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spk06: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Kuaishou Technology's second course learning from 2022 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management of their remarks, and this English line will be listened only mode.
spk04: And now, I'm going to turn the call over to Miphala Diwu, Director of Investor Relations at Kuaishou Technology.
spk06: Thank you, Operator. Good evening and good morning to everyone. Welcome to our second quarter and interim 2022 Financial Results Conference Call. Joining us today are Mr. Chongyi Xiao, Co-founder, Executive Director, and CEO, Mr. Jing Bing, Chief Financial Officer. Before we start, we would like to remind you that today's discussion may contain poor-looking statements, which involve a number of risks and uncertainties. Ex-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 any forward-looking information except as required by law. During today's call, management will disclose certain non-iFIRS measures and for comparison purposes only. For a definition of non-iFIRS financial measures and reconciliation of iFIRS to non-iFIRS financial results, Please refer to our results announcement for the second quarter, an interim report ended June 30, 2022, issued earlier today. For today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous English interpretation in a prepared remark session and a conceptive interpretation during a Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail. I will now hand the call over to Isha. Hello, everyone. Welcome to the question of the second quarter of 2022, Earliest Conference Call. In the second quarter of 2022, we continue to overcome challenges and achieve significant business breakthroughs. Though the pandemic was sporadic and also macroeconomically volatile, we remain steadfast in the commitment to creating more values for users and society while also consistently enhancing our operation efficiency. Our domestic DA use in the second quarter of 2022 reached $347 million, achieving better than average seasonal performance and setting a new record. Meanwhile, our domestic business segment made breakthroughs progress, delivering quarterly, operating profit two quarters ahead of plan, which clearly shows the health and sustainability of our business model. as well as the executive and also efficiency potential to our organization and teams. We launched EquatIO Express in the second half of 2019 and have made considerable investment in growing users while paying attention to acquisition efficiency. The group's adjusted EBITDA turned positive for the first time in nearly a year. I would like to discuss the progress we made with several aspects of our business in the second quarter. First, let's talk about the user metrics and also traffic. In the second quarter of 2022, we committed to achieve high-quality and efficient user growth through optimizing our strategies, algorithms, content operation, etc. We delivered a record high TAUs of 347 million and an accelerated growth of 18.5% year-over-year with a low acquisition and maintenance cost per TAU. Our average MAUs reached 587 million, up by 15.9% year-on-year. And an average GAUs-to-average MAUs ratio also hit a historical high at 59.2%, reflecting QISO's growing user-stickiness and vibrancy of our user community. Furthermore, our average daily time span per GAU reached 125.2 minutes in the second quarter of 2022, up by 17.1% year-on-year. Our total time span also grew a rapid pace of 38.7% year-on-year. More specifically, our user acquisition size, we continue to explore efficient channel and effectively expand existing channels in a target manner. At the same time, we actively manage the operation according to our traffic strategy and improve our very unique session. And also, at the same time, we're improving efficiency. And also, our channel strategy is also iterative. And also, we are improving our economic management manner At the same time, we actively manage operating according to our traffic strategy and also improve the kind of best operation method. And also, at the same time, by having seasonal iteration, we are also focusing on our strategy and also efficiency. At the same time, with a lower cost, we have also, you know, which also had a significant improvement in both quantity and quality of user growth. And also, user experience is key for retaining user and increasing time span. Through algorithm operation, We have made more accurate and differentiated recommendations of high-quality content, particularly mixed and long-tail content, thereby enriching user consumption and improving user experience. In the second quarter, the year-on-year growth of our video views even outpaced the growth of total user time spent. Meanwhile, we developed a new perspective on user retention, iterated our simple user labels into a more comprehensive user health index. This enhancement has made our incentive model more refined and efficient. improving our system iteration frequency from database to minute base, and also putting us a generation ahead of our peers in terms of efficiency. Our highly effective user retention strategy also serves as a powerful tool for ongoing control of