Weibo Corporation

Good day and thank you for standing by. Welcome to WeBall report second quarter 2025 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 need to press star 1 and 1 on your telephone. You will then hear an altered 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 of Investor Relations.

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Thank you, operator. Welcome to the second quarter of 2025 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang, and our Chief Financial Officer, Fei Cao. The conference call is also being broadcast today on the internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the state public statement in connection with today's conference call. During today's conference call, we may make forelooking statements, statements that are not historical facts, including statements of our beliefs and expectations forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update a forward-looking statement in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20F and other findings with the SEC. All the information provided in this press release is occurring as a dead hero We will assume no obligation to update such information, except as required under the applicable law. Additionally, I'd like to remind you that our discussion today includes certain non-GAAP measures, which includes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials include certain expenses, gains or losses, and other items that are not expected to result in future cash payments, or are non-recurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-debt measures. Following management's prepared remarks, we 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.

Thank you. Hello, everyone. Welcome to the Weibo call-in conference.

Thank you. Hello, everyone.

Welcome to Weibo's second quarter of 2025 earnings conference call. On today's call, I'll share with you highlights on Weibo's product and monetization in the second quarter of 2025. On the user front, in June 2025, Weibo's MAUs reached $588 million, and average DEUs reached $261 million.

In the second quarter, Weibo's total revenues reached $444.8 million U.S. dollars. up 2% year-over-year. Our total ad revenues reached US$383.4 million, up 2% year-over-year. Our non-GAAP operating income reached US$161.8 million, representing a non-GAAP operating margin of 36%.

In 2015, Weibo, the company's overall strategy, remains at the core of the price range, maintaining Weibo's advantage in terms of heat and micro content, stabilizing the competitiveness of social media products, In 2025, the company's overall strategy focuses on the value of users, sustaining the leading position in trending topics and entertainment sectors.

and solidifying the competitive edge of the social products. On top of that, we prioritize on enhancing the recommendation and search functions by integrating large language models to drive user skill and engagement. Next, let me share with you our progress made in the second quarter of 2025 from three dimensions, user growth, the competitiveness of the company's ecosystem, and monetization.

to promote the improvement of the system, and to promote the activity of users and the improvement of the scale. In the past 15 years, we have been focusing on improving user content consumption efficiency and social efficiency. These two goals are to achieve balance and cross-examination. We have gone through a gradual advance from the time line to the smart power supply engine. The earliest mobile information flow is to be distributed in a short period of time. But as the content of the user is not convenient, the content is explosive, and the production is far beyond the scale of consumption. On user growth and engagement, we focus on integration of social product and upgrade of our recommendation system this year, aiming to drive user engagement and user growth.

Over Weibo's 15 years' development, the homepage information feeds have continuously evolved to achieve two core objectives, to enhance the efficiency of content consumption and social interaction by users. And accordingly, the content recommendation mechanism of information feeds has evolved from a timeline-based distribution to a recommendation-based distribution. To be specific, The information feeds were originally distributed in reverse chronological order based on the posting time. As content creation became more convenient for users, the explosive amount of content produced largely exceeded the amount of content consumed. And therefore, to improve content consumption efficiency, we upgraded the algorithm of information feeds from purely timeline-based to focusing on distributing unread posts from individual accounts being followed by users in 2016. Later in 2018, we introduced a new feed product structure, composing of a relationship-based feed and an interest-based feed, aiming to broaden users' content discovery and increase their content consumption scale.

In the first half of this year, we have upgraded our first-hand information products. The new version of the first-hand business is also recommended for users to open their first-hand business on Weibo after the end of the year. The recommended distribution mechanism has also been greatly adjusted. On the one hand, it integrates the social content of the original relationship with the recommended mechanism of the original recommendation flow based on the information content. On the other hand, the focus is on strengthening the user's recommendation response in the consumer interaction of the recommended flow to meet the current deep consumer needs of the user. Overall, In recent years, users' content consumption behaviors have been altered by the recommended content.

To adapt to this trend, we initiated a strategic revamp of our homepage information feed. in the first half of this year, which makes the interest-based feed as a primary interface when users access Weibo. We also made significant adjustments on the distribution mechanism of the interest-based feed. On the one hand, we integrated a recommendation mechanism for both relationship-based feed and interest-based feed. On the other hand, we enhanced the user feedback mechanism based on user interaction and consumption behaviors in the interest-based feed. aiming to meet their in-depth consumption demands. Overall speaking, while preserving users' fundamental need for social content consumption, the upgraded interest-based feed delivers improved efficiency of discovering interest-based content and deepens user engagement. Additionally, by leveraging large language models, we have enhanced the quality of recommended content, improving users' overall consumption experience.

