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spk03: Ladies and gentlemen, thank you for standing by and welcome to Shihu Inc. First Quarter 2024 Financial Results Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations Please go ahead, ma'am.
spk10: Thank you, operator. Hello, everyone. Welcome to Zhihu's first quarter 2024 financial results conference call. Joining me today are Mr. Zhou Yuan, our founder, chairman, and chief executive officer, and Mr. Wang Han, our chief financial officer. Before we get started, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Legatation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Other information regarding these and other risks and uncertainties is included in our public filings with the U.S. SEC and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Additionally, the matter we will discuss today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issue earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.zhuhu.com. I will now turn the call over to Mr. Wang Han, CFO of Zhuhu. Han, please go ahead.
spk04: Thank you, Yolanda. Hello, everyone. Thank you for joining Zhuhu's first quarter 2024 earnings call. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, founder, chairman, and CEO of Zhuhu. The first quarter of 2004 marked a significant turning point for Zhihu. Strategically, we concentrated on our core strengths and the most crucial aspects of our development in the AI area. This involved a series of tactical adjustments, including resource reallocation and organizational optimization. From an operating perspective, our top priority in the short term is to achieve profitability. The advent of AI has disrupted the traditional internet business model. which relied on expanding user base, enhancing user engagement, and boosting user ad value to gain market share. In AI era, the focus has shifted to high quality content and user value, whose core value lies not only in presenting Chinese highest quality content library, but also in our unique content creation mechanism and our community's professional atmosphere, which foster continued emergence of new high quality content. 3Who users are not passive recipients of information, but are active participants in content creation and knowledge sharing. This core strength provides us with a first mover advantage in exploring new business models and position us uniquely in the market, increasing our pricing power. Following our proactive reduction in community-related user acquisition costs, the size of our user base declined to some degree in line with our expectations. However, engagement among our monthly active users increased, core user retention sustained its growth momentum, and daily active user time span also increased significantly. Furthermore, our efforts to enhance trustworthiness within the Drupal community continue to drive community prosperity. Our strategy for cultivating scenario-oriented content ensures a continuous stream of authentic, in-depth, high-quality content based on users' own experiences. As of the end of the first quarter, the cumulative pieces of content on our platform reached 804.2 million, including 611 million Q&As, up 15.4% year-over-year. Cumulative content creators within the Juho community reached 73.6 million, an increase of 13% year-over-year. We also observed a notable year-over-year increase in the proportion of highly active users engaged in creation and a percentage of high-level daily active creators. Utilizing the power of AI-driven technology, we continue to equip our content creators with a variety of user-friendly creation tools, offering a professional and supportive environment to help them break financial rewards. In the first quarter, the total number of content creators who earned income on Zhihu grew by more than 25% year-over-year. Notably, the number of content creators benefiting from our Zhizhi plan was nearly fourfold compared to the same period last year. In the AI era, we have continually upgraded our cybersecurity capabilities to ensure better protection of our user data privacy and intellectual property rights. At the same time, we fully leverage AI model's capability to enhance efficiency of content identification, review, and governance within the Google community. In certain scenarios, AI reviewers can achieve higher accuracy compared to the manual identification and review, allowing us to significantly reduce the number of manual reviewers while maintaining high efficiency. We continue to refine and upgrade our existing systems, Wali and Wukong, leveraging our Zhihai 2 LLM. These improvements have further enhanced user engagement and effectively combated fake traffic, leading to a continued decline in users' negative feedback and propelling to community sustainable development. We're progressing steadily towards our goal of achieving quarterly profitability within this year. To that end, we have accelerated our loss reduction through two operating tactics. First was to continually improve employee efficiency, further reducing labor costs. Second was to reduce community-related user acquisition costs. Meanwhile, we have maintained a higher ROI in our paid membership and vocational training businesses, which extended our reach beyond the Zhihu community. With this effort, the cost of revenue and total operating expenses in Q1 decreased by over RMB $130 million quarter-over-quarter. Notably, we recorded our sixth consecutive quarter of year-over-year growth in gross profit margin and three consecutive