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spk08: Welcome to the WABOR Report 3rd Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sandra Dang. Please go ahead.
spk05: Thank you, Operator. Welcome to WaveWorks' third quarter 2023 earnings conference call. Joining us today are our Chief Executive Officer, Songfei Wang, and our Chief Financial Officer, Fei Tao. The conference call is also being broadcasted on the internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forwarding 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. WAI 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 WABLE's annual report on Form 20-S and other filings with the FDC. All the information provided in this press release is occurring as of the date hereof. WABLE assumes no obligation to update such information except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which includes stock-based composition, and certain other expenses. We use non-debt financial measures to gain a better understanding of labor's comparative operating performance and the future prospects. Our non-debt financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payments or non-recurring in nature or not indicators of our core operating results and outlook. Please refer to our press release for more information about our non-gas measures. Following management prepared remarks, we'll open the lines for a brief Q&A session. With that, let me turn over the call to our CEO, Gao Feiwang.
spk01: Hello, everyone. Welcome to the Weibo press conference.
spk05: Thank you. Hello, everyone. Welcome to Weibo's third quarter 2023 earnings conference call.
spk01: Today, I will share with you highlights in Weibo's product operation and monetization in the third quarter of 2023. On user front,
spk05: We both monthly active users raised 605 million and average daily active users raised 260 million in third quarter, adding approximately 21 million and 8 million users year-over-year respectively.
spk01: In terms of commercialization, from the supply side, the third quarter is the best time. At the same time, due to the increase in the effect of the hot drama and movie hot spots, the user feedback has been further improved. The platform's overall flow reached its peak in July and August this year. Advertisement traffic storage is guaranteed. From the demand point of view, due to the red-line economy and the pace of consumption that is not as expected, plus some factors other than the expected at the end of August, the same period last year, due to the outbreak of the epidemic, the opening of the customer was very sad. Advertisement investment is active. The overall advertising income of the third quarter is not obvious. In July, there was a decline at the same time. August and September showed a more and more recovering trend. The total revenue of the third quarter reached US$4.42 billion, which dropped by 3% year-on-year, and the balance was flat. With the exception of the exchange rate factor, the total revenue increased by 2% year-on-year, and the sales volume increased by 2%. Advertising revenue reached US$38.93 billion, which is the same as the downfall of 1%. With the exception of the exchange rate factor, advertising revenue increased by 3%. The number of moving orders from Guangzhou reached 95%. We will continue to increase the operating efficiency of centralized resources this year. After adjustment, the operating profit reached US$1.639 billion. After adjustment, the operating profit was 37%.
spk05: On monetization, from the supply side, in third quarter, benefiting from the promotions of popular TV series and movies during the summer vacation, our user engagement continues to improve, and the overall traffic on Weibo reached peak level this year in July and August, providing sufficient ad inventories on the platform. From the demand side, a few factors negatively impacted on ad revenue's growth. First, the macroeconomy and consumption fell short of expectations. Secondly, a few unexpected adverse factors in late August negatively impacted on some clients' budgets. Thirdly, in Q3 last year, after the pandemic lockdown, advertisers have been intensively launching new products and increased ad placement. Due to these factors, our ad revenues in Q3 picked up modestly year-over-year. with ad performance of July declining and the performance of August and September recovering month-over-month. In Q3, our total revenues raised $442.2 million, a decrease of 3% year-over-year and a slight quarter-over-quarter. On a constant currency basis, our total revenues would have increased 2% year-over-year and 2% quarter-over-quarter. Our total ad revenues reached $389.3 million, a decrease of 1% or an increase of 3% on a constant currency basis. 95% of our ad revenues came from mobile. This year, we continue to focus on improving operating efficiency and our long-term operating income reached 163.9 million US dollars, representing a non-GAAP operating margin of 37%. Next, I will briefly introduce the situation of Weibo's third quarter in terms of product operation and commercialization.
spk01: The focus of our product operation this year is to turn from the hot spots related to the epidemic in the past three years to the recovery of the flow of the vertical field, to strengthen the development of the content ecosystem in the vertical field, to strengthen users and customers' mindsets, and to achieve the value of commercial sales at the same time as improving user productivity.
spk05: Next, Let me share with you our progress in product operation and monetization in third quarter. This year, our product operation, which shifted our focus from the hot topics around the pandemic in the past three years to traffic recovery of custom verticals, reinforcing the development of custom ecosystems for vertical areas, aiming to improve user engagement on the platform and drive monetization value for our clients.
spk01: On the channel front, leveraging increased sale of Hot Trends on Weibo in Q3
spk05: will continue to collaborate with handset manufacturers and step up our channel investments moderately, and thus improving the scale of high-value users acquired through channels and the conversion rate of these high-value users to DAUs. In this quarter, the average DAUs acquired from handset manufacturers achieved double-digit growth quarter-over-quarter. In particular, with the promotion on iOS channels, the proportion of high Apple users from Apple Kansas reached 46% of our total DAUs, which also boosted user engagement on Weibo.
spk01: In terms of social security, in the first half of the year, I have completed the price upgrade of the relationship network. The efficiency of the relationship network has been further improved, and the number of daily posts has continued to increase. As the platform focuses more on the development of vertical and vertical marketing, the relationship network product has automatically strengthened the efficiency of the interaction with fans in the third quarter. to enable social media users to further enhance the activity of the platform, and thus improve the social flexibility of users. On the one hand, the double-sided model improves the interaction with the target to carry out the relay, effectively leading to the activity of the fans and the content to flow smoothly. On the other hand, the positive feedback mechanism for the activity of the broadcast is perfect for the broadcast. Combined with the flow of momentum and ease of motivation, it is in time to give the broadcast momentum feedback, so that the content of the broadcast can be produced and the quality of interaction with the fans can be improved at the same time. The above work not only leads to the three-level relationship flow, The relationship has been improved by the increase in the number of active users and the increase in the efficiency of mutual users in the third quarter. At the same time, it has also improved the activity of the production of the content of the blog. In addition, we have been doing a lot of work to improve the efficiency of other recommended travel scenarios. By upgrading the recommendation algorithm, recommending traffic and the consumption of people in the city, the scale has been increased by 20%.
