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spk02: Good day, and thank you for standing by. Welcome to Weibo fourth quarter and fiscal year 2022 financial results conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To redraw your question, please press star 11 again. Please be advised that today's conference is being recorded. And I'd like to hand the conference over to Ms. Sandra Chung from Weibo IR team. Please go ahead, ma'am.
spk05: Thank you, operator. Welcome to Weibo's fourth quarter and fiscal year 2022 earnings conference call. Joining me today is our Chief Executive Officer, Gazi Wang. and our Chief Financial Officer, Pete House. The conference call is also being broadcast on the internet and is available through Weibo's IR website. Before the management remarks, I would like to read you a safe, proper 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 statement. Weibo assumes no obligation to update a forward-looking statement in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20F and other findings with the SEC. All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as it requires 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-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials include certain expenses, gains or losses, and other items that are not expected to result in future cash payment, or are not recurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Annoying 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, Gao Feiwang.
spk07: Thank you. Hello, everyone. Welcome to the Weibo Telecom Conference.
spk05: Thank you. Hello, everyone, and welcome to Weibo's fourth quarter and full year 2022 earnings conference call.
spk07: On today's call, I'll share with you highlights on Weibo's user product monetization, review the progress made in 2022, and elaborate our strategies for 2023. First, let's talk about the financial performance of Weibo in the fourth quarter. In the second quarter of the second year, the entire quarter was greatly affected by the impact of the epidemic factor and time. Weibo customers' investment in Weibo's advertising plan was greatly affected. In the fourth quarter, Weibo's total revenue reached $4.18 billion, and the annual decline was 27%, and the G2G decline was 1%. To remove the exchange rate factor, the total annual revenue decreased by 20%, and the G2G leveled, and the total advertising revenue reached $3.95 billion. Let me start with our fourth quarter financial results. In the first quarter, our total revenue reached $448 million, a decrease of 27% year to year.
spk05: or a decrease of 1% quarter-over-quarter, as marketing activities on Weibo was largely impacted by the COVID factor, as well as other major affairs. In the mid-term, our total revenue decreased 20% year-over-year and remained flat-ish quarter-over-quarter. Advertising and marketing revenues reached $399.5 million, with 94% of our revenue coming from mobile. Leveraging solid execution of our cost optimization initiative, our non-GAAP operating income reached $152 million, representing a non-GAAP operating margin of 34%. Meanwhile, non-GAAP net income attributed to Weibo reached $178.5 million, up 50% quarter-over-quarter, representing a non-GAAP net margin of 40%.
spk07: At the same time, from the whole year, The total revenue of Weibo reached 18.4 billion US dollars. The annual revenue is 19 percent. The total revenue of advertising has reached 1.6 billion US dollars. The annual revenue is 19 percent. Remove the profit factor. The total revenue of annual revenue is 15 percent. The annual revenue of advertising is 16 percent. The company began to adjust the strategy in February of this year to improve operating efficiency. These measures allow Weibo to adjust the operating profit after two years to reach 6.01 billion US dollars. After adjustment, the operating profit of the whole year reached 33 percent.
spk05: For full year 2022, Weibo's total revenue reached 1.84 billion, a decrease of 19% year-over-year, or a decrease of 15% year-over-year in Renminbi term. Advertising and marketing revenue were 1.6 billion, a decrease of 19% year-over-year, or a decrease of 16% in Renminbi term. Our non-GAAP operating income reached 601.1 million, representing a non-GAAP operating margin of 33%, mainly attributable to our strategic focus on improving operating efficiency since Q2 last year.
spk07: In the 4th quarter, our monthly operating cost reached 5.86 billion yuan, and our annual operating cost reached 1.3 million yuan. Our monthly operating cost reached 2.52 billion yuan, and our annual operating cost reached 3 million yuan. In the 4th quarter, our monthly operating cost reached 95%.
spk05: On the user front, in December 2022, Weibo's MAUs reached 586 million, a net addition of approximately 13 million users on a year-on-year basis. Every year, users reached 252 million, a net addition of approximately 3 million users on a year-on-year basis. In December, 95% of Weibo's MAUs came from mobile.
spk07: In the past two years, due to the additional impact of the pandemic and the epidemic, the overall market environment has faced certain challenges. The demand for advertising has not recovered to a more or less economic track. In the case of the resupply of advertising demand, the company persists in the strategy of stable efficiency throughout the year. The cost-benefit implementation of R&D requirements is more strict. Product operation increases operation efficiency. The return of platform users is significantly improved compared to last year. The overall flow has remained stable compared to last year. In 1982, the company also invested a great deal of power in reporting on security protection and real-time big events. Weibo has fully implemented platform resource integration and combined all the advantages of the report and help. It reflects the unique social value of Weibo. In terms of commercialization, the overall marketing environment of 2020 is more severe. The advertising market has shown a fluctuating trend throughout the year, but the company has used a combination of marketing models to organize media, stars, and K-out to produce topics and content, and combined with Weibo's hot spot ability to create a broken circle of customer hot spots. in the car, mobile phone, and the game industry, and enhanced the customer's marketing mentality. We have also further improved the core competitiveness and risk-saving capabilities of Weibo in the brand advertising market.
spk05: Looking back to 2022, due to negative impact from macro environment and the COVID factor, the overall market continued to face challenges, and the ad demand showed limited recovery trend. To navigate through the challenges from the ad demand side, we adhered to the strategy to optimizing cost and expenses, and improving operating efficiency throughout the year, adopted more disciplined ROI requirements for cost, cost expenses, and improved efficiency in product operation. As a result, user engagement was largely improved, and overall traffic maintained steady growth from the previous year. In 2022, we also made great efforts in content control and content distribution for major political affairs. We gave full play to Weibo's advantages of resource integration and content distribution, for the COVID-related publicity and assistance, representing Weibo's unique social value. On monetization, despite of the challenging marketing environment in 2022 and the volatile ad market with descending trend, we successfully enhanced adoption of our strengthened brand-class performance ad with content marketing solution among advertisers from mobile, handset manufacturers, and online gaming industries by allowing celebrities, media, and KOLs to generate topics and concepts, and combining our hot-chain products to create industry facts for clients and distribute beyond the audience in the vertical area. And thus, Weibo's core competitiveness and risk-resistant capability in the brand ad market has further strengthened.
