our core strategy in 2021 is to enhance Weibo's key social features and competitiveness, and thus drive users' thickness and interaction among Weibo's core user groups. For relationship-based feed, in the second quarter, we further strengthened the data mining and distribution of quality social content, and thus improved our content diversity and consumption experience. With stronger social attributes, we are pleased to see significantly higher social interaction levels, leading to better consumption and retention based on relationship-based feed. In addition, DA use of our Super Topic products continues to grow rapidly in the second quarter, Particularly, we are encouraged to see notable growth in verticals such as gaming, TV series, and variety shows, and campus, et cetera, demonstrating users' robust demand on the interest-based social front. The Super Topic product has not only driven users' social stigmas on Weibo, but also shed light on our roadmap to further optimize our feed products. For interest-based feed, in the second quarter, thanks to tech optimization in our recommendation system, We give more weight to video content in content distribution for interest-based feeds to further serve users' consumption needs. We are testing a new version of interest-based feeds based on the revamped video recommendation system, which hopefully will be launched in the second half of the year.

In terms of video, we are trying to organize it in the same way as we did in the video. We are trying to increase the video content creation process of the Weibo platform. We are trying to increase the supply and consumption of Weibo video content. At the same time, we are working on key areas. to cultivate the mindset of users in Weibo to consume videos. With the improvement of the video brand product system, the video marketing process of Weibo creators has been further accelerated. As of the end of the second quarter, the opening scale of the video brand has exceeded 10 million, and the size of the video brand with millions of fans has exceeded 30,000. The original video brand's video release volume has been doubled. The increase in video content has, on the one hand, contributed to the increase in the core flow of the scene, and on the other hand, contributed to our continuous optimization of the recommendation of video recommendations. to improve the overall distribution efficiency of the video, especially the recommendation efficiency in the video community. Currently, we see that the depth of consumption of users in the video community and the video recommendation field has been significantly improved at the end of last year. This has also led to an increase in video traffic and commercial storage. In terms of live broadcasts, we focused on live streaming and live streaming products in the last quarter and improved the functions and system of the products. The form of live streaming and live streaming has been more widely accepted by platform head content creators in the second quarter, Moving on to video.

In 2021, we focused on accelerating the content visualization for Weibo's content creators through our Video Accounts program, and thus increased video content generation and consumption. Meanwhile, we emphasized on cultivating users' mindsets of using Weibo for video consumption through content operation in key verticals. Leveraging ongoing progress made in our Video Accounts program, we are pleased to see the further visualization trend among content creators. As of June, the number of registered video accounts surpassed the 10 million mark, among which over 30,000 already had more than 1 million followers. As a result, the number of original video submissions under the video account program more than doubled quarter over quarter. The substantial growth in video accounts not only enabled us to enhance video content exposure and consumption in core feeds, but also help us to continuously optimize our recommendation capabilities around video content as steps to further improve the overall video distribution efficiency, especially in video community and video recommendation fees. Currently, we're pleased to see an uplift in users' consumption deaths in our video community and video recommendation fees compared with the end of last year, which also brought forth incremental ad inventory in video recommendation fees. On live streaming, we launched the feature of joint mic live streaming in the first quarter and continuously refined its functions. We are encouraged to see a wider recognition among Weibo's top content creators on the product in the second quarter. Top media agencies and a number of KOLs have already used this feature for regular content generation to build up IPs and boost fan thickness. as such format nature could effectively lower the barrier of video and live streaming generation for those traditionally text and picture-based authors. Looking forward, we will step up our investment around key joint mic live streaming IPs to strengthen the brand recognition of Weibo's live streaming feature and further drive user engagement.

下面我分享一下 Weibo在商业化方面的策略和本期的进展。 2021年, Let me share with you more color on our monetization strategies and the progress made this quarter. In 2021, we will further strengthen the competitive edge of our social ad products, solidify our industry-specific marketing capabilities,

and unleashed the potential and efficiency of traffic monetization, so as to improve Weibo's monetization scale and market competitiveness.

