This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good day and thank you for standing by. Welcome to the Weibo reports first quarter 2024 financial results. 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 first speaker today, Sandra Shang, IR Head. Please go ahead.
spk06: Thank you, operator. Welcome to Weibo's first quarter 2024 earnings conference call. Joining me today, our Chief Executive Officer, Gaofei Wang, and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the internet and is available through Weibo's IR website. Before the mention and 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 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 the 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 20-F and other filings with the SEC. All the information provided in this press release is occurring as a dead hero. Weibo 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 include stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financials include certain expenses, gains or losses, and other items that are not expected to result in future cash payments, or are non-recurring in nature, or are not indicative of our core operating result and outlook. Please refer to our press release for more information about our non-debt measures. Following management prepared remarks, we will open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gao Fei Wang.
spk07: Thank you. Hello, everyone. Welcome to the Weibo Caibao phone call meeting.
spk06: Thank you. Hello, everyone. Welcome to Weibo's fourth quarter 2024 earnings conference call.
spk07: On today's call, I'll share with you highlights on Weibo's product monetization in the first quarter of 2024. In the first quarter, Weibo's MAU reached 588 million
spk06: and average DA use reached 255 million. In light of an already sizable user community and increasingly mature user mindset, we have proactively adjusted our user strategy in 2024 with more channel budget allocated to the acquisition and engagement of high-quality users. We are dedicated to further enhancing Weibo's product competitiveness, leveraging optimized channel strategy, social features, and differentiation in hot trends.
spk07: In terms of commercialization, we have been able to strengthen the combination of the need for micro-blogging hotspots, micro-IP, and customer marketing needs in the past two years, and continue to strengthen the commercial value of micro-blogging hotspots. In the case of the overall weakness of the 1st quarter's advertising market, we have used the platform to strengthen the effect of the Spring Festival hotspots to play a marketing advantage, leading to a total revenue of 3.95 billion U.S. dollars for the 1st quarter of micro-blogging, and a total revenue of 3.39 billion U.S. dollars for advertising. In addition to the exchange rate factor, the total revenue of the 1st quarter of micro-blogging is equal to the annual income, and the advertising revenue is equal to the annual income.
spk06: On the monetization front, in the last two years, we have been focusing on increasing commercial value for Weibo's Hot Trends through combining entertainment and IP-related Hot Trend content with advertisers' marketing demands. This quarter, we enhanced the Hot Trend effect of the Spring Festival, leveraging Weibo's advantages in Hot Trend marketing. Despite the overall sluggish ad market in the first quarter of 2024, our total revenues reached $395.5 million, and our total ad revenues reached $339 million. On a constant currency basis, both our total revenues and ad revenues will be flat year over year. For the first quarter of 2024, our non-GAAP operating income reached 125.8 million US dollars, representing a non-GAAP operating margin of 32%, a modest pick-up year-over-year.
spk07: Thank you. I would like to introduce you to the progress of Weibo's E9 in retail operations and commercialization. In 2024, Weibo's overall strategy is to improve the scale of platform users, strengthen the competitiveness of platform content and ecosystem, and strengthen the efficiency of platform management as the core goal, as well as continue to optimize channel cooperation, strengthen the competitiveness of platform social and hot-point retail, Next, I'll introduce our progress in product operation and monetization in the first quarter. In 2024, we still focus on growing user skill and engagement, strengthening the competitiveness of the content ecosystem.
spk06: and improving operating efficiency as our key strategic objectives. We keep optimizing channel collaboration, improving the competitiveness of social and hot-trend products, and strengthening key content verticals to further enhance the overall competitiveness and healthy development of Weibo's content ecosystem. We believe execution of this strategy will lay solid foundation for our top-line recovery from user, content, and monetization side. enabling us to capture market opportunities once macro economy gets better and brand ad demand improves.
spk07: On the channel front,
spk06: We maintain close collaboration with handset manufacturers, focusing on the acquisition of high-value users and the promotion of user engagement. We also invested to further refine accuracy of algorithm and targeting capability of our business model in order to create enriched content offerings for our channel users and increase user engagement, which lays foundation for monetization.
spk07: In the first quarter, we will continue to develop the vertical strategy of the company and further restore the vertical content ecosystem. On the one hand, we have focused on adjusting the number of relationships and recommending the algorithm strategy in the first quarter. In addition, we will provide more personalized vertical content recommendations for different content groups, strengthen the feedback experience of timely recommendations, and promote social interaction transformation. The consumer content consumption and interaction efficiency of the two quarters are much better than last year. On the other hand, We have invested more in the user-centered UGC content in the past 24 years. The product system has begun to improve the UGC content in the growth path of Weibo. Encourage users to surround the hot spots of Weibo to create more UGC content in the ecosystem. Thus, while the users are active, the content in the ecosystem is also richer and more diversified. For example, in the past two or three years, we have held the Weibo mobile phone image competition. We have created a theme track every month to share the content of joint media and mobile phone manufacturers, drive video activities, and call ordinary users to share the video content such as beauty, human culture, and life on Weibo. More than 6 million users have participated in the event every month, and we have contributed 3 million copies. This year, we will carry out more similar activities by combining the resources of Weibo with the content created by the users, enriching Weibo's ecosystem. In addition, our products continue to improve the speed of post-production and interaction, improving the social activity of users in the community. While users are fully satisfied with their social life, they also gain the platform's opportunity to create positive content, which leads to the increase in the number of post-production people, post-production volume, and interaction volume, which is called QNS, which increases the number of posts. Our projects have become important channels for the platform to cultivate positive and interesting content creators.