spk07: Next, I would like to introduce you to Weibo's 4G map, the progress in product operation and commercialization, and our key business ideas for 2023.
spk05: Next, let me share with you our progress made in product monetization in Q4, and they are our key initiative for 2023.
spk07: In the fourth quarter of 2023, Weibo, the main content security and propaganda coverage of product operations, and the propaganda coverage of the epidemic prevention meeting, as well as the promotion of products by the關係楼, the improvement of new products and distribution mechanisms, and the improvement of consumption efficiency, these key works have led to the growth of the overall flow of the fourth quarter of new products.
spk05: In the first quarter, on operational side, we focused on content monitoring and discussion for major public affairs, as well as COVID-related publicity after a reopening. And meanwhile, we further optimized the distribution mechanism for relationship-based feed and interest-based feed to improve users' consumption efficiency. This initiative contributed to traffic growth in information feed in Q4 on a year-over-year basis.
spk07: On the channel front,
spk05: In Q4, our Hot Trend product has fully covered the core position on the devices of leading domestic handset manufacturers, which increased the content consumption of users from a domestic handset. In December, the number of Hot Trend users from domestic handsets increased 40% from September, which further enhanced the influence of Weibo's Hot Trend product among handset manufacturers and strengthened the user consumption for Hot Trend.
spk07: In the fourth quarter, the relationship flow continues to optimize the distribution model and product form, further strengthening the exposure and user response to high-quality social content. Due to the investment of the whole year to strengthen the social nature of the product, the 12-year relationship flow of users and traffic quickly recovered and reached the highest point of the whole year. At the same time, in the fourth quarter, we have reorganized and clarified the positioning of the relationship flow products, and further strengthened the network distribution of the relationship flow based on secondary relationships. We hope that the relationship flow products can help users to develop more high-quality, real social relationships. to build a more diverse social network. At the same time, it can promote the value of fans, strengthen the interaction between big V and fans, and get more exposure opportunities in the audience. With the gradual optimization of the algorithm, during the strategy test, the number of users' exposure and the number of people's attention has been improved. This strategy has been heavily invested for 23 years, and the content of the work has been displayed, and more valuable accounts have been paid attention to. The social network of users can be more diverse, and the social core competitiveness of Weibo can be further stabilized.
spk05: On social attributes, in Q4, we continued to optimize the distribution mechanism and product structure of relationship-based feed, which further increased the exposure of high-quality social content to users. Our user and traffic for relationship-based feed picked up rapidly in December and reached the peak level in 2022, largely attributable to the strengthening of the social functions of our product. We also clarified the position of relationship-based feed and reinforce content distribution based on the social behaviors of users' social network in the relationship-based feed. We hope that relationship-based feed can help users build up high-quality and real social connections for a more enriched and diverse social network, and encourage high-quality content creators to recognize the value of fans and generate more interaction with other big feeds and fans for more exposure in the relationship-based feed. During the beta test period for the algorithm upgrade, the impression per user and increased follow behavior per user have picked up. This year, we will continue to invest on this initiative to improve exposure of high-quality content and enhance sales accumulation for valuable content creators for a more enriched social network, so as to further enhance Weibo's core competitiveness in the social sector.
spk07: In terms of video, in 2022, we will focus on strengthening the operation of YouTube video accounts, and guide bloggers to produce more series and specialized video content to promote fan consumption. as well as the promotion of digitalization and deepening the content to improve the interaction frequency of fans. This has further improved the activity of the number of users of the video account. In December, the number of users of the video account published in January and the number of users of the video account have been increased by double from the average. At the same time, video product technology continues to improve the recommendation efficiency and playback experience of video channels and strengthen social interaction. The number of users of the video account has increased by more than 50% in December last year, and the number of users of the playback page has increased by more than 20%. This has accelerated the growth of user activity and the expansion of video marketing. In 2023, the growth of video media revenue will provide a good source of traffic.
spk05: On the video front, we focus on the operation of high-quality video accounts. To this end, we introduce and encourage video content creators to produce CV and topic-based video content to accumulate more fans and also to produce content in the text and photo on daily life to promote interaction with fans, which could further enhance engagement of video content creators on the online board. In December, both the number of video accounts that generate video and the effective video view grew double-digit year-over-year. And moreover, the optimization of video product continued to improve the recognition and video playing experience in the video feed, and promoted social interaction on the playback page. As a result, the effective views of the video feed in December 2022 increased over 50% year-over-year, and the number of users who interact on video playing page increased over 20% year-over-year, which improved the user engagement and increased video ad inventory, laying a solid foundation for the video ad revenue growth in 2023.
spk07: In terms of content and ecology, in the past two years, we have strengthened the production of media, micro-media, gaming, sports, and collaboration partners, as well as the production of IP and hot-pot content. In addition to operating effectively, The scale of the flow and interaction in the key areas has been improved to a 5% degree in 21 years. In the media cooperation, we have fully influenced the media to achieve comprehensive content and commercial cooperation, strengthen the discussion of the social hot spot of the media, enhance the participation of the media in promoting the hot spot of the industry, and ensure the efficiency of the hot spot of the industry. In addition, to promote the advantage and spread value of the media, to promote the active participation of the media in the customer marketing service of Weibo, At the same time as increasing the brand influence of the client, it also increases the commercial value of the media. In fact, the media is in Weibo from the content to spread the business. The media's income in Weibo in 2022 has increased in scale. It increased by 20% in the first 21 years. I am in cooperation with the company to strengthen the content production and social activity of the top users. Joint focus on broadcasting platforms and producers to strengthen the hot topic of production and discussion of works.
