Zhihu Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Juhu Inc. second quarter and half-year interim 20-second financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Jingjing Du, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Hello, everyone. Welcome to our second quarter 2022 Financial Results Conference Call. Joining us today are Mr. Zhou Yuan, Chairman and CEO of Zhihu, and Mr. Sun Wei, our CFO. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.jehu.com. I will now turn our call to Mr. Sun Wei, our CFO. Okay.

Thank you, Jingjing. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, founder and CEO of Zhihu. Thank you for joining Zhihu's second quarter 2022 earnings call. The recent COVID-19 pandemic situation and the macroeconomic condition created challenging environments in the second quarter. Against this backdrop, we focused on retaining high-quality user growth in a sustainable and efficient manner. Confronting these uncertainties, we firmly executed our Community Ecosystem Comes First strategy and improved business efficiency with optimized organizational structure. In addition, we continue to expand our fulfilling content offerings, enhance creators' experience, and strengthen community culture. Together, we efficiently draw quality growth in our user base improved engagement and stickiness, and bettered our bottom line performance. In Q2, our average MAU grew by 12.3% year-over-year to 105.9 million. And from January to June this year, the average time spent per DAU increased more than 12%. We are delighted to see our content creator becoming more active and creative, contributing more high-quality, fulfilling content to our library. In the quarter, the average BAU of our high-ranking content creators increased by nearly 50% compared to the same period last year, with the average creation volume per creator almost doubling. With all of the effort we've made to enhance our community ecosystem, we are delighted to see fruitful rewards, not only in our community ecosystem centered around our users, creators, and content libraries, but also in our business results. In Q2, despite many uncertainties, our total revenue reached RMB 836 million, growing 31% year-over-year, and 12.5% quarter-over-quarter, while our net loss narrowed by 24.4% from the first quarter of the year as a percentage of the total revenue. Chihuahua's diversified revenue structure was a critical force in achieving remarkable top-line growth amid Edward's macro conditions, paid memberships in the quarter rose significantly by 75.1% year-over-year and contributed 32.4% of total revenue. This phenomenal growth clearly demonstrates the strength of content-centric business models and the resonance of our fulfilling content with users. We also saw strong growth in Common Commerce Solutions, or CCS, which grew 15.9% year-over-year, retaining strong growth momentum relative to the wider industry. And our vocational training services are rapidly emerging as a new growth driver, contributing 5.5% of our total revenue in the quarter, with a six-fold year-over-year growth. Last year, we set 2022 as a transition year, focusing on the execution of our community ecosystem come-first strategy. We are now more than halfway through 2022. Given all the macro-level unexpected developments in the first half of the year, we have never been more sure that by investing in high-quality growth and focusing on achieving profitability in the near term will make our community and business more sustainable for the long run. Now, I would like to go through our business in detail, covering content, users, and monetization. Content. Fulfilling content that broadens horizons, provides solutions, and resonates with users is the foundation that drives sustainable community growth. By the end of Q2, the cumulative pieces of content in our community reached 551 million, including 462 million questions and answers, representing a year-over-year increase of 31% and 26%, respectively. In Q2, we continue to implement the scenario-oriented approach to fulfilling content creation in various verticals. This approach has worked especially well in scenarios surrounding career development and family needs. For example, during the time of a once-yearly National College entrance examination , search traffic surges with parents and students actually seeking knowledge, experience, and insights to help with important decisions around this life inflection point. To meet this need, we broaden and deepen related content coverage by enlisting experienced users who previously sat for the exam, raised questions, and sought scorecard information on our platform to become scorecard answerers. and provide help to others in our community. According to the summer report on college selection and application 2022 we released in July, the total number of questions on college selection and application related topics increased to approximately 7.7 million. And the total page views for GoCo related content grew a remarkable 57% year over year to exceed 2.5 billion. After the exam period, we released more relaxing content in tune with the summer vacation and launched a well-received series of online summer events in categories including sentiments, movies and television, fashion, ACG. It is worth mentioning that the laughter and forgetting on Gaokao topic in Chinese Gaokao Xiaolangshu and high-quality video live content we produced during the summer break was not only well received by the young generation, but also resonated among our mature users. In June, we launched an online learning portal on our website to further promote our vocational training related content portfolio. The learning portal offers hundreds of online educational resources in both video and text and picture formats. The robust content library contains both career skill development and personal enrichment learning resources. Some examples include patent training and English exam prep, as well as photographic and pop music educational content. The learning portal has been well received and significantly drove engagement with our target users for the vocational training