spk06: On social attributes, in the first quarter, we continue to execute strategies to focus on the development of content verticals to further recover the vertical content ecosystem. On the one hand, we focus on adjusting the algorithm of relationship-based feed and interest-based feed to distribute personalized vertical content for users, reinforce recommendation on real-time feedback, and promote social conversion. As a result, The per capita content consumption and interaction efficiency of these two feeds continue to increase sequentially. On the other hand, in 2024, we step up investment in UGC content and improve generation of high-quality UGC content on Weibo. We encourage users to create more high-quality content around hot trends and verticals on Weibo to improve user engagement and enrich and diversify content in vertical areas. For example, in the Weibo mobile photography contest, we introduced multiple student tracks, co-created content with media and handset manufacturers, and opened offline photography exhibition to encourage ordinary users to share photography of scenery, culture, and life, et cetera, on Weibo. As a result, over six million users participate in the contest in five months and contribute approximately three million photos. This year, we will organize more similar activities and encourage users to participate in the content generation, leveraging Weibo's influence and enrich Weibo's content ecosystem. Additionally, we further upgraded the posting and interaction functions for the Super Topic product in order to boost the user engagement within the community. That is to say, users can gain traffic incentives on high-quality content they posted while also enjoy the social interaction around the interest-based content within the Super Topic community. In the first quarter, the number of posts, users who posted, and interaction in the Super Topics community all grew double-digit compared with Q4 last year. The Super Topics has become an important channel to cultivate interest-based high-quality content creators.
spk07: In the first quarter, while maintaining our competitiveness in hot trends, entertainment, and other advantageous IP-related verticals,
spk06: We focus on increasing investment in verticals such as digital, automotive, game, fashion, and beauty, and healthcare to enhance the competitiveness of Weibo's ecosystem and further improve monetization efficiency.
spk07: In terms of hot spots and IP eco-economy, we focus on Spring Festival holiday. The content of the Spring Festival project is rich. We use the eco-advantages of new products and works and the advantage of day-to-day operation in the cross-border area will integrate the cooperation between the hot spot, mosquito net and the cross-border area, allowing more users to participate in the consumption and interaction of the platform and the content related to the Spring Festival. The flow of the platform has been significantly improved. This year, the demand for the Spring Festival dinner has reached 100 billion yuan, and the sales volume has exceeded 300 billion yuan, and the sales volume has increased by more than 50%. At the same time, the increase in the flow of the Spring Festival hot spot has also brought us obvious commercial profits. This kind of operation mode that integrates the expansion of the hot spot and the IP space across the field, In the first quarter, with abundant entertainment content released during the Spring Festival,
spk06: We integrated content operation of Hot Trends Entertainment and various vertical areas to engage broader users to consume and interact around the content related to the Spring Festival, leveraging our advantages in these areas. As a result, the overall traffic of the platform increased significantly during the period. Total views of content related to Spring Festival Gala this year reached 100 million, and the related discussions surpassed 300 million of 50% year-over-year. The increase of traffic in Hot Trends during Spring Festival also created significant commercial value. On the one hand, such cross-vertical operations amplified the Hot Trend and IP effect on the platform and improved the platform's operating efficiency and established Weibo's influence in key industries. On the other hand, as Hot Trends become increasingly standardized and the process of Hot Trend marketing becomes smoother, We will also bring a sustainable revenue growth going forward. We are confident that Weibo will maintain its leading position in the industry in the field of culture and operations and marketing.