user-related costs. With optimization in content algorithms, operations, and more, we further increase the proportion of unsubsidized and minimized subsidized users in our base. In the second quarter, our DAO growth rate and decrease in retention costs per DAO showed a healthy divergence, and our first-year ROI of new users continued to increase quarter-over-quarter. This accomplishment boosted our confidence and enabled us to strive forward to our 400 million DAO user target. In addition to improving efficiency, we're so here to our growth gratitude of creating the greatest social platform and user mindset with meaningful results in the second quarter of 2022. Tens of mutual followers of Kuaishou App grew 66% year-on-year, reaching more than 20 billion per MECD, with average following per MAU continuing to increase more than 300, with reflective of strengthening social sickness and also user mindset. On the content side, we continue to strengthen operations in our advantageous verticals while conducting more proactive screenings and or co-operations of blockbuster content. Quiet Playlist has always been a benchmark content vertical in the second quarter of 2022. We further accelerated the growth of our short play content and achieved meaningful results by adding new categories, including family and documentary, and exploring new duration formats, such as five-minute episodes. Our strategy is to place great emphasis on content and less on production, particularly on the scripting stage. This strategy has consistently produced blockbusters. Short plays have also contributed significantly to user acquisition and user activity, especially among young and female users. With key insights into blockbuster content and also stronger operational capability, we recently created several blockbuster entertainment content. Quasar uses its own strategy of providing entertainment content with high interactions and bringing user experience. We organized and hosted Jackie Chan's first global live streaming event and J-Dog, highly anticipated new album live streaming event. Jackie Chan's spectacular live streaming event was enjoyed by fans worldwide, joining more than 130 million viewers, including question and answer notices users. JJ's live streaming had over 110 million viewers and over 450 million interactions and also reservations exceeding 10 million, which is actually a historical high in the history of internet. As of June of 2022, Kuaishou had more than 2,000 celebrity accounts, which together had 870 million followers. Another primary focus of Kuaishou has been to improve the monetization efficiency, and we have continued to implement an optimization measures across our ecosystem, product technology, and service capabilities among the experts of our business. Like most inventors here in China, we felt pressure from challenging microenvironment and also research of pandemic in the first half of the year. For a fifth time, we have the annexation of Google BenQ, the fully unleashed of our improved monetization capabilities in the short term, which are outperforming the industry across our business segments and conditionally market share. In the second quarter of 2022, revenue from our online marketing service increased by 10.5% year-on-year to €11 billion. Against a weak economic environment and advertisers' conservative budgeting, we have been more proactively deepening our relationships with advertisers to increase the number of active consumers and also boost overall advertising demand. In the second quarter, the number of active advertisers increased by more than 90% year-over-year, Meanwhile, advertiser retention rates further improved, reflecting our ad performance and product capabilities. We have also recently implemented several toxic optimization measures. For example, we introduced light versions of our products to medium and small customers, making advertising easier and more convenient. In addition, regarding ad performance, we adopted more refined and frequent monitoring and operations and minimized the ROI for advertisers. Through algorithm operations, we were able to improve toxic intelligence, We allowed it to help the advertisers with budget allocation and bidding strategy management to actually improve matching and conversion efficiency. In the second quarter, over-advertising CTR and advertisers' satisfaction rate also improved. Growth advertising from our native e-commerce business also rebounded during the second quarter, and our e-commerce business started to recover after the pandemic surged. In the second quarter, we focused more on building comprehensive e-commerce marketing service capabilities while continuing improving the basic service quality. We further capitalized our dual engine of short video plus live streaming to attract incremental advertising business through the short video e-commerce advertising while improving management conversion rate. We also guided the merchants to conduct combined promotions and operations in both public and private domains to further unlock the value of our closed-loop e-commerce platform. The average ROI for native advertisers continued to improve in the second quarter. In terms of the brand advertising, we have also expanded