Zhihu Inc.

Gentlemen, thank you for standing by, and welcome to the QHU Inc. Third Quarter 2022 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 would 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 third quarter 2022 financial results conference call. Joining us today are Mr. Zhou Yuan, our 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 our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.jihu.com. I will now turn the call over to Mr. Sun Wei, our CFO.

Thank you, Sun Wei. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, founder and CEO of Ji Hu. Thank you for joining Ji Hu's third quarter 2022 earnings call. We delivered another quarter of a solid execution on our community-to-system-first strategy and are delighted with the strides we have made promoting our community's prosperity. Starting from the beginning of this year, we shifted our strategic focus toward growing quality users and further bolstering the strength and resilience of our content-centric business model. In Q3, the excellence rate of our app users FDAU over MAU reached its highest level in the past three quarters of this year. And the time spent for daily active users climbed both year-over-year and quarter-over-quarter. Faced by this still challenging microenvironment, our community ecosystem demonstrated strength and resilience during the third quarter. Program deals were up by double digits on a year-over-year basis as we continued to expand and optimize our counteroffering and enhance our content creator's user experience. Furthermore, our initiative to heighten operating efficiency drove significant improvements in our bottom line performance for the quarter. In Q3, total revenues reached RMB 911.7 million, increasing by 11% compared with the same period last year, and net loss narrowed by 39% quarter over quarter. Our paid membership retained robust growth momentum, increasing by 88% year-over-year, and contributed 37% of the total revenue during the quarter. Meanwhile, vocational training services continued to accelerate their contribution to total revenue, with a 458% growth rate year-over-year. Continuing efforts to refine our business line and improve operational efficiency during the quarter helps make our ecosystem stronger and more resilient. The Juhu community is thriving and becoming more healthier and healthier. The results of our efforts give us further confidence to invest in long-term growth while striving for profitability in the near term. Now I'd like to share some more details on third quarter achievement. The first part is by users. Our differentiated, fulfilling content and a unique content-centric ecosystem not only resonates with users, but also well-positioned us to address their evolving demands. In turn, increasing user interaction attracts more content creators and inspires their creation, driving the healthy and sustainable community growth. With this in mind, since the beginning of this year, we have shifted our focus from user expansion to quality user growth, which has produced remarkable achievements in the third quarter. On top of our record-high activity rate for monthly active users, DAU over MAU, in Q3, the time spent per user grew by 26% year-over-year and 14% quarter-over-quarter, reaching 29 minutes Average MAUs were down in Q3 by approximately 4% year-over-year, as expected. We continuously expand the breadth and depth of our high-quality content to support user interaction and introduce timely and fulfilling new content. For example, our dot-com-related content significantly drove up the time that young users spend on our platform during the summer vacation period. Our timely content offerings during the quarter not only attracted more male users, but also encouraged them to engage more deeply in rational discussions within the community. In Q3, we also continued to innovate in content format development, aiming to encourage user interaction in more diversified content formats. In particular, our new thoughts format has caught on quickly among creators and users alike. Thanks to its flexible nature and the broad appeal, it's now becoming a more frequent format for both content creation and content consumption. Accordingly, in Q3, the new active follow, one of the ways that our users interact with each other, grew by 16% year over year and 19% quarter over quarter. Second part is about content. We believe that when we better meet users' demand for more high-quality content, higher-quality user growth is a natural result. In Q3, we continue to improve user experience and enhance our competitiveness by expanding our content offering, diversifying our multimedia content formats, and further enhancing our recommendation algorithm. As of the end of Q3, The cumulative pieces of content in our community reached 579 million, representing a 26% year-over-year increase. Of these, 485 million were questions and answers, representing a year-over-year increase of 22%. Our scenario-oriented content cultivation approach has proven to be effective, not only in exploring and satisfying the demands of our various user groups, but also in motivating content creation and boosting content consumption. For example, during the last summer vacation period, we presented Wild Journey's talk, Huang Ye Hui Tan, an eight-part series of high-quality, self-produced programs, wherein our content creators, Li Xueqin and Li Sunwei, exchanged their thoughts with other young people on how Generation Z sees the world. Through this innovation format, we were able to share a brand new world from Gen Z's perspective and help our viewers better understand their view on life. The series' resonating content attracted many young viewers, generating a DAU penetration rate of 28.4% for the quarter. Content offerings associated with self-improvement also proved popular with users between 18 and 25. Driven effectively by these scenario-oriented activities, the percentage of new users between 18 and 25 among our total new MAUs was four percentage points higher compared to the same period last year. In September, we further expanded our content offerings in our career development segment content formats, including video, live streaming, thoughts, and text-and-picture TNAs. The expanded content