spk07: In terms of the industry, this year we will continue to implement some key measures. The first is to strengthen the ecological construction of vertical content, including the important support for the professional content of verticals. It also leads to the spread of the ecological content of cross-sector bloggers, professional media, and participatory vertical hot topics. The second is to strengthen the support for vertical bloggers in the flow of platform platforms. to promote the growth of YouTube bloggers in the digital field, and also to help them use their content to get better commercial returns on the platform. In addition to the medical health field mentioned in the last episode, the car, digital, and game fields have also seen a significant growth in this quarter. Whether it is because of the size of the blog, or because of the volume of the platform, the size of the interaction, and the advertising revenue, compared to the same year last year, there has been a significant improvement. Especially in the game field, the volume and interaction have increased by more than 20%. Bozu's advertising revenue has increased nearly twice as much. This has gradually made the content and business environment of the game industry more intimate and positive. In the beauty industry, we have strengthened the hot spot operation by clearing the platform traffic in the past two seasons. We have gained significant growth in terms of the hot spot and SMEs. However, due to the fierce competition between other platforms and Bozu, the content and business environment of the beauty industry has not yet returned to an effective growth trajectory. We still need to continue investing to find a stable and effective path to optimize the content and business environment
spk06: Our industry-related content verticals this year will continue to execute against some of the key strategies we adopted in the fourth quarter last year. First, we strive to strengthen the construction of vertical content ecosystems. To elaborate, we'll beef up our support of vertical content, engaging cross-vertical accounts and media outlets in the generation and distribution of popular vertical content. We will divert more traffic to vertical accounts to promote the growth of high-quality accounts in vertical areas and empower them to gain higher commercial returns with their own content on Weibo platforms. In addition to the healthcare industry mentioned in last quarter's conference call, we also achieved notable growth in automobile, digital products, and online games in this quarter. we are encouraged to see significant increase in the number of Golden and Orange Verify accounts and their traffic, interaction, as well as revenues generated on an annual basis. In particular, for the online game vertical, the number of Golden and Orange Verify accounts increased by nearly 50% year-over-year, with traffic and interaction increasing over 20%, and their revenues from marketing activities nearly tripled. As a result, we have gradually integrated the content and monetization ecosystem in a closer and healthier manner for the online game vertical. In terms of the cosmetic and beauty vertical, we achieved notable growth in the number of Hot Trends and the Golden Verifier accounts in the past two quarters, leveraging our traffic support and Hot Trends operations. However, due to the fierce competition from other platforms and accounts, Weibo's content ecosystem in the cosmetic and beauty vertical has now returned to an effective growth trajectory. We need to keep up our investment, find a stable and effective roadmap to optimize the content ecosystem in order to reinforce our competitiveness in this vertical.
spk07: Next, let's talk about the progress of commercialization. In 2024, we will continue to strengthen our company's investment in commercial competitiveness. Weibo, as a social media platform, has been able to improve its competitiveness as well as continuous improvement of continuous economic competitiveness, and improvement of good domestic sales and effective commercial product competitiveness, to enhance our high-risk capacity in the core industry.
spk06: Moving on to monetization, in 2024, we will continue to beef up our efforts to reinforce our monetization competitiveness. Leveraging Weibo's strengths in Hot Trends and IPs, as well as thriving vertical content ecosystem, we will sharpen our competitive edge of our content marketing and performance ad products. in the hope of enhancing our capabilities to navigate through business risk in key industries.
spk07: As a result, in the environment where the overall demand for advertising is weak, our advertising revenue has been removed from the exchange rate factor and maintained the same level. During the Spring Festival, we will integrate platform resources to connect customer sales nodes, and combine platform hotlines with customer contacts to maximize customer promotion and budget. Spring Festival sales-related advertising flows are the same as last year's total volume of 50%. With the diversification and diversification of our marketing solutions, more and more customers in the industry can participate in the sales hotline of the Spring Festival, including e-commerce, games, shoes, medical, digital, food and beverage industries. The sales threshold of the Spring Festival is more than doubled. For example, the beverage brand Wang Laoqi on Weibo remembers the most important traditional festival in China, the Spring Festival, and the brand ambassador Zeng Shunxi Amid a relative soft end market in the first quarter, our ad revenue will flattish year-over-year on a constant currency basis. During the Spring Festival,
spk06: We accustom the platform resources to customers' marketing campaigns. By integrating the hot trends of Weibo and market hype for clients, we seek to accommodate customers' promotion budget as much as possible. As a result, our gross ad revenues related to the Spring Festival ad placement increased by 50% year-over-year, of which gross ad revenue connected to the Spring Festival IPs doubled year-over-year. With our diversified marketing offerings and products, customers from more industries can participate in the Spring Festival marketing campaigns. Therefore, our growth in revenue from e-commerce, online games, footwear and apparel, healthcare, digital products, and food and beverage sectors, et cetera, all more than doubled year-over-year. For example, during the Spring Festival, the beverage brand Van Logie launched the Send Good Wishes campaign on Weibo, through the hot topics around the brand ambassador, Zongxuan Xi, such as Spring Festival greetings, auspicious words, and the popularity of works. Over 300 celebrities posted good wishes under the topic of Good Luck in the Year of the Dragon to create an auspicious atmosphere and enhance the brand mindset of the auspicious Xi culture. As a result, the customer successfully built market hype with its brand exposure on Weibo increasing 290%, which drove the growth of e-commerce sales of the brand during the Spring Festival season, growing 20% year-over-year.
spk07: In terms of the industry, the mobile phone industry and the gaming industry both maintain the same double-digit growth. The mobile phone industry, with customer-oriented marketing growth, has made Weibo better in terms of customer marketing and budget. From the perspective of the mobile phone industry, By industry, we are pleased to see the handset and online game industry sustain double-digit growth year-over-year.
spk06: The handset sectors continue to grow of a high base as we capture a higher wallet share among customers at budget, thanks to the customers' recognition of our hot-trend marketing offerings. As for the online games, with the tailwinds from game license approval and the client's growing demand in content marketing, ad revenue from the game sector also grew significantly.