spk05: On the content front, in 2022, we strengthen strategic cooperation with partners in media, entertainment, online gaming, and sports verticals and secure the production of IP-related content and hot topics. Coupled with the effective execution of operational strategy, the traffic and number of engaged users in key verticals, increased by a varying degree from 2021. On the media front, we reached a full cooperation with state media and media with national influence in content and the monetization side. To elaborate, we encouraged media accounts to lead discussion around how to discuss the social topics on Weibo, facilitate media's discussion from this topic to those in vertical areas to ensure the popularity of Hot Trend in vertical areas. In addition, we motivated media to actively participate in the marketing campaigns on Weibo. With the effect of media endorsement and distribution value, both advertised brand influence and the commercial value of the media were promoted, and also built a self-reinforced ecosystem of content distribution and monetization for media accounts on Weibo. As a result, revenue earned by media accounts scaled up in 2022 up 20% from 2021. In terms of entertainment vertical, we work with agents to promote content generation and engagement of top celebrities, and also work with video platforms and producers to strengthen the topic generation and discussion around the popular movie and TV series. As a result, the traffic and the number of engaged users in our entertainment vertical resume its healthy growth trend consistently.
spk07: In response to the overall sluggish ad market in 2022, we optimized the monetization model for people's top content creators
spk05: And thus, the number of content creators who earn revenue on Weibo increased over 20% year-over-year. In 2023, we will continue to strengthen the monetization for top KOLs to improve Weibo's marketing capability to serve brands and increase top KOLs' monetization skill and improve their engagement on Weibo.
spk07: In 2023, the overall performance of the product cloud will still promote user-scale growth, improve operating efficiency, and increase traffic flow.
spk05: In 2023, we will continue to focus on growing our user feel, improving operational efficiency to drive up traffic, and strengthen the core competitiveness of Weibo.
spk07: In 2023, we will continue to focus on growing our user feel, improving operational efficiency to drive up traffic, and strengthen the core competitiveness of Weibo. The number of users in the film industry increased by 86% last year, and the number of users has increased by 130%. In 2023, Weibo will work more actively with film and television companies to promote the health and development of cultural works. The business will also increase the investment in hot spots, consolidate the hot spots of users, and promote user growth and activity. In addition, we will restore the investment and operation of some channels and market activities according to the recovery progress of the market and industry this year, and further promote the growth of user size.
spk05: First, on youth growth. In 2023, youth engagement around hot trend and entertainment verticals is expected to recover as the market and industry trend gradually improves. For the movie vertical, driven by the blockbuster effect from movies scheduled for the Spring Festival and TV series earlier this year, the number of users who had engagement was up 86% year-over-year, and the total engagement volume grew 136% year-over-year. Entering into 2023, we will work most actively with our partners in movies, TV series, and variety shows in order to promote the healthy development of the ecosystem around entertainment works. On product front, we will also step up investment in hot trends and thus reinforce users' mindset of hot topic consumption as well as bolster user growth and engagement. And meanwhile, we plan to resume investment and operation of certain channels and market campaigns based on the recovery trend of the market and industry this year, so as to further drive user growth.
spk07: Secondly, in terms of traffic growth, in 2003, we will continue to focus on hot-point social core competitiveness, more efficient traffic for users, and increase the commercial value of traffic. Business will focus more on key vertical areas, such as the stability of the content ecosystem and the activity of social media platforms. Product will further optimize the product form and distribute efficiency, and continue to improve user consumption. Especially, the relationship product has expanded its social network positioning this year, and the community product has strengthened the community interaction atmosphere this year. These key tasks are crucial for the consolidation of the company's social competition, and further promote the continued health development of Weibo platforms in the future.
spk05: Secondly, on traffic growth, in 2023, we will further focus on strengthening our core competitiveness in hot trends and social attributes, and efficiently grow our traffic and its monetization value. On the operational front, We will beef up our efforts to reinforce the content ecosystem in key verticals, as well as deepen engagement of social accounts. As for user products, we are dedicated to further optimizing product structure and distribution efficiency to continue to improve the user consumption. In particular, we'll broaden the social network coverage for relationship-based feed and nurture the interaction vibe within our community products. These initiatives are crucial to solidify our competitive mode in the social product landscape, which will further facilitate Weibo's sustainable and healthy development in the future.
spk07: Weibo's 4G advertising revenue has dropped by 29% compared to the previous year, and the share price has dropped by 22% compared to the previous year. Although the overall marketing environment is more severe, some key industries have maintained the same growth in 4G.
spk05: In the fourth quarter, Weibo's ad revenue decreased 29% year-over-year, or 22% year-over-year, on a constant currency basis, and slashed quarter-over-quarter on a constant currency basis, as macro halvings and COVID disruption weighed on the overall advertising demand side. Despite the challenging marketing environment, we are pleased to see certain key industries sustain an upward trend year-over-year in this quarter.