We hope that with the change of the mobile information network, we will be able to further release the value of the UZI content, and improve the depth and consistency of the user's sales through the algorithm, and strengthen the competitiveness of UZI content. In July, we successfully completed the upgrade of the product and infrastructure framework, and covered the full range of features. Currently, the number of people who consume UZI content in the mobile information network remains stable, and the number of users who recommend the content has increased by 43% compared to the previous 17% increase.

We hope the upgrade of the homepage information feed will further unlock Weibo's value in delivering quality content. We aim to enhance users' consumption depth and engagement through algorithm capability, which will strengthen the competitiveness of our vertical content ecosystem. In early July, we completed the upgrade of product and technical framework, which has rolled out to nearly all users. Currently, with the average content views of home page information feed for users remaining stable, the proportion of the recommended content consumed by users has increased to 43%, representing a 17% improvement over the previous level. This established a solid foundation for efficiency improvement and the development of the platform's content ecosystem.

So you know, The platform has been designed to attract attention and interest, to enhance the content competitiveness of the platform. Social products, along with the social relationships and community of the platform, to strengthen the social aspect of the platform, to enhance the activity of the user in the sharing and interaction of the platform. In the second quarter, we have further strengthened the user's experience of social interaction in the core product field, and made a more obvious progress. For example, the content of the comments section with more questions from users, our focus is on the comments section for celebrities and fellow bloggers, to strengthen the recognition and management of low-end content, effectively improve the quality of discussion, and improve user comments and comment support. For StarCraft, we focus on the real interaction, sharing, and social needs of users, and focus on improving StarCraft's diverse and practical social environment experience, and restoring the sense of sociality of StarCraft. The number of players in StarCraft 2.0, the number of interactive players, and the number of players in the game have all made a significant increase.

With the output of the homepage information feed product, our platform's content distribution strategy will expand from relationship-based distribution to interest-based distribution, aiming to enhance content competitiveness. For social products, leveraging the platform's long-accumulated social assets and interest-based communities, we reinforce the platform's social attributes and boost the user's willingness to share and interact. In the second quarter, we further strengthened users' social interaction experience in the core product scenarios, achieving notable progress. For example, to address the prevalent issue of low-quality content in comments retention, particularly comments under posts by celebrities and top KOLs, we enhanced the identification and monitoring of low-quality content. This effectively improved discussion quality and increase users' willingness to visit and engage in a commentary session. For the celebrity-related super topics, we prioritize users' genuine communication, content sharing, and consumption needs, and focus on improving the diversity of content and real-time attributes of the community. These efforts help improve social connection in the celebrity-related super topics, driving notable year-over-year growth of users who posted, engaged,

and consume content in the second quarter. to mobilize the operating mechanism of cross-border production. At present, the advantage of the new content is that more than 50% of the production comes from cross-border production. This is also due to the advantage of the deep growth of the vertical field and the vertical operating system of Weibo for many years. In the second quarter, the vertical consumption of推薦流 has reached 60%. At the same time, the content quality of the new推薦流 will distribute more traffic to the quality of the real content. The traffic of QR and star accounts has been increased, which also gives the content creators of small and medium-sized companies more access to traffic. In the second half of the year, we will continue to focus on the goal of increasing user engagement based on content content. Product management drives the attack of useful content, and the technical drive is more precise and more reliable to match the content to improve the efficiency and satisfaction of user information acquisition, which leads to more content reading and more frequent user visits. Stabilizing Weibo on the basis of the hot topic of the advantage of content ecology, assisting the long-term development of vertical ecology, and achieving the results of user-friendly, creative growth platform functions.

To enhance the competitiveness of the content ecosystem, our interest-based feed will become the primary feed for content distribution. In the second quarter, on the vertical content ecosystem, we completed the transition of content operation from an influencer-based model to a vertical content-based model, which attracted content creators from cross-verticals to generate content on a specific vertical area. Currently, over 50% of the interest-based content from key verticals are generated from cross-vertical KOLs, which benefit from our use of feed cultivation in vertical areas and the advantages of our vertical content operation. In the second quarter, vertical content consumption accounted for 60% of the interest-based feed consumption. And meanwhile, the new interest-based feed optimized content quality by allocating more traffic to high-quality authentic content. This has increased the traffic share for KOLs and celebrity accounts while also providing more growth opportunities for mid-tier and long-tail KOLs. In the second half of this year, with the goal of enhancing user engagement through the interest-based feed, we will increase the supply of quality content to users through product optimization and recommend more precise and engaging content to users through recommendation. This will improve the efficiency for users to access effective content. and their satisfaction of content consumption, and thereby further drive up content consumption and more frequent usage. While solidifying Weibo's advantages in entertainment verticals and trending topics, we'll support the long-term development of vertical content ecosystem to achieve a win-win situation where users enjoy quality content, creators develop, and the platform thrives.