services business. Vocational training content is evolving into an important part of our closed-loop monetization ecosystem. The second part is about users. In our oriented content cultivation in various verticals and enhanced recommendation algorithm effectively boosted the demand for more quality content consumption. During the quarter, we saw encouraging performance across a range of user growth metrics, including our user base, user consumption experience, user engagement and stickiness. The average MAU for Q2 increased by 12.3% year-over-year to 105.9 million. Average monthly viewers for the quarter exceeded 647 million, rising by 26.6% year-over-year. We continue to see our user base remain young and a general balance, with a robust user growth trend from the second in the lower tier cities. We're also seeing inspiring growth across other closely watched key metrics used to inherently evaluate the well-being of our community. These include users' activities, time spent, retention, and engagement. Moving to the content creator side, enhancing creators' creating experience and financial reward is one of the pillars to our strategy. Our high-end plan for creator support scheme is a critical part of this effort. Within one quarter of the plan's release, we received overwhelmingly positive feedback from creators with survey results showing more than half of the high-ranking creators have experienced strong traffic support. On the financial side, we are gratified to see that both the number of creators who earned financial income and average income per creator in Q2 retained strong growth momentum on a year-over-year basis. At the start of Q1, we set a target to help more than 100 creators earn more than 1 million RMB in a year, while our paid membership program. We are proud to announce that we have progressed much faster than expected. The next part is about community culture. During the quarter, we further reinforced our community compliance to improve product features and technical infrastructure, such as upgraded privacy protection features for users. and copyright protection features for our content creators. We also increased thresholds to enhance youth protection in verticals such as esports. Our community culture and a strong brand further strengthen our content ecosystem and we are firmly demonstrating our conviction to uphold our social responsibilities to maintain a healthy community culture and to promote rational optimism at the social platform and content community. As we look at the second half of the year, we will continue to iterate our multimedia infrastructure and optimize product offerings. We believe we can further unlock our value in more commercial opportunities by better addressing our users' content consumption needs. In particular, we see our diversified content formats providing greater potential to address users' needs in multi-scenarios, including thoughts and live streaming. which are both gaining in prosperity among users. We believe that the diverse and enhanced monetization capabilities will position us stronger and more resilient for long-term development. Now moving to financials. Our CFO Wei will go through our financial results in detail later in this call, but I'd like to first highlight a few points how our content-centric monetization has proven itself resilient and strong in the second quarter. As many industries were heavily impacted by the ongoing COVID-19 outbreaks and softer macro environment, advertisers and business partners became more cautious in online marketing spending and placed greater weight on integrated marketing solutions that deliver more comprehensive influence on targeted consumers. Our community-based ecosystem is an ideal vehicle to accomplish this goal. Through our content commerce solutions and advertising, we successfully increased our recognition from brands and merchants and attracted their market spending despite the challenging market conditions. The top five industries in revenue contribution in Q2 came from e-commerce, IT and 3C, cosmetics and skincare, internet services, and automotive. There are two drivers raising the ceiling of CCS. In Q2, we continue to motivate our creators by publishing the Jihoo influence and growth list. The newly listed commercial content creators in the second quarter came from various industries, including IT and 3C, fashion, automotive, maternal care, among others. At the same time, Qi's platform maintained its role to effectively connect content creators with brands and merchants. The number of creators who have joined this platform and earned income through CCS continue to grow, both on a year-over-year and quarter-over-quarter basis. We also further improved our commercial content distribution efficiency and further upgraded the assessment system for commercial content by implementing fulfilling content standards. Let's talk about advertising. Despite the fact that brand advertising budgets were negatively affected in Q2, our IP-based marketing campaign provided a unique value to advertisers. By leveraging our massive user base and trustworthy community culture, our multiple IP-based marketing campaigns have great influence on users' mindset to creative and fulfilling content. During Q2, our curiosity lab in Chinese . This series partnered with one of our clients, a smart kitchen appliance manufacturer, to design, fly, and execute a fun and imaginative campaign centered around playful, quirky questions tied to their products and business. The campaign was a huge success. One of the questions that generated huge engagement was, if your kitchen smoke could sing, what opera would it sing? The relevant content under this question attracted nearly five million views, and the accompanying experimental video we made has been viewed over a million times. Paid membership retained strong momentum during the quarter. Among Juhu's premium paid content library, our Yen columns are particularly popular owing to the high quality of original work from our community creators. One such creator, the ER doctor, Mr. Li Hongzheng, known in the Chihuahua community as the Dr. House. We were