In terms of industry sales, Weibo's advertising revenue increased by 47% in the second quarter, which is mainly due to the recovery of the overall marketing environment, and Weibo has strengthened its marketing services in the focus industry, and established a unique competitive advantage. In the second quarter, the revenue of the focus industry has still maintained a significant increase in the same ratio. For example, in the market of food and beverage and makeup customers, Our advertising revenue has remained high throughout the first half of the year. Weibo has fully utilized the value of the Weibo platform in the long run of this industry. It has formed a unique marketing formula and refined service capabilities, helping enterprises to keep improving their marketing performance. In addition to the traditional brand industry, in the field of games, performance e-commerce, and other industries, with the further integration of Weibo sales and product operation systems, we have continued to improve our ability to receive and serve customers' quality and marketing needs. Customers have also increased their recognition of our services,

From an industry perspective, our ad revenues increased 47% year-over-year in the second quarter, benefiting from the recovery of overall marketing demand, as well as improvements in our industry-specific ad offerings for key sectors. Leveraging our unique competitive edge in the market, we continue to deliver robust year-over-year growth in key sectors, For example, FMCG sectors, such as food and beverage and beauty and personal care, took solid growth in the first half of the year. Built upon years of experience in these key sectors and our platform value proposition, Weibo has developed a unique marketing playbook and refined our service capabilities and thus continuously improved our ad performance. In addition to the conventional brand industries, We have also beefed up our capabilities to serve the brand-plus performance marketing needs of sectors such as gaming and e-commerce. With the further synergies of our sales and operation team, our ad offerings and service earn better recognition among customers, leading to strong growth in both the branding and performance-driven ad dollars from these key sectors.

In terms of advertising, our key work in the second phase is to expand and enrich Weibo's advantageous content. is a marketing product. On the other hand, it actually continues to optimize our information flow advertising products, and enhance the edge efficiency of information flow. In terms of content marketing advertising products, today, in addition to the content marketing promotion of the traditional fast-selling, car, and mobile industry, we have also expanded the game industry, where customers are more likely to see the results. Through helping customers strengthen the topic discussion of new games, and the development and activity of game market assets, customers can further understand and recognize the content marketing model of Weibo. and increased the budget. For example, this year's summer hot topic, Molzangyuan, was posted on Weibo for half a month. The total number of topics read was nearly 500 million. The number of topics discussed was more than 1.3 million. The number of fans on the official website increased by nearly three times in half a month. These better content marketing models have promoted the budget for customers to post content on Weibo to increase the brand content. In terms of information flow and advertising products, we have refined the traffic, prepared, selected, and distributed the traffic to maximize the efficiency of the advertising industry and increase the efficiency of the information flow.

On the ad product front, in the second quarter, we'll continue to enrich Weibo's differentiated content marketing offerings while optimizing feed ad products to enhance our monetization efficiency. On content marketing, in 2021, apart from sectors such as SMCG, automobile, and cell phones, We have also gradually extended content marketing to the gaming industry, which used to be a purely performance-driven sector. We helped customers drive more topic discussions around their newly launched games, as well as accumulate social assets and engagement. As a result, we successfully tapped into a higher ad wallet in the gaming sector, as such content marketing offerings resonated greatly with customers' needs. For example, half a month upon launch of the blockbuster game Most World, the cumulative views and discussions around related topics reached around 5 billion and over 1.3 million, respectively. Followers of its official account increased by nearly three times within half a month. These content marketing ad offerings effectively entice customers to raise their brand and content budget on Weibo. On feed ad products, Leveraging refined traffic distribution capabilities, we could better match traffic of higher conversion potential with performance-driven industries, so as to maximize our feed monetization efficiency. Moreover, we continue to improve our tech capabilities of ad products for performance-based industries, such as gaming and e-commerce, leading to a notable growth in eCPM of each of these industries on an annual basis.

Next, I would like to talk about the impact of the overall advertising industry policy. In the first half of this year, the government-related departments gradually implemented management regulations for the opening advertising of APBs. We have actively revised and adjusted the internal regulations accordingly. In the short term, the revision of the opening advertising will affect some of the opening advertising investment plans for customer-oriented opening advertising. However, for Weibo, the revenue contribution of partial-effect opening advertising is relatively low, which affects the overall advertising revenue. For a long time, As the entire industry and the market adopt and implement the same rules and regulations, the rules and regulations of advertising are still beneficial for the long-term health development of the Internet industry. In addition, let me talk about the progress of the education industry. We see that the political and regulatory requirements of the entire Internet industry this year are rising. The strengthening of the supervision and supervision of the education and training industry in the field of academics does indeed affect the marketing needs of these industry customers. Head-to-head education and customer advertising have already been cut or stopped. But for Weibo, In the first half of the education industry, the percentage of overall advertising revenue is less than 2%, and the risk is relatively low. Subsequently, we will adjust the sales structure of our Internet industry customers according to the direction of the policy, and increase the investment in new consumption and industry customers. In addition, the possible impact of the new IDFA policy mentioned last week, we also see that with model training and optimization, our replacement strategy has achieved a good return effect and is gradually accepted by advertising customers. The impact of IDFA's new policy will be better than the previous industry and our own expectations.