I would like to introduce the production of self-publishing products. In the second quarter, the self-publishing product continues to develop rapidly in the second quarter. In June, the number of self-publishing users exceeded 50 million. The self-publishing product shows the experience of self-publishing under the promotion of improved users and the satisfaction rate of the search in the main search products. Since the rapid growth of the number of web pages and the number of footnotes, we have also further promoted the growth of the volume of the search engine. In more detail, based on the summary of the big model and the ability to calculate, we believe that the Facebook platform has accumulated more than 10 years of high-quality content and views, and can be more intelligent in the comprehensive search result presentation. Next, let me share with you the updates of Weibo Intelligent Search product.

In the second quarter, we beef up our efforts to transform the AI-powered search experience to optimization in model strategies, enrichment of database, and integration of multi-model content. Additionally, we incentivize the content creators to produce more high-quality content and perspectives, which further refine the quality of search results. As a result, Weibo's intelligent search so robust growth during this quarter, with MAU surpassing 50 million in June. Notably, Weibo's intelligent search has significantly enhanced the user experience for trending topics, as well as better fulfilled user queries in on-demand search scenarios. Daily active users of intelligent search also increase notably quarter over quarter, driving solid growth in average daily search queries. In the longer run, powered by the large language model summarization capabilities, we believe that the high quality content and diverse viewpoints accumulated on Weibo over a decade will be presented in a more thorough way. This will not only improve results relevancy, and content consumption efficiency, but also enable Weibo's intelligent search to go beyond trending and real-time topics to better address long-tail search needs. We are encouraged to see an AI-driven roadmap to strengthen our competitive edge in the search market.

From a commercial point of view, Weibo's 25-year online product sales team focuses on the marketing nature of content in Weibo, to infiltrate and consolidate and continuously improve the sales conversion capability of advertising products. From the point of view of organizing the market, under the guidance of the expansion of the domestic market for sales, the e-commerce platform and the marketing industry have made a significant contribution in this quarter. In this quarter, the focus of the marketing process is to continue to expand the customer market while covering the hot spots, stars, and top KOs of the entire Weibo, focusing on the customer new product marketing market, and strengthening the customer interest of Weibo as the main source of new product marketing. Second, to continue to invest in the performance of advertising products, to improve the quality of the advertising budget, and to continue to get positive feedback on today's input.

Moving on to monetization, in 2005, our ad product and sales strategy focused on expanding and solidifying customers' mindsets of choosing Weibo as the go-to platform for content marketing across industries, as well as enhancing ad product conversion capabilities. From the demand side, backed by consumption stimulus policies, e-commerce platforms and related sectors increased their ad spend during the quarter. We focused on two aspects in our sales execution this quarter. First, we continue to leverage Weibo's unique strengths in trending topics, celebrity resources, and top KOL content to broaden our industry reach, while focusing on new product launch marketing to further reinforce Weibo's position as the go-to platform for clients. We maintained our investment in performance-based ad products, which enhanced our capabilities to capture incremental ad budgets and continue to deliver positive revenue outcomes.

From the industry point of view, the main benefit is the collaboration between the various e-commerce platforms in the 2018 stage. The increase in the number of e-commerce services has been obvious. As a result, it is a very significant change in the field of e-commerce. The e-commerce platform has increased the number of e-commerce services for local life services in the current stage. By industry, e-commerce platforms posed a solid year-over-year revenue growth in the second quarter, benefiting from close partnerships with major platforms during the June 18th shopping festival.

As a pivotal arena for boosting domestic consumption, e-commerce and related categories, such as local service, are expected to further ramp up marketing efforts with Weibo this year. As for the automobile vertical, Weibo continues to be the key discussion hub for new energy vehicles, sustaining its ecosystem advantages. Major OEMs have increased their budget allocation to Weibo with marketing coverage for new EV model launches exceeding 60% in the first half of this year.