spk05: On social attributes, in the first half of the year, we completed a structured upgrade of social network products, which improved the distribution efficiency of relationship-based feeds and continuously increased the average daily refreshments per user. As we pay more attention to the development of a vertical content ecosystem, the interaction efficiency between KOLs and their followers improved in Q3 for relationship-based speed. It motivated engagement with social content creators and thereby improved users' social stiffness. To elaborate, on the one hand, we upgraded the algorithm model to drive user interaction and effectively divert more traffic to KOLs and content with more fast interactions. On the other hand, we improved the positive feedback mechanism for KOL activities, which means to reward KOLs in real time based on traffic and on the incentive system to encourage their content generation and expand interaction frequency. Our efforts in these two aspects not only lead to a quarter-over-quarter increase in the number of average state-engaged users and the engagement efficiency of relationship-based feeds, but also boosted KOL's content generation in third quarter. For interest-based feed, we have also been refining its user interaction efficiency and have upgraded recommendation algorithm by modifying content tags and user demographics. As a result, the consumption of interest-based feed and video feed per user grow 20% year-over-year.
spk01: In terms of the content ecosystem, our operation strategy today in the hammer field is mainly on two aspects. On the content front,
spk05: This year, we mainly focused on two aspects of our vertical content operation. First, we further solidified Weibo's advantage in the IP-related content ecosystem, such as social topics, entertainment, ACGN, and sports, to continue to improve our competitiveness in the user acquisition market. Secondly, we allocated incremental traffic support to certain content verticals with strong commercial attributes to better support the industry market, such as digital products, automobiles, fashion and beauty, and healthcare verticals, as well as other interest-based verticals that will drive user engagement, such as food and humor verticals.
spk01: First, let's talk about the situation in the IT industry. with plenty of literary works in the summer season, and the hot spots such as the Asian Games and the Grand Finals. The traffic and user interaction in the entire IP ecology field of Weibo is increasing every year. In the literary field, by using the drama and movie hot spots, the activity of stars and literary and ecological figures is active. The traffic and interaction of the three seasons of the Japanese army is increasing every year. The same is also increasing. In addition, the summer season is also a period of promotion of new releases and activities. The traffic and interaction in the ACGN field is increasing every year. In the field of sports, Regarding Weibo's IP-related content infosystem, driven by numerous TV series and movies in summer and hot topics around the Asian Games, the traffic and user engagement of Weibo's IP-related content continues to increase quarter over quarter,
spk05: In the entertainment vertical, engagement with celebrity and KOL was stimulated by the hot topics related to TV series, variety shows, and movies. In Q3, the average daily traffic, the number of interactive users, and total interactions grow year over year and achieve double-digit growth quarter over quarter. For ACGN Vertical, at this peak season in summer for game developers to launch and promote new games, the traffic and user engagement for this vertical continues to grow quarter over quarter. For Sports Vertical, thanks to our strategic cooperation with the Asian Games Organizing Committee, the hot contents of the Asian Games were fully covered by mainstream media, and over 600 star athletes share their competition experience on Weibo, which led to the total discussion of the Asian Games exceeding 100 million times on Weibo.
spk01: In terms of the business industry, the digital car industry over the past three years has built up a perfect content and business environment by enhancing the activity and activity of the professional accounts of the industry by enhancing the professional accounts of the industry by enhancing the activity and activity of the professional accounts of the industry by enhancing the activity and activity of the business industry by enhancing the activity and activity of the business industry by enhancing the activity and activity of the business industry In this field, the digital field integrates the hot spots of the industry, such as Xiaomi, Huawei, QGIS, Weibo mobile phone video year activities. The flow of the digital field and the capacity of the user is the same as the growth after double sales. In the second half of the year, we will have a system that is integrated into other fields related to customer sales, such as make-up, sports shoes, medical health, etc. The focus is to solve the people who are affected by the industry in these fields and the cooperation and activity of professional KOLs. Integrating the operation of Weibo's hot spots in the industry makes Weibo the main place where professional KOLs grow and hot spots in the industry grow. For the commercial workflow content area,
spk05: Traffic from digital products and automobiles sustained solid growth momentum in the past three years, leveraging the robust content and monetization ecosystem we've used as we focused on increasing the number and engagement of professional accounts in these verticals and strengthening clients' mindset for new product releases. In this quarter, both traffic and user interactions generated from the digital product vertical with double-digit growth year-over-year and quarter-over-quarter, as we tap into the industry health trends, such as the full launches of Xiaomi and Huawei and Weibo mobile photography year. In the second half of the year, we expanded the system to other synergetic verticals, with the client marketing ecosystem such as beauty, apparel, healthcare, et cetera, with focus on inviting people with industry influence and professional KOLs to join Weibo and driving their engagement. Leveraging Weibo's strengths in operation on hot topics, we have used Weibo into the go-to platform for the growth of professional KOLs and distribution and discussion of industry health topics, and thus enhance clients' recognition of Weibo and further reinforce our market competitiveness. At present, we are pleased with the early results in the healthcare vertical. We have expanded partnerships with industry associations, increased the number and engagement of professional doctors and faculty, and collaborated with media and top accounts across views to elevate the influence of medical professional content. As a result, the number of engagements and traffic from professional doctors rose significantly year-over-year, which also supported the sustainable development of healthcare clients in Weibo's marketing ecosystem.