Next, let me share our thoughts on the regulatory impact facing the overall advertising industry. In the first half of 2021, government departments have gradually tightened regulation on the launch screen ad format, and we have taken a proactive approach in product rectification accordingly. In the short term, we expect that such rectification may impact on the launch screen campaigns of certain performance-driven customers. That said, as for Weibo, revenue contribution from performance-based launch screen ads is relatively low, and such impact on our overall advertising revenue is manageable. We also believe that an industry norm on ad formats will facilitate the healthy growth of top Internet companies in the long run. with such standards gradually accepted and implemented in the entire market. Also, let's talk about education. In the context of more rigid compliance requirements facing the overall Internet industry, the tightening regulation on K-12 educators sees impacts on their marketing demands, with top tier education customers cut back or even cease their campaigns. That said, the education sector only took less than 2% of our total ad revenue in the first half of the year, and thus our risk exposure is quite limited. In light of recent policies, we will take steps to further optimize our sales structure for customers in the internet sector and default our efforts to tap into the incremental ad wallets of the emerging consumption economy. Finally, we pointed out Apple's new IDFA policy as a potential headwind last quarter, and let me give you an update so far. Leveraging model training and optimization, our alternative approach delivered a solid attribution result, and thus have earned recognition among our customers gradually. As such, the impact from IDFA changes has been less than widely feared, as well as our own expectations.

Finally, I would like to take this opportunity to share with you some of Weibo's performance during the Tokyo Olympics, which ended not long ago. Thanks to Weibo's unique field effect and the large number of active users, during the Olympics, Weibo was able to gain a lot of attention in terms of topic popularity, the number of players, and the number of active users. Thanks to its long-standing presence in sports, the media, and the field of sports professionals, Weibo has become the first media platform for Chinese Olympic team accounts. In addition, the media reports and netizens' discussions have shown a lot of performance.

Lastly, let me take this opportunity to share with you the momentum we've seen during the recent Tokyo Olympic Games. Leveraging Weibo's unique positioning to serve public conversation and our massive user scale, we're encouraged to see strong momentum in key metrics such as hot trends, topic discussion, and engagement of athletes' accounts. Due to upon years of cultivation on our sports ecosystem around athletes, media, and professionals, Weibo has become the go-to platform for Chinese Olympic teams to join and for our users to find media updates and discuss around Olympic-related topics. As a result, Weibo's MAUs, traffic, and interaction all reached record high in July 2021, giving us confidence in further reinforcing our competitive mode based on unique value proposition.

Since entering the third quarter, we are happy to see that the relatively strong commercial trend in the first half of the year has been able to continue. For example, Anta and other Olympic sponsors, combined with the hot spots of the competition, the endorsement of athletes, and other unique marketing cases on Weibo, make the uniqueness of Weibo based on social content transmission recognized by more and more of our customers. This also helps to expand the community and budget of the quality customers. We look forward to bringing more marketing opportunities to Weibo in the next half of the year.

Furthermore, on the monetization front, we are delighted to see the solid momentum in the first half of the year continue into the third quarter. For instance, our differentiated social marketing playbook featuring high trends and excellent endorsements resonated greatly with the Olympic Games sponsors, such as Anta, which enabled us to capture higher brand-plus performance at customers and their wallets. With such good momentum, we are well positioned to tap into incremental marketing opportunities in the second half of the year. With that, let me turn the call over to Fei Cao for a financial review.