attracted by his talent while big data and invited him to start his own column in the community. Stories from the emergency room. Since then, he has become one of our top columnists, attracting tens of millions of clicks. There are many others like him. The value of this mechanism is more than allowing us to scout for talented creators. It also provides a steady stream of creative inspiration for our creators. In the second quarter, the financial income earned by our premium content creators increased by almost 80% compared to the same period of last year. This community-based mechanism not only differentiates us from other premium content providers, but also offers strong potential to drive the vitality of our monetization ecosystem. At the end of Q2, our average monthly paying members reached 8.46 million, and in July, the number exceeded 10 million. This growth demonstrates the remarkable success of our content-centric business model. It is encouraging to see a more diversified paying member base. and a growing number of male users captivated by more content relating to history, fiction, and true stories in our premium library. Male users have now grown to about 25% of our total paying members. Our rapidly developing vocational training business maintained robust growth momentum during Q2, contributing 5.5% to the total revenue. In the second quarter, we further enhanced the sales and CRM system for the business by strengthening our technical capabilities. In addition, we continue to expand the number of course offerings, including newly launched courses in engineering and design. Our growing library of diversified vocational courses helps further expand our user base. as witnessed by the number of paying users in this business tripling over last year. We view this business as an emerging growth driver with huge potential, and we believe it will make further positive contributions to our community ecosystem. And marching forward, by leveraging our self-reinforced content ecosystem, combined with the enhanced commercialization capability, we will be able to drive the sustainable prosperity of our community ecosystem. At the same time, we will continue to implement prudent cost controls to achieve a rational balance between user growth and the profitability in the long run. This concludes Mr. Zhou Yuan's remarks. I will now turn to our financials. We are delighted to report another strong quarter despite the resurgence of COVID-19. and the subsequent business disruptions in major cities across China. Our confidential business model continues to show its resilience, as well as exciting growth potential through the impressive execution of our community ecosystem comes first strategy. Our revenue for Q2 reached RMB 836 million, representing a year-over-year increase of 31%. To whose overall top line growth reflects the strength of our diversified revenue drivers, the CCS and our advertising business combined contributed 57.2% of total revenue in the quarter. Our paid memberships and the vocational training business together represented 38% of our total revenues, further demonstrating the value of diversified drivers within our monetization ecosystem. CCS revenue alone achieved a year-over-year growth of 15.9% and accounted for 28.8% of total revenue. In late Q2, our CCS reacted quickly and captured the demand uptrend in the market. As the macroeconomy started to show an upward trend in June, the effectiveness of CCS services was validated, recording increases in both the number of end customers and the average spending per CCS customer. We have seen a negative impact on the advertising market since April due to the COVID-19 resurgence. Some of our brand marketing customers delayed or canceled their marketing campaigns originally scheduled for Q2. As a result, our advertising revenue accounted for 28.4% of total revenue in a quarter. down 4% compared to the same period of last year. Our paid membership services recorded a 75.1% year-over-year growth rate in revenue, reaching RMB 271.2 million in Q2. The average number of monthly paying members in the quarter hit another record high of 8.46 million. with a penetration rate of 8% of average MAU. Our fledgling vocational training continued its revenue growth momentum in Q2, and it increased six times year over year in revenue. During the second quarter, our growth profit was RMB 400 million, with an improved growth profit margin to 48% compared to the previous quarter. The quarter-over-quarter improvement in GP margins was due to our diligent, ongoing cost control discipline and efficiency improvement. Across the wider industry, our gross profit margins continue to remain at high end. Throughout the quarter, we continue to look for ways to better optimize our operating expenses structure and improve operational efficiency. Our total operating expenses for Q2 or on the 860.3 million, with improved operating margins on a sequential basis. As a percentage of total revenue, social marketing expenses decreased over 5% compared to the same period of last year, thanks to our optimized expense structure with targeted spending on our promotion and advertising to adapt to the changing market conditions. At the same time, we selectively invested in our R&D capability and improved R&D staff incentives to a better organized employee benefits plan. Accordingly, our R&D expenses as a percentage of revenue increased 7.8% year-over-year, while G&A expenses decreased 13% as a percentage of our revenue. Our net loss was $487 million in Q2. and narrowed by 24.4% as a percentage of the total revenue from the first quarter of this year. And our adjusting net loss, which primarily excludes share-based compensation expenses, was RMB 443.8 million in Q2. As of June 30, 2022, the company had cash and cash equivalents, term deposits, restricted cash, and a short-term investment of RMB In late May, we announced an up to $100 million share repurchase program. And as of June 13, 2022, we have repurchased approximately 0.3 million Class A ordinary shares at a total cost of $1.1 million. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Thank you.