our ad spaces and also add constantly the innovating new promotion solutions. For example, for KOLs, we launched a wheat plant innovation platform approach linking platform plus KOL plus brand. We selected 100 high-quality KOLs based on our content quality and commercial value and jointly launched various combinations for brands to fulfill their KOL marketing needs in different scenarios, empowering brands to grow their business use. The year-over-year growth of our brand advertising in the second quarter of 2022 outpaced that of the overall online marketing services. Our e-commerce business was also affected by the pandemic during the second quarter. Nevertheless, we outperformed the industry thanks to our differentiated advantages in traffic efficiency and e-commerce experience. E-commerce GMB increased by 31.5% year-on-year to $191.2 billion, with live streaming e-commerce gaining a larger share in the e-commerce market in the second quarter. On the merchant side, more sellers have come to recognize live streaming e-commerce's advantage in traffic efficiency and customer acquisition, as well as the growing number of successful cases. Hence, more merchants are joining KWAIS's live streaming e-commerce ecosystem, adopting our promotion strategies, which has helped to enrich our merchant supply. For the first half of 2022, the monthly new merchant number increased notably again, same period last year, near doubled. ending the second quarter number of multi-active coin brand merchants by more than a third quarter of a quarter, and number of multi-active brand merchants grew by more than 200% year-over-year. Voting on our dominant traffic and enriched merchant content We maintain close attention to improve the transaction efficiency. To optimize algorithms starting from this year, we have focused on improving accuracy of the buyers, seller, and product management. Regarding users, we have actually set up the experts in exploring our personalized needs to continue to refine the user label and have a better understanding of our users. On the product front, we made significant investments in building a product database and have kept perfecting product descriptions that we can better understand our products. The efforts, significantly half the GPM of e-commerce live streaming in the second quarter, of new merchants that are starting up stage, we've spent and invested additional resources on service providers to boost their startup efficiency and help them to speed up growth. In the second quarter of 2022, over 2,000 merchants saw their revenues climb in leaps and bounds through service provider empowerment. Meanwhile, we consistently fortify our trust-based e-commerce ecosystem. In the second quarter, our industry-leading market repeat purchase rate continues to increase year-over-year and quarter-to-quarter, and our trust-based economy further reinforce consumers' purchase market thickness. compared with the shelf-based e-commerce, live-streaming e-commerce engaged in the earlier stage in the consumer decision-making process. With ongoing upgrades of content matching and merchandise supply, we optimized the browsing part of the shopping experience, creating a virtual cycle. In the second quarter, our monthly active e-payers actually penetration rate remained in growth momentum reaching over 15%. And also another highlight of our second quarter performance for live-streaming businesses in revenue grew at an accelerated pace of 19.1% year-over-year to 8.56 billion, particularly due to following the practice move. First, the strategy adjustments that we made on the content supply since the second half of last year produced excellent results. Through strengthening collaborations with talent agencies and also empowered content operations of existing streamers on Kuaisha while also onboarding the more external professional streamers, we have achieved more achievement improvements in overall content quality as well as operational capabilities for our live streaming business. In the second quarter of 2022, the number of our monthly active streamers exceeded 10 million, almost a number of high-quality active streamers with over 100,000 followers saw double-digit growth year-over-year. In the second quarter, We made more explorations in live streaming production and operations to launch mobile interactive features and new scenarios-based user consumption motivations, such as the multi-person live streaming function, driven by dual improvement in content diversity and quality, are proposed also rose further among users, evidenced by accelerated year-over-year growth in user time span on live streaming, and also the significantly optimized revenue efficiency in our live streaming traffic. As for the algorithms, through real-time management of live streaming content, we improved our live streaming conversion rates, effectively penetration rates, and also paying the ratio, establishing a more efficient and smooth live streaming payment funnel. In the second quarter, the average MPUs for live streaming rose 21.8% year-over-year to $54 million.
spk04: Within Kwaiter's live streaming ecosystem, Kwaiter Recruitment, a high-potential new business, also made remarkable progress in the second quarter.