In the consumer market, including the food and clothing industry, we can see that the overall customer market is changing. With the increase in the investment and competition of e-commerce, the investment-editing effect of customer service is significantly reduced. More and more customers are considering brand construction. For example, we can see that the cost-efficiency budget has been transferred to T&R Effect or KUC. This year, the focus is on the budget and the public endorsement of the investment, or the production and acquisition of IPs. The changes in customer service are gradual, but we can see that this trend will continue. In the first half of this year, The customer base of the sales industry has been greatly improved by the promotion of the new products and the IP2 audience. The growth of the new products and the star's official core products and the number of projects has been slightly increased. The collaboration between the top stars and the star base has been strengthened and the value of the star has been returned. At the same time, we will divide the customer sales needs of the sales industry and strengthen the construction of advertising products. We will combine the content of the star and its fellow creators and the customer's sales with the content of the special advantages of Bo Wen and Hot Face.

In the SMCG category, including food and beverage, footwear and apparel, and personal care and beauty sectors, we are seeing shifts in client marketing strategies. After years of heavy investment in e-commerce performance and KOC seeding, more and more advertisers now face diminishing returns. which prompt a reconsideration of building. For instance, certain advertisers who had previously shipped most of their budget to performance-based marketing or influencer seeding are now reallocating budget towards selected endorsement, content IP creation, and sponsorship. While the transition is gradual and measured, we believe this trend is likely to continue. In the first half of 2025, Advertisers from the SMCG category became increasingly interested in Weibo's product launch, celebrity, and IP marketing offerings. As a result, both the number of campaigns and the revenue generated from product launch and celebrity official announcement campaigns broke the double-digit year-over-year growth. We are encouraged to see customer sickness through our product launch marketing further enhance, with the value of celebrity assets gradually revived. And meanwhile, We focus on tailoring our ad products to fulfill the more granular marketing needs of different segments within the FMCG sector. We seek to amplify the synergy between commercial content and organic posts and trending topics generated by celebrities or KOLs, leveraging our ad products like content boosting and aggregation. With these efforts, We aim to facilitate more effective distribution of commercial content, so as to cultivate consumer mindset and drive conversion.

In terms of advertising products, the second quarter of the new year, we expect the advertising to continue to grow. We expect the advertising to continue to grow. In the third quarter, we expect the advertising to continue to grow. We expect the advertising to continue to grow. From ad product perspective, ad revenue from our commodity feed offerings enter the real-time bidding system, the same solid year-to-year growth in the second quarter, with decent enhancement

ad performance for those performance-driven e-commerce advertisers. In the third quarter, we plan to further expand advertiser coverage and see opportunity to extend this growth trend to the second half of this year. And meanwhile, we are stepping up our exploration and integration of AI on a monetization front with focus on streamlining ad creation and accelerating review process, as well as improving ad targeting and click-through rate This initiative successfully drove higher eCPMs for real-time business lead-ups in the second quarter versus the same period last year.

Currently, it is a three-level commercialization. Due to the recent high-intensity situation of the Olympic Games, it will have a negative impact on all governments in the three-level. We will actively grasp the transfer opportunities of e-commerce, car, medical health, etc., and improve the penetration of brand and content marketing in this industry. as well as the progress we have made in the promotion of the information stream, and the increase in revenue. In the long term, we will continue to stick to the same strategy of content marketing and commercial marketing. With the upgrade of the new product, we will strengthen the development of the content ecosystem and promote the consumption of new content, so that content marketing can be more flexible and interested in the consumer community. The advantages of content and new media marketing will be more prominent, and we will strengthen the long-term budget competition among customers in Weibo.

Entering the third quarter, we do face a tough comparison due to the high base from last year's Olympics, which would negatively impact on the year-to-year growth. That said, we'll beef up sales efforts to capture visible opportunities from sectors such as e-commerce, automobiles, and healthcare sectors, etc., with focus on driving the penetration of our brand-plus content marketing among these sectors. Furthermore, we strive to secure incremental budget, leveraging the progress we made in real-time billing fee ad products. In the longer run, we remain committed to amplifying the synergy between content and monetization operations. With the revamp of information feeds on homepage, we have a clear roadmap to further strengthen our vertical content ecosystem and boost the interest-based content consumption, enabling commercial content to effectively reach desirable audience At that time, our value proposition of content and new product marketing will become even more pronounced, and therefore reinforce Weibo's competitive edge in the ad market. With that, let me turn it over to Feita for a financial review.