Thank you. We'll now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble a roster. Our first question comes from Zoukeng Zhang from CICC, please go ahead.

Zoukeng Zhang from CICC, please go ahead. Zoukeng Zhang from CICC, please go ahead. Zoukeng Zhang from CICC, please go ahead. Zoukeng Zhang from CICC, please go ahead. And I will translate myself. Thanks management for taking my question. And my question is related to paid membership business. We saw our membership revenue has achieved 75% year-on-year growth in the second quarter. and became the largest revenue contributor as well. So just wondering what's the driving factors behind this, and how does management think about the longer-term growth rate of membership business? Thank you.

Hello, I'm Zhou Yuan, the CEO of Zhihuo. Thank you very much for your concern about our membership business. To put it simply, Hi, I'm the CEO of the company. My name is Zhou Yuan. First of all, thank you for your interest in our membership business.

Now, our members were grown and born in our community, and they come back and actually give us very positive feedback to the overall development of the community. And right now, we believe that their development has been very healthy.

具体从数据上来看,我们的复仇复原数在MAU的渗透率在6月份是7.98%,就是899万吧。 Now the penetration rate of our PAGE membership in MAU was 7.98% in June, reaching 8.99 million.

In July, it exceeded 10 million and it has continued to grow in the past 24 months. Currently, there is no sign of signaling slowing down of the growth momentum.

Okay.

Now, the number of members continue to grow. It not only help our existing users to consume some of the content, but also is a great attraction to attract new users as well. Now, the spillover effect of the page content of our members will continue to promote the increase in the number of page members, which played an important role in promoting the growth of Zhihu's community users.

should understand the originality of Ye Xiao Guiyuan. You can understand that the call center is a powerhouse of the original content of the Chinese Internet. The original UDC content is a generator of the entire ecosystem of various content in the community. By using the existing mechanism of the continuous creator of the call center, it brings the difference of the content. Now, in order to understand the long-term development of our membership business, one first understands the organic growth of our members out from our community.

Our Zhihu community is really the powerhouse of original content on the internet in China. The original UGC content is the engine of our very diverse content ecosystem in the community. With the help of content differences brought about by the continuous emergence mechanism of content creators, which is very unique to the Zhihu community, we have incubated our membership business from the community, making it one of the most efficient and effective monetization models in Zhihu and in our content ecosystem.

The second thing I think we need to understand is the size of the membership. The continuous growth of the membership is actually due to its capacity to meet the needs of users. Now the other thing is the scalability of our membership's business.

We have noticed that the significant differences in the content that we are able to generate from our ecosystem actually meet the demand of a large number of users on the entire network that are constantly longing for high-quality content, which makes our business growth space very significant and substantial. When we are able to incubate such an environment where the efficiency of content supply continues to improve and our user demand continues to expand, we believe that our business still have a lot of room for growth and the ceiling is very high.

Now with that said, we have curated an environment that allow the efficiency of content supply continue to improve and also user demand continue to expand.

It is expected that we will continue to see the penetration rate of our members in Zhihu MAU continue to increase, and in the long run, it's possible that we can achieve 20% or higher.

The third one is about continuity. In the course of the member's development, we have a large, efficient, and sustainable to discover the mechanism of quality content is a driving force for member business to keep growing. The community is a core advantage of our member development. Community mechanism, its core is to make it easier for the platform to identify high-end creators and continue to help them to get revenue through creation on the call platform.

Now, the other aspect that I would like to mention is sustainability. In the process of our membership development, large-scale, efficient, and sustainable discovery of high-quality content is the key to really unlocking the high growth of our membership business. Our community is our greatest strength, and also it is the greatest driving force for member development. The community mechanism makes it easy for us to identify high-potential content creators and continue to help them make profit through creation on our Zhihu platform. And this has been very crucial for our membership business development.

Today, you will see a lot of activities in the community, such as the community's creative event, and also the Hanyang Geography 4.0 that we are promoting now. These are all activities We formed a series of know-how. This makes us understand our creators better. On the other hand, it is also more efficient to support more selected creators.

Now, in the process of developing our membership business, we have formed a series of know-how through developing projects such as the Yen Selection 4.0 and also the Community Content Creation Contest, et cetera, et cetera. We have curated a series of supporting activities that allow and encourage our content creators, which in turn allow us to efficiently support more Yen Selection content creators based on a better understanding of their creation style. Now, the key to our ability to produce high-quality content on a large scale really lies in this kind of improvement of this model.

Why can the community mechanism produce more high-quality content on a large scale? In fact, it has improved the creation of topics, to content consumption, to user feedback, and then to content repair. Now, this model is very effective in a sense that it allows us to curate a series of steps which is closed-loop process, including topic creation, content consumption, user feedback, and content revision.