Thank you, Gao Fei, and hello, everyone. Welcome to Weibo's second quarter 2021 learnings conference call. Let's start with user metrics. In June 2021, We bought MEUs and average DEUs reached $566 million and $246 million respectively, both surpassing the peak level in March 2020 during the pandemic outbreak. On annual basis, we had a net addition of approximately 43 million MEUs and 16 million DEUs, a notable re-acceleration compared with prior quarters. leveraging our strength in serving public conversation, initiatives on video front, as well as the effective channel investment. Turning to financials, as a reminder, my prepared remarks will focus on non-GAAP results and old comparisons on a year-over-year basis, unless otherwise noted. Now, let me walk you through our financial highlights for the second quarter of 2021. We put second quarter 2021 net revenues with $574.5 million, an increase of 48%, exceeding the high end of our guidance. Operating income was $223.2 million, an increase of 83%, representing an operating margin of 39%. Net income Tributable to Webull reached $182.8 million, an increase of 60%, representing a net margin of 32%. Diluted EPS was $0.79 compared to $0.50 in second quarter 2020. Now, let me give you more color on revenues. Weibo's advertising and marketing revenues for the second quarter 2021 increased 47% to $502.3 million. Mobile ad revenues were $470.3 million, contributing approximately 94% of total ad revenues, up from 89% last year. On top of good user momentum, Weibo delivered strong ad revenue growth with monetization scale reaching a record high. We are delighted to see broad-based trends across key verticals. In terms of revenue contribution, our top three verticals were FMCG, e-commerce, and 3C products. Leveraging the e-commerce peak season, we will reinforce its unique value proposition to advertisers in serving their integrated branding plus performance needs. and thus tapped into incremental ad wallet of these pillar industries. In terms of growth, the fastest growing verticals were luxury and 3C products, as Weibo has become the go-to platform for these sectors to capture the hearts and the minds of Generation Z users who hold the next generation of consumption power in China. From the ad product perspective, Promoted fees continued to be the largest part, followed by social display ads and other ad offerings, such as promoted trends and topics. Our first form of social marketing products delivered a competitive ROI and resonated greatly with brands and merchants, leading to healthy growth for each of these product categories. In particular, revenues from promoted trends and topic products continue to lead growth among major ad products, with customers embracing the swift growth of our traffic and utilize the differentiated native ad format for brand exposure, interest cultivation, and conversion. Additionally, we also delivered robust video ad growth built upon a higher penetration of video content and ongoing optimization of video ad offerings. Overall speaking, we are pleased with current demand versus supply dynamics, where our ad revenue was driven by both incremental monetizable traffic and a positive eCPM trend on a year-over-year basis. Ad revenues from Alibaba for the second quarter increased 12% to $40 million, a moderate slowdown in terms of growth rate. As communicated earlier, ad spend from Alibaba highly correlated to its own marketing strategies, and thus made BlackBerry quarter-to-quarter. That said, our cooperation with Alibaba positions as well to capitalize our ongoing digitalization trend and the general value for brands and merchants on both platforms. Value-added service vast revenues were 72.1 million in the second quarter, an increase of 54%, primarily attributable to the revenues derived from the interactive entertainment company acquired in November 2020, as well as increasing revenue generated from our gaming business. Turning to cost and expenses, total cost and expenses for the second quarter was $351.2 million, an increase of 32%. The increase was primarily due to a step up in marketing spend and higher personnel-related costs. Operating income in the second quarter increased 83% to $223.2 million. Operating margin was 39%, up from 31% last year, exceeding our expectations. We are pleased with further operating efficiency achieved by our platform this quarter, and we will focus on keeping good balance between investment for growth and margin performance for the company's development in the long run. Turning to income tax and the gap measure, income tax expense for the second quarter was 46.9 million compared to 14.7 million last year. Net income attributable to Weibo in the second quarter was 182.8 million, representing a net margin of 32% compared to 30% last year. Turning to our business sheet and cash flow items as of June 30th, 2021. WebOS cash, cash equivalent, and short-term investments totaled $2.9 billion compared to $3.5 billion as of December 31, 2020. The decrease was primarily resulted from investment activity we made during the first half of 2021 and was partially offset by cash provided by operating activities. In the second quarter of 2021, cash provided by operating activities was $94.1 million, Capital expenditures totaled $9.5 million, and depreciation and amortization expenses amounted to $13.6 million. Lastly, let's talk about our financial outlook. We anticipate our third quarter of 2021 revenues to increase by 20% to 25% year-over-year on a constant currency basis. This forecast also 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.

Thank you. As a reminder, to ask a question, you need to press star and the number 1 on your telephone. And to withdraw your question, please press the pound or hash key. And please stand by while we compile the Q&A roster. Once again, please press star 1 for your questions. First question is from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead.