quarters of sequential decline in our sales and marketing expenses in the first quarter. Additionally, we have been accelerating the application of Zhihai to LLM to further enhance operating efficiency across every aspect of our businesses. For example, teaching, learning, and research aspects for our vocational training business. By integrating our own knowledge library, we have driven notable efficiency improvements in AI teaching assistance, cell services, homework assessment, and more. As a leading content-centric community, Jihoo serves as a lending platform where professionals engage in the most extensive and in-depth discussions on AI-related topics. Since the beginning of this year, the amount of AI-related content and the number of creators have continued to surge by double-digit year-over-year growth. Specifically, the number of AI field creators certified by Blue Label has increased by 130% year-over-year. Moreover, tens of thousands of specialized terms related to AI are being discussed within our community. In 2004, our exploration of and investment in AI will shift to focus on application layer. Our advancement in AI enables us to enhance operating efficiency across our existing businesses. as well as to unlock emerging potential beyond the Google community, all built on a foundation of trustworthiness. Since the launch of our AI-powered search feature in March, we have observed double-digit growth in app active days, user retention rates, and user engagement among the users who are using our new AI search feature. Now, I would like to delve into more details of the progress we achieved across our multiple business lines for the first quarter. First, our vocational training business continued to grow robustly, with the revenue increasing by 35.9% year-over-year to RMB 145.4 million. Its contribution to our total revenue also rose, surpassing 15% for the first time. As of the end of the first quarter, we established more than 30 subcategory courses through both self-operated business and acquisitions. Notably, our self-operated offerings are closely connected to the Zhihu community. allowing us to address users' needs swiftly and precisely while earning higher profits. Our acquired offerings, on the other hand, meet specific demands and cater to a broader market. Together, these courses complement each other in broadening our offerings and driving the rapid and sustainable growth of our vocational training business. In the first quarter, Our self-operated offerings grow rapidly, particularly AI, AGM, software exam courses, demonstrating excellent profitability and rapid growth. Importantly, our program tutors are also content creators within the dual community. With this dual role, tutors are deeply involved in the course development while maintaining ongoing interactions with students in the community about real course experiences, skill improvements, and other topics. This approach effectively addresses the ever-growing new demand of our new users. Growth from our acquired offerings remains steady during this quarter, further elevating our brand name awareness and service advantages. In April of this year, one of our subsidiaries, P&G Education, hosted a dedicated live broadcast inviting executives from the CFA Institute. They provided professional insights into CFA exam reforms. offering firsthand preparation guidance and expert analysis. This initiative garnered significant attention and sustained feedback from both the industry and examinees. Our paid membership business remained our largest revenue contributor this quarter, reaching RMB 449.7 million. As of the end of this first quarter, our average monthly subscribing members stood at 14.8 million, showing a slight decrease of 0.8% year-over-year, but an increase of 4.1% quarter-over-quarter. Average revenue per user remained stable compared to the same period last year. Leveraging the support of the G4 community and our unique positioning, our premium short stories continue to captivate and resonate with our users. In April, 123 historically chart-topping pieces, including Zhi Hu's exclusive story Sand of Time and Endless River Sea Wars Flows were included in the National Library's digital collection. Zhi Hu's Premium Counter Library, including short stories, continued to expand in the first quarter. The total volume of premium content increased by 14% year-over-year, attracting new subscribers while encouraging increased consumption among existing subscribers. On the content creator side, we are delighted to see our creators building a solid market reputation and achieving financial rewards on our platform. In the first quarter, the number of content creators who earned income increased by 78% year-over-year. In addition to top creators earning substantial income, many mid-tier and long-tail content creators within our community also earn significant income through high-quality content creation discourse. As a market leader, Zhihu continues to unlock the monetization potential of our vast array of premium short story IPs, spearheading our expansion into the short drama market and consistently setting new industry benchmarks for growth. In the first quarter, IP monetization revenue increased by 165.7% year-over-year, In April, another short drama, Drippy, adapted from a story in Jiwoo's content library, achieved a new record high for popularity on its debut day on Tencent's micro drama platform. In the long run, the ongoing expansion of our premium content and diverse content consumption