The entire content creation process ensures the output of high-quality content.

Fourth, I think we can pay attention to the IP network. We now see that the user's favorite selection column in the last quarter, its new content volume is more than 130%. So we actually see the content of this package Now, the new content of the Yen selection, which is very popular amongst our users, increased by over 130% year-over-year in this quarter. These popular items and contents can fully drive the conversion of new members.

and we believe that our membership business model will allow us to continue to generate high-quality content, which will in turn feedback very positively to the community ecology.

Finally, I think the ecosystem is also quite important. In fact, this business model also has a positive countermeasure to the community ecosystem. On the one hand, it allows creators to achieve an objective income in the ecosystem. Now the last point is about the ecology or ecosystem that I just mentioned because this membership business model allow us to have very positive

contribution from our content creators, which could help us to continue to build our ecosystem, allowing our creators to achieve considerable income in the whole ecosystem. And the value generated can further actually support other creative activities in the community, which further improve the ecosystem health of the community content. Thank you.

The next question comes from Ashley Zhu from Credit Suisse. Please go ahead.

Thank you for accepting my question. I would like to know about our eco-first strategy. This strategy will continue to land in this quarter. I would like to know if there are any specific indicators that can be shared to reflect the situation that we continue to improve in the community ecosystem. And then we probably expect this kind of adjustment to last for some time. Thanks management for taking my question. I want to get more color about our ecosystem first strategy, which has been executed this quarter. Are there any operating metrics that could be shared to showcase the improvement in our community? And also, what's the timeline of this adjustment? And should we expect any impact on our user growth target, both for the year-end and also in the long term? Thank you.

Thank you. There are many questions. I will answer them one by one. First of all, we set the first strategy for the year-end. Its core work is to continue to surround the creator's experience and knowledge. Now, first of all, thank you for your questions.

There are really multiple levels of questions to your statement, so I'm going to respond to them one by one. Now, regarding the first part of your question, actually, at the beginning of the year, we started our ecosystem first strategy, which mainly revolves around our user experience creator experience content with a sense of fulfillment a good community atmosphere and really matching commercializing matching the development of commercialization um

Now first let's look at the result for Q1 and Q2 ever since we adopted this new strategy.

Now, in terms of the content production, the average daily content volume increased significantly, and also ever since we highlighted the quantity of high-level content creators, we're able to observe actually an increasing activity rate of those creators, and also the DAU of mid-level and high-level creators increased by 50% year-over-year, and the average daily creation volume nearly doubled year-on-year as well.

Last time, I introduced the 2022 Marine Plan 4.0. This work includes the cleanliness of the flow in the creative system, the revenue of funds, and then there are many measures. We are actually in the second phase, we are constantly following this plan. This plan is not a simple sabotage. So we see the changes in the group of high-level creators, and gradually start to promote it to the group of creators in the central department.

Now, last time I mentioned about launching the Yen Selection 4.0 projects, which involved a lot of resources allocation and favorable supports going to the high-level content creators. And now we're entering the second developmental stage of that project, which is more than just a fewer update. We are really pushing forward a new iteration of that project, which means that the positive changes that we observe from high-level content creators are beginning to spill over to our mid-level content creators as well, which also generated very positive outcome for the second quarter of the year.

In terms of the creator's tools, we are In the first quarter, we upgraded our idea, which is to turn content into a tool. Its purpose is to reduce the cost of creating content for creators. This is also our continued goal. This upgrade in the second quarter has received the welcome of many creators. On the one hand, it broadens the form of creation and reduces the threshold for creation. On the other hand, it also attracts many new creators. Now it seems that the amount of creation has increased by one-tenth compared to the record.

Now, in terms of the toolkits that we provided for our content creators, first of all, the goal is to reduce the cost of content creation. And ever since the second quarter, we've received a lot of positive feedback regarding using those toolkits because, first of all, it helped them to really expand the creation format, allowed them to lower the creation threshold, and also attracted a lot of new content creation as well. And that's why we've observed such positive growth for the second quarter of the year.

And so as a result, our overall content creation volume on a daily basis increased by 10% quarter over quarter. Our DAO in Q2 has increased by 12% from the beginning of the year to the end of the year. At the same time, we see that in July, there is an increase in the range of the Japanese market. The number of users of our members is already about twice the number of large-scale users in the retail market. The content consumption of users with video consumption and its market share are not as high as the market share of video consumption. Now, in terms of the average time spent of our DAU, as of the end of June this year, it increased by about 12%, and also the consumptions that has included the content format of videos

has been 20% higher than those kind of content consumption without the format of video, which means that our very diversified kind of content creation format really allow us to untap a lot of commercialization opportunities that really are leveraging the effect and benefits and advantages from our very diverse crowd of users as well as different kind of consumption scenarios as well.