spk01: In terms of the ecosystem, our focus this year is to increase the investment in Weibo, which is highly influential and has high social value, and to increase their traffic, operations, and transformation. to create a healthier sitting ecosystem. For the certification system of Bozu, the second-level certification is for those with high influence on the platform. The third-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. The fourth-level certification is for those with high influence on the platform. On top content creators,
spk05: We focus on selecting more top KOLs with higher influence and social values and offer support to them in terms of traffic, operation, and monetization, aiming to build a healthier ecosystem. As such, we introduced the Golden V badge for influential content creators in the second quarter and the Orange V badge for high-quality content creators in third quarter. Since then, apart from traffic support, We also focused on enhancing the monetization capabilities of the GoldenVee and OrangeVee accounts so that they could obtain business recognition more easily and high-quality commercial content than the better chance of traffic support. In third quarter, the Golden and OrangeVee accounts generated a significantly higher proportion of all ad revenue derived from our VTAC system, with income for these accounts ramped up by 50% year-over-year, which further boosted their engagement. Additionally, the scale, average daily posts, average daily interacting users, and interaction of the GoldenVee and OrangeVee accounts achieved double-digit growth quarter-over-quarter. We will adhere to this direction in the future and continue to facilitate the synergy between vertical KOLs and clients on the monetization front, and thus empower more of the accounts with original content and social value to earn income on Weibo and better support the business ecosystem.
spk01: Next, I will talk about the progress of commercialization. In the second quarter, the consumer demand was released under the guidance of the 5-1 standard. Most of our industry customers received some business repairs. But from the perspective of the whole year, the overall sales market recovery rate is not as expected. Some of our industry customers still remain uncertain about the market. We see that the core industry customers of Weibo fluctuate in terms of budget in the third quarter. Most industries shrunk their budget in July, and the rebound was obvious in June. However, thanks to the advantages of summer hot IP sales and new product sales, maintaining Weibo's core financial strength in the marketing market, most of our industries recovered their budget in the middle of August and September, showing an increase of more than 20%.
spk05: Moving on to monetization, in the second quarter, driven by the Labor Day holiday and e-commerce festivals, we are encouraged to see pent-up consumption demands relieved through markets, leading to a broad-based ag recovery across verticals. Nonetheless, the recovery pace of the overall consumer market fell short of expectations for the full year. Customers from certain sectors remained cautious and hesitated towards market uncertainties, considering the soft consumption environment and sentiment. In third quarter, we saw a volatility of ad budget from Wave's key sectors, with a notable pullback of ad spend in July versus June. That said, benefiting from advantages in hot IP and new product marketing, we highlighted Weibo's core competitiveness in the ad market, which resulted in gradual ad recovery in August and September, with a month-over-month growth of over 20% respectively.
spk01: From the branch industry point of view, with the resumption of online and offline activities and sports events, our third quarter has seen more hot topics broadcast and discussed widely on Weibo. The number of sports-related hot spot IPs on Weibo is growing rapidly. In this process, we will continuously optimize the commercial product industry and marketing system in three seasons. We will take advantage of the flow of hot spot IP content and the warm discussion atmosphere of users. We will present the hot spot content and the marketing content of customers in a comprehensive way for users to satisfy the purpose of the customer brand exposure and marketing. We will also further enhance the efficiency of Weibo hot spot traffic. We will directly lead the budget for the food and beverage industry, the film and television culture and entertainment industry to improve. In three seasons, we will achieve the same growth as the two seasons.
spk05: By industry, the further resumption of online and offline entertainment activities and sports events were encouraged to see numerous blockbuster IP conferences widely distributed and discussed on Weibo in the third quarter, especially in the areas of entertainment and sports. As such, we'll continue to optimize our monetization product system and marketing model. We'll elaborate Weibo's hot IP traffic and hit a discussion to show the combo of organic hot topics and marketing content to users. This approach enabled us to better fulfill customers' brand exposure campaign goals and also beefed up our monetization efficiency around hot trends. As a result, ad revenue generated from the food and beverage and entertainment sectors demonstrated notable recovery trends, both delivering double-digit growth year-over-year in the third quarter.
spk01: In addition, the digital market continues to show bright results in the third quarter, with revenue increased by 50% compared to the previous two quarters. This is mainly due to the interoperability of the digital industry in terms of the formation of content and business projects. When customers have new products or brands to publish, Weibo is one of their must-select marketing platforms. Moreover, the digital product sector continues to outperform in third quarter
spk05: with over 50% year-over-year growth in revenue, mainly thanks to the synergy between content and monetization ecosystem. Weibo has become the go-to platform for new products or brand launch. As mentioned before, we also beef up our operation efforts in these business verticals. For example, the healthcare industry is on the trajectory of steady growth with ad revenue maintaining double-digit growth year-over-year in third quarter. We are also encouraged to see greater quantity and diversity as customers in the healthcare sector, from performance-oriented aesthetic medical institutions originally and now to various kinds of clients across upstream equipment manufacturers, pharmaceutical companies, healthcare platforms, etc., all campaigning our label with a growing trend.