晚上好,谢谢管理层接受我的提问。 恭喜节目长进的业绩,还有这么好的一个outlook。 我主要是有三个问题。 第一个问题,想先询问一下管理层, 可不可以分享一下我们怎么看 下半年广告的一个展望呢? 另外的话,就是我们开Prepare Remarks的时候, We also mentioned that there are some factors that will affect us. For example, the supervision of education, and the organization of advertising. We still see other industries, real estate, tourism, have some impacts. So I want to take a look at our assessment of these factors. Thanks management for taking my questions and congratulations on a very strong set of results and strong revenue guidance. I have a few questions. My first question is about the second half advertising outlook and followed after that, Can management also comment about our assessment about the impact on the pop-up ads in open app ads as well as education regulations together with more cautious industry outlook in the property auto as well as the travel sector? And my first question is about our feed app. Can management comment about the role of drivers, such as pricing as well as inventory? And thank you.

Thank you, Mr. Chen. I would like to answer from the perspective of the current industry and the growth trend in the second half of the year. First of all, in addition to the fact that the impact of the pandemic last year may be relatively low, we will see that compared to Q2, even in the same period of 2019, the growth rate should be 36% to 40%. And compared to the first half of this year, the number of Q1 sales has also accelerated. I think this is still the whole business marketing system of Weibo in the market. We have put out the product marketing unity, including our content marketing and hot sales. These advantages are actually the majority of products that cannot be available at the same time. This has also promoted us in almost all industries. This year, there has been a very obvious improvement in the first half of the year, including FMCG. This time, the number of sales is relatively fast, more than 50%. Even if this year, So thank you very much for your question.

So let me first of all answer the question about the drivers of the growth in the second half of this year. So as you can see that even though we had the factor that last year we had a pandemic and our base number was pretty low. However, if we're talking about the year-on-year performance comparing with the same period in 2019, we're still enjoying 36 to 40% of the growth. And also in Q1, we are also accelerating the growth overall speaking. As a result, what you can see is that talking about our strong abilities, especially talking about the commercial marketing capabilities, and especially we have a marketing strategy of focusing on the content and hot topic marketing, and also the combination of brand and then performance. So what you can see is that in almost all industries, we enjoy pretty good growth on the app. And especially in FMCG, which is a very promising industry, we enjoy over 50% of the growth. And also in those not that promising kind of industries, for example, in digital and also automobile, still we enjoy 50% and more growth. So as a result, what you can see is that we really focus on a lot the sales and also products as well, and especially targeting those industries with a great amount of combination and synergy between brand and performance as well. So this particular method has been highly recognized by the customers.

In addition, I just mentioned the customer needs and our characteristics. In addition, we saw the storage of ads and our advertising products. On the one hand, the storage I just mentioned in the screen, we have a lot of new storage with the growth of video traffic in the first half of this year. And these storage EPM and Adload will be relatively high. I also mentioned that since the Olympic Games in July and August, we have reached a trend of historical flow. And since August, we have seen the growth of this flow continue. This also brings more space for us to store our information. In terms of advertising products, I just mentioned that in addition to this kind of commercial advertising, we also have this kind of brand and content marketing

And also, second of all, I would like to comment on the other aspects, especially talking about the inventory and also the product of the ad. So we can see this that in the remark, we already mentioned that in the first half, we had actually a very good inventory created for the, because of the increase on the video part and the video consumption and also the ad load, et cetera, of that particular new inventory is very high. And also another thing is that for the Tokyo Olympics, which happened in July and also August, what you can see is that we reach the historical high and also peak on the traffic and data. And also this particular traffic is still increasing even after the pandemic, I mean Olympics. And also this is a very good direction for the future. And also third of all, we are talking about the kind of products. So not only we are talking about the particular ad products of combining ad performance and also the branding as well, but also we are talking about the marketing related ad for brand and content as well. This has been also highly recognized by our customers and also becoming one of the major drivers for our further growth. Okay.

In terms of price, in the second half of last year, we continued to grow with the growth of the core industry customer demand. In addition, the upgrade of our super fans has brought continuous improvement in advertising effects this year and the first half of this year. Especially, we continue to optimize our advertising product and service capabilities for the gaming, e-commerce, and other sales industries. The improvement of these industries is very obvious.