spk07: In terms of the retail industry, although the overall revenue of the market has been restored, as previously predicted, the share price has still dropped significantly. This is mainly due to the change in consumer perception and trends. It is gradually changing to a more cost-effective way, causing the sales volume of international brands to still be suppressed, affecting the rhythm and regularization of new products. Even though domestic local makeup brands have made progress in product quality and marketing, in the second half of last year, in Weibo, the number of posts has increased by 50%, but it can't make up for the decline of international brands. In order to promote the desire of makeup customers for new products, This year, we will strengthen cooperation with e-commerce platforms and domestic brands, continue to explore new products in the fast-trade industry, and promote cooperation between social platforms and e-commerce platforms, provide better marketing support for customers, and achieve a more stable growth in the fast-trade industry in the future. In the second quarter, we will try with Tianmao to focus on deep cooperation in the makeup and clothing industry. Through Weibo's hot-point marketing ability, let the business's new products, or from social influence to e-commerce purchases,
spk06: On the fleet side, despite the sequential recovery, the cosmetic and beauty sector continued to decline year-over-year, as we previously expected. This was mainly because the consumer's concept and trends are gradually shifting toward more cost-effective products. As a result, the sales of the international beauty brands were still under pressure. which negatively affected the pace of new product launch and thus their scalable budgets. That said, we are pleased to see continuous improvement of domestic beauty brands in product quality and brand marketing, leading to increased brand ad placement on Weibo since the second half of last year. In the first quarter, ad revenues from domestic beauty brands grew over 50% year-over-year. However, the growth still cannot fully offset the impact of the decline in the international brands on our overall revenue yet. In order to boost clients' willingness of new product marketing and improve its performance, we will strengthen cooperation with e-commerce platforms and domestic brands and actively explore the synergetic promotion of new products in the FMCG industry on social and e-commerce platforms. and provide clients with better marketing support. We hope these efforts will translate into more stable growth in the FMCG industry in the coming quarters. In the second quarter, we'll test the in-depth cooperation with Tmall, focusing on the beauty, footwear, and apparel industries. Leveraging Weibo's strengths in whole chain marketing, we aim to create full funnel value to customers for their new product launch. from social influence to e-commerce conversion, and thus, enhance customers' perception of Weibo's value in hot-chain marketing.
spk07: Overall, although the decline in revenue from the makeup industry has always had a negative impact on our income, we have been able to perform well in terms of overall efficiency in the first quarter of the company. We have maintained a relatively high operating profit rate, and increased our operating efficiency last year. Over-speaking, although revenues from certain industries such as cosmetic and beauty industry feel short of expectation and drag the overall revenue growth, we deliver decent operating profit, which further increased from last year.
spk06: the solid execution of our efficiency initiatives. Leveraging improved operating efficiency, stable profitability, and healthy cash flow, we further elevated our financial flexibility, giving us ample room to invest in the vertical company ecosystem to drive user growth and engagement, as well as strengthen our monetization competitiveness.
spk07: Next, let me introduce you to the financial results.
spk06: With that, let me turn the call over to Feitao for a financial review.
spk05: Feitao Feitao Feitao Feitao Feitao Feitao Feitao Feitao Feitao Feitao Feitao and increasingly mature user mindset. We have proactively adjusted our user strategy in 2024, which put more emphasis on the acquisition and engagement of high-quality users, leveraging effective channel investments, optimize the social features, and our differentiation in house chat. Turning to financials, as a reminder, My prepared remarks will focus on the GAAP results. All monetary amounts are in U.S. dollar terms, and all comparisons are on a year-on-year basis, unless otherwise noted. We continued to experience having to our financials due to the volatility of free exchange rates in the last 12 months. Since our business primarily operates in China, while we report our financials in U.S. dollars, our financial performance was affected by adverse currency movements. Now, let me walk you through our financial highlights for the first quarter of 2024. Weibo's first quarter of 2024 net revenue was $395.5 million, a decrease of 4% or flattish on a constant currency basis. Our operating income was $125.8 million, representing an operating margin of 32%. Net income attributable to Weibo reached 106.6 million, representing a net margin of 27%. Diluted EPS was 41 cents. Let me give more color on the first quarter 2024 revenue performance. Weibo's advertising and marketing revenues for the first quarter 2024 was 339 million. a decrease of 5% of leverage on a current currency basis, reflecting low seasonality and a tattered macro environment. Mobile ad revenue was $322.5 million, contributing approximately 95% of total ad revenue. In terms of growth, the online game and the 3C product sectors demonstrated strong momentum, both booking double-digit growth For the online game sector, we benefited from normalization in the game license approval and the captured ad budget of newly launched blockbuster titles. We are also encouraged to see the solid ad wallet increase of concept sector continue into 2024, leveraging our years of cultivation around content ecosystem in the first C vertical. For the FMCG category, It continued a descending trajectory year-over-year, though delivering sequential growth. Within the FMCG category, the food and beverage and apparel sectors already returned to positive growth, while the cosmetic and personal care sector still faced the challenges from lack of new product pipelines and intense competition among ad platforms. The ad products Promoting this ad was the largest, followed by social displays on the topic and the search. Ad revenue from Alibaba for the first