Thank you, Luofei, and hello, everyone. Welcome to Weibo's second quarter, 2025 Early Content Fall. Let's start with user metrics. In June of 2025, Weibo's MEUs and average DEUs reached $588 million and $261 million respectively, representing a net addition of 5 million and 5 million users on a year-over-year basis. The DEU versus MEU ratio further enhanced as our strategic focus on high-quality users are paying off. Leveraging the transformative power of AI, we are rebunking our recommendation engine as well as speed and search experience to make Weibo more relevant and engaging. Turning to financials, as a reminder, my prepared remarks will focus on Manga results, or monetary amounts in US dollar terms, and all comparisons are on a year-to-year basis, unlike otherwise noted. Now, let's review through our financial highlights for the second quarter, 2025. Week of second quarter 2025 net revenues were $444.8 million, an increase of 2%. Operating income was $161.8 million, representing operating margins of 36%. Net income attributable to Weibo reached $143.2 million, an increase of 13%. And the diluted EPS was $0.54. Let me give you more color on the second quarter 2025 revenue performance. Weibo's advertising and marketing revenues for the second quarter 2025 was $383.4 million, up 2%. while value-added service revenues were 61.4 million US dollars, down 2%. Weibo's advertising business continued to deliver a slant uptick, which resulted from mixed performance of major ad verticals by industry. Our top three verticals were FMCG, e-commerce, and 3C products. In terms of goals, e-commerce, internet services, and automobiles were the key contributors. Band beating from trading policies and intensifying competition among platforms. E-commerce advertisers increased their ad spending on Weibo to boost brand visibility during the June 18th shopping festival. The automobile sector has seen healthy growth, as weibo plays increasingly important role in building market hub for EV launches, underpinned by joint discussion web of the auto vertical. The FMCG sector continued to see a year-over-year decline. However, we are seeing early signs of gradual recovery, despite near-term pressure. We are encouraged to see a gradual comeback with those manga festival brands, FMCG brands reallocate their budget to label celebrities and product launch ad offerings to engage our young and high-value users. Other underperforming industries that drag the overall top-line retargeting include online games, lectures, and entertainment. In particular, the online game sector remained soft due to tough comps and lack of blockbusters released this quarter. The ad product category. Promoted speed ads remained the largest contributor, followed by social display ads and topic and search placement. We have been integrating AI to facilitate smarter ad targeting and placement. which fuels the double digit growth of our feed ad offerings. Specifically, our real-time bidding feed products show strong improvement in both performance and conversion metrics. Ad revenues from Alibaba sustained a healthy growth of 10%, reaching 35.7 million US dollars in the second quarter, weakening a larger share of Alibaba's ad wallet in Q2. driven by increased marketing demand during the 2018 festival and heightened competition in the local survey segment. Looking ahead to the second half of the year, we expect to face a tough year-over-year comparison in the first quarter due to the Summer Olympics in the prime year. Also, advertisers from construction-related industries remain conservative in their ad-budget allocation in light of fluid geopolitical outlook and macro uncertainty. That said, we will step up our sales execution to capture innovation opportunities, particularly in on-demand e-commerce services and new EV launches. In the longer term, we aim to further integrate AI capabilities to designate for improvement in ad inventory, scalability, and eCTM updates. Value added to service revenue was 2% to $61.4 million in the second quarter, mainly due to a modest decrease in membership services. Turning to cost and expenses. Total cost and expenses for the second quarter were $283 million, an increase of 1%, with increase in cost of revenue and the product investment expenses offset by decrease in general and administrative expenses. Operating income in the second quarter was $161.89, an increase of 3%, with an operating margin of 36%, less, versus the same period last year. Turning to income tax, under gas, Income tax expenses for the second quarter was 31.7 million U.S. dollars compared to 33.3 million U.S. dollars last year. Net income attributed to Weibo in the second quarter was 143.2 million U.S. dollars, an increase of 13%, representing a net margin of 32% compared to 29% last year. from merely attributable to higher net interest and other income. Turning to our balance sheet and cash flow items, as of June 30, 2025, Weibo's cash cash equivalents and short-term investments totaled $2.11 billion, compared to $2.35 billion as of December 31, 2024. The decrease of Weibo's cash cash equivalents and short-term investments was mainly resulted from the purchase of long-term wealth management products and the payment of the annual dividend to our shareholders in the first half of 2025, and partially offset by out-pricing cash flows. In the second quarter, cash provided by out-pricing activities was $24.8 million. Capital expenditures totaled $17.6 million, and depreciation and amortization expenses amounted to $14.8 million. With that, let me now turn it over to the operator for the Q&A session.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by as we compile the Q&A roster. Our first question comes from the line of Felix Lu from UBS.

Please go ahead. Thank you, management, for taking my question, and congratulations on the strong second quarter results. Management earlier mentioned about your progress on Weibo Smart Search. So could Benjamin elaborate a bit more on your product strategy and the future plan for commercialization? And furthermore, on AI, could Benjamin share more progress on how AI is helping the overall monetization and commercialization for the Weibo platform? Thank you.

Okay, thank you. . . . . . . . .