spk01: Finally, I would like to introduce the situation in the game industry of each pair of foxes and foxes. The entire recovery rhythm of the each pair of foxes and foxes industry this year has been a turning point in trading. Customers are the most competitive factors, and the rhythm of new products is not as expected, and the marketing environment is not good, which directly affects the speed of our revenue recovery. For such a customer market environment, we mainly focus on the hot traffic of the first seven stars, and strengthen the competitive power of micro-blog stars. This has supported the big market of each pair of foxes and foxes in the third quarter, and promoted the complete growth of the second quarter of the revenue curve. In the game industry, with the long-term release of the new product number in the second half of the year, We have increased the coverage of the new product, and the main customers are trying to cooperate with more ecological content marketing. In the new product construction period, we strengthen the ecological infrastructure and hot spots operation. At the same time, for the long-term efficiency operation of the new product, we enhance the normalization of the ecological contribution. As a result, advertising and product technology optimize the customer effect of the game. Thirdly, in the marketing environment of the game specialization high-end period and the game anniversary celebration, the game industry is called the secondary industry, which is two numbers higher than normal.
spk05: Finally, let me share some color on the beauty and personal care as well as online gaming sectors. This year, the beauty and personal care industry has experienced twists and turns in its overall recovery pace, which was negatively impacted by the chalky brand marketing environment. We saw customers cut back investments in new products due to headwinds from their own operations. In response to such marketing environments on the demand side, we focused on capturing opportunities brought by hot topic traffic related to celebrities during summer vacation and strengthening labels' competitive edge around celebrity marketing. Consequently, we effectively solidified ad wallets as the overall beauty and personal care sector, booking sequential growth in the third quarter. As for the gaming industry, With normalization in game license approval, we expanded the coverage of new games and built more partnerships with key customers on the content marketing front. We not only strengthened content ecosystem and hot topic operations during the public testing period of new games, but also reinforce the routine build-up of content ecosystem and optimize technology to improve ad performance of game science for existing blockbuster titles. In third quarter, driven by the summer vacation peak season and anniversary celebration, ad revenue from gaming industry books a double-digit growth from the second quarter.
spk01: Next, let me introduce the financial and financial results.
spk05: With that, let me turn the call over to Faith House for financial review.
spk04: Thank you, Gaofei, and hello, everyone. Welcome to WeWood's first quarter 2020 earnings conference call. Let's start with user metrics. In September 2020, WeWood's MEU crossed the 600 million milestone, reaching 600 at 5 million. An average DEU between 260 million representing a net addition of 21 million and 8 million users on a year-on-year basis respectively. Turning to financials, as a reminder, my prepared remarks will focus on the gap results. All monetary amounts on the US dollar term and all comparisons on the year-on-year basis are like otherwise noted. We continued to experience hybrids to our financials due to the volatility of free exchange rates this quarter. Since our business primarily operates in China, while we report our financials in U.S. dollars, our financial performance was affected by, at worst, currency movements. Now, let me walk you through our financial highlights for the third quarter 2023. Weibo's first quarter 2023 net revenue was $432.2 million, a decrease of 3% or an increase of 2% on a constant currency basis. Operating income was $163.9 million, representing an operating margin of 37%. Net income attributable to Weibo reached $136.6 million, up 15%. of 17% on a constant currency basis, representing a net margin of 31%. Diluted in EPX was $0.57 compared to $0.50 last year. Let me give you more color on the third quarter 2023 revenue performance. Wave was advertising on the marketing revenues for the third quarter 2023 for $389.3 million. a decrease of 1% or an increase of 3% on a constant currency basis, with a relatively soft July while accelerated growth in August and September. Mobile ad revenues were $368.9 million, contributing approximately 95% of total ad revenues. In terms of growth, we are encouraged to see strong momentum of concept, entertainment, and online services sectors as the largest contributors to top-line growth for the Hun-Sai sector, our years of cultivation around the content ecosystem in the 3C vertical continued to pay off, which enabled Hun-Sai manufacturers to target high-value users and build market hype during high-end product launch. We also benefited from solid traffic performance built upon the blockbuster effect during the summer vacation, leading to further ad recovery from the entertainment sector and online platforms, Ansley said. The automobile and the luxury sector showed weakness this quarter, reflecting the seasonal pullback post the eventful first half of the year. The ad product. Promoted fees ad was the largest. followed by social display on the topic and search. Ad revenues from Alibaba for the third quarter were 21.7 million, an increase of 44% or 50% on a constant currency basis of a relatively low base, driven by incremental ad spend and brand exposure, seasonal shopping festivals, as well as the Asian Games. Before turning to red segments, let me share preliminary color on the trends entering the fourth quarter of 2023. On the upside, advertising market continues to demonstrate balcony off-trend post-Asleep in July, in line with the macro and consumption data trajectory. We hope to close this year with further recovery of our ad business in the fourth quarter. benefited from opportunities brought from the manga e-commerce festival. That said, we may have to wait a while for a turning point of consumption sentiment, especially in certain discretionary categories to pick up, in light of current macroeconomic conditions. Value-added service revenues were $52.9 million in the third quarter, a decrease of 12% or 7% on a constant currency basis, primarily due to decrease of game-related revenues. Turning to cost and expenses. Total cost and expenses for the third quarter were $278.3 million, a decrease of 5%. Operating income in the third quarter was $163.9 million, representing operating margins of 37%. compared to 36% in the same period last year. Turning to income tax and the gap measure, income tax expense for the third quarter was 25.4 million compared to 19.8 million last year. Net income attributable to Weibo in the third quarter increased 15% or 17% on a constant currency basis to 136.6 million, representing a net margin of 31% compared to 26% in the same period last year. Turning to our balance sheet and the cash flow items, as of September 30, 2023, Weibo's cash, cash equivalent, and short-term investments totaled $2.77 billion. In the third quarter, cash provided by operating activities was $131.6 million. Capital expenditures totaled $7.8 million. and depreciation and amortization expenses amounted to £13.9 million. With that, let me now turn the call over to the operator for the Q&A session.
spk08: Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.
spk09: We will take our first question. Please stand by.
spk08: Your first question comes from the line of Miranda Zhang from Bank of America. Please go ahead. Your line is open.