format generated huge interest. For example, the thought-provoking video speech, How We Should Get Along With Our Work, presented by historian Mr. Xu Zhuoyun, produced over 20 million views within just two weeks. More than 13% of our DAUs consume the career development-related content, and their retention rate was higher than that of our overall DAU by 15 percentage points. Moving to content creators. Our content creators are the most important asset in driving sustainable growth within our community ecosystem. At the end of Q3, our cumulative number of creators has reached a new high. reaching $61.2 million, a year-on-year increase of 15%. We are committed to providing our content creators with an enhanced creation experience as well as fruitful rewards. We work toward this goal by leveraging the solid foundation of our content-centric ecosystem and by providing a broad array of creator-centric programs. In Q3, We are delighted to see thousands of content creators from a cross-section of ranking levels and verticals, including e-sports, career development, and education receive financial incentives from the RMB 100 million fund and the QG plan. In Q3, average income per content creator increased by 47%, compared with the same period last year. Furthermore, On September 13th, we officially launched the Deacon Prize , a new fund program under the Gigi Plan. The Deacon Prize will award specific subsidized to the top 10 content creators who make significant contributions in the field of science or humanities. The third part is about community culture. In line with our community ecosystem first strategy, We are committed to better serving our users and content creators with clearer community rules and guidance, better products and features, and enhanced protection. In Q3, our regular surveys showed significantly increased user satisfaction with our community governance and services. In addition, these surveys also indicated a significant improvement in content creators' net promoter scores across an array of sub-categories scores, including creating tools, growth guides, creator benefits, and copyright protection. As a leading online content community, during the quarter, we continue to fulfill our social responsibilities by leveraging our technological capabilities to promote rational, multidimensional, and constructive discussion on our timely content offerings. For example, we enhanced the emotional monitoring function on our Zhihu hot list to ensure a professional and a rational community environment. Next part is about monetization. Our ever-growing content library, thriving creator ecosystem, and the flourishing community are the assets that differentiate us in this fast-evolving and highly competitive market. During the third quarter, Our high-quality, content-centric community drove sustainable improvement in our monetization ecosystem, enhancing the resilience of our business model and creating new growth drivers for our longer-term development. Our paid membership has maintained a year-over-year growth every quarter for the past three years. In the third quarter of 2022, revenue from paid membership increased by 88% year-over-year. contributing 37% to our total revenues. At the same time, our average monthly paying users exceeded 10 million for the quarter. These achievements were driven by the expansion of our premium content library, especially in the vertical targeting male users. Meanwhile, the enhanced influence of our premium content endorsed with the exclusive e-book rights also contributed to this growth. To better satisfy users' demand for a sustainable supply of premium content, we further strengthened support for premium content creators to encourage their creation efforts and enhance their creation experience. In Q3, we were pleased to see an increasing number of our premium content become mature commercial IPs. This in turn rewarded their creators with a better income. Furthermore, Upgraded copyright protection features help to deepen creators' trust and reliance on the Drupal community. In the third quarter, the average income earned by premium content creators increased by almost 30% compared to the same period last year. Earlier this year, we set a target to help 100 creators earn more than one million RMDs while on a paid membership plan. We are now setting a new target and planning to launch a new ambitious program to reach it. A new super novel program established under the future plan will have greater funding resources and will aim to help 500 content creators earn more than one million RMB over the coming three years. We first established our vocational training and business team in 2019 to better meet our users' evolving needs for knowledge-related content. Now, after nearly three years of development, we are well-positioned in the rising demand market with our trusted brand, improved technical capabilities, and a mature team structure. In the third quarter, revenue from our vocational training business quadrupled year over year and contributed 9% to our total revenue, clearly cementing this business segment as our emerging growth driver. During the quarter, we continue to expand our course offerings, basing our users on the go-need scenario, and in two major categories, academic improvement and career promotion. We further enhance our technical capabilities, including our CRM system, and improve our operational efficiency to better support the robust growth of this business. Our effective customer acquisition strategy paired with diverse, high-quality programs, drove a 300% year-over-year increase in vocational training paying users in the quarters. In Q3, we acquired a new vocational training brand, Yiqi Call, that specializes in professional teacher qualification certification. In doing so, we further broadened our vocational training program coverage to better meet our users' needs. we will continue to explore greater growth opportunities to drive the sustainable development of our community ecosystem. Now, moving to our advertising and accounting commerce solution. Based by challenging micro-dynamics in Q3, Shibu continues to gain traction in marketing budget share and includes greater recognition from brands and merchants. Our CCS and advertising business