spk07: The world cup of the four seasons is a significant turning point for many customers, especially food and beverage customers. It has been improved by the efficiency of the second year of the competition. This year, the flow of food and beverage has exceeded that of the Beijing Winter Olympics. Customers have seen the brand's growth due to the hot spot effect. Weibo has also achieved a scale-up of advertising revenue growth. The advertising revenue of the world cup of the whole season has exceeded that of Beijing Winter Olympics, which has led to a significant growth in the four seasons of the food and beverage industry as well as the advertising revenue of the four seasons of the same year. In the four seasons, the car industry has improved its recognition of users in the industry. The revenue of the mobile phone industry remains the same growth. At the same time, we successfully copied the new model to the mobile phone industry. In the case where the market environment of the mobile phone industry is not good throughout the year, the revenue of the mobile phone industry in the fourth quarter has achieved an increase of the same percentage. For example, the listing of the Bello X90 new machine, we aim to be the core of marketing, from the warm-up of the business to the release to the deep analysis of each part, to organize the digital industry professional team, with the ability to break through the QL, media production, and operation of customer characteristics. In the first quarter, the World Cup was a major campaign event for many clients, especially in the food and beverage industry. Thanks to enhanced operation efficiency this year,
spk05: The traffic and interaction volume of World Cup surpassed that of the Beijing Winter Olympics. We were achieved sizable growth in air revenue as customers leveraged the hot trend effect to build hype in the market. We are pleased to see total air revenue generated in the World Cup season exceed that of the Beijing Winter Olympics, especially notable air growth of the food and beverage industry year-over-year basis. Our revenues from automobile industry also took a year-over-year growth, benefiting from better recognition of the new car launch among the industry clients. And meanwhile, we successfully introduced the new product launch model to the handset sector, which delivered double-digit year-over-year growth in Q4, despite the weak market environment of the handset sector throughout the year. For instance, we showcased our content marketing solution with the launch of Vivo X90, From phase of pre-launch to product release and to index interpretation, we organized DigBee in the digital product industry, vertical KOLs capable of breaking the limitation of surface, as well as media, to generate and operate client-specific topics. Averaging the hot topic effect of the World Cup, we deliver brand recognition beyond the client's expectations. Top views related to the new Vivo X90 exceeded $2.5 billion. Once again, we showcase Weibo's unique value proposition with our counter-market solutions and service capabilities in turning our new product into a blockbuster to our clients in the handset industry.
spk07: In addition to the wide-ranging model, Weibo has been conducting commercial transformation in multiple channels of e-commerce members, promoting the commercial value of Weibo platforms. Social e-commerce has been an important part of Weibo's content ecosystem, and is also the core path of Weibo's transformation. In the second year, Weibo's social e-commerce layout In addition to the Aliexpress and JD.com, Aliexpress and JD.com chose a high-end e-commerce industry to combine with live streaming, and launched Weibo e-commerce. In the second year, e-commerce has made a three-fold improvement since early last year. Although e-commerce currently has a smaller total income and profit contribution to the platform, this online promotion, offline transformation, and mobile mode can be applied to more similar industries in the future through the circulation of e-commerce in the e-commerce industry. This will also contribute to the strengthening of e-commerce
spk05: We have been monetizing our traffic through multiple channels, such as membership and e-commerce, to amplify the commercial value of the platform. Social e-commerce has always been an integral part of Weibo's company ecosystem, and also the key monetization channel for P3. In 2022, in addition to ongoing ad cooperation with Alibaba and JD.com, We also tap into the closed-loop e-commerce, starting with the aesthetic medicine industry, which enjoys a relatively high business size, featuring KOL live streaming on our platform. In 2022, the annual GMV for the aesthetic medicine e-commerce business on Weibo doubled from the previous year. Currently, although the contribution of the revenue and profit from the closed-loop e-commerce business was non-material at this stage, The combo of online promotion and offline conversion could be replicated to more similar industries in the future upon the trial and error with the aesthetic medicine in e-commerce business. It will also help further strengthen users' mindset of e-commerce on Weibo, facilitating monetization growth of BigBee, as well as providing a strong support for the long-term ad monetization opportunities.
spk07: In 2023, Weibo's business strategy will continue to strengthen Weibo and its media, Let me share some comments on our overall manipulation strategy in 2023. We will continue to focus on enhancing the marketing combo, which centers around media and celebrities.
spk05: supported by KOL distribution across verticals, while underpinned by traffic contacts featuring strong exposure and mind-sight cultivation. In particular, we will beef up Weibo's unique crowdfunding IP and new product launch ad offering, aiming to earn recognition from more industries and customers, and thus further strengthen Weibo's core competitiveness in the ad market.
spk07: From the current situation, Weibo's overall advertising is in the process of recovering. But due to the impact of the spread of the epidemic in various regions, customers need time to resume their lives and work. Although we see that the epidemic has passed the peak, it is expected to be faster, but most companies still need a certain time to determine the overall marketing plan for 23 years. We have also seen a series of economic and industry-oriented policies come into play recently. However, it may take some time for the implementation of these policies to gradually improve the market economy and the recovery of the brand advertising demand. From an industry perspective, as the policy improves, the consumer market will stabilize and recover, The car industry, which has been growing in the second year, will continue to grow in the second and third years. The new product sales activities of the cosmetic industry are expected to resume in the second half of the year. This year, Weibo will upgrade the sales of celebrity sales and new products and other sales methods to strengthen the purchasing power of cosmetic industry customers. The revenue of the cosmetic industry will continue to increase in the second half of the year. The gaming industry has a chance to increase its revenue as the new version is released this year. In addition, in the second and third years, we also see that some industries will have a chance to recover as the economy recovers.
spk05: Based on Weibo's performance in January and February, our overall advertising exhibited graduate recovery trend month by month. Nevertheless, due to the outbreak of COVID-19 in various regions and the Spring Festival, it takes time for clients to gradually return to normal life and work. Although the country has passed an infection peak faster than expected, most companies still need time to determine the overall marketing plan for 2023. Recently, we are glad to see the issuance of a series of favorable economic and industry policies. However, we may have to wait a while for a full recovery of ad demand side, since it takes time from the policy implementation to macroeconomic rebound, and then to pick up of demand side of brand ad. By industry, with the tailwind of favorable policy and the stable recovery of the consumer market, The automobile and luxury industry, which had nice growth in 2022, are expected to deliver positive growth in 2023. Hopefully, our revenue from the cosmetic industry may resume growth in the second half of the year, assuming new product marketing campaigns in the cosmetic industry come back that time. In 2023, we will strengthen Weibo's capability of capturing ad budget in the cosmetic industry through optimizing the marketing models featuring celebrities, new products, and shopping festivals. As for the online gaming industry, we still have room for further revenue growth with the resumption of the gaming license issuance. In addition, we are also excited to see opportunities for certain industries, such as tourism and real estate, to recover following the economic rebound.