formats will continually drive growth in the lifetime value of subscribing members. Let's now shift to our marketing services. In first quarter, marketing services revenue were RMB 330.5 million, representing a decrease of 15.7% yield. Business returned to a growth on a quarter-to-quarter basis. Our key clients in cornerstone verticals continue to demonstrate healthy improvements in retention rates, consumption, and output. Apart from ID3C industry, which maintained its year-over-year growth rate of over 40%, the fast-moving consumer goods sector also experienced high double-digit year-over-year growth. We're currently in the process of upgrading our CCS product, including proactively enhancing content governance and reducing the distribution of commercial content that negatively impacts user experience. As we are striving for quality profitability by the fourth quarter of 2024, we are giving our efforts to narrow our losses. Meanwhile, we firmly believe the emerging potential of our AI search and the value we continue to unlock across Chihuahua's trustworthy community will provide fresh momentum for our sustainable growth and a clear path to profitability for the remaining quarters of this year. This concludes Mr. Julian's remarks. Now I will review the details of our first quarter financials. For a complete overview of our first quarter 2004 results, please see our press release issued earlier today. We have continually optimized our core structure over the past several quarters. As a result, we recorded our sixth consecutive quarter of year-over-year growth in the gross profit margin. On the expense side, we significantly reduced community-related user acquisition costs while maintaining a prudent level of investment in cutting-edge technology, including AI. This initiative has effectively optimized our fixed costs, enhancing our commercialization efficiency. With this proven strategic adjustment, we are confident of achieving quarterly profitability of within 2004. Our marketing services revenue for the first quarter were RMB $330.5 million, a decline of 15.7% year-over-year. This increase was primarily due to the ongoing refinement of our CGS product to strategically focus on margin improvements. However, we have observed the recovery in our brand advertising segment in the first quarter. Performance-based advertising also demonstrated sequential growth. Notably, audience receipt, as well as fast-moving consumer goods, led its growth by vertical. Pay membership maintained a stable trend in the first quarter, reaching RMB 449.7 million. The number of subscribing members grew to 14.8 million, up 4.1% a quarter of a quarter. Vocational training revenues for the quarter was RMB 145.4 million, increasing by 35.9% year-over-year. Our soft-operated offerings, particularly AI-AGN software-exam courses, delivered robust growth, while our acquired business also retained solid momentum. Benefiting from enhanced operating efficiency, our gross profits for the first quarter increased by 6.1% year-over-year to RMB 543.5 million. propelling a gross profit margin improvement of 5.1 percentage points year-over-year to 56.6%. Our total operating expenses per quarter were RMB 768.2 million, compared with RMB 729.0 million in the same period last year. Selling and marketing expenses increased to RMB 478 million from RMB 445.6 million in the same period of 2003. Moving forward, we will maintain our prudent financial policies and rigorously map our ROI across marketing channels. Our research and development expenses this quarter increased to RMB 197.4 million from RMB 183 million in the same period of 2003. The increase was primarily due to our increased spending on technology innovation. DNA expenses decreased by 7.5% to RMB 92.9 million. The decrease was primarily due to lower share-based composition expenses combined with improved operating efficiency. As a result of all of this, our gap net loss for the first quarter narrowed by 7.4% year-over-year to RMB 165.8 million. Our non-gap net loss for the first quarter was RMB 135.7 million. As of March 31st, 2004, the company had cash and cash equivalents term deposit and short-term investment of RMB 5.2 billion, compared with RMB 5.5 billion as of December 31st, 2003. In the first quarter, the company repurchased 4.8 million plus eight owner shares for a total price of US dollar 8 million. In summary, as we continue to optimize our cost and expense structure, our operating efficiency is steadily improving. Throughout the remainder of 2004, we're confident that our strong strategic execution will provide a solid foundation for achieving our quarterly profitability goals in the near future. 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.
spk03: Thank you very much. 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, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. If you would like to state your question in Chinese, you may do so. but then please also restate your question in English. Our first question is from the line of Xueqing Zhang from CICC. Please go ahead.
spk06: 谢谢管理层接受我的提问。 我们的问题是关于我们盈亏平衡目标的。 可以请管理层跟我们更新一下今年就是 计划实现单季度盈亏平衡的一个时间表吧。 然后我们最新的实现路径进展是怎么样的。 谢谢。 Thanks management for taking my question, my question about the break-even target. A code management update was asked on your timetable to achieve a costly breakeven, and what's the latest progress? Thank you.
spk04: This is Han. Our probability target remains unchanged.
spk10: We expect to achieve a quarterly non-GAAP net profit in the fourth quarter of this year.