And also what you can see is about the price. So since the second half of last year, what you can see is that we were increasing the demand from the core industries. And also because of the improvement of our Sutong FST, we can see that the performance increased. And also talking about those others like performance-driven industries like the gaming and also e-commerce, because we have optimized our technologies and also service provided, we can see a very good growth on the ECM, and especially enjoying a double-digit growth on the ECM. All right.

Regarding some of the negative factors that you mentioned in the second half of the year, including the education industry and real estate, we do see that in the second half of the year, the sales plan of customers on Weibo has dropped significantly. But this industry, as mentioned earlier, such as the education industry, has a total revenue of about 2% of the total net income. We think it is still controllable. Okay, you can translate it first.

And also, as you have talked to us about, some negative factors happening in the second half, especially to the education industry and also real estate. So, of course, it is true that we have been seeing a decrease over the planning on the customers in those industries in terms of their marketing plans. However, as I have already stated, for example, education industry only accounted for about only less than 2% of our total product. So I think that this particular impact was pretty much controllable.

Okay. And also, lastly, talking about the flash ad or the pop-up ad.

So I think that it is true that the ratification of this pop-up ad really had a big impact or some of the impact over the whole industry, including Weibo. So majorly reflected in the fact that the click rate actually has been reduced. And also that is primarily impacting and influencing those customers with the performance-oriented plans. However, what you can see is that our major ad customers are still focusing on branding and also the final effectiveness. So they would like to care more about exposure rather than the clicks. And also our percentage-wise is pretty much limited. So as a result, I think that the impact is pretty much within the control scope. Okay. Okay.

From a Weibo perspective, our current Q3 revenue index has already reflected the current most strict monitoring and market environment. For example, the education industry, including us, has a negative impact on all the effective advertisements. If we remove the above-mentioned monitoring factor, the increase in the previous three seasons and the following year will actually be stronger. And also,

from the Weibo's own perspective, I think that in the guidance that covering the Q3 performance, we have already, you know, truthfully reflected and also evaluated the most strict regulations happening now in the education industry and also the pop-up ad industry. So that is to say that, you know, without those kind of factors, we should have been enjoying a higher and stronger growth in Q3 and also second half of 2021. So, however, still, you know, from the Weibo's perspective, we are going to continue the optimization of our ad model, especially, you know, talking about the pop-up ad. We're going to actually have better research over the new models and also the new recommendation algorithms, for example, try to minimize the impact to the lowest level. So, of course, those kind of plans are still in the implementation and research in Facebook. so that we are not showing them in the new guidance for the future growth. Okay, thank you.

Thank you and congratulations again.

Thank you. Our next question is from the line of Alex Cole of Morgan Stanley. Your line is open. Please go ahead.

Thank you, Manager Chen, for accepting my question. Also, congratulations on Weibo's strong performance. 我们二季度的用户表现不错,同时增速又accelerate,所以管理层是否可以分享一下我们七月八月看到的一些情况和今年下半年的用户预期? 谢谢。 Let me translate into English. So thank you management for taking my question and congrats on the solid results. So on the user front, we had a strong quarter with accelerated pace of growth. Can management share what we have observed quarter to date and the expectation in the following quarters? We're also aware Weibo recently launched a rectification on fandom. So how would that impact the user growth and traffic in the second half of this year? Thank you.

First of all, I would like to introduce our strategy for the current traffic growth in the first half of the year. In fact, since the beginning of April last year, we have been focusing on user acquisition this year, as well as the core user flow of Weibo. First of all, in terms of channels, we will see that we have increased cooperation with manufacturers, operators, and other key apps. We have increased the size of channel acquisition users And also, first of all, I would like to comment on the very first part of the question, especially talking about

the growth in talking about our traffic and also the future users. So since Q4 of last year, we have already stated that we are going to invest and also focus more on the users' acquisition as well as the users' cost of acquisition and also the retention as well. So first of all, in terms of the channels, we have been collaborating more widely with those different brands and also operators as well as the other apps. So the user volume from this particular channel has been increased for about two times. And also, the next thing is that in terms of the strategy optimization, as well as our improvement over the user retention, et cetera, we have been reducing the overall cost of the user acquisition. So as a result, what we can see is not a significant increase in terms of investment paid into this particular area. OK.