spk07: In terms of advertising products, in 2023, we will take advantage of the advantage of Weibo content marketing to improve the sales and advertising effects of hot products in the field of commercial products, and to maximize the efficiency of increasing the flow of hot products. At the same time, we will continue to excavate and expand the sales and marketing of customers by increasing the number of people in the industry, especially for customers in the first-class industries such as cars, tourism, and real estate. We will further enhance the combination of user products and advertising products to improve user-to-advertising interaction. to enhance the ability and opportunity of advertising to be used in the broadcast environment, to optimize the transfer cycle of advertising, and to improve the transfer effect.
spk05: In 2023, our ad product front, leveraging Weibo's strengths in content marketing, will step up our efforts to drive sales and ad performance of high-trend ad products and maximize the monetization efficiency of high-trend-based traffic. Meanwhile, we will also continue to explore and expand the targeting audience package and improve its reach, accuracy, and conversion, particularly for industries such as automobile, tourism, real estate, and home furnishing that require lead generation. We will further strengthen the synergy between user and ad products to enhance users' social interaction around ads, aiming to elevate our capability as opportunities to reach users in multiple scenarios. and thus optimize the conversion cycle of our social ad offerings as well as conversion results. With that, let me turn the call over to Fei Cao for a financial review.
spk04: Thank you, Gao Fei and hello, everyone. Welcome to Weibo's both quarter and fiscal year 2022 earnings conference call. Let's start with user metrics. In December 2022, Weibo's MEU An average DAU is 586 million and 252 million respectively, representing a net addition of 13 million and 3 million users on a year-on-year basis in 2022. Our user community and engagement remained healthy, despite that we executed well a disciplined channel investment strategy with a 21% cut in sales and marketing expenses versus 2021. Turning to financials, as a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in US dollar terms, and all the comparisons are on a year-on-year basis, unless otherwise noted. Now, let me walk you through our financial highlights for the fourth quarter and fiscal year 2022. Weibo's fourth quarter 2022 net revenues were $448 million, a decrease of 27%, or 20% on a constant currency basis. Operating income was $152 million, representing operating margins of 34%. Net income attributable to Weibo reached $178.5 million, representing a net margin of 40%. Diluted EPS was $0.75, compared to 83% last year. For fall year 2022, total revenues reached 1.84 billion, a decrease of 19% or 15% on a constant currency basis. Operating income was 601.1 million, representing operating margin of 33%. Net income attributable to Weibo reached 514.1 million, representing a net margin of 29%. Diluted EPS was 2.27 compared to 3.08 in 2021. Let me give you more color on the fourth quarter and the four-year 2022 revenue performance. WebOS advertising and marketing revenues for the fourth quarter 2022 was 319.5 million, a decrease of 29%. or 22% on a cryptocurrency basis, reflecting the disruption from COVID resurgence and the volatile advertising market amid reopening. Mobile ad revenues were $367 million, contributing approximately 94% of total ad revenues. Fall year 2022 advertising and marketing revenues reached $1.6 billion, a decrease of 19%, or 16% on a constant currency basis, with mobile ad revenues contributing 94% of total ad revenue. Recapping on Q4 performance first. Consistent with our expectations, Q4 advertising revenue remained under pressure from weak demand sets, resulting from uncertain macro landscape and sales execution challenges amid COVID spec. In terms of growth, Food and beverage was one of the major positive contributors to year-over-year growth in Q4, with customers embracing the World Cup campaign season. We are also delighted to see solid growth in the 3C products, automobile, and entertainment sectors, as customers from these sectors leverage our social app playbook to build apps for their eventful model launches on Flipset. A few large verticals continued on a descending trajectory year-over-year, such as cosmetics and personal care, suffering from disruption from pandemic wave and broadly stringent marketing expenses control among our customers. Moving on to full-year 2022 performance, 2022 was challenging in many ways. WebOS advertising and marketing revenue decreased 19% of 16% versus 2021 on a constant currency basis, with uncertain COVID policies and the volatile macro economy winning on overall advertising demand. For industry, our largest three verticals were FMCG, 3C products, and e-commerce. With respect to growth, online games, automobiles, and luxury sectors outperformed, underpinned by secular tailwinds in industry development as well as unique value proposition of our ad offerings. However, the rest of consumption-related verticals and e-commerce faced broad-based headwinds against backdrop of weak consumption data and conservative marketing budget by ad product. Promoted fees was the largest, followed by social display ads and topics on the search in 2022. In light of industry-wide pricing pressure and subdued demand set, we proactively beefed up our performance-based ad capabilities and the content marketing offerings to drive for funnel ad goals. We are also delighted to see further visualization trend in our ad revenue mix. thanks to video traffic optics and optimized video ad technologies. Ad revenues from Alibaba for the fourth quarter were 42.3 million, a decrease of 7% or an increase of 3% on a constant currency basis. With pent-up ad budgets released to drive inventory clearance during the 2011 shopping festival, four-year ad revenues from Alibaba decreased 23% to $107 million, correlating with its conservative marketing strategies in 2022 amid recurrent business disruptions. Before turning to last segment, let me share some preliminary colors on the trends entering 2023. Upon twists and turns with COVID situation during the past three years, we kicked off 2023 with reopening and gradual normalization in business activities. Despite limited visibility in the recovery pace of macroeconomy and consumption age, we believe the world is behind us and we are turning more constructive on the broad recovery of advertising market in 2023. With many sectors rebased in 2022, our team will build up skills execution and work relentlessly to capture higher ad mileage of pent-up budget from consumption sectors as well as sectors seeing secular growth, pale wind, such as automobile and online gaming. Leveraging our full spectrum of social ad offerings, we remain confident in our long-term monetization opportunities that our unique value proposition and a diversified content ecosystem will unlock. Value-added service vast revenues were $57.5 billion in the fourth quarter, a decrease of 12% or 2% on a constant currency basis. The decrease of vast revenues was mainly due to less revenue contributions from membership services and the live streaming business. Go year 2022 vast revenues decreased 13% to $239.7 million. mainly due to less revenue contribution from membership services and live streaming business as well. Turning to costs and expenses, total costs and expenses for the fourth quarter were $296 million, a decrease of 25%, demonstrating strong execution of our efficiency initiative. The reduction slowed into each cost and expense item. Thanks to ongoing stringent cost control measures, on various operational fronts, especially disciplined channel investments and optimization of organizational structure. Full-year costs and expenses totaled $1.24 billion, a decrease of 13%, speaking to our commitment to stable life earnings against the top-down pressure. 