spk04: We will bring a structural reduction. It will be very obvious. And from Q2, we will gradually show you more obvious data performance. The core idea is the same as what we said to you in the last episode. Between the user size and quality, we firmly choose the user quality to protect and improve the core user experience. to ensure that high-quality content continues to be produced. Because we believe that the logic of the age of AI and Internet has changed a lot. The main logic of the Internet is the media market, which is the large-scale number of users multiplied by LO multiplied by ECPM, and so on. In the age of AI, the leverage of modeling and computing has increased the value of the head user and the most high-quality language. So what are the most important three elements? First, you have money to buy a card to model. Second, you have the highest quality language. Third, you have the most high-quality language the best production users. At Zhihu, last year, we invested in the first large model, which has made us one of the few China-owned large model brand companies. Then, on the second and third high-end production users, Zhihu has the most natural advantage. We are very lucky that the AI era has given Zhihu a good opportunity. As long as we can go back to Zhihu's original best high-end questions, we can be very determined and self-reliant in our strategy adjustment.
spk10: At the end of the first quarter and the start of the second, we strategically refined and restructured our approaches, driving a notable reduction in losses. Starting from the second quarter, you will see more pronounced improvements across our matrix. The core philosophy behind these adjustments is what we shared at last earnings. We will always prioritize user quality over user skill we're dedicated to protecting and elevating our core users experience and ensuring a continuous flow of high quality content or corpus we believe that our industry is undergoing a fundamental shift as we move from the internet era to the ai era in the internet era The dominant logic here is to maximize user engagement through large user bases and metrics like AD load and eCPM. But currently in AI era, advancements in LLMs and compute power are amplifying the importance of top tier users and high quality content. So the most crucial factor for Zhuhu going forward are, first of all, having sufficient capital to invest in high performance chips. Second, having the highest quality content and data. And third, having the highest quality and productive content creators. So Zhihu has been a pioneer in these aspects. First, our substantial investments have made us one of only a select few platforms in China with a license to operate, to self-operate LLMs. And second, we already have natural advantages thanks to our abundant high-quality content and high-quality user base. The advent of AI era presents a golden opportunity for Zhuhu to return to what we do best, that is high-quality Q&As. This has enabled us to make strategic adjustments with confidence and spontaneity. Next question, please.
spk03: Sure. Thank you. The next question is from the line of Steve Chu from Goldman Sachs. Please go ahead.
spk00: Good evening. Thank you for taking my questions. I would like to ask about the user trends post your selling marketing discipline strategy. And what are the future strategies to further improve your user engagement? Thanks.
spk01: Thank you, Steve. I'm Zhou Yuan. In terms of the adjustment of the marketing strategy, the core is quality orientation. We just started. In general, it meets our expectations. In terms of trends, the core user flow has maintained a trend of continuous growth. The market of Japanese users has also shown an increase.
spk10: Thanks, Steve, for your question. This is Zhou Yuan, Zhihu CEO. Our sales and marketing strategy adjustment is based on a quality-oriented approach. Overall, these adjustments are in line with our expectations. While our core user retention rates maintain its growth momentum, our DA use time spans also increase significantly.
spk01: The sales marketing strategy adjustment is just one part of our broader community strategy. Our efforts to build and enhance the community's content and atmosphere are also crucial
spk10: to improve the effectiveness of our users.
spk01: 首先是来自于专业的用户。 大量专业价值被低估的专业人士和职业人群 在知乎上获得了讨论分享的一个舞台。 我们在各个行业的专业人群是有着极高的渗透度的。 比如知乎上拥有浓度最高的AI行业从业者 The trustworthiness of Zhihu is primarily from our professional users. Many professionals and industry experts whose professional value is often underestimated.
spk10: have found a platform for discussion and sharing on Zhihu. We have very high penetration rates among professionals in various industries. For example, Zhihu has the highest concentration of AI industry professionals and the senior technical executives from leading LLM companies who engage in cutting-edge discussions on our platform. The number of our blue label certified AI participants grew by 130% year-over-year as of the latest.
spk01: One of the most important work of community operation is to upgrade the experience of our core creators. For example, recently, we have optimized the knowledge planning of the community. By optimizing the allocation of revenue, the revenue of science engineering and other non-knowledge areas has been increased.
spk10: Thus, one important aspect of community daily operation is to enhance the experience for our core content creators. For example, recently our GG plan in the community in which by optimizing the revenue distribution articles, the revenue in broader range of knowledge-related fields such as science and engineering increased by 30% to 50% quarter over quarter, quarter over quarter.