In terms of products, we will see, as I mentioned earlier, that this year's interest-based products, including our relationship flow, have achieved a good growth, including the flow of users and the accuracy of users. At the same time, in terms of the promotion of hot events and effects, you can see from this conference that a product like Weibo can actually be better than other short-term products, including long-term products, And also, what we can see is that talking about the products. So as we have already stated, that because of the generation of the interest feed and also the super topic and also growth on that,

as well as the very good growth over the relationship-based feed. What we can see is that we have further improved the activity engagement of the users as well as the total kind of a user number. So, for example, because of a lot of hot topics and also some of the big events happening, what we can see is that comparing with those platforms offering short videos or long videos on Weibo, we can have a better attention track to the customers and also users, and also we are going to trigger a better discussion and wider discussion and more focus on those super topics and important events. So that is the result that after the unpicks, we can actually have a very good retention of the users and also a very good increase on the users' volume. So what we can see is that we can forecast a pretty good result in this particular area in Q3 and also even forward. So that is to say that even though Weibo already had a pretty high internet penetration, however, still we think it's quite promising for Weibo to actually grow the user and also the user retention in the second half and also in the medium to long term. All right.

In addition, you mentioned that you are also concerned about the current situation of this circulation. In fact, if you pay attention to this kind of announcement on Weibo, Weibo is actually not in the second quarter, we are only concerned about the related issues of circulation. Weibo in the second quarter of last year, also in the second quarter of 2020, has begun to focus on some negative effects of circulation and began to adjust the operation of our products. And strengthen the standard management of star management companies, including fans, and encourage stars to participate in positive energy and public opinion behavior to guide a positive development of fans on the Weibo platform. We should start from last year's, I read it before the press conference, from last year to the end of last year, we should have about 40 posts on Weibo, including the special work of the self-management fan circle.

And also, second of all, you have mentioned something about the ratification of the fandom. So what we can see is that if you pay close attention to the announcement made by Weibo, we do not actually start paying attention to this particular fandom ratification starting from this year. But actually, from 2020 Q2, we already started paying attention a lot and started ratification over the fandom in this particular industry. So that is to say that, for example, we are already changing and adjusting the operation of this particular area, especially we are managing those KOL agents as well as their fans as well. So we are encouraging more KOLs to really participate in those charity programs and activities as well as those positive energy-oriented activities. So that is to say that as of medium of last year until as of now, we have been already publishing over 40 different announcements of the working related to the ratification of the fandom.

Actually, we all know that in terms of the environment and users of Weibo, entertainment is indeed an important vertical area of Weibo. So, from last year, we have made some changes to the internal products and functions of the entertainment industry. In fact, the flow of Weibo has a certain impact. In the second half of last year and the first half of this year, we have closed our accounts And then the optimization of the search engine, including the management of some fan accounts, has actually done a lot of work. For example, in fact, the comparison of the entertainment of the search engine is about 30% or 40% from last year. And then the second quarter of this year has dropped to 25%. These are actually the influence of the flow. In fact, the main influence is the second half of last year and the first quarter of this year.

And also, Weibo, it is true that Weibo is actually a kind of an ecosystem and also a kind of a user platform that is pretty much focusing on one of the important verticals, which is entertainment. And of course, since last year, we've been seeing that because of this justification and adjustment made on those functions, as well as the new launch of some of the products, we did receive some of the impacts to this particular entertainment and also to our performance because of something happening in the entertainment industry. However, the thing is that, you know, talking about, for example, last year, second half, and also Q1 of this year, we've been closing down some of the accounts and also try to rectify the content and also try to manage the fans and also the KOLs, et cetera. So that is to say that a very good example would be that among the hot research and hot topics, entertainment used to account for about 30% to 40%, but now in Q2 of this year, entertainment topics only accounted for about 25% of those hot research and hot searches. So that is to say that from the second half of last year until the Q1, we did receive some of the impacts, but we believe that this particular rectification and also regulation is pretty much important to really strengthen and try to regulate the whole ecosystem that Weibo has. 整体来看的话,我们觉得对于饭圈的治理其实是我们整个娱乐行业规范化措施的一部分。

As an Internet social media platform that has been operating for more than 10 years, Weibo has also witnessed the rise and fall of the entertainment industry, and has also witnessed the process of our entire supervision becoming better. In the past 10 years, we have been communicating effectively with the government, and then, based on the requirements of the environment and some major trends, we have been actively adjusting our product operations. We also believe that these policies are not only for Weibo,