2023 will continue to be a year of efficiency for us. Upon solid execution of cost optimization initiatives in 2022, we have emerged with a more focused team and a leaner cost structure, positioning us as a clear path to earnings growth in 2023. Operating income in the fourth quarter was $152 million, representing an operating margin of 34%. compared to 36% in the same period last year. Operating income for fall year 2022 was $601.1 million, representing operating margins of 33% compared to 37% in 2021. Turning to income tax, under GAAP measures, income tax benefit for the fourth quarter was $18.7 million, compared to an expense of $45.6 million last year. The change in income tax amount was primarily due to, first, the reversal of tax liabilities recognized related to a certain tax provision, and second, lower taxable income in the fourth quarter of 2022 versus the same period last year. Full-year income tax expenses were $13.3 million, compared to 138.8 million in 2021. The decrease was mainly resulted from, first, lower taxable income in 2022 versus 2021, and second, the reversal of tax liabilities recognized related to uncertain tax provisions. Net income attributable to Weibo in the fourth quarter was 178.5 million, representing a net margin of 40% compared to 32% last year. Net income for full year 2022 was $514.1 million, representing a net margin of 29% compared to 32% in 2021. Turning to our balance sheet and the cash flow items, as of December 31st, 2022, we put cash, cash equivalents, and the short-term investments totaled $3.17 billion, compared to $3.13 billion as of December 31, 2021. In the fourth quarter, cash provided by operating activities was $158.7 million. Capital expenditures totaled $15.3 million, and depreciation and amortization expenses amounted to $12.4 billion. On a four-year basis, cash provided for operating activities was $564.1 million. Capital expenditures totaled $43.1 million. And depreciation and amortization expenses amounted to $54.7 million. With that, let me now turn the call over to the operator for the Q&A session.
spk02: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be mailed. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Timothy Chow from Goldman Sachs. Please ask your question, Timothy.
spk06: Thank you for accepting my question. I would like to ask two questions. The first is, can you share with us the trend of recovery of revenue from the fourth quarter of last year to January and February this year, or the change of the year? In addition, we see which industries may recover faster and have a positive growth, and which will recover a little later. This is the first question. Thank you, Benjamin, for taking my question. I have two questions. First, could Benjamin please share with us more detail colors around the monthly trend of ad revenue recovery and young year growth trend from first quarter last year to January and February this year? and how the recovery path differs across various industries? And secondly, on the monetization plan for the new year, is there any new ad product or monetization model that we may launch for this year? Thank you.
spk07: Let me answer the first question first. Because of the four seasons last year, there were some major events in October and December. There were major events in terms of governance. From December to the end of the month, In fact, Beijing and Shanghai were also affected by the epidemic. So in December, the daily operations of the entire company, including customer and brand investment plans, were still negatively affected to a certain extent. Fortunately, we were prepared for the operation of the business cup, so we didn't get too much of an impact through the closed-off operation model. But overall, the design is actually a little bit different from what we expected. I think this is mainly due to some unexpected changes in December. Gordon.
spk00: Okay, thank you for the question. Let me answer the first one first. So first of all, in last Q4, especially in October and also in December of last year, we've been having some of the political issues happening. And also from December to January of this year, also we had the COVID ramping and also infections here in Shanghai and Beijing very quickly. So I have to say that in December of last year, we've been having an active impact on our operations and also some of the active impact due to the lower budget allocated by our customers. But we were never having a big impact from the World Cup preparations and also operations because of a closed loop preparation of that World Cup itself as an event. So overall speaking, last year Q4, we had some of the missing and also some of the negative impact on the overall business. due to a lot of accidents and also a lot of issues happening in December of last year. Okay.
spk07: From the current situation, in January and February, because January is the Lunar New Year, although the traffic is recovering relatively quickly, but the advertisement is also affected by the Lunar New Year. In fact, it is not difficult to make a comparison with the same currency last year. Of course, there is a clear improvement in the exchange rate, but I don't think there is much to compare. There will be a certain level of recovery in February, but we will look at most of our brand customers. In fact, when designing this year's first-level marketing plan, most of them were in December last year. Most of the customers are actually for this year's first-level investment plan. In fact, in the case of the time, it is still relatively conservative. That may be the mobile industry or part of the cultural industry. In this case, this year's first-level recovery, but some fast sales, e-commerce, we will look at their marketing activities. And also in January and also February of this year, in January, we had the Chinese New Year. And also, of course, from the standpoint of traffic, we had actually a lot of growth on that.