spk01: Yes. The adjustment of this upgrade is gradually taking place from the beginning of Q2. Our focus on the creator's working model is to operate, drive, and produce. The corresponding algorithm distribution system will also
spk10: These adjustments have been happening in Q2. Our approach to support creators focuses on operations driven with enhanced efficiency through product development and research. And accordingly, on the content distribution-wise, we will prioritize professional, in that and authentic content.
spk01: 第二就是来自于专业深度和真实的内容。 知乎聚集了真实用户的多样性经验和深度见解。 比如最近面壁智能在开源领域遭遇的一些事件, 它这个讨论也上了知乎的热榜。 我们看到内容里面有首席科学家的亲自作答, 海内外AI行业的成业者,
spk10: Secondly, it comes from professional, in-depth, and authentic content. Zhuhu gathers a diverse range of real user experience and deep insights. For example, the recent incident involving MotoBats in the open source field became a hot topic on Zhihu. With the chief scientist personally responding, AI industry professionals, open source community operators, and lawyers from both domestic and international communities participated in the discussion, generating widespread attention and dimension.
spk01: The influence generated by this content is not just ordinary traffic from curious onlookers.
spk10: but rather it empowers more people to gain common knowledge behind the news through professional insights, providing a sense of fulfillment. We will continue to upgrade our operational system in line with our content fulfillment standards.
spk01: Thirdly, by Nazalas,
spk10: the community culture and atmosphere. In the second quarter, we began integrating and streamlining our operational system and community governance, including the user service team, to enhance our community culture of sincerity, expertise, and respect. For example, the proportion of professional in-depth and rational content in discussion on training topics is steadily increasing in line with our expectations. Thanks. Thank you for the question.
spk03: Thank you. Our next question is from the line of Daisy Chen from Haitong International. Please go ahead.
spk05: Good evening, Wen Licheng. Thank you for accepting my question. My question is also about AI. It may involve two things. First, I would like to ask about our progress in the field of AI applications. For example, last quarter, we also released the AI search function. Are there any new products recently? And can you talk more about these products for the community? For example, do they have any positive effects on the users? This is the first question. I'll check with myself. Good evening, management. Thanks for taking my question. I have two questions about AI. The first one is I'd like to ask about the recent development of our AI applications, such as the AI-powered search feature, which was launched last quarter. Do we have any new products? And can management elaborate more about how these products empower the community And for example, does measurement see any positive impact on the user activity or behaviors? Following that, I think I have a second question. We noted that already had announced the partnership with OpenAI to bring its Q&A contents into OpenAI products. And they also reached out to deal with Google to authorize its data for some AI training. Green is roughly 60 million US dollars per year to radius revenue. So my question is about whether we consider a similar business model to add more revenues to the book. Thank you.
spk01: Thank you for your question. I would like to answer the first question. We actually released the discovery version of AI Search at the end of March. This is actually a Thanks for your two questions. This is Zhou Yuan, Zhihu CEO. In the late March, sorry, I will just answer the first question.
spk10: In the late March, we introduced a beta version of our AI search feature, named Discovery. The initial results of the testing phase have been very promising. Users utilizing our AI search become notably more active. We regard this as a positive indicator, demonstrating a significant expansion in our users' content consumption scenarios.
spk01: So, based on the feedback and usage patterns from the past two months, we are excited to announce that we will launch a new version of AI Search by the end of June.
spk10: This version will have a fresh product name.
spk01: And it will initially be available on our PC platform. We believe that our PC platform is a crucial scenario of productivity and efficiency.
spk10: perfectly complementing the mobile end.
spk01: In the AI era, the quality of user and content are far overweight
spk10: the importance of quantity. Our AI search function relies on the high-quality and trustworthy content within our community, and it enables it to provide users with high-quality search results.
spk01: We believe that AI search is a tool-based use scenario, and community is a scenario of multi-person interaction. These two have a strong relationship.
spk10: So we believe that AI search serves as efficient tool-based scenario while the community offers a multi-user online interaction environment. These two have strong complementary characteristics. Integrating AI search with our community ecosystem will be our central product development focus moving forward.
spk01: And for the second question, indeed, many companies are interested in acquiring Corvettes from us.
spk10: but we haven't made a decision yet. Thank you. Thanks for the two questions.
spk03: Thank you. Our next question is from the line of Sissy from CLSA. Please go ahead.
spk08: What's the long-term growth outlook for the vocational training business and how could companies differentiate yourself from other educational institutions? Thank you. Thank you for your question.