maintain its growth in our leading industries, including IT and 3C, automotive, and games. The quarter's top five revenue contributors for CCS and advertising were IT and 3C, cosmetics, e-commerce, automotive, and education. We continue to upgrade our chief platform in the third quarter with additional improvements in the platform infrastructure. We also released a new version of the commercial value index to further improve matching efficiency between brands and content creators. Due to continuing weak market conditions for online advertising, CCS revenue decreased slightly in Q3 year-over-year, but showed a double-digit quarter-over-quarter growth Total income earned by content creators through the chief platform continues sustainable growth in Q3. We have long been dedicated to delivering better marketing performance through technology and innovation. As such, our inventive IT-based marketing campaigns have become an effective extension of our traditional advertising program. The IP-based campaigns we released, including Curiosity Lab, Auto Lab, Ingredients Lab, and the G-Trial Lab, have gained great market recognition by advertisers in various industries, such as consumer goods, automobiles, and e-commerce. In Q3, we launched a new Wizarding Factory IP campaign. Content creators, as experts in different fields, are encouraged to visit the factory and R&D facilities of different brands seeking answers submitted by our users. This campaign has received positive feedback from both our users and the brands. The resulting high-quality content helps our users better understand these brands' products and enhance their trust in each brand through transparent communication. To sum up, Our long-term strengths are impact, and our fulfilling content and user quality are well recognized by brands and merchants. We expect that we will continue to win market share in the growing content marketing industry. And moving forward, we will continue to expand our portfolio of marketing solutions to empower our clients in reaching their goals. Meanwhile, we will continue to enhance Juhu's competitiveness to broaden our fulfilling content, drive user engagement, increase operating efficiency, and further enhance our trustworthy community culture. The road ahead is long and will involve many challenges, but with determination, perseverance, and our goal insight, Zhihu is well-positioned to forge a path to growth and profitability. This concludes Ms. Zhou Yuan's remarks. will now turn to our financials. In the third quarter, our community ecosystem first strategy continues to effectively strengthen the resilience of our content-centric business model. As evidenced by our solid operating and financial performance, total revenue grew by 11 percent year-over-year, reaching RMB 911.7 million in Q3. And our net loss margin narrowed significantly by 26 percentage points over Q2, thanks to our disciplined cost control measures. The strength of our multiple growth engine in the content-centric business model once again proved itself in the third quarter with a further balanced revenue structure. CCS and our advertising business combined contributed 51% of our total revenue. At the same time, the PIP membership and the vocational education accounted for 37.9% of total revenue, respectively, in the quarter, up 4.3 percentage points quarter-over-quarter, respectively. Our PIP membership maintained rapid growth momentum in Q3, with revenue increasing by 88% over the year to RMB $3.4 billion. The average number of monthly paying users reached a record high of 10.9 million, representing a percentage rate of 11.2% among the total average MAU in the Zhihu community. Notably, the revenue from our emerging growth engines' vocational training was an over fourfold year-over-year increase to RMB 78 million in the quarter. Revenue from CCS and our advertising business came under pressure in Q3, impacted by the overall weak market conditions for online advertising. Total combined revenue for CCS and advertising for the quarter was down 23% year-over-year and 3% quarter-over-quarter. Wealth profit for Q3 was RMB 4.4 billion. Wealth margin was 48.7%. up one percentage point compared to the last quarter, remaining at the high end across the industry. The quarter-over-quarter improvement in gross margin was mainly attributable to our continuous, vigorous cost control and ongoing efficiency improvement. During the quarter, our relatively fixed costs, mainly including cloud services, bandwidth, and personnel costs, along with the constant costs, continued to decline as a percentage of total revenue. Continuing our effort, starting from the beginning of this year, we further worked to optimize operating expenses and streamline operating efficiency in the third quarter. Our work is yielding food. Total operating expenses for the third quarter were RMB $7.2 billion, leading to our improved operating margins, both year-over-year and quarter-over-quarter. As we continue shifting our focus from user expansion to user engagement, system marketing expenses decrease by more than 10% quarter over quarter. For R&D and G&A expenses, we continue to optimize the expense structure to improve our operational efficiency, and R&D and G&A expenses as a percentage of revenue decrease by 9 percentage points and 3 percentage points. quarter over quarter, effectively. We are steadily reducing our net loss. Our GAAP net loss for the quarter was RMB 297.6 million, compared with the net loss of RMB 487 million in previous quarter. Our adjusted net loss, which primarily excludes share-based competition expenses, was RMB 250.6 million for Q3. compared with RMB 443.8 million last quarter. As of September 30th, 2022, the company had cash and cash equivalent term deposits, restricted cash, and short-term investments of RMB 6.6 billion. And as of September 30th, 2022, we have repurchased approximately 4.9 million Class A ordinary shares at a total cost of US dollar 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 will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please ask one question each time. If you have any follow-up questions, please go back into the queue. Thank you. Today's first question comes from Steve Kueh with Goldman Sachs. Please go ahead.