spk00: But still, if you're talking about the advertisement businesses, we do not have a very good comparison if you're talking about the year-on-year basis. And also, of course, if you're talking about quarter-on-quarter, and definitely speaking, we had increased, but that was not an appropriate and legitimate comparison. And also, second point is that in February, we had the recovery. But the thing is that if you're talking about the budget given by the customers while they were doing the marketing plan for Q1, Normally, this particular plan was already made in December of last year. So these customers were pretty much conservative back then in December of last year. We've been seeing some recoveries in the mobile and phone industry and also entertainment industry as well. But still, the budget on the FMCG and also from the e-commerce industries or verticals have been postponed until two sessions of npcn cppcc of this year or after april so that we believe that we are going to wait until the late march or the early april for us to have an overall and also appropriate evaluation of the recovery speed of the whole industry okay
spk07: In the first quarter of this year, we also introduced that our industry is actually related to consumption, such as FMCG, social media, 3C, e-commerce, etc. So in 2023, the driving force of the entire advertising industry will first come from the recovery of the red-light economy and the consumer environment. If we look at it from the perspective of this industry, in the first quarter, we will see that mobile phones, including products, in fact, its product release has basically started in the first quarter, so we Although we are not optimistic about the sales volume of the mobile phone industry this year, from last year's experience, Weibo has put the marketing focus on the mid- and high-end models. This is relatively beneficial for Weibo. In 2022, we will see that the sales volume of this industry has dropped by 15%, but from Weibo's advertising budget perspective, it has maintained a stable income. We believe that in 2023, mobile phone products will gradually warm up.
spk00: And also in terms of the detailed verticals, so two-thirds of our total revenue were from the verticals that were related to consumption in Q1 of this year, and primarily speaking FMCG, 3C products, and e-commerce, et cetera, et cetera. So it is pretty much subject to the macroeconomic recovery and also the recovery of the consumption power as a whole for the society. And also in Q1 of this year, we've been seeing a very good thing about the launch of the new products by the 3C products industry or the luxury vertical. But still, we were not positive over the total shipment of the mobile phone or smartphones. But still, what's good is that the manufacturers or those OEMs were pretty much focusing on the medium to high-end smartphones. So this is something that is beneficial to us. And also in 2022, you know, we had witnessed a 15% decrease in terms of the total sales volume, but still, you know, in terms of our wayboards, you know, revenue, we had a very good stabilizing trend and also a little bit increase on the revenue so that we are very much positive in this new year, especially with an increasing sales volume of the smartphones and also some of the other products consumption-related products. Okay.
spk07: For the car industry, last year, we maintained a good growth in the current market situation. In 2023, from the current situation, with the full-scale transformation of traditional brands and the competition of the entire car industry in the market, the advantages of Weibo in new products marketing are actually more complete in this industry. So we still have a high expectation for cars this year.
spk00: and the next vertical is on the automotive so last year we had a very good development in terms of the adverse and revenue on the automotive industry and also in 2023 with the further electrification of the whole industry and also with a more and more intentional competition from this whole industry weibo will leverage further our ability of you know promoting the new product marketing, and also do the advertisement on that. So you can see that after Q1 of this year, we've been already seeing a very positive trend of the growth from Weibo's side. Okay.
spk07: So some of the advertising strategies in the last two or three years, including the direction of advertising products, as I mentioned in the screen just now, most of our industry has been doing marketing for our customers. For example, we sell brand ads or add a part of the effective ads. But in 2022, we are mainly in the car and mobile industry. We started to try to use quality and content marketing, a mode of content plus hot spot marketing. In other words, in addition to quality ads, we want to use the media and stars as the core. Then, we use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area We want to use the QR transmission as a support for multi-area Okay. Okay.
spk00: And also the next one is on the strategy of our advertisement and also the advertising products in 2023. So as I was already stated in a preparing mark that, you know, in most of the time last year, we had been promoting the advertisements of brand plus performance. But actually in 2022, you know, for some of the verticals, for instance, the automotive one and also the smartphones, we had a try in a platform. having the brand and performance advertisements, also some of the new ways of doing marketing via content and also hot trends. For instance, we had an integrated manner of combining the media and KOL and some of the exposures all together to obtain a fairly well more budget from our customers in terms of the marketing and advertisements. So in 2023, this particular integrated way of doing an advertisement is also going to be continued and also for, especially for some of the new product launch from the industries like luxury products and also the smartphones and also furniture and decorations, etc. Okay.
spk07: Other main is currently I think the whole market for 23 years, especially in the last few years, there is still a relatively high uncertainty. In terms of our whole, the core strategy is still mainly to optimize our marketing efficiency, our operating efficiency, and strengthen our core competitiveness in some more obvious industries and fields. Mainly to improve our competitiveness in the entire customer base. That's all. Thank you.
spk00: So on the overall basis in 2023, first half, we're still experiencing a lot of uncertainties. But the core thing here is that we have to further enhance our marketing efficiency and also operational efficiency and also really try to laser focus on those advantageous areas as continued.
spk02: Thank you. Our next question comes from the line of Felix Liu from UBS. Please ask your question, Felix.
spk01: Thank you for accepting my question. My question is about our降本增效. We noticed that in 2022, we made a very good progress in降本增效. And I want to see how we will look at this in 2023. What are our expectations for the rhythm of investment? Thank you. Let me translate myself. Thank you, management, for taking my question. My question is on the efficient improvement and cost control that we have done very well in 2022. So looking ahead into 2023, what are our plans on efficient improvement, cost control? Is there any pace or trend that we can expect on the investment side? Thank you.
spk07: In terms of the whole year, the impact of the epidemic on the whole economy began in the second quarter of the first quarter and began to occur in the second quarter. In fact, in the second quarter, we also began to do some strategies to reduce costs and increase efficiency. We see that the total cost of 22 years is actually the same as 21 years. It should be down by more than 10%. That's because of the adjustment of personnel. In fact, in the second and third quarter of this year, because of some reasons, we can't do it. So we mainly market in this year In the long term, the cost of reducing costs and increasing efficiency is through the reduction of our market sales costs. Okay.