In June, we experienced the Chinese college entrance exam season. Many new users will come to Zhifu to seek answers during the exam period. The relevant content of our college entrance exam has been updated nearly 60% year-on-year. The activity rate of users in Q2 has also risen steadily. Similarly, the activity rate in July also has a relatively large increase space.

Now June is the typical college entrance exam month in China so we had observed a lot of students coming to our platform for that kind of related content and so the content consumption or the viewing rate of those kind of related content actually increased by about 60% year over year and the activity level of those kind of content related users increase substantially as well. And we also see that kind of growth sustained for July of this year.

What I want to say is that the landing of the entire ecological strategy is not an easy task. In fact, there are a lot of detailed work. It is a continuous process. We are now working on this product and operation in two aspects. We are doing more specific improvements. I can also introduce it.

Now, the optimization of our ecosystem doesn't achieve overnight. There's a lot of details embedded in this process, and we are taking them step by step. And I'm going to talk about the details from two aspects of the product and operation.

First of all, we are continuously improving this process. This part of the work includes the division and classification of our acquisition content, the continuous investment in user image clarification, and the continuous investment in community color and emotion identification. These are all the basis for improving user experience. We continue to invest and replace in this matter.

Now, on our community side and also our product side, our focus of work is first to continue to improve the infrastructure, which includes further, you know, have better classification of the content, further refinement of our user profiling, and also the construction of our community atmosphere, and also better emotion recognition as well. These are really the solid foundations that allow us to ensure the improvement of the user experience, and we are continuing to iterate this kind of community construction as well.

The second is that we are continuously upgrading our media. In the last quarter, we have upgraded our short content ideas. We are continuously updating and improving this feature. The original creators are actively using this feature. Now the second thing is in order to continue to upgrade, we have continued upgrading our media as well. The content that we mentioned last quarter, which is named Thoughts,

continue to improve. And we have done a lot of effort in improving the feature and the user experience. And as a result, the activity level of using those kind of thoughts content has been very high. And from the results, we can actually see that the monthly average number of content creator posting thoughts has increased by over 150% quarter over quarter. And the number of content creators who sent both pictures and videos have continued to increase quarter over quarter as well.

The third is that we also think that there is a job that can be obtained for a long time. This is the cost of building relationships between users in our community. In the optimization of corresponding product experience, we now have the new attention of this Japanese fire user. The new initiative to pay attention to this year, this year, our two systems have achieved an accelerated growth. So we are now optimizing users through social relationships. Now also one thing that we notice can generate long-term benefits for us is to strengthen the community relationship.

And we have done so. For example, we are able to actually attract a lot of active attention based on our relationship referral and endorsement. And with the improvement of our community governance, we have observed a lot of positive outcome as well. The new kind of active attention of our daily active users has achieved accelerated quarter-over-quarter growth in the past two quarters since the beginning of this year, and strengthening the functions centered on social relationships can actually further strengthen the stickiness and the healthiness of the community ecosystem.

In terms of operation, there are two main areas of work. On the one hand, it is the continuous promotion of Hanyuan. Now we have received more and more positive feedback, so we will speed up and expand the scale to promote it. On the other hand, in terms of user operation, In addition to the content that we talked about last season, we also made a positive content breakthrough for the core audience this year. We launched a series of OGVs. For example, you can now see the job I am working on. We actually invited programmers from the shareholder platform, for example, to talk about the confusion and professional development of programmers. Now, in addition to that, we have also been focusing on the targeted improvement of, for example, the high selection plan or projects

around the content creators as well. And we have been progressing step by step. Since we launched this plan, our creators have had a lot of traffic and income, which is very, very positive and beneficial for them. And our high-level content creators also feel that their overall traffic has improved as well. In terms of our user operations, in addition to the, for example, the cultivation of content, in-depth cultivation of content, and also the encouragement of originality and other such projects that I mentioned to you last time, we have also made targeted content breakthroughs for our core user groups this year. For example, we have a project, we have launched the OGV project named The Careers That I Desire that's really targeting different kind of careers. Within that project, we are able to invite a lot of professional professionals come here to share their experience. For example, we invited programmers from Silicon Valley on our Juhu platform to talk about their experience and also answer a lot of questions about being a programmer. We also invited lawyers, well-known lawyers and successful lawyers from the red circle law firms We've invited brand directors of Fortune 500 companies, etc. to really showcase what a typical workplace is like and to talk about different kinds of scenarios. Overall, the feedback has been very, very positive.