Okay, so actually in the last quarter we've already shared that in Q1 we promoted the Intelligent Search product. In Q1 we actually connected to the DeepSeq R1 model and we promoted the product, launched the product. And in Q2 actually was a first full season for the Intelligent Search to be present in Weibo. And then in June we also connected to the Ali Q1 because for the DeepSeq R1 model in terms of the output speed actually it's a bit low so actually a lot of users couldn't wait for the result to be produced so in general we should say that actually in Q2 the product is still being perfected and it's still in the process so basically at the end of Q2 the product form was finally stable

In June, the maximum number of MAUs was more than 50 million. There was a 60% increase in management. In terms of DAU and the number of queries, the growth may be faster. The daily usage capacity may reach 100%, and the number of queries Then actually in terms of June, just now we introduced that actually for the MAU, it's already over $50 million.

So for the query, it also improved by 60%. And as for the DAU and for the user query, actually the growth was even faster. So actually the growth rate was already over 100%. And in terms of the traffic, it grew by around 150% compared to the previous quarter. So in general,

We can see from that data actually the user scale is growing and the frequency of usage is obviously increasing. Weibo's long-term advantage is in news search. In the long-term search, the advantage of this platform is not very strong. However, we can see that in the current users' use, there is still a large proportion of users who use the search engine based on news. However, as more and more users use the search engine, they start to use the experience search engine, including product search engine, as well as the function of long-term search engine. Then we think that including some models now, its content introduction, also helps us to perform some outside-the-stand information search results, which can be reflected in Weibo search. So actually, we have pretty high expectation on the intelligent search product in the latter half of the year.

And I think if you have been following Weibo, you would know that actually we have always have the advantage of news search. but in terms of the long tail searches, actually Weibo isn't that advantageous in that aspect. But right now with this product, we can see that in the current usage by the users, of course the search on the news is still accounting for a big percentage, but more and more users are using it and now they're using it for the experience search, product search, maybe some other long tail searches. And also now with the connection of the models and other content, It also helps us in terms of displaying some of the out of sight search results that can be displayed in the intelligent search on Weibo. And that is very vital for Weibo to really change the user behavior of the users and also to improve the percentage of the long tail searches.

I think the whole industry is very serious about AI search. In fact, the replacement of traditional search is still an obvious trend. Specifically, social media platforms For us, it's not just to do the search function itself, but also to use Weibo. You can see that users actually communicate with their own products. In addition to the search, it also includes social interaction. For example, in the comments, you can use the search engine to ask for permission, as well as some of the functions of the blog itself to ask for permission. In terms of the authenticity of Weibo itself or the expansion of reading, there are actually more application scenarios. This is also the work that we will focus on in the second half of the year to develop products. There are already some tests now. As for commercialization, we have a lot of customers who are interested in this product, but we are not particularly anxious about commercialization at the moment. Then maybe more of it is to expand its number of users and its user size first. As for its commercialization, is it based on the brand to do this kind of binding cooperation in the future? Or is it like traditional speed, to increase this kind of advertising in the result? We may not consider it in the third quarter of the second half of the year, but we may do some testing in the fourth quarter. But overall, we think that such a product improves our So actually, in the industry, people have this general awareness that AI search is clearly overtaking and replacing the traditional search, and that is a clear trend.

And now, in the social media platforms, we can see that for us, we're not only making the search function better. Actually, in terms of the usage on Weibo, you can see that for users, when they use this product, it's not just about the search. It's also about social interactions. For example, in the comment sections, they can do fact checking, and also for some of the blogs, they can also use this kind of tool to fact-check or maybe do some extensive reading for the relevant material. Actually, there are a lot of use cases and scenarios, and they are some of the key works, key directions for our latter half of the year, and we do have some pilots going on. And in terms of commercialization, we should say that actually a lot of clients are interested in this product. but we are not overly anxious in terms of commercialization and we tend to try to expand the user base right now and in the future for the commercialization maybe it's about the bundled cooperation with the brands or maybe it's just like in the traditional search where we include ads in the search results but actually in the latter half of the year in Q3 we may not consider that maybe in Q4 we would do some tests But overall speaking, we should say for this product, it's really important for us to increase the user base for the search and also to help us increase the user stickiness and the traffic. And we have a really high expectation in terms of the future commercialization of the product.

The second question you just mentioned is about the ad. In terms of advertising, I think this progress is similar to most of the platforms, that is, focusing on effective advertising. On the one hand, we include the automatic placement of AI materials. In the second quarter, we launched our own AI advertising creative platform, the zero-creation platform. At present, in terms of material consumption, is actually from AI material. In terms of the results, just now in the group, we talked about the entire eCPM of the entire second quarter, the entire eCPM of the entire new quarter, has probably increased by more or less 10%. In terms of CTR, the types of different clients may be different. In terms of clues, the CTR may be higher, about 20% or so. So just now, your second question was about AI ads.