spk07: Thank you. So can management provide more details on the recent ad business recovery in the fourth quarter? Especially today we have the 2011 e-commerce promotions. And then how will the company increase the competitiveness of the ad business? Thank you. OK.
spk02: All right, thanks for the question. So first of all, as we have already stated in terms of the Q3 performance of the advertising performance, so in the third quarter, advertising revenue increased on the basis of the Airbnb by 3% year-on-year and also quarter-on-quarter, which is actually basically in line with our expectations. And also this was primarily due to the concentrated release of the consumer demand and advertising placement requirements during the e-commerce event on 6-18th. And also, after that, we've been seeing a quite weak performance during the July and also August, and also a much better performance in August and also September.
spk01: Let me briefly summarize the situation in the industry in the 4th quarter. Double 11 and e-commerce platforms have no doubt been a year of fierce competition this year. In the 3rd quarter, the growth of AliptonB increased by about 50% due to the Asian Games. And also, let me share some of the colors on the Q4 expectations.
spk02: So actually for the Double 11 shopping festival and also the e-commerce events, we've been seeing a very good trend. For instance, we expect to have also in Q3, we've got over 50% of the growth because of Asian Games by Alibaba. And also in Q4, we've been seeing also activation of the ad placements by all kinds of different e-commerce platforms like the Double 11 and also Double 12 shopping festivals. so that we are expecting a year-on-year growth for the double 11 and also double 12 e-commerce events, especially for the e-commerce, including all kinds of different brands and also platforms.
spk01: Okay. For some other industries, such as cars and digital, we will see this year, including food and drink, medical health, which Scribd mentioned earlier, these industries will be able to It can still maintain a good growth situation because the overall industry, whether it is the speed of our overall flow recovery and the ecological content in the industry, are in the process of a positive recovery. The situation of the car may be a little bit special. The average speed is relatively fast in the first half of the year, but in the second half of the year I will see the sale of gasoline cars in July, including some electric cars, there are still some obvious declines in July. So now electric cars are still making a lot of money, but fuel cars are making a lot of money. In fact, it is obvious that there is a decline, which will lead to the overall government of our car in the second half of the year is not as fast as it was in the first half of the year, but it should be able to maintain a double-digit growth throughout the year.
spk02: And also, let me talk to you about some of the verticals. So first of all, in the second half of this year, we had a very good momentum of the growth for the verticals like the automotives and also digital products, food and beverages, as well as the healthcare, as we have already stated. So you can see that because of a very good recovery of the traffic for those verticals and a very good works around the ecosystem building and also the accounts recovery as well. And it's quite special in terms of the automotive industry. because we really had a very good growth in the first half of this year. However, in the second half of the year, we've been seeing a slowdown of the sales both for the ICE vehicles and also the electric vehicles. But of course, for the electric vehicles, we do see actually a revenue increase, especially for the air revenue increase. But actually, the air revenue for the ICE vehicles actually was decreasing. As a result, we are expecting a lower performance in the second half of the year in terms of the revenue from the automotive industry than the first half. But throughout the whole year, we expect to have a double-digit growth for the automotive industry as a whole.
spk01: In addition, in the first half of the year, we talked about two very big challenges. One is fashion, and the other is games. In terms of games, in the third quarter, there has been a positive growth. One is that the size of the game itself has been improved. In addition, through the optimization of advertising algorithms, the optimization of the behavior of paying users, the number of customers of the game, including some games, the games of the central department, have all started to advertise on Weibo. It has led to a recovery in the third quarter of the game. It should also maintain such a situation in the fourth quarter. The challenge of makeup and skin care is still quite big. In the third quarter, we will see that on the one hand, the business situation of the customer itself has clearly declined this year, and the customer's investment in new products and marketing has clearly declined. At the same time, Weibo itself's recovery of content and ecology in this field is not as good as we expected in the first half of the year. Although the company has also invested a lot of resources And this is the work of the union. Of course, we will look at the overall recovery of the current flow, which is the flow of the United States of America. You have returned to a total flow rate before the epidemic. However, the account structure in the makeup industry is still not as good as it was before the pandemic. We don't have any accounts that are really influential in the market and have social transmission. It's still worse than before the pandemic. We think this part needs to be restored for a while. Therefore, our makeup skin care industry is definitely going to go down year by year. It's similar to the previous year.
spk02: All right. And also in the first half of the year, we do see some of the challenging verticals, for instance, the fashion and also the beauty products and also the gaming industry. And of course, for the gaming industry, we return to the track of a positive growth in Q3 because of the growth of some of the new games and also the optimizations in terms of the algorithms and also the paid gamers. So, as a result, we do actually see a very good recovery starting from Q3 for the gaming industry because of the better performance and also the better allocation of the advertisement budget for some of the medium to high-end games. And also, it is going to be the momentum that is continued all the way to Q4 for gaming industry. And also, it's a pretty much challenging situation. for the beauty and cosmetics industry, because in Q3, the operational effects was decreased. And also, as a result, the budget for the marketing of some of the new products for the cosmetic and also beauty industry was also decreased. So you can see that in Weibo, of course, we do actually see a lower than expected recovery of the ecosystem or the content ecosystem. And also, of course, we've been dedicated a lot on the investment of our resources and also the operational effects to this particular area. And also, we do see a traffic that actually has recovered before to the level before the COVID. However, still the account structure wise, it is not as good as the situation before COVID. So, still meaning that we are in lack of the number of those influential and also impactful accounts in this area. So, this does take time for us to see a full recovery for this industry of fashion and also beauty care products. So, as a result, we expect to have a year-on-year decrease for this one. Okay. Okay.