Good evening, Mr. Kueh. Congratulations on the progress we have made. Thank you for taking my questions and congrats on the progress of cross-country initiatives. I have a question on MAU. So noticing that your MAU has declined over the quarter, yet the time spent and monetization efficiency per MAU was much better. Did you shift your strategy from pursuing absolute MAU growth to extract the lifetime value for the high-quality user? And could you share some insights on our long-term user growth potential? Thank you.

Thank you for your question. My name is Zhou Yuan. Let me answer this question first. Our strategy this year is Eco-first. We have been sticking to this strategy since the beginning of this year. How do we understand Eco-first? Eco-first is actually a group of input goals, the experience of the creators, the sense of content acquisition, the good community atmosphere, including the commercialization of the community, Thank you for this question. The answer from Mr. Zhou Yuan, the CEO of the company.

At the beginning of the year, we set our annual strategy as a year of transitioning. That is to keep our community ecosystem first. And that means a good experience for content creators, fulfilling content, as well as a good atmosphere for the community. And more importantly, that is to have a commercialization that goes in line with our current community or simply to achieve stability, profitability as soon as possible.

In the process of implementing the first strategy, we actually made a lot of adjustments. In this process, some of you will pay attention to some numbers, such as the size of the indicator numbers. There will be some fluctuations, which is normal. We also did a lot of analysis. In the year, while we are pushing forward our strategy of year of transitioning and community ecosystem, first we had make some adjustment.

We believe that our volume numbers remained quite stable and we had hit our strategy targets such as revenue and volume output targets.

In the past year, we have done a lot of work on some important work, such as the optimization of the user algorithm, the improvement of the user algorithm, and the product upgrade of the creators.