In terms of commercialization, the knowledge and impact creators have brought a good result for the platform. So what we see is that the number of creators who have earned revenue and the revenue of the people are all beyond our expectations, which has led to a relatively obvious growth of the same ratio. We have been saying before that the content business model based on the community is to better integrate the transformation into the community ecosystem.

Now, in terms of the commercialization, we believe that the Cheese platform and the Young Selection creators have all brought very good results to the platform's ecosystem. And a number of creators who have obtained income has increased, and also the income per capita has also increased year over year. We have been talking about the community-based content business model, which is really to integrate monetization into our community ecosystem.

OK, you just asked about the growth of the user. What I want to say is that the ecological strategy is actually not a project. It is a gradual process of promotion. So I have roughly introduced it just now. From the perspective of ecology, from the beginning of the year to now, we have actually made a lot of mistakes. Many of the results have received positive and positive returns.

Now, in the second part of your question, you also asked about user growth. As I mentioned earlier, the community-first strategy is not a project. It's a process that we have to go through step by step. Now, from the perspective of ecosystem construction, ever since the beginning, we have launched a series of measures that have generated very positive outcome. For example, our MAU has reached 106 million, which is 12% YOY growth.

In this area, the monthly viewer of the stock, this number actually represents the content generated on the stock. It is on the whole network. The actual number and scale of users has now reached 6.48 billion. Its annual growth is still quite a lot, about 26.6%. This data actually means that the future quality content actually covers more and more potential users.

Now, this quarter, in terms of our monthly view of our Zhihu content, which means the viewership of our content across the Internet has reached 648 million, which is about 21.6% of YOY growth. This means that our Zhihu's content really is penetrating every single corner of the Internet.

In the past, our experience with this monthly view OK.

Now monthly viewer in the beginning was just a simplified information displayed on other websites outside of the platform of Zhihu and with our upgrade of the functionality right now we are seeing a smaller gap between viewing the content from our website and platform versus viewing it from externally. And so definitely this is not a work priority of ours, but we continue to push forward the development and the upgrade of this function.

I would like to say that the pressure of the macroeconomic economy is still very obvious in the second quarter. Although we can see some gradual improvements in the third quarter, we think that the measures that are effective Okay.

Now, the macro environment has placed a lot of pressure on our second quarter performance. However, we believe the situation is being eased going into the 3Q this year. Therefore, we have to really reduce and control our costs and improve our operational efficiency in the face of these external and macro challenges. Now, in terms of our user acquisition, we need to enhance the acquisition efficiency as well as control the cost as well, which means that we need to put more focus on our community-based kind of user acquisition.

In general, our investment will continue. This is also quite clear and firm. But we will pay more attention to the match between the growth, investment, and transformation rhythm of our customers. OK.

Now, in summary, we will continue to invest in growing our users. However, we will definitely consider the return on investment and we will pace a very good rhythm in terms of balancing our investment as well as the monetization effect. In the short term, we are not going to prioritize or rushing into scaling up our platform. I think that's the only responsible move for our shareholders and investors.

I appreciate it.

Thank you.

Again, if you have a question, please press star, then one. The next question comes from Daisy Chen from Haitong International. Please go ahead.

Good evening, Wang Licheng. Thank you for accepting my question. On behalf of Nata Nina, Our question is about our online marketing business, including traditional ads and content commercialization. Could you please comment on the reason why ads and CCF have dropped in the second quarter? At the same time, please comment on the recovery situation in June, July, and August. For example, the performance of advertisers in the industry is affected by the epidemic and its recovery situation. My question is about traditional ads and CCFs. Can management share more color on the reasons behind the revenue deceleration for anti-clap CCFs in the second quarter? For example, the performance of advertising articles that were affected by the pandemic resurgence. Also, can management comment on the recovery trends post the lockdown, including the trends in June, July, and August. And your expectations on the future performance in the third quarter and the second half. Thanks.

Okay. Thank you, Bessie. Let me answer this question. We just saw that in the second quarter, because of the weakening of the whole red line economy, and the repeated impact of the epidemic has actually had a negative impact on the entire marketing industry. But overall, our own advertising plus CCS has achieved a positive growth in the second quarter. At the same time, we also observed that in the short term, customers are actually pursuing a better ROI, and at the same time, they are more concerned about the long-term value of marketing. Okay.