spk01: In addition, you mentioned that weibo has a competitive advantage in advertising and the entire ecosystem. In fact, from our perspective, there are still several aspects that need to be built. The first is to improve the value of our users on Weibo. As I mentioned earlier, one of the main marketing strategies in the second half of this year It's not about the size of the user, but about the structure of the user, especially the improvement of the high-up value of the user. This is a representative example of iPhone users, including Huawei users, because the up value of these users is relatively high. If these high-value users can maintain a relatively good competitiveness in the market, Right.
spk02: And also, second part of your question was pretty much about the enhancement of our competitiveness of our ecosystem of the advertisements. So I had several points to be sharing with you. The first one is that still we are going to be focusing on the value and also the ARPU of the Weibo users. So in the second half of this year, our strategy was not only focusing on the volume or the number of users, but actually on the total structure of the users. meaning that we have to focus on those high output users, for instance, the users of the Huawei and also the iPhone users. So if we can really increase the number of those high output and also high value users, we do see a more willingness for them to allocate their budget on Weibo for the advertisements And also judging from the feedback that we've got for the Double Eleven Shopping Festival of last year, we did see that particular effectiveness if we're trying to focus on those high R2 and also the high value of users. Okay.
spk01: Another one is in terms of customer service capabilities. In terms of our competitiveness in advertising, First of all, for brand customers, there are fewer and fewer customers who simply buy exposure or get pure brand exposure today. The reason why we can maintain or improve the competitiveness in the market is because the hot spot of Weibo itself and our QR ecosystem is a more competitive strategy compared to other platforms. For example, whether we turn the customer's product into a hot spot or integrate the hot spot to direct the customer's product, And also, second one, on the service provision capabilities, especially talking about the competitiveness of our advertisement service,
spk02: I have two points to be sharing with you. The first one is that actually for those branded consumers and also customers, nowadays we did see fewer and fewer customers of those brands that were actually procuring the advertisement for the purpose of exposing their brands only. So we do see actually because of our very unique competitiveness, in terms of the KOL ecosystem and also the hot trends and also hot topics on Weibo. We do see actually those customers choosing Weibo as a platform for them to place the advertisement. For instance, we did have a very good endorsement of those important accounts or the KOLs to really emphasize on the advertisement and also some of the, for instance, placement of their products in the advertisement. So because of this, we do see a very good competitive edge comparing with the other media like the newspapers or video accounts or some of the other like television and also radio stations, for instance. We did see, still, Weibo is keeping our competitiveness and also the competitive edge over the other platforms for those branded consumers or customers.
spk01: Okay. In terms of effective advertising, I think the trend in the future, including from this year, in fact, from the recovery of the game industry, we have already seen that the trend of the whole algorithm is how to help customers in Weibo's ad investment can generate positive ROI. Our overall algorithm optimization is aimed at deep payment conversion optimization. This is directly related to the structure of our users and the value of our users. At the same time, our overall algorithm is in all industries, whether it is The game industry, the e-commerce industry, and some of our film and television consumption industries are doing optimization in terms of deep consumption purchases. For example, if I bring a customer over, can I have a purchase behavior in the customer side to do the calculation and optimization? In this respect, the progress is relatively fast. And also second point is on those performance based ads.
spk02: So especially I would like to make an example of the recovery of our gaming vertical. So as I have already stated that we have been optimizing on the algorithms and also which is going to generate the positive ROI for the customers. And for instance, we are really focusing on the conversion and also the increasing increasement of those conversion rate for those paid users in this area. And also this particular thing is also related to our strategy of focusing on those hard output value users. And for instance, the very important thing is that not only for gaming industry, but also for e-commerce and entertainment and also the other relevant for consumption, for instance. As Verticals, we do actually see the better optimization of our algorithm, which is around the area of making those pay users to actually consume the contents in those different verticals. And also you can see that this is advancing very much well in this gaming industry first, and also by heavily and continuously investing into the technologies around this area. This is also helping us to gain a sustainable growth. for the future. So this year we do see a very good outcome from the gaming industry and also from this year onward. So we are going to see a very positive impact to the business of the entertainment and the consumption and e-commerce, et cetera. Okay.
spk07: Thank you. Thank you.
spk08: Thank you. We will take our next question. Your next question comes from the line of Daisy Chen from Haitong International. Please go ahead. Your line is open.
spk06: So regarding this, I would like to ask Guan Licheng about the current progress of Weibo in the large V-signature system and how we can assess the activity of Weibo's content ecosystem, content, and user activity. Thank you. I'll translate it myself. Thanks, Benjamin, for taking my question. my question is about the real name display rule we have noticed that many social media platforms in china including weibo have recently announced that they will display the real names of the online influencers on their front account pages so about this i would like to ask the management what is the progress of weibo's real name display work of those degrees and how we should evaluate the the impact of real-name rules on Weibo's content ecosystem and the user activity? Thank you.
spk01: First of all, front-end ID is not a new rule in Weibo. When Weibo was first introduced, the early ID verification was a kind of front-end ID. This is because it effectively solved the issue of credibility of social media and early Internet platforms. But as you all know, social media platforms have been competing with industry platforms in the past. And Internet users' requirements for privacy have been constantly improving. So it's not particularly strict to execute front-end ID before. Because the earliest Weibo verification is to display the name of the front desk or the company plus the address information. Basically, it's a form of front-end ID.
spk02: So for this question, first of all, since the birth of Weibo, we've been always emphasizing on the real name registration mechanism. So I don't believe that this is actually kind of a new rule or new regulation for Weibo. And also, for instance, if you want to be identified as a V account, normally you have to provide the real name and also the other relevant information to facilitate this accreditation process. So Weibo actually did that when we were appearing in this market to solve the issue of the trust. However, in the future, after that, we did see the emergence of many different social platforms and also because of the requirement of the personal and privacy information protection, this is becoming less stringent as we required before. But still, we still are performing the regulation of the front-end real name registration. For instance, if you still apply for the solicitation of your account, you need to provide the name or the position and also your company's name. So, this is kind of a real name restoration process. Okay.