In the past year, we have made quite a lot of effort in fulfilling content optimization, quality control, as well as the algorithm improvement on the user side, the rewarding to the content creators, as well as upgrades of our product. And I would like to talk a little bit more details about this.

First of all, the experience of our entire creators is still improving. As for its activity, it is still constantly improving. Our high-level creators, in this quarter and also in the third quarter, their daily life has increased to 27%. At the same time, they have also continuously brought more high-quality professionals to the community.

To be more specific, we keep improving the experience of the content creators. They are more active on our community. High-level content creators on this quarter had an increase of 27% increase of daily activity rate, and they keep injecting high-quality professional content to our community. And in May this year, we have launched our high-end plan 4.0, And in this system, the content creators with specialties in key areas are enjoying better tools and growth support as well as rewards to their content creation. And the average income per income-making creator had a revenue increase of 47% in Q3, year over year.

In terms of the sense of content, we mainly have two points. On the one hand, the upgrade of our product test and software test has achieved a lot of performance improvement. On the other hand, our diversified content form has been constantly upgraded and improved in the past few years. What is the result? The result is that the user's content consumption experience is definitely significantly better. Second is ever-growing fulfillment content that we have due to the optimization on the product and algorithm that we provide.

to the users and they have better experience in consuming our content and they go deeper in consumption and as well as the intensity of content consumption gets better. In the third quarter, you can see that our daily time spent per user had been as long as 29 minutes with an increase of 26% year-over-year and 14% quarter-over-quarter.

The third is mainly in the environment of our community. It also includes a lot of services that we do for our users. Just now, our CFO also mentioned some of their work progress. I would like to emphasize that our user experience and community environment, this team is actually an important part of the company. In terms of users, The user's satisfaction with the management and service of the community has been significantly improved in the process of our continuous evaluation. Of course, more importantly, it is also from our creators. The entire NPS of our creators, the improvement of our tools this year, and the improvement of our growth system and social system, all of these points have been significantly improved.

The third point is that we keep optimizing our community atmosphere and our community services, both for the users and content creators. On the user side, their satisfaction rate for our governance of community and services both increased significantly. And on the content creator side, their net promoter scores, as well as other subcategories for satisfaction rate, such as creator tools, growth, as well as revenues, are all seeing very nice growth. And the last point is that our users are getting more active. For instance, our app DAU and NAU are getting increased for three quarters consecutively. And also we believe that we focus more on the commercialization that goes more in line with our community so that our high quality users will keep giving us drivers for commercial growth. so that we can develop a virtual cycle of healthy community and sustainable business growth. In the third quarter, our up-hall had a year-over-year growth of over 15%.

I believe that with our effective work, we will achieve more development. At the same time, we also see that the improvement of the entire ecosystem is not in vain. Indeed, there are many Okay.

So overall speaking, we believe that improvement for the ecosystem takes time and there are a lot of details to attend to and it takes time for us to generate greater value for the community through a better ecosystem. And if you improve the user experience, this will organically drive up the user base in a more sustainable way. And for the long term, we believe that it is the most efficient method that we have for the user base growth.

In the third quarter, the growth of the monthly viewer of the entire service is more than 223. We see that there is a change in the number of users and the change in the content. In the future, we will continue to strengthen this part of the content consumption experience. On the one hand, give them more path and better experience to be able to transfer to the service. At the same time, it also improves their commercial value.

Overall speaking, our target remains unchanged, that is to drive profitability. And for the short term, we do see some slightly changes in our users. And for the third quarter to be more specifically, our monthly viewers grow by 23%. year over year and we see that our users are getting more consumption on our content and will keep increasing and improving their content consumer experience, consuming experiences and create more commercial values out of our community.

Thank you. And our next question today comes from Shuqing Zhang with CICC. Please go ahead.

My question is related to paid membership benefits. The membership business once again demonstrated a strong growth this quarter, so could the management share more details about the reason behind it, and how should we think about this business in the long term? Thank you.