In terms of ads, I think most of the platforms are alike. That means they're mostly concentrating on the performance-based ads. And for us, on one side, it's about the auto-placement of the AI assets. So in Q2, we launched our AI at creative platform called Lingchong. And right now, for the assets that is consumed, actually more than 10% is already from AI. And from the results, just now we already talked about it. For Q2, in the information feed ads, the eCPM grew by a single digit, less than 10%. And then when it comes to CTR, I think for different clients, for different client types, things would be different. For the leads type, the CPR would be higher, maybe around 20%. But for the apps, maybe more than 10%. But comprehensively, the eCPM may be grouped by less than 10%. So that's for information feed or maybe for the performance-based ads.

另外在品牌这个广告方面, 其实因为很多的品牌客户本身在微博投放的这种广告出来的质量, is relatively high. We actually did some individual customer cooperation tests in the second quarter, because some of their relatively high-quality TPC ads are used by AI to coordinate or for different user groups, according to their interests, to do this kind of re-editing of their material. This is actually better than the original expected effect than the pure effect. The effect of this medium and small customers will be better. And then some of the test data we've seen, basically, its refresh rate may be almost the same as the effect, but its mobility improvement is actually even doubled. The overall effect is not bad, but for brand customers, there is a bigger challenge now. and the entire advertising process of this industry. Basically, our brand customers are still asking for data to be reviewed by them on Weibo. Such a work process is actually very difficult for AI advertising it is still not very suitable for all-in-one advertising materials. It limits the size of our customers, especially brand customers, who use our AI ads. In general, we think that if we can use AI ads in a large scale, the effect will be more obvious. But it may take a longer time for our customer groups to accept it. We expect that by the end of the year, there will be more than 10% of our brand customers So in terms of the brand ads, for a lot of the brand customers, they are placing quite high quality ad assets on Weibo.

So actually in Q2, we have done some tests with some specific customers. For them, they have some high quality PVC ads and then we use AI to conduct some coordination or for different user bases. According to their interest, we conducted some re-editing with their existing assets. Actually, in terms of the result, it's better than the results for the small and medium sized customers. And then they saw some of our testing results. Basically, for the click rate, it increased just like the performance-based ads, but for the interaction, it basically doubled. So the overall result was pretty good. But for the brand clients, the biggest challenge is still in the restraints of the process of ad placement. So basically, for our brand customers, when they place the information feed ads, they require all the assets to be approved on their side. So that kind of work process for AI ads, which is quite customized for different people, it's not really adaptive. So that really limits our customers, especially the brand customers when they want to use our AI ads at scale. So generally speaking for the brand ads, I think if we can use AI ads on a large scale, performance and the results will be even more obvious in terms of this improvement. But it may take some time for our customers to gradually accept it. So we expect that at the end of the year, maybe more than 10% of our brand customers can start to use the AI ad system.

Thank you. Just a moment for our next question, please. Next, we have Timothy Zhao from Goldman Sachs. Your line is now open.

Good evening, Mr. Guan. Thank you for accepting my question. My question is about our advertising revenue. I would like to ask you about the overall advertising revenue of our company in the third quarter and the second half of this year. Which industries should show a better increase? In addition, I would like to ask you about the advertising model. If we look at the display ads, search ads, including the new wave ads we just talked about, what is the growth expectation in the second half of this year? Wang Yicheng also mentioned some applications of AI in the new wave advertising. I would like to ask if it is the search, we see that the use of the search has increased very high. What impact does this part have on the search ads we already have? I will translate it quickly. Thank you, Benjamin, for taking my question. My question is regarding the advertising revenue growth outlook. Can Benjamin share what is your expectations for the ad revenue growth into the third quarter and second half of this year, and specifically which industries may show stronger revenue growth? And from the format perspective, just wondering what is the difference in terms of growth rate between search ads, display ads, recommendation fees ads, et cetera, and specifically As Benjamin already mentioned, the applications of AI in information ads, just wondering, given the very rapid usage of the AI search functions on Weibo, what is the implications for the search ad growth? Thank you.

Okay. 下半年其实还是有, 特别是我们看博股, 主要是国股的, 有些行业就一定有确定性的, 主要是跟国股相关的, 像手机啊, including the automotive industry, is somewhat uncertain. In terms of the third quarter, I think the first part, as mentioned in the second quarter, is the e-commerce industry, including the automotive industry. We think it can still maintain a good growth. In addition, in the past two years, with the changes in the age of our users, especially in the white-collar community, the importance of medical health has been increased.