spk01: In the first quarter, our professional training business achieved a higher score than that of the same industry. This is mainly due to the self-employed business in the community growing rapidly in this quarter, especially the AI and AGI software test mentioned in the Open Remarks just now. These skill-based and interesting courses have received the good reputation of the users and at the same time
spk10: Thank you for your question, CC. This is Zhou Yuan, Zhifu CEO. In the first quarter, our vocational training business continued to outperform the industry with a year-over-year growth rate of 35.9%. This is primarily driven by the robust growth of our community-enabled self-operated offerings. Notably, the AI, AGI, and software and other vocational skills and interest courses mentioned in the opening remarks not only received positive feedback, but also demonstrated improved profitability. 智学堂对比其他教育机构的不同之处,在于智学堂是始于社区高质量内容和知识沉淀的,从而拓展出
spk01: Unlike other educational institutions, Zhizhetang is built on the foundation of high-quality content and accumulated knowledge originating from our community.
spk10: which naturally extends to supervised learning services. This process is primarily driven by the needs of our users who are also potential learners of our vocational training business.
spk01: We have also shared in the last episode that the future of vocational training can continue to discover and quickly verify the needs of vocational training students. At the same time, it will give us a good As we shared in last quarter, Zhihu's community mechanism continuously identifies and rapidly validates users' demands in vocational
spk10: sub-segments, providing us with a significant customer acquisition advantage. Community users and content creators effectively support our course development, resulting in high labor efficiency across existing offerings.
spk01: Besides, our community-based approach means that when learners' needs are satisfied, they can in turn contribute back to the community.
spk10: fostering the development of subsequent programs and exempting learners' lifetime value. This helps mitigate the common challenge of low renewal rates in the vocational training industry. Our future growth strategy targets enhanced profitability. First of all, we will continue to expand into sub-segments across three main categories, academic improvements, career enhancements, and vocational skills and interests. Our primary focus will remain on vocational skills and interests. which are with higher certainty and better profit margins. We aim to enhance our learners' renewal and repurchase rate by leveraging JUHU's unique advantages, thereby increasing our average GMB.
spk01: Secondly, we will further enhance the ROI of our resources, and use ARS to enhance the internal operating efficiency,
spk10: Second of all, we will further improve the ROI of our resources investment and leverage AI to enhance internal operational efficiency. Our goal is to achieve operational break-even as soon as possible. This is in line with Zhuhu's overall top priority. Thanks. Next question, please.
spk03: Thank you. The next question is from the line of Vicky Wei from Citi. Please go ahead.
spk07: Good evening, Manager. Thank you for accepting my question. My question is about the member business. I would like to ask the current stage of the company, how do you see the competition and business strategy of the member business? Can you share with the management team about the payment of the recent actor story users? Thank management for taking my question. My question is related to the membership business. How should we think of membership business, competition landscape, and business strategy? Would you please share some comment about stories, paying user behaviors, and also other business such as IP operation business updates? Thank you.
spk04: Thank you. I'm Wang Han. I'll answer this question. Thank you, Vicky, for your question. This is Han, Zhufu CFO. In terms of the competitive landscape,
spk10: we remain the leader in this segment. While we have experienced competition from other fake internet companies, as well as some fluctuations in content creator numbers and submissions, a significant number of content creators have returned to Zhihu, notably, confirming that Zhihu provides the best environment for short story creators to thrive. I would like to share two points on our strategic plan.
spk04: First, many people in the market know that the story of the call is very good. But some people will take the story of the call as a negative thing. It seems that if you have a story, it is the standard of the content of the call community. For this matter, we would like to share our different understanding. You see, the Nobel Prize has a literary award, and the New York Times has a novel. Literature itself is good content, it is unrivaled. The problem is that if we separate more non-story content and story content in the future, it will give many users with different preferences a better experience. You see, the best libraries in the world, the best bookstores, are all categorized as fiction and non-fiction. So the focus is to separate the content to give you a better sense of sight. So our YanYan Story App Zhihu's excellent in short form story segment has been widely recognized
spk10: However, some view this negatively, as if the presence of stories on our platform dilutes the quality of our content library. So on this, we would like to share some insights. We believe that literature itself is undeniable valuable content. After all, the Nobel Prize has a literature prize, and New York Times has a bestseller list of novels. But we have concluded that By separating the display and distribution of story content from non-story content, we can provide better experience for users with different preferences. The best libraries and bookstores globally also categorize fiction and nonfiction separately to enhance users' experience. Therefore, we launched the standalone Yanyan Story app Yanyan's DARI achieved a nearly 40% quarter-over-quarter increase in MAU for Q1 2024, reaching millions of users. This segmentation allows us to optimize each domain for specific user preferences without affecting the experience of the other group of users.