Thank you for your question. I am very happy to share my thoughts with the members. The key is actually in the supply side. In fact, it is basically turning the entire community into a production side or a supply side. This is also beyond the productivity of the previous individual creators and publishers. So today, the membership business can go from not making money at the beginning to the current profit rate and health stability.

Thank you for this question. Well, it was three years ago since we're beginning to launch our membership program. And up until now, you see our membership growth is faster than our expectation at the very beginning. We believe that the demand for the paying for the premium content is still there and will remain resilient for a long time. And the crux of the matter only relies on the supply of the good content that worth paying for. And we believe our entire community serves as a supplier for great content. And that is why you see that we have entered into a very good cycle of supply and demand for premium content worth paying for. And as a result, you could see that our membership business started off with losing money and now it's getting more and more sustainable in driving profit and also to the net profit we have as a whole community.

As a member, the growth of our business has always been fast and healthy. The reason is that high quality content and high quality creators is the core driving force for the growth of the member business. In our three seasons, the number of member creators has increased by nearly 40%. The increase in income of member creators has reached 29%. Last time, I shared with you about the exposure. The number of new members of our exposure selection column has increased by more than 130%. The content of these reports is also in line with the proposal, which led to the transformation of our new members. The number of new members in the third quarter, as everyone knows, has exceeded 10 million. In fact, by the end of September, the number has exceeded 11 million. We can see that the number is actually continuing to rise. Through the growth of members in and out of the account, Our membership growth is a healthy and a fast one. And as you can see, our high quality content and high quality content creators are the main drivers for our membership business.

In the third quarter, our member content creator had an increase of 40% year-over-year, and the income per member creator increased by 29% year-over-year. And our most popular Yen Plus content column had an increase offering of over 130% year-over-year. And this popular content has transformed more new members to us. For the third quarter, our monthly paying users is over 10 million. And as of September, effective paying user number is over 11 million. And we see that this number keeps increasing. And we think that these had provided very good driver force for paying members, both in and outside of the website. And so far, we haven't seen any sign of slowing down of member growth. And we think that this is thanks to the momentum that we cultivated through our community content-based business model.

We will continue to invest in the creative environment and create more value for them. In fact, the introduction of Mr. Sun just mentioned our super-star plan. I just want to briefly tell everyone that the Baijing project we launched this year has actually been completed in advance, and the results are also very good. Therefore, we want the Super Star Project to be completed in three years. This will give us the opportunity to release more and better new projects. We also hope that there will be more good creators joining us to gain growth and revenue on the platform.

We do value the value created by our content creator, YenPlus, to our community. And in the past three years, they kept creating high-quality content for us. And we just launched our Supernova program for the next three years. As mentioned by my colleague, Mr. Sun Wei, that we had hit this year's target ahead of schedule. So with our next three years program, we hope to create more content creators with revenue over 1 million. And we hope that more people can join us and benefit from our platform for more growth and red world.

Okay, the last thing I want to say is that smart customer service is actually a business that grows from the community ecosystem. But in the long run, I also think that this customer service will not be limited to the community itself. We saw that the quality content is actually full of attraction. We also saw that in terms of trends, the general consumer or all kinds of users OK.

Our membership business actually is emerged from our ecosystem and its ever-growing size proved again that our member paying system from premium content based on community screening is really powerful and highly potential. For the mid to long term, I think that our membership business will not be limited to the community grows, we think that premium content is attractive across the internet. And there is this general growth of a willingness to pay for premium content as a general trend across our industry. And this will help us to further grow our membership growth in the long term for the future.

Thank you. Thank you. And our next question today comes from Ashley Xu with Credit Suisse. Please go ahead.

Thank you for accepting my question. I mainly want to ask about our advertising business. On the one hand, I want to know the main reason for the decline of the third quarter year-on-year and how we view the current trend of the fourth quarter. And if we look at it in terms of the industry, what are the trends? I'll translate by myself. My question is related to the ads and the CCS revenue. What's the driver of third quarter decline and how is the fourth quarter outlook? Could management provide more color by different verticals? Thank you.