In the latter half of the year, especially when we look at the industries with some national subsidies, those industries still have some uncertainties, especially the national subsidy-related industries like the cell phone or the automotive industry. And then when it comes to Q3, I think, firstly, I think we already covered about that in Q2, which was e-commerce and also automotive industry. We think those industries can still maintain very good growth. And in the last two years, with the change of the age of our users, especially for the white collars, people generally paid more attention to health care. So healthcare had pretty good growth in the last two years, but the base number was not as large as e-commerce and automotive industry.

So those are the growing sectors. Yes, milk products like this, including a lot of fast food, this year, the entire budget has also been reduced, mainly in the third quarter. Yes. In addition, cosmetics and luxury goods, cosmetics are actually starting to stabilize gradually, but I think there will still be some pressure in the third quarter. Luxury goods will also have some pressure. The mobile phone and game industries have a very big uncertainty. In the mobile phone industry, this year, although our customers' budget is as high as the first half of the year, It's a little bit stable, but its entire sales are still falling a lot. A lot of state-owned companies don't have any new stocks in the second half of the year. The growth of our mobile phone industry in the second half of the year is still under a lot of pressure. As for the special aspects of the media, I think on the one hand, the main The largest proportion is information flow advertising. The second is display advertising and revenue advertising. Information flow advertising itself is growing. Then, from the increase, information flow advertising has the highest increase. The second is this display type of advertising. The display type of advertising is one and two and one and two. In fact, there is also a small decline. Because I think this is the overall budget of the customer. It is related to information flow advertising, effect advertising and content marketing advertising. Pure display advertising itself from our point of view. It may not be the center of our future. In the future, more and more customers will invest in existing commercial ads, and they will invest in celebrities, including KOL, and, for example, customers' own accounts will produce content marketing ads. This is a trend in the future. In terms of search ads, I mentioned it when I introduced it. There are some customers who want to commercialize their products, but we don't have a clear commercialization model for this type of advertising. We are still focusing on large-scale and large-flow advertising. I don't think there will be any ads in the future. But I don't think there will be any ads in the future. But I don't think there will be any ads in the future. But I don't think there will be any ads in the future. But I don't think there will be any ads in the future. But I think there will be no ads in the future.

So actually in Q3, we still face a lot of pressure in terms of FMCG because there was the Olympics last year. So for dairy products and other FMCG had some spending cuts, especially in Q3. And the other thing is for the cosmetics and luxury goods. Cosmetics have already quite stabilized. but we still face some pressure in Q3. And also, the same thing goes for luxury goods. And then for cell phone and gaming industry, there is huge uncertainty. For cell phone in this year, we do see that compared to the first half of the year, their budget basically stabilized, but their overall sales went down a lot. So if there's no additional national subsidy policies coming out, we still expect some pressure in terms of the cell phone industry in the latter half of the year. And then in terms of the ad strategy, I think the biggest percentage still goes to the information feed ads and then the displayed ads and then the other ads. And then for the information feed ads, it's growing in itself. And in terms of the growth rate, I think for information feed ads, the growth rate is the highest. And actually for the displayed ads in Q1 and Q2, there was a small dip because I think that's related to the overall budget of the customers. So for the information feed ads and the performance-based ads and for the maybe content-based ads and then for the purely displayed ads, from our perspective, I don't think The pure displayed ads is our future focus, so that means more and more customers will purely go to performance-based ads, and also they may invest more in terms of star collaboration or maybe KOL investment, and maybe customers, they have their own accounts, the social media account that can produce some content-based marketing type of ads. That is the mainstream in the future. For the search ads, I just introduced that, of course, there are certain customers. They have some expectation on the monetization or commercialization. But for us, or even in the industry, there's no clear business model for this type of ads. So right now, we still focus more on building a bigger customer base and introducing more traffic. And of course, maybe we can introduce a bit of the display desk, but that's too small a piece. So I think we still will focus more on increasing the user base. And also we need to focus on the user experience of the intelligent search and also the feedback of the industry had been good. So we would increase a bit in terms of the budget, maybe in computing power and also the investment for the external corporation and marketing. And we hope that that will help us grow in terms of the user base because that's the highest expectation we have now for this product. In terms of the revenue and commercialization, we're in no hurry. Thank you.

Thank you. Thank you for the questions. I will now turn the conference back to Sandra.

Thank you, operator. This wraps up our conference call today. Thank you all for joining us. We'll see you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.