And also, you know, talking about this particular ratification of the fandom, I think that, you know, this is a very important thing happening to regulate the whole kind of entertainment industry. And also, you know, as a platform that has been operating in this world for about 10 years already, we have been already witnessing the fluctuations and ups and downs of the entertainment industry. And also, what we are trying to do is also try to observe a further optimized regulation post against this entertainment industry. And also, during the past 10 years, we've been collaborating actively and communicating actively with the government to really try to understand the latest trend, and also try to understand the latest requirements imposed upon the ecosystem that we have. So we are very much proactively optimizing and also changing our operating strategies. So not only this is really helpful for us to regulate Weibo internally, but also this is a very good thing to regulate the whole industry and also beneficial to the whole industry to really grow on a sustainable course.

Thank you.

Thank you. Our next question is from the line of Miranda Zhuang of Bank of America. Please go ahead.

Thank you. So my question is about the video business. Can management elaborate more on the initiatives for Weibo's video ecosystem? For example, the expansion of the content category, the assistance for the content creation and content distribution, and how does Weibo video compete with other video platforms with different value propositions? And also, can you provide more color on the development of the video ad monetization? Thank you. Thank you.

Thank you. And then, first of all, there are some strategies in terms of our ecosystem. The ecosystem of the second year is still through the system of video numbers. Accelerate our micro-blogging on a larger scale The process of video optimization by the creators of the group to improve the supply and consumption of our video content. Well, first of all, let's talk about the video number. As I mentioned just now, the number of subscribers has exceeded 20 million. And there are about 30,000 video number subscribers. The number of fans has exceeded one million. OK. And also, first of all, talking about the whole ecosystem. So as we have already stated that in 2021, our ecosystem will be pretty much focusing on the development of the video accounts.

And also, you know, we are encouraging more video creators to opening up their accounts and also, you know, further to boost the consumption as well as the supply of the video products. So as we have already stated that we have exceeding 10 million as a threshold of all the video creators and also 30,000 of them had already the followers of reaching 1 million. So that is to say that in Q2, we can see that we nearly doubled this particular volume of the videos created. Okay.

At the same time, users can also share their views and consumption with Weibo. And these views and consumption can be shared through some head-up accounts, such as IOS or media. This also allows users to present more rich content. And also, next thing is about the kind of total consumption of the videos.

So that is to say that we are still leveraging the advantage of Weibo as a social media platform, which is a very important one, and to really trigger the consumption of the videos and also the other kinds because what you can see is that go along with the consumption of videos, we also have the consumption by the users to the text and images, etc. And also what you're going to see is that we are really triggering more kind of topics as well as the consumption of videos around the social media platform. And also we are really encouraging more KOLs and also the other media to really disseminate those knowledges and also those videos as well as the content as well. So that is to say that we are trying our best to diversify the content that we are providing through Weibo. So a very good example is that during the analytics, what you can see is not only we can see people's and also users' consumption around the videos, short videos, for example, as well as the other live streaming, but also all the discussions triggered by that is pretty much around the video as a product. So that is one of the major differentiating strategies and also a unique selling point of WaveWall. All right.

In terms of video conversion, we will see that with the improvement of the video number product system and our entire video traffic, especially the increase in video recommendation traffic, we have increased a lot of ad storage. At the same time, there are more customers using video method to post ads, especially in the second quarter of this year, when we cut the video into full screen, video commercial materials will also be quickly posted on Weibo, and the efficiency will also be improved. The increase in the number of video ads in the second quarter is obviously faster than the increase in the number of ads in the whole. Video ads

And also, third of all, in terms of the ad monetization, what we can see is that with the increasing of the number of video accounts and also the increasing traffic, we can see a very good contribution to our ad inventory. And also, we see more customers actually post their ads on us and also place their ads on us. So with also the enabling of the full-screen ad, we can see a kind of more placement as well as the enhancement over the efficiency of the advertisements. So that is to say that in Q2, we had enjoyed a higher growth on the video ad than the other format of the ad. And now the video ad already accounted for about one-third of our total ad products and formats.

All right. Thank you. And if there are no further questions, I would like to hand the conference back to the management for closing remarks. Please continue.

Yes. Thank you for joining us today. See you next quarter.

Thank you. And this concludes today's conference call. Thank you for participating. You may now all disconnect.