Thank you, Ashley. uh, uh, This is the sales income. Advertising and CCS are the total sales income. If we look at the structure of these two parts, we will find that although the sales income of advertising and CCS are all down, the actual sales income of CCS is much lower than that of advertising. It is a single-digit drop. So it proves that CCS is very risky compared to traditional advertising. Let me pause for a moment.

Thank you very much for this question. The answer comes from our CFO, Mr. Sun Wei. Well, thank you. Overall speaking, in the third quarter, demand decreased, slightly decreased from the ads and CCS. This is mainly due to a weaker market environment as a whole and also a struggling environment due to COVID. I think overall speaking, if you compare advertisement and CCS as a whole, our CCS business remained more resilient against a struggling environment compared with traditional advertisement business. So they are rather resilient and they only had a single-digit decrease.

Then if we look at the industry structure of commercial CCS, although it has generally declined,

Overall speaking, in our key and strength sectors, the results remain positive, especially in IT, 3C, automobile, and games. They all registered year-over-year increase.

And what I just mentioned, IT, 3C, cars and games, these areas are also relatively advantageous content areas in our western community. In other words, in terms of marketing products, products like CCS, which seem to be combined with the community's advantageous areas, such content-based marketing products are actually very popular among customers.

And IT, CC, automobile, and games are exactly the strength areas that we have in our community and also in our content offerings. So that, in a way, proves that our content and our community are really popular amongst the users as well as the merchandisers on CCS area.

Okay. And then if we look at our ARPU, that is, the amount of investment per customer, even in the current macroeconomic situation, the macroeconomic situation has slowed down, and the amount of investment per customer has also achieved a growth of about 5% year-on-year. That proves that even in such a bad environment, in such a bad economic environment, the marketing products trusted by our customers will still gain growth. Thank you.

And if you refer to the specific poll we got from our merchants, their spending per paying client still increased by five percentage points year over year, even with a weaker macro environment. So this proves that we are still trustworthy method of marketing and we keep gaining market share even despite some headwinds in the entire economic backdrop.

OK.

By way of attacking and gaining market share against this market headwinds, we try to iterate our product from the lab IP series to cheese platforms to tree planting. We've tried various ways of marketing to showcase the brand so as to bring longer lasting and sustainable marketing values for our client. And I think this has been proven by our results and also in our premium content in our CCS product.

So we believe that based on Zhihu's quality content, such commercial and marketing products have always been Zhihu's advantage. And in the long term, we believe that this advantage will not change. In the case of economic recovery, we still believe that with the help of CCS, such unique products will return to

Our advantage that based on the commercial product, based on the premium content and community has always been our competitive advantage. And for the long term, this will remain so for the future. So when the market comes back, when the consumption recovers, we will be able to go back to a fast growth track due to our advantages position in CCS and gain more market share in the marketing world.

Okay. Speaking of 4Q or 23 years, we think that 4Q compared to 3Q, advertising plus CCS should be at least a double growth. But compared to Q4 last year, because Q4 last year was a high base, As for the look out for the fourth quarter,

We believe that we will register a double-digit growth, but compared with the high base in the fourth quarter of last year, the to-be business for advertisement CCS in fourth quarter will probably be still subject to the COVID situation and the weaker economic environment.

Speaking of two or three years, because now the situation of two or three years, especially the low-end situation, As for the direction in the 2023, I think it could be must

pretty much depends on the medical economy as well as the COVID policy evolution. So we keep a close eye on those market situations. But so far, we are not able to make an accurate prediction as to what will happen next year.

Thank you, Ashley, for answering this question.

Thank you. And our next question today comes from Yiwen Zong with China Renaissance. Please go ahead.

Thank you.

Thank you. Let me answer this question about education. In this year, our education has actually increased by more than three times in three consecutive seasons. In this season, we can see that its contribution to the overall income is constantly expanding, exceeding 8%. We expect that the future income ratio will continue to increase. When we were talking about financial statements just now, Thank you very much. The answer from CEO, Mrs. Zhou Yuan.