First of all, thank you for your question on the CFO. Let me respond to this question. Now for the second quarter of the year, the whole marketing industry has been struggling due to the macroeconomic effect and also the weakening demand side, as well as the resurgence of the pandemic. And this is not just about you know an incident to our company but for the whole marketing industry but overall our advertising and our ccs business still achieve positive growth we also notice that our clients are actually paying more attention to pursuing higher roi at the same time they are paying more attention to gaining a long-term value of from the marketing activities as well now from the user side we also notice that the consumption behavior has become more cautious and more pragmatic So when making consumption decisions, it has become the norm to really obtain information from content platforms and also from multiple other platforms as well.

the same as CCS revenue, there is still more than 15% growth. At the same time, the number of CCS customers who invest in CCS brands or businesses in the second quarter is still growing. Relatively speaking, it shows a relatively active field, including IT3C, training, e-commerce. At the same time, the number of CCS customers who invest in CCS alone is also a result of the same growth. This proves that our products, CCS products,

Now let me talk about the advertising and CCS business one by one. First of all, our CCS really has become a marketing product that gained the trust from our users with our high-quality content, and it continues to gain market share as well with a year-over-year growth of over 15%. And the merchants and our customers that invested in our CCS continue to grow in Q2 this year. Also, in terms of the vertical that are active using our CCS include our IT and 3C electronics, education and training, e-commerce, et cetera. And the average amount invested per customer also increased year over year, proving that we are actually still the go-to platform for brands and business customers even in a very harsh economic environment.

Advertisement OK.

Now, in terms of our advertising business, which is also affected by the overall macro element in the economy, our brand revenue is actually affected as well. But we believe that such an impact will actually be eased in later quarters, especially in Q4. as we see the pandemic pressure continue to be relieved and also the economic continued economy gradually picks up. At the same time, we are also continuing to innovate on the advertising product side to better integrate with the continent creators of the community. For example, we have launched a series of IP-based products. For example, our car laboratory and also the curiosity lab you know, both of them have received a very good reputation and we will continue this kind of launching of different series of products and projects.

Okay. 如果我们去展望一下Q3或者是下半年的话呢, 目前来看仍然是有这个不确定性。 我们认为主要跟几个因素有关, 第一个是呢,从外部来看, 疫情是不是还会有比较大的反复, 以及宏观经济环境是不是, will be warm. As you all know, recently, in Chengdu, Shenzhen, and Sanya, there has been a relatively large response to the epidemic. This is from an external point of view. From an internal point of view, it is our own internal structural factors. For example, we ourselves, from CCS and advertising, such as e-commerce, digital makeup, IT3C, online clothing, cars, and the field of professional education, we relatively have a greater contribution to our CCS and advertising. So in these fields,

Now, about our Q3 and also the trends for the second half of the year, we will look at different factors externally and internally. Externally speaking, we are really depending on whether or not the pandemic will resurge. For example, lately, we hear that kind of resurgence in cities such as Chengdu, Shenzhen, and Senya. And also, internally speaking, we have to look at our vertical mix regarding these kind of businesses. For example, e-commerce and daily care and also cosmetics, IT, 3C electronics, internet service, automobile, and also professional education. These are the top contributors to our business. And so whether or not they can pick up very soon will also determine our forecast going into the second half of the year.

In terms of July and August, compared to June, there is no significant return trend yet. Especially after e-commerce hit its peak in June, there will be a certain reduction. So in general, in September, e-commerce will hit its peak in the second half of the year. If there is a recovery in the second half of the year, e-commerce industry will capture the first wave of revenue.

Now, looking at our July and August performance compared to June, there is no clear sign of recovery just yet, especially in the vertical of e-commerce. Typically, they will have some shrinkage in their investment budget after their June investment, which typically reached the peak of their budget. And typically, in September, the e-commerce players will gradually start their second half investment in the marketing. So if the macroeconomy begins to recover quicker for the second half of the year, basically the e-commerce vertical will be the first industry that can generate more profit and revenue for us.

同样的像日化美妆食品饮料这些, 它因为这个供应链的这个恢复的程度, 也会对我们这个PCR2的广告的恢复是有一定的影响。 当然整体来说, OK.

In addition to that, other verticals such as daily self-care, cosmetics, food and beverage, they are still suffering from the supply chain shortages, etc. So overall, we also will have to judge the macroeconomic recovery speed in order to understand better our focus going into the second half of the year. Now, overall speaking, because our CCS is better compared to traditional advertising in terms of its marketing efficiency. So in the long run, we believe that excluding the pandemic's impact, you know, we would be able to actually get a lot of commercialization and market opportunities in the long run with our high quality content centric marketing solution. All right, that's all for our guidance regarding going into Q3 and also the second half. I hope that has been helpful to you.

There are no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Jingjing for any closing remarks.

Thank you all once again for joining us today. And if you have any questions, please contact our IR team directly or TPG Master Relationship. Thank you.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.