spk04: Recently, the high-quality short stories changed by Call to Story have achieved very good market performance. It has become the highest-priced high-quality short story so far. Therefore, all major video platforms are more aware of the original value of Call to Story. Many of the most high-quality channels come to us for cooperation. The value of our story IP is also increasing. How should we understand the IP value of the general story? I would like to share with you that we have some academic friends recently. Let's talk about their perspective. They said And second of all,
spk10: Zhu Hu's short story Zhi Bi has become the most popular premium revenue-sharing drama on the market. The premium short drama Zhi Bi, adapted from Zhu Hu's short story, has achieved excellent market results, becoming the highest revenue-sharing short drama to date. Its success has raised major video platform awarenesses of the value of Zhuhu's short story copyrights. Premium channels are approaching us for collaboration, further allegating the value of our IPs. How should we understand short story IPs' value? So in our recent discussion with the academic community, They share that short story may represent the most advanced format of content evolution, as they precisely and quickly showcase the latest authentic and value trends. Short story may be as much as five years ahead of novels, which in turn are five years ahead of film and television production. We look forward to sharing more Zhufu IP content success story with all of you in the future. Thank you for your question.
spk03: Thank you. The next question is from the line of Thomas Chong from Jefferies. Please go ahead.
spk09: Thank you for accepting my question. My question is about your marketing service. My question is about our marketing strategies. So I want to ask about the online marketing value outlook and our long-term strategy. Thanks. 感谢您的问题,我是王海,回来回来这个问题。
spk04: Thank you for your question. This is Wang Han, Zhifu CFO.
spk10: As we mentioned in last quarter, Zhuhu is committed to enhancing the community's trustworthiness, even at the cost of satisfying some short-term, low-quality revenue. As such, we proactively refine our commercial content and distribution mechanism, resulting in an expected CCS decrease. Our brand advertising increased by 40% year-over-year during the non-pick season, and performance advertising delivered a quarter-over-quarter growth compared to Q4-23. For the rest of 24, we will focus on improving performance advertising through enhancing AI and data infrastructure.
spk04: In long term,
spk10: We believe that Zhihu's commercial potential should be assessed with Zhihu's brand premium instead of only focusing on in-platform traffic. Let's take an example. Many emerging domestic 3C tech brands showcase their R&D technologies and principles on Zhihu. They believe that only on Zhihu can they popularize their tech in a sufficiently professional and in-depth in-depth approach and establish market awareness for new product categories. They even integrate and upgrade their products based on Zhihu's data and the user feedback.
spk04: In the large consumer industry, as some of you may know, most of the products on the market are actually relatively poor, very poor. More people are struggling with the level of investment. And to be able to attract professional users in the community of Zhihu, Then maybe its goods really need some hard work. You may often see some content on the Internet called ZhiHu GaoZai, or ZhiHu DaZi, as the title of the article. This proves that ZhiHu means two words. Compared to the content published on the public Internet, there is a chance of luck and the ability to read books. So we believe that it is the same in the commercial industry. ZhiHu will also have more and more potential and potential to enhance the reading of books for brands in the future. Thank you.
spk10: In the consumer industry, most of the products on the market are actually quite similar. The main difference is the level of investment in advertising and promotion. However, products that can earn a solid reputation among professional users within the Juhu community likely have a genuine competitive edge. You might have same phrases like Ju-Hoo high phrase followed by the rest of the title or Ju-Hoo KOL plus the rest of the title in many articles. These validate the trust premium and the endorsement value of Ju-Hoo's content compared to that of content from other internet platforms. We are quite confident that in commercial area, Drupal has great potential to further enhance brand credibility. Thank you for question.
spk03: Thank you. That concludes today's question and answer session. At this time, I will turn the conference back to Yolanda for any additional closing remarks.
spk10: Thank you, operator. Thank you all once again for joining us today. If you have any further questions, please contact our IR team directly or PSN Financial Communications. Thank you.
spk03: Thank you. This conference has now concluded. Thank you for attending today's presentation.
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