So for our vocational training business for this year, we had already registered multiple times of growth for three consecutive quarters. And for this quarter, particularly the contribution from vocational training to total revenue is expanding to over 8% and will continue to increase in the coming days. And our vocational training curriculums center around Our target users demand scenarios, i.e., academic improvement and career promotion, and we are expanding our paying curriculum offerings in these two specific areas for our users.

I think in these two directions, we will provide a more diversified and diversified coverage of the course. In terms of this year's situation, our test course, after the summer semester, its number of registrants is now a new high. We have to adjust and improve the quality of our courses according to the feedback of the users. Then the test type, including this CFA, CPA, and some software skills, such as the class written by our full-fledged operations in the post-trial period, all have good performance. Uh. Uh. Uh. Uh. Uh. Uh.

We provide a diversity of curriculums to cater for the needs for the users to study and improve their skills. To be more specific, the graduate school examination related programs saw a record high enrollment numbers. and our users are really happy and give us some positive feedback for our high-quality content. And exam-related, for instance, CFA or CPA, as well as some skills training, for instance, new media operation, writing courses, as well as video editing, are also main contributors and key contributors to our revenues. And in the third quarter, our paying user number increased by nearly 300% year over year, and with a quarter over quarter, 40%. But still, right now, the paying users are relatively small and still has a great, great room for further growth. And we will keep diversifying and enriching our training programs to cater for their needs and to give them better content. for their demand.

We will also use this way of purchasing and investing to carry out such a layout of our professional education track. In October, we have actually completed the acquisition of such an investment by Ichikawa Teachers. In fact, what it brings is to further improve the content of our test classification course. Um, um, um, um, um, um, Another point I want to make is to expand our vocational training business through M&A activities.

In October this year, we had acquired a teacher qualification training company so as to make our offerings more comprehensive. And also thanks to the great branding value and word of mouth and reputation, we are able to attract more people in this area and to be supplementary in this area so as to attract users. And we are also relying on our brand in Zhihu and our technology advantages to empower the inquiry companies. For instance, as of this quarter, the revenue of our inquiry company had registered a 60% increase with ever-growing paying users.

Um, um, Okay.

That's about our future plan. Well, actually, our vocational training business emerged from our community users' demand. And in 2019, we just started to launch our education training part of our business, make our first trials in vocational training. And over the past three years, we had roughly developed a business presence, either by self-operating or acquisition or mergers or cooperation in operating of the businesses. And as we keep expanding it, we believe that the successful business model will gradually expand and be able to provide premium content and drive commercialization for users across port.

You can see that we have a lot of activities on the product side. In June, we launched a special area for learning. There are a lot of master classes that are very popular. We will also launch a special teaching platform. In December, the platform's name is Zhixue Tang. It will be officially released soon. We will focus on this, through this app, to carry out a more comprehensive and comprehensive course coverage. So, our next action will be to use technology to promote the digital transformation of vocational education to improve the efficiency of each link.

And we had made quite a lot of effort in launching products in this area. For instance, in June this year, the Learning Zone went live. And on this Learning Zone, we launched multiple popular programs, for instance, the AI. And we will also launch a special platform for training. in December this year, which is an app called Zhixue Tang. The official version will be released soon, and this will help us to cover the fourth category of training curriculum for the future development. So overall speaking, I think relying on our technology advantages, we will keep optimizing and transforming the content and also to increase the commercialization efficiency of vocational training for our business.

In the end, I would like to say that now we will use vocational training as the second main line of the company. I believe that vocational training in the future

Overall speaking, vocational training will serve as an important second curve for our business revenue. We believe that this will continue to benefit the overall sector and also benefit our company, Zhihu. Thank you.

Thank you. And ladies and gentlemen, this concludes our question and answer session. At this time, I will turn the conference back to Jingjing for any additional or closing remarks.

Thank you all once again for joining us today. If you have any further questions, please contact our IR team directly or TPG Investment Relationship. Thank you. Bye.

Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.