spk00: So for this particular question, first of all, in 2022, we had already, you know, had the impact from COVID starting from the end of Q1 and also continued when time passes by from Q2. So we started to actually reduce the cost and improve our efficiency starting from then. So in 2022, the overall cost has been actually reduced by more than 10% versus 2021. And also, of course, this year, the major way for us to further improve the efficiency and also reduce the cost is by further reducing the marketing-related expenses by as many as 20%. And also in Q4, at the end of Q4, we started to actually do the reorganization of a structure of the company. And this is going to generate impact since 2023. So that is to say that from this year onwards, we're going to really continue focusing on the core businesses and also really have a very flexible financial and also accounting performance, and also really have a very sustainable competitive edge being built continuously. Okay.
spk07: From the current market environment, we have recently introduced 23 years of innovation. First of all, we are recovering our income growth, including our flow growth. But at the same time, we still need to further improve our operating efficiency. In the end of last year, the growth of this group actually had a few points of influence on profits, but this will mainly happen in two or three years, and it will be more obvious. In the last financial report, I also mentioned that in the past five years, before 2020, our operating costs were controlled at about 60%. In 2020, due to some effects of the epidemic, The cost of this whole cost is about to rise to 65%. In 2022, in fact, the impact of the epidemic is indeed in the past few seasons, sometimes this cost will exceed 70%. But in 2023, we still require the company's operating efficiency to at least return to a reasonable level, probably a level of 2020 or 2019. This is our goal. But this also depends on this year's
spk00: And also in 2023, our key focus will still be on the further recovery of revenue and also the traffic as well, and also further increase our operational efficiency. So as I have already said that we've been starting doing the reorganization or restructuring of our organization since the end of Q4 and this had a little bit impact and especially positive ones on our profit and profit margin but it is going to generate a higher impact in 2023 with regards to the profit and margin and also before 2021 we had the total operational cost which was around like 60% of our total revenue and this particular figure has been increasing to around 55% after 2021 due to the impact of COVID. And also in 2022, because of some other issues today with the COVID, we had this particular operational cost as high as 70% in some occasions or some of the months and quarters. But in 2023, our focus is that we want to regain our operational efficiency and also would like to have the operational efficiency recovered to the approximate level and appropriate level which was about the level of 2019 or 2020. This is continued going to be our goal and objective and also of course that we really wanted to realize the enhancement of the operational efficiency on top of the recovery of our traffic and also the revenue as well. This is going to be the objective for our company in 2023 and onwards. Okay.
spk02: Thank you. In the interest of time, I'd like to take our last question from Xueqing Zhang from CICC. Please go ahead, Xueqing.
spk03: Thank you, Mr. Gaofei and Mr. Fei. I would like to briefly discuss the issue of promotion. I would like to see what kind of strategy we will use for the promotion of the business in 2023, and especially the progress of social e-commerce business and future prospects. Can you share with us? So my question is related to last day needs. Can management share with us the strategies the strategy of large business in 2023 also with the progress and the outlook of social e-commerce business thank you um
spk07: Advertising model For example, we work with Alia and Jindong through this kind of alliance method and advertising method to cooperate to obtain a flow transformation model Of course, in the past two years, in fact, we have also done some tests on some B ring e-commerce, but from the current data point of view, one of us is to look at the user structure of Weibo, such as the field of high up value. At the same time, in these fields, it is through offline to complete the transaction of these O2O fields with high price. At present, its transformation mode is more efficient than the advertising mode. At the end of 2022, there may be a three-fold improvement. In 2023, from our point of view, social e-commerce will continue to improve its scale and commercialize its efficiency as a goal. Then, mainly through our popular live broadcasts, including the expansion of the product category, we hope to acquire more market share and also improve our core business group. For example, there is a new trend in the e-commerce community in Weibo.
spk00: So, thank you for this question. If you're talking about the non-ad businesses, we're talking about social e-commerce and also the membership services. So, of course, for the social e-commerce, definitely speaking now, we're primarily speaking, we're trying the advertisement model. For instance, form the alliance together with Alibaba or JD and also to realize the traffic monetization. So, of course, last year we've been trying some of the closed loop e-commerce as well, and especially focusing on a scenario of 0-2-0 for those high ARPU customers. And we found that the efficiency of the traffic monetization was way higher than of the advertisement model only. So in 2023, we are able to further increase the total scale and also enlarge the scale and size and also enlarge our market share by leveraging the method of, for example, KOL, you know, e-commerce, live streaming, or some of the, you know, like the celebrities live streaming. And also we are trying our best to really obtain as many, you know, customers with a high R-Prove value as possible. Okay.
spk07: In addition to the member business, in terms of Vita members, they will actually maintain a positive growth, but their turnover rate is relatively low. The core is our Weibo membership. Although the revenue is not high, about 150 million to 600 million per year, but its profit is relatively high. On the one hand, in the second half of the year, due to the ecological governance of the entertainment industry, we have had some decline in the first membership in history. In two or three years, we hope to further strengthen the construction of membership, especially with the recovery of the entertainment industry. We hope that membership revenue can be restored to a path of growth. And also last but not least, let's talk about some of the membership services.
spk00: So that you can see now, the primary part of the membership revenue was contributed from the Weibo membership itself, which was contributed as many as 500 to 600 million a year. This was actually a very fraction part of our total revenue, but still that was very much in joining a high gross margin for the Weibo membership business. And in 2022, especially in the second half, we had the ratification and also some kind of adjustment of the entertainment industry. So this particular business witnessed or experienced the very first drop or decrease of the contribution to the revenue for the first time in the history. However, in 2023, while we are seeing the recovery of the entertainment and cultural industry, And also with regards to the expectation of increasing revenue, we really hope that we could really not develop this Waveboard membership business further because nowadays the DAU penetration is very low or relatively lower than expected. So that is to say that there is still a large room for the further improvement. And we really hope that Waveboard membership business is going to contribute more to our total revenue and also to the profits. in the specific occasions. Thank you.
spk02: Great. Thank you very much for your questions. I'd now like to turn the conference back to Ms. Sandra Zhang for closing remarks.
spk05: Remarks. Thank you all for joining us. We'll see you next quarter.
spk02: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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