spk01: The purpose of this presentation is mainly to enhance the credibility and authority of the top self-media accounts on all platforms. We believe that we can promote the responsibilities of big companies to match the energy of conversation and thus promote a safe, civilized, and harmonious network ecosystem. In terms of implementation, we have recently led the implementation And also for this time, for the real name registration process of this time, actually the major purpose is actually to emphasize
spk02: on the authoritativeness and also the responsibilities and also the obligations that should be shouldered by those top-notch WE media accounts and specifics so that we are able to facilitate and also lead the process of creating a more harmonious environment of the internet. So of course, at this particular round of the real name registration process, especially those kind of channels of news and the military and also the legal and the council-related accounts are in the forefront of this round of the Real Name Registration Rule. But of course, that this is not going to impact the accounts of the food and beverage or the automotives and also cosmetics and beauty products, etc. Okay.
spk01: In terms of the impact of the new Civil Code, first of all, this time the Civil Code is relatively limited, about five to six areas. In addition, some of our VATs have already been identified at the front desk. We have calculated that in these areas, we have calculated that more than 40% of VATs have actually already achieved this standard of VAT identification through its VAT certification. Overall, the impact of this part of VAT on these areas is limited, and this time the VAT identification is implemented in a different stage, and it is not strong. VAT, strictly speaking, is a voluntary way of selecting VAT identification. Unlicensed accounts will indeed be limited in terms of traffic and advertising revenue. Because the license has just been released, it may be officially started on November 10th. We expect that it may have some impact on the activity of investment accounts in the short term. But in the long term, we believe that it will be helpful to enhance the credibility and authority of these accounts and to improve the credibility of content on social media platforms.
spk02: And also, another thing is that for this round of this regulation, so the impact is quite limited. For instance, it's only influencing five to six different areas. And also, as I have already stated, those big Vs already had their real name registration conducted before. So over 40% of those big V accounts actually had already realized this real name registration and also the real name demonstration on the front end or on the front page. So we believe that this particular round of the impact is pretty much limited. And also another thing is that this round of the real name registration process is not compulsory and also is going to be carried out by different phases. So if this round, the account is choosing not to go on this particular process, the particular traffic and also certain revenue are going to be impacted. And also for this round, it started in about 10th of October. And also in the short period of time, this will generate a certain impact and limitation in terms of the traffic and some of the others. But in the longer run, I think that it's beneficial for us to create a more trustworthy environment with more trusted information and public information. So we will be still observing the impact for a while.
spk09: Thank you. We will take our next question. Your next question comes from the line of Timothy Zhao from Goldman Sachs.
spk08: Please go ahead. Your line is open.
spk00: Thank you for accepting my question. I have two questions. First, I would like to ask the management to share some of the progress of Weibo in building the content ecosystem and the help of this part of the content ecosystem and commercialization. Can you help us update it? Thank you for taking my question. I have two questions here. First is regarding the the progress in building the vertical content ecosystem. Could measurement elaborate more on what is the wave of progress so far, and how does that affect your monetization capabilities? And secondly, it's regarding AIGC applications. I think we discussed last time, but I was wondering if there's any updates, especially regarding content generation and also the efficiency improvement in your monetization capabilities. Thank you.
spk01: In fact, I also talked about the simple situation in terms of vertical ecology. In fact, from Weibo's own strategy, I think it is also relatively, we also talked about it in these reports, it should be the strategy of the whole company after the epidemic, strictly speaking, one is through some ecology, we call it the IP ecology field, that is, as everyone knows, hot spots, mosquitoes, such as sports and video games, can bring us more users in the market and more users' attention. We call it the IP generation field. This field is also a relatively strong field for Weibo. This part has been growing steadily in the last three years of the epidemic. In this industry, many of our income, including customer influence, has also maintained a good growth.
spk02: All right. So for this particular question, we were always trying to emphasize on the Weibo strategy for the past several earnings report sessions, and also especially touching upon the concept of the building of a vertical ecosystem. So for instance, after the COVID, we had several strategies of focus. The first one is that focusing on the establishment of the IP ecosystem. The definition of which is actually for those areas that could attract a lot of eyeballs and also intentions from the society. For instance, the hot topics and also the entertainment and culture and also sports as well as the gaming industry as well. So you can see that these different verticals were regarded as the IP ecosystem and also these IP ecosystems were growing still, even during the COVID period for the past three years. So that you can see that both in terms of the revenue and also the influential power, we've been seeing a very good growth and a very good momentum.