quarter was $22.6 million, an increase of 23% or 29% on a constant currency basis. We are pleased to see the solid ad growth from Alibaba continue into 2024. Some tools have already picked up in ad budgets, amidst the intensified competition landscape. Before turning to web segments, let me share some preliminary colors on the trends entering the second quarter of 2024. On the upside, advertisers actively embraced the campaign window before the opening of the Summer Olympics. Consumption sentiment also seems to be bottoming out with the holiday effect and execution of economic stimulus packages. We hope for further recovery of our ad business in the second half of the year, driven by Manga's four events, as well as a relatively easier comparable base. Turning to VAT. VAT revenues were 56.5 million in the first quarter, a decrease of 3%, or an increase of 1% on a constant currency basis. Turning to cost and expenses. Total cost and expenses for the first quarter for $269.7 million, a decrease of 5%, mainly due to lower personnel-related expenses and the marketing expense. Operating income in the first quarter was $125.8 million, representing operating margin of 32% compared to 31% in the same period last year. Turning to income tax and the gas measure, income tax expense for the first quarter was 25 million compared to 21.9 million last year. Net income attributable to Weibo in the first quarter was 106.6 million, a decrease of 4% of slackage in RMB terms. Net margin was 27% slackage versus the same period last year. Turning to our balance sheet and the cash flow items as of March 31st, 2024. WebOS cash, cash equivalents, and short-term investments totaled $325 billion. In the first quarter, cash provided by off-duty activities was $139.5 million. Capital expenditures totaled $21.7 million. And depreciation and amortization expenses amounted to $14.8 million. Before turning to the Q&A session, We are pleased to announce that we have completed distribution of special dividend of $0.82 U.S. dollars for ordinary share, or ADS, to our shareholders with aggregate amount of approximately $200 million. Looking forward, we remain highly committed to consistently returning value to our shareholders and explore various ways to enhance shareholder returns. including but not limited to distributing dividends. Besides, I would also like to provide an update on our ESG initiative. In April, we released our third ESG report, which details the company's initiative and progress in key ESG areas such as cybersecurity and privacy protection, human capital, content quality, social responsibility, and green operations, et cetera. The SG practice described in the report showcase our long-term commitment to sustainable development, carrying impact on our users, content creators, employees, business partners, and other stakeholders. Weibo is discussed in the vision of making the world a better place with the power of Weibo. Looking ahead, We will strive to further refine our ESG governance system and enhance our ESG performance. We invite all participants and stakeholders around the WebOS ecosystem to jointly achieve the sustainable development goals of the company, as well as the society. You may visit our IR website to obtain more information of our ESG disclosure. With that, let me now Turn the call over to the operator for the pending session.
spk02: Thank you. 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. Thank you. We will now take our first question. This is from Felix Liu from UBS. Please go ahead.
spk01: Thank you, management, for taking my question. And congratulations on the first quarter beat to consensus expectations. My question is on your outlook for the advertisement business in second quarter and second half. How is advertiser sentiment trending and how do you expect or how do you expect your advertisement business to perform? And could you maybe elaborate a little bit more on your ad strategy? Thank you.
spk07: I think from the perspective of Q2 and the second half, as a whole, because Q2 and Q3 In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and four seasons, the uncertainty is actually getting stronger. In the first two, three, and Thank you very much for the question. First of all, let's talk about our expectation on Q2 and also the second half overall speaking.
spk03: So in last year from Q1 all the way to Q4, we have been seeing an increasing of the certainties of the advertisement industry. And in 2024, each quarter, but still, we are keeping a very cautious manner in this area in terms of our expectation of the recovery of the sentiment. So, of course, in Q1, this was more optimistic than our expectations. Apart from the cosmetic and beauty products industry, we've been seeing a slow recovery and also a quite normal sentiment of the rest of the other advertisers from the other industries. And also in Q2, especially in March and also in April, Of course, we have seen some of the positive trends, except that it seems that the consumption seems to be slowing down. However, still, we believe that the expectation in the second half, in Q3 and Q4, is more optimistic than the Q1 and also Q2 of this year. Okay.
spk07: On the other hand, we also observed that our customers are more and more limited in their budget. On the one hand, we all know that they have invested in some effects, Uh, uh, That's why I mentioned that we will strengthen our core performance in some of the hot spots in the industry, including holiday hot spots, hot spots in the film industry, and hot spots in the e-commerce industry. And also, with the limited budget on the advertising, most of these budgets went to the effective based advertisement. For instance, the live stream advertisements
spk03: And also, it is pretty much focusing on the branding as well as some of the promotion of the new brands. This is going to be focused on the, for instance, some of the hot topics like the IP of the entertainment programs or the holidays like the Chinese New Year, et cetera. So we've been seeing a pretty much obvious trend of the allocation of the budget in these areas in the past quarters. And of course, another very important thing is that we have to really focus on the hot topic marketing and also some of the relevant areas like the hot topics of the festivals and also some of the IPs, as well as the e-commerce focus, for instance, the 618 or Double 11 Shopping Festival. And also, we have to pretty much focus on the new product marketing and also the new brand market as well. So that is to say that against the overall trend, we still need to focus on the core competitiveness areas of Weibo as a whole. OK.
