Phoenix New Media Limited

Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, press star 1 on your telephone. I must advise you that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ching Liu. Thank you. Please go ahead.

Thank you, Oprah. Welcome to Phoenix New Media's Third Culture 2020 Earnings Conference Call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu, and Chief Financial Officer, Mr. Edward Lu. On today's call, management will first provide a review of the culture results and then conduct a Q&A session. The third quarter 2020 financial results and webcasts of this first call are available on our website at ir.typhoon.com. A replay of the call will be available on the website in a few hours. Before we continue, I would like to refer you to our safe harbor statement in our earnings price release, which applies to this call as we will make forward-looking statements. Finally, please know that unless otherwise stated, all figures mentioned during this conference call are in R&D. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Thank you, Qing. Good morning and good evening, everyone. Although we face a complex situation as a result of the COVID-19 pandemic and escalating geopolitical tensions, we deliver revenues in line with our previous guidance in the third quarter of 2020. generating RMB $303 million in total revenue in the period. Furthermore, we remain steadfast in our commitment to providing a superior user experience, upgrading our products, maintaining our content leadership, augmenting our monetization capabilities, and setting the stage for return to growth. First, in regards to our flagship news app, iPhone, we continue to enhance its user experience and improve its content delivery efficiencies through the optimization of its core capabilities. During the quarter, for example, we reached the quality of viewing experiences for our users while also providing them with additional fresh, short-form concepts. Moreover, we were successful in introducing new public survey functions to the platform, which helped to amplify both user engagement and user interaction, especially within the content of major social events and hot topics. In addition to these key product upgrades, we also maintain our relentless efforts in fine-tuning our content recommendation engine. By integrating our seasoned editorial knowledge into more areas of the content recommendation process, we were able to better focus on improvements of click-through rates and user timestamps on the platform during the period. As such, our user thickness improves substantially during the quarter, with average time spent per user on the platform increasing by 20% year-over-year, and our user retention rate grows by 41% year-over-year. Meanwhile, our total number of newly added users also increased by 30% quarter-over-quarter as we continue to adopt a put-in approach in our user acquisition strategies. and a focus on leveraging those acquisition channels with quality ROI. Now, turning to our content operations. In the third quarter, we remain focused on strengthening our leadership in those company verticals that we believe have long-term strategic values. In our financial vertical, for example, we further expanded our audience size by releasing such fast hits as Undercover, an in-depth video series featuring exclusive interviews with influential people, including Mr. Long Yong-Chu, former Vice Minister of Foreign Trade and Economic Co-operations, and Ms. Maya Musk, celebrity model and mother of Elon Musk. In fact, on the cover was so well received by our users that it has recorded more than 60 million total views our own media portfolio during the quarter. To further establish our story in the food article, we organized the 2020 iPhone Food Festival in Shanghai, Hangzhou, and Guangzhou during the period. In line with these efforts, we also introduced a number of quality restaurants into our Golden Wutong Restaurant Guide , which helped to better establish the guide as a go-to source for premium dining choices. Since its initial launch, the iPhone Food Festival has gone beyond merely providing our users with food-related content to penetrating China's entire food industry, gaining traction with famous chefs, reputable restaurants, and common KOLs in the food space. As a result of the event's widespread success, it also continued to do well financially, once again demonstrating the monetization potential of our lifestyle verticals. Additionally, in the quarter, we remain committed to fueling the growth momentum of our fashion vertical, organizing several online ranking events for personal care and cosmetic products. The success of these ranking events was mostly driven by our significant brand influence and large audience size. It was also due to our understanding of the new media landscape in China as we coordinated with 48 influencers in the cosmetic industries to organize effective promotional campaigns for the events. This combination of factors allow us to significantly expand the reach of our online ranking events, further showcasing the power of our brand authority and influence on our target audience as well as the fashion industry as a whole. Beyond our progress in expanding our Vertical Council leadership, we also made meaningful strides in the development of original IP programs. In the third quarter, for example, a launch of the fourth season of She De Wisdom People, She De Zhi Gui Ren Wu, generated encouraging results, with the first episode of the series immediately collecting more than 100 million total views to reach the top of trending lists for different social media platforms. Another successful show, Jinping Tan, also continued to perform quite well during the period, enabling us to form strategic partnerships with both Jiangsu Satellite TV and Guizhou Satellite TV to broadcast the show. We believe that these type of deals are reputable and therefore demonstrate the significant monetization potential of our premium IP content going forward. On the innovation front, we maintain our focus on the cultivation of our existing initiatives while also carefully analyzing a number of other potential business opportunities. In advertising, for example, we further accelerated the development of our ad platform Fengfei. As part of these efforts, we focused on upgrading those online traffic control and price betting control functions capable of helping advertisers manage their acquisition costs with more precision. In addition, we also concentrated on enhancing Fengfei's data management platform to augment its external traffic identification capabilities, advertisement distribution efficiencies, and monetization performance. As a result of our efforts, the total number of mobile applications that Fengfei has access to grew rapidly past the casual basis in the quarter. In regards to our real estate vertical, the outbreak of COVID-19 has resulted in significant disruptions throughout China's real estate market in 2020, forcing developers to become increasingly reliant on both online housing and online housing transactions to conduct their business. In recognition of this trend, we have partnered with real estate associations, government agencies, and taught developers to launch live streaming sessions for property users. Beyond helping to facilitate property transactions more efficiently, this work also highlights our long-term plans to provide the real estate market with a one-stop real estate marketing solution. Looking ahead, as the epidemic continues to be gradually brought under control in China, will impact the integration of online and offline marketing channels to become the key for property developers to restore their business growth. In light of the growing demand, we plan to continue leveraging both online and offline resources to further enhance our marketing solutions for the realistic vertical and thus better tailor these solutions to meet the needs of industry players in return. Please allow me to provide some additional color in regards to our key strategic focus for business development going forward. In terms of future investments, as we continue to evaluate potential investment opportunities, we'll also be sure to assess our existing capital structure and explore the different ways of sharing the value we have created with our shareholders. For strategic investments, we'll focus Our forging partnerships with the top VC funds in several different verticals, which not only has the potential to generate lasting returns, but will also keep us up to date on the rapidly evolving market dynamics of new business sectors. On an organic growth front, we are maintaining our commitment to the continuous optimization of our product batches with our flagship news app, iPhone. remaining at the core of our service offerings. Moreover, we'll actively explore new opportunities through continuous product innovation, while also experimenting with new monetization channels. As such, by focusing on these key strategic areas and executing as appropriate, we'll be able to capture market share at a larger scale and expand at a faster pace than previously possible. enabling us to capitalize on more worthwhile opportunities over the long run. In summary, in the third quarter, we maintain our strategic focus on optimizing our flagship news app, expanding our content verticals, and fueling the growth of our monetization capabilities. Looking ahead, we expect the new media industry to continue facing pressure throughout the remainder of the year. as a result of the current macroeconomic and geopolitical uncertainties. Nevertheless, our deep technical expertise, premium news content, and potent brand influence will enable us to remain at the forefront of China's new media industry, allowing us to capture those segments of the market with promising growth potential as the world rebounds from the COVID-19 pandemic. With this, I would like to pass to our CFO, Edward Lu.