spk01: Okay. Let me give you some general data. In the last three seasons, we talked about the traffic in the IP ecosystem. Before the pandemic, it was about 70%. In other words, in the past, the traffic in the IP ecosystem in Weibo was about... Uh, four, five, forty to sixty between such a level, but during the epidemic, there is no question that the growth of these fields is far beyond what we are talking about. Uh, the industry vertical field, such as cars, digital, uh, fashion, uh, medicine, uh, this is one, but, uh, it is true that because of these fields, we are relatively strong in terms of words, and it is also one of the overall use of users on Weibo, a stable growth But the focus of this year is that we need to change our traffic structure after the epidemic. We can't rely on these IP ecological fields anymore, because these ecological fields are too hot. We will put a lot of traffic to these industries we are talking about, such as makeup, cars, digital, and these industries. Because these industries, on the one hand, can interact with users, and the users' age and K2R's ecology, And also by Q3, we've been seeing the statistics of showing that we had over 70% of the growth in terms of the traffic
spk02: for this particular, what we call the IP ecosystem, and also for the past several years during the COVID. So, you know, originally the traffic from the IP ecosystems actually was accounting for about 40 to 60% of the total traffic of Weibo. And also during the COVID period still, we had a much better growth from the IP ecosystems than the verticals of automotives and digital or cosmetics and beauty and also the other electronics area. So this particular growth was pretty much stable in the past. However, this year, we would like to shift our attention of our strategy. So after the COVID, we would like to change the traffic structure, meaning that we should not be too dependent on the traffic gain from the IT ecosystem anymore. because this is too much hot trend and hot topic oriented. So since this year onward and after the COVID, we would like to focus and also divert more traffic to the other vertical industries, for instance, the cosmetics and beauty, digital products, and also automotive, et cetera, because the users are more interactive and also the user's thickness is better. And also the KOL ecosystem is much better for those vertical industries. And also, we do have our own advertisement customers that are actually from these different verticals. So, if we actually divert and also try to get more traffic to those verticals, this is also going to help us to increase our revenue of the budget, the revenue of the advertisement as well. Okay.
spk01: So, when we look at the industry trends this year, we can see that in the second half of this year, especially in the third quarter, there is some good traffic. For example, the flow rate of each brick may increase by about 50%. The flow rate of digital and medical products is about 30% in the third quarter and about 30% in the second quarter. However, we will see that different industries still have some differences in the recovery of this kind of ecology. In some industries, while the flow rate is recovering, its KOL ecology also quickly recovers. For example, digital, including medical health, But in the fashion and makeup industry, although the flow has recovered, but its Q2's ecology, that is to say, in our field, we are talking about the scale of the real commercial value of the gold level. In fact, it is still a bit more obvious than before the epidemic, including last year. We think it will take about two more seasons. We hope it can recover the level of consumer consumption before the epidemic, so that it can support the customer market better.
spk02: And also, for those verticals, as I have already shared the color upon, so we've been seeing a very good recovery and also the growth for the traffic in Q3 and also in the whole second half, as we expected. So, of course, for instance, for the cosmetics and beauty vertical, we had an over 50% of the growth quarter by quarter and also around 30% and more growth for the digital products and also healthcare verticals in Q2. But of course, having said that, still we've been seeing actually a quite differentiated performance across different verticals for those areas in terms of the recovery speed. So there are actually two points that we are making comparison upon. The first one is the recovery of the ecosystem as a whole, or the KOL ecosystem, and another one is the traffic recovery. So for the verticals like the electronics and the healthcare, we actually have observed a very good recovery of both the KOL ecosystem and also the traffic. However, for the fashion and cosmetics vertical, the traffic has recovered, but not for the KOL system, meaning that the influential accounts and some of the really variable accounts recovery was not as good as that of the traffic. So, we still need to have another two quarters more for us to have a total recovery, both on the KOL ecosystem and also the traffic. Okay.
spk01: In terms of AIDC, as we introduced in the last episode, our focus this year is still on the data accumulation based on Weibo. We are focusing on training some models with Weibo features, and using them to help Dawei to produce some auxiliary tools. In this way, we can improve the content diversity and the interaction between bloggers and users. This is the main focus of our work this year. In terms of the third quarter, as I mentioned in the previous quarter, on the one hand, in the vertical field, we use this kind of large model to help bloggers improve their content productivity. For example, in terms of Q3, we mainly achieved some progress in the field of content production for the two areas of makeup and games. Now, we can help the average production department of more than 5,000 pieces every day. From the point of view of content reading efficiency, the content produced by AIGC is more than 50% higher in terms of the content produced by AIGC.
spk02: And also in terms of AIGC, as we have already stated in the past that we have several focus of this year. First one is still we have to focus continuously on the accumulation and also the collection of data by using and applying AIGC so that it is going to help those bloggers in generating the content in a more efficient and higher quality way. For instance, the contents generated by AIGC have more user stickiness and also interactive rates and very efficient as well. In Q3, we have been actively applying the LLM, a large language model on different verticals to increase the efficiency of the content generation. Let me give you an example. In Q3, in the area of fashion and cosmetics, and also in the gaming industry, on a daily basis, AIGC is facilitating the blogger in generating over 5,000 pieces of information a day. And also, if you're comparing the content generated by AIGC versus naturally or written by the bloggers themselves, you can see a 50% better interactive rate and also user stickiness for the AIGC generated content. So we, of course, plan to apply the AIGC well in the beauty and cosmetics vertical, gaming vertical, and also the digital and electronics products area. And next year, we are thinking about rolling this technology out to the rest of the other verticals. Okay.
spk01: On the other hand, we are working on some content about learning and history. try to make some AI chat robots to help, including some of the virtual characters in the play, to explore some innovative application scenarios. For example, AIGC technology to learn some of the language styles of celebrities, celebrities, including Dawei, to do some And also last but not least, we are also having some innovative trials and experiments. For instance, using the middle AI,
spk02: to learn the characteristics and also the features or the languages that those big Vs always use to generate an AI chat box or some of the virtual characters. So we did that in Q3 to actually really using AIGC to learn from those important KOLs and influencers, learning the way that they talk and also the style of their interaction so that the AI chatbot was interacting with the fans. So in August, for instance, we had experimented this particular technology upon four to five KOLs, and also on a daily basis generating tens of thousands of interactions together with the fans and followers using AI chatbot features. But of course, at the current moment, we are not opening this to the rest of the ecosystem of the old big Vs. But still, we are thinking about doing that in the future still. And nowadays, we are trying to perfect the whole system and also trying to really find out the final effectiveness of this application. Okay. Thank you. Thank you.
spk08: This concludes today's conference call. Thank you for participating. You may now disconnect.
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