spk07: From the perspective of the industry, Q2 and the second half of the year, we will focus on the industry that we need to grow. For example, such as Xiefu Games, food and drink, including big health, one is in the second half of the year, there are competitions like the Olympic Games and the big summer. The hot spots in these industries are still relatively concentrated. In this case, the food and drink Xiefu industry is expected to contribute In the game industry, we mentioned that our game industry is more dependent on commercial ads. Commercial ads have been competitive in recent years, but in the current situation, our content ads, including hot spot activity ads, are also growing gradually. Currently, the structure of this kind of game ad, including game ecology, is changing rapidly. So we will see that in the second half of the year, we hope that these industries can be a driving force for our growth. OK, let me continue to talk about some other industries, such as mobile cars. These two industries are actually relatively large in terms of total revenue. And in the past two years, we have seen that the market size of this industry itself has not increased significantly. In fact, the mobile phone market is still declining. But we will see that these two industries, because Weibo's advantages in terms of customer interest are still relatively prominent, so these two industries are actually still relatively good to maintain the growth rate, especially in the mobile phone industry, which has maintained an increase of nearly 20% in coins. Okay.
spk03: And also in terms of the overall industry, we have seen that in Q2 and also in the second half, we've been seeing some of the focuses of the driver of the overall demand from the shoes industry and footwear, for instance, and also the gaming, food and beverage, and also the healthcare, et cetera. So in the second half of the year, we are going to pretty much focus on these hot IPs. And also, we're going to have a lot of activities that could pretty much drive up the budget of the advertising, like the Olympic Games. So that's to say that the industries like the footwear as well as the food and beverage are going to be contributive to the advertisement industry in the second half of the year. And also, we've been seeing a very good effectiveness and turning up pretty much the focus on the effect-based advertisements from the gaming industry, which used to be the case. But now we've been seeing more and more focus shifted to the content-based advertisements and also some of the hot topic-based advertisements. So that is to say that the overall structure and also the ecosystem of the advertisements from the gaming industry is getting better. And also, as a result, we are expecting a positive result and a more optimistic recovery in the second half of the year. And also, apart from that, for the other kind of industries like the assets and also alternatives, according to our estimation, the base number was still quite high. So we've been seeing some of the challenges in terms of development of these industries. But still, we think that there's still some of the uncertainties that whether we're going to maintain the same growth rate as of 2023. However, still, we need to, based on our differentiated strategies and also core competence in terms of the content marketing, and also we believe that we still have a very good high ability in terms of the anti-risk variability. And also, we've seen that for the headset industry, some of the high-end headsets, we do see a more allocation of the budget of adjustments. And also in the second quarter of the year, we are able to pay attention to the increasing of this particular budget. But still, now we do need to be aware that there is still less new assets promoted. And also in the automotive industry, we've been seeing a very good recovery. But overall trend is like that. But still, there is a price war and also some subsidies policies. So the profit of the automotive industry is actually getting down. As a result, some of the budget of the development is getting shrinkage. And also for the other industries, we do see some of the pressures. for instance, like the cosmetics and also the beauty care products. As I have mentioned, we've been seeing a very good overall quarterly performance and a recovery of the performance, but still there is a certain reduction over the past. So this is pretty much an understanding of that. So in Q2, we have to focus on different topics of that, like the Olympics and also the others, to do more marketing on this. Okay.
spk07: And the other thing is that I just mentioned that the individual industries are still under a lot of pressure in the short term. For example, we just mentioned the makeup industry, which is almost the same as the first quarter, which brought us a loss of nearly five points. Although I will see this part, although we just mentioned that we have strengthened the cooperation of the online platform, In 2023, there was a big delay in our income. In the first half of this year, we saw a negative impact on our income in the first and second quarter. Although in the first quarter, the growth of the U.S. dollar was complete, the decline was very obvious. We hope that in the second half of the year, because the U.S. dollar was relatively low in the second half of last year, we hope that in the second half of the year, the delay in our income may become a little bit smaller and stable. This is the situation of the U.S. dollar.
spk03: All right. And also, I would like to share some of the colors on some of the most stressful industries, for instance, cosmetics. As I have already said that in details, we had around 5% reduction in terms of the overall revenue from this particular sector in Q1. And also, we do see now we have shifted our attention to the collaborations with the domestic beauty products brands. And also, we've been seeing a kind of a very small percentage against the total revenue contribution, which is only 20%. But still, there is a lot of a stressful situation for the decline of the revenue from the international famous brands of the beauty care products. So this is one of the problems, which is that the international brands are having actually a driven down of their overall sales. And also, second, we did not recover fully in terms of our whole ecosystem. And also we are waiting to fully recover our core competence and competitive edges. So in 2023, the overall revenue from this particular industry was decreased. And also you can see that on the year-on-year basis in Q1, we still had a little bit reduction versus the same period last year. But still, because of the low base in the first half of the year, we are expecting a pretty much positive trend for this cosmetic and beauty product industry in the second half of this year. That's for this industry and sector. Thank you.
spk07: In terms of advertising strategy, we can see that the competition in the market is still very intense, including the growth of the entire economic advertising industry. In the current situation, the main core strategy of Weibo is still to strengthen our advantageous field and advantageous model. In the current situation, the marketing of IP hot spots and the marketing of our customer hot spots. On the one hand, we are improving the selling rate of IP hot spots on the Weibo platform. For example, the selling rate of the festival, the film and television competition, such as the Spring Festival, the Olympic Games, and some major variety shows and TV shows. In this part, we will see that whether it is in the coverage of the industry or in the coverage of its customers, there is still a relatively large space for improvement. For example, in the film and television industry, our number of customers is In the same department, we can cover up to one-fifth of the number of customers. There is still a relatively large room for improvement in this regard. And then the other part, we will strengthen the customer hotline. In fact, it is mainly the new product release of the customer, such as car mobile phones or some services of the customer's IP, such as customer 618, including some of the customer's holidays, this kind of image mode of promotion. Then this mode, once in, we will see that once in some industries, you can get In the past few years, we have successfully achieved this mode of coverage in mobile phones. In the past two years, we have made better coverage of our customers' new products in cars and games. In other areas, such as makeup, we have failed. But we will continue to go down this road. This is also to strengthen our own advantageous mode.
spk03: And also in terms of the overall strategy of boosting this revenue from the business ministry, first of all, we need to really focus on the particular market trend and also focus on the core business models that we already had. For instance, emphasizing still on the advertisement based on the IP hot topics and also the customer-related hot topics and also increasing the sales penetration of these areas. So for instance, like the Olympic Games and also increasing our sales and promotion during these competition days, and also some of the very important e-commerce festivals. So at the current stage, we've been seeing a very good improvement of the overall penetration of our products in these occasions. But still, you know, comparing with some of the other brands like the IT or Youku or Tencent videos, still we are accounting for only uh several like um only accounting for um dozens of a percentage against their total customer base but still we are having a very positive trend on this area and also in terms of the other hot topics related to customers for instance some of the new product the launching and also the like the uh new headsets and also the new automotives and also some of the e-commerce festivals like the 618 or double 11 festival we are now having a very good success rate of our product promotion, for instance, 50% to 70%. And also sometimes if we really focus on these key areas, the overall success rate could be as high as 90%. So still, it takes a little bit of time for us to reach a final economy of scale. But still, what we need to do is still focus on the overall trend and also know what's the best industry that we have to cover for different years. For instance, many years ago, we were doing a very good job in terms of development to the industries like entertainment and also movies and TV series and also the headset. And two years ago, we were doing good jobs in the area of automotive and also gaming. And of course, in recent several quarters, it was not that successful in promoting the investment business among the cosmetic and beauty products industry, but still, we will keep our eyes on the development trend and recovery trend of this industry and also really focus on those industries that we believe that are most suitable industries and also sectors for different quarters accordingly. Okay.
spk07: Last but not least, in addition to the brand, this part of the hot topic, we will talk about the commercial advertising We also know that in the past two years, there has been a lot of pressure in terms of competition, including in terms of traffic. At the same time, in terms of current traffic, the price of the brand and the hot spot ads is indeed higher than the effect. So in the past year or two, in fact, we have undergone a lot of pressure in terms of the effect of advertising. In terms of this year, through the use of increased traffic, including some traffic sales, we expect this year, our own goal is to hope that the effect of advertising can recover this year. And also, now you can see that if we're comparing the brand-based marketing versus the effect-based advertisement scale, we've been seeing the latter part experiencing some of the pressures.
spk03: And also you can see that the pricing trend for the brand-based marketing and advertisement is always better than the effectiveness-based advertisement. But still, we have taken some of the measures in coping with that challenge. For instance, we are purchasing the traffic and also using some of the traffic to have a very good recovery of the effectiveness-based advertisement and also to have a stabilized performance within this year. And also in the near future, within this year, we are going to emphasize more on our investment and also the implementation of better and more precise algorithm to really boost the performance of this particular part. This is all my answer. Thank you.
spk02: Thank you. We will now take our next question. Next question is from Daisy Chen from Haitong International. Please go ahead. .
spk04: Thank you, Nathan, for taking my question. My question is about the user base. This quarter we noted that the number of active users has decreased. But a good point is that the revenue per user has improved in many times. We think that indicates the improvement of our user quality. As you just mentioned that you will adjust your user growth strategy this year. Can you tell us more about the adjustments and what kind of user data will be the forecast this year, and maybe is there any, is there a feeling of the user base that you feel comfortable? Thank you, management.
spk07: Actually, we have been talking about this since the fourth quarter of last year. At that time, we were talking about our strategy adjustment in the Labo area. Of course, in the second half of last year, I mentioned that we will increase the investment on iPhone users. The reason is that we will now look at the user structure, which is actually DAU, MAU, But in our DAU user group, if we go into detail, the user up value of different models and brands is actually very different. Some high-end mobile phones or mobile phones of certain brands, such as Apple or Huawei, the up value of some brands may be two to four times higher. So from the current strategy, especially when we are working with most social media platforms, In terms of competition, we believe that Weibo's characteristics are more in terms of the production of our hot points and the UGC of our hot points. We believe that we should spend the same amount of money on the platform to buy more apps that can generate more value on the platform, generate more content, and generate more interactive user groups. Even if this group of users may be two to three times more expensive than some channels, But we actually started testing gradually from the second half of last year. Maybe there will be some major adjustments this year. We will give up some users relatively cheaply. But the up value of this user is also relatively low. Perhaps the interaction of users is also much lower than that of the iPhone and Huawei users. In this way, from our own expectations, we will look at the stability of DAU first. Because this is actually more related to our income. And then, we will look at the quality of our users. For example, in our customer base, the average users open up more than 10 times a day. The number of users with low-end users may be several times higher than the number of users with high-end users. Another thing that may not be reflected in our data is that we will look at the amount of activity of the users who bought in through our channels, including the amount of content they contributed and the amount of content interaction they participated in. So actually in last year Q4 and also the second half of year we were already discussing our strategy on this particular area. And now of course that we are focusing on the DEU and also MAU.
spk03: But still, we truly believe that not only that, we have seen that the output generated from the different headset types and also different brands is actually pretty much different. For instance, we've been seeing actually the output for those smartphone brands like Huawei and also iPhone is two to four times higher than the other brands. So as a result, we have to really focus on those really competitive ones. For instance, especially focusing on those users that is actually able to generate more opinions on the social top or hot trends, and also in terms of the UGC as well. So that is to say that if we need to spend the budget in acquiring those users, we are going to focus on those users with a higher ARPU, and also the users that are able to generate more content and also are more interactive. So normally, of course, the overall spending is around two to three times more expensive than those users with lower performance. But still, we've been seeing a very good positive trend. So still, we have tested that notion last year, and we're going to keep doing so. So for instance, in Q1 of this year, we purposely gave up on some of the cheap-to-get or low-cost-to-get users in terms of their interactivity and also the output generation. So we expect to have a very good DAU increase because of this focus. And also second, that we do expect some of the frequency of the use and by switching on the Weibo app, for instance, really will focus on those high frequency uses. For instance, we might have a turn on of the app 10 or more times during the day. And this is really going to contribute to overall ad inventory. And also in the future, we believe that with higher activity and interactivity and also the higher and more content contribution, this is going to increase the core competence of Weibo as a whole. Okay.
spk07: If we give you some data, we can see that among our MAUs, there are more than 20% of customers who have bought from HL. In this regard, when we go to buy some high-end users, we will see that the same calculation, we will definitely buy less MAUs. But in the case of DAU, we basically hope that DAU is basically stable or has no growth. But what I value more is the composition of DAU. That is, we come from GAAP users, it must be in our mobile customer base, DAU must be compared, so there must be an obvious improvement. This way, our user value will be higher, and my transmission capacity will be stronger. At the same time, the content of these users will be more, and our external competition will be stronger. In the current situation, our iPhone and Huawei users are about 40% more than the current customer user group. So I think this ratio is relatively high compared to other domestic platforms. Of course, we hope to reach 50% or more on our internal side this year. In this case, we hope to have more than double the number of content production and user interactions on our platform.
spk03: And also, we are going to see that in terms of the overall MAUs, we have been seeing around 20% of the users that are these, you know, purchased and also the acquired users. And of course, that now, against those particular acquired users, still the percentage of those users with a higher ARPU is quite limited. But still, our strategy is that we want to keep a very stable performance of the DAU figure or a slight increase of the DAU number. And also in the future, we will be focusing on the increasing of those high ARPU generated users number against the overall DAU. And also, you know, a very important thing is that we really want to focus on the user activity and also the particular content generation capability and also the higher ARPU in order to, on the overall basis, improve and boost the core competence of weibo as a whole and also now we have been seeing that against those terminal users and the app users of the brand iphone and also huawei we've been seeing 40 of our users that are using the app and also the terminal this is already higher than the other social media platforms but still internally we wish that this particular figure could go up all the way to about 50 or even higher so um you know in terms of the user generation capability or capability of generating content and also the user's interactivity, etc. These performance indicators are really important to us because that is going to help us to drive the overall competence with a double-digit impact.
spk07: Okay. From the perspective of our overall market channel cost, the whole year should remain flat. Under such a budget strategy, the trend we will see is that MAU will fluctuate. For example, in June and December, the news events, including hot events, MAU may have a certain growth. But this growth is not from my channel strategy, but from natural growth. In other cases, we pursue more. The first is DAU's stability or real growth. But what we pursue more is high up value, high active users, And last but not least, I would like to say that in terms of the whole channel feed,
spk03: It is keeping flat throughout the whole year. And also, not only we want to keep a very stable growth of the overall MAU, but still we really wanted to make sure that we had a very organic growth for it. But sometimes in June and also in December, we had a lot of hot news happening and also some of the hot social trends happening. So we actually have seen the increase of the overall MAU, but not organically. But pretty much organically due to the natural incident happening during these two months, but not because of our channel strategy. So in the future, of course, our core strategy is that we really want to keep a stable or a slight increase on the DAU number. But more importantly, we have to focus on the percentage of those high output users against the DAU, which could have around 5% to 10% of the increase, which is going to be better. And also, for the whole Weibo platform, we're going to focus on the content, UGC-related content, and also the improvement of the overall interactivity and also the content generation. This will be the focus of our effectiveness while taking some of the appropriate channel-related strategies. This is the answer for the strategy of our channel. Thank you.
spk02: Thank you. Thank you. Thank you. And we have no further questions. In that case, I will hand the conference back to the speakers for closing remarks.
spk06: Thanks, operator. This wraps up our conference call today. Thank you for joining us. We'll see you next quarter.
spk02: Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.
Disclaimer