spk06: With advantages in traffic algorithms, core user profiles, and our trust-based ecosystem, Kwaiter has striked a balance between profit and efficiency for corporate recruiters, creating economies of scale while providing high-trust recruitment and fulfillment experience to users. Also, it is a relatively new business. Choir recruitment has quickly gained the recognition and attention of individual and corporate users. Within the years of choir recruitment reaching $250 million in the second quarter, up 90% relative to the first quarter. Supported by our powerful management and operational capabilities combined, choir recruitment boosts the industry-leading placement conversion rate. Also, our priority for this year is to cultivate a user's mindset and grow our scale while improving service quality. Through short videos and live streaming, we aim to create more social and economic value for both individual users and enterprises. Moving on to our overseas business, in the second quarter, we continue to create differentiated content, force the user mindset, and explore more diverse content styles and formats. At the same time, we further increase our investment algorithms and products to optimize user experience, so as to achieve high-quality and efficient user growth and retention rate. At the end of June of this year, the time span for the AU overseas market exceeded 60 minutes, and 60-minute inclinations, a positive breakthrough in user experience in a growing number of regions, as well as the flywheel that is gradually gathering momentum. In the second quarter, we also actively explore the more monetization by advertising, by live streaming, virtual gifts, broadening more advertisers and partners with more live streaming talent agencies to consolidate and also solidify the foundation for our creator ecosystem. As a result, the revenue for our overseas operations went up a quarter, but now we're in losses. Going forward, we hope to continue to explore how to now arrive at an overseas growth model. We will compete in a new round of organizational restructuring aiming at further unlocking the organization's vitality and potential and continuously creating efficient and high-value services for society and users. This concludes my prepared remarks. And now I'd like to have the CFO, Gene Lin, in talking to us about financial performance. Thank you, Michelle, and hello, everyone. We now could have a closer look at the financial performance for the second quarter of this year. So, furthermore, I'm sure that Kuaishou made a breakthrough progress in the second quarter. Despite a challenging micro-environment, our traffic and revenues continued to grow steadily. Meanwhile, our domestic business became profitable at the operating level and also two quarters ahead of schedule. We also achieved positive results in monetization of our overseas businesses and, at the time of trade, fired up the revenue growth and seen a bit of narrow operation loss. Our revenues for the second quarter have increased 13.4% year-on-year to $21.7 billion a year. The increase was mainly driven by revenue growth in our online marketing services, e-commerce businesses, and live streaming businesses. Revenue from online marketing services reached €7 billion in the second quarter of 2022, up 10.5% year-over-year. This was primarily attributable to our traffic growth and the continuous improvements in our services, productivity, and ad performances, which considerably increased the number of retires. Meanwhile, as our solid personal ecosystem generates improved conversion rates, For e-commerce merchants, their contribution to up-to-date rebonding and marketing services shows stronger resilience and growth. E-commerce services revenue for the second quarter of 2022 increased by 7.1% year-over-year to $22.1 billion, largely due to the solid growth in e-commerce revenues. Our rich merchandise supply was powered by the growth of well-known brands, which was by-brands, which, while our enhanced matching efficiency promoted the increase in the monthly active e-commerce paying uses. This, combined with our unique trust-based e-commerce model and empowerment by service providers, enable our e-commerce GMB to increase by 31.5% year-over-year to 191.2 billion RMB. In the second quarter of 2022, revenue from live streaming grew by 19.1% year-over-year to 8.6 billion RMB. This was primarily attributable to improvement in both our live streaming content quality and platform's live streaming operational capabilities, and also as well as the continuous improvement in user content management efficiency, which propels the growth of average live streaming MPUs of 21.8% year-on-year to $54.2 million. Our cost revenues for the second quarter of 2022 increased by 10.9% year-on-year to $11.9 billion, representing 55% of total revenues. A year-on-year increase was made due to two reasons. First, an increase in revenue-sharing costs and related taxes, which were in line with our revenue growth. Second, the increase in content costs as part of the other cost of revenues, resulting from our continued efforts in diversifying the content verticals and enriching the content ecosystem. However, during the quarter, we were able to partially offset the impact of these factors by optimizing the efficiencies of our bandwidth usage and reducing our bandwidth expenses and serving custody costs. Growth, profit, for the second quarter of 2022 reached $9.8 billion, growing 16.5% year-on-year. Growth profit margin in the second quarter of 2022 was 45%, improving from 43.8% in the second quarter of 2021, an increase of 3.3% quarter-over-quarter. Our year-on-year increase in GDP margin was primarily a result of further optimizing truck bandwidth and server efficiency, which drove a decrease in ratio of bandwidth and depreciation to revenue. However, the quarter-over-quarter improvement To growth, profit margin was mainly due to the optimization of revenue sharing costs and related taxes. Selling and marketing expenses were 8.8 billion U.S. for the second quarter of 2022, decreased by 22.2 year-over-year, and 7.7% quarter of quarter, representing 40.4% of revenues, a significant decline of 18.5% from 58.9% in the second quarter of 2022. Why? This decrease resulted from our improved acquisition efficiency, and optimization in content algorithms and operations, which led to more disciplined and efficient standing to our user acquisition and maintenance while sustaining strong traffic growth. The administrative expenses for the second quarter of 2022 were 960 million yen, increased by 10.6% year-over-year, primarily due to an increase in share-based compensation expenses. Research and development expenses in the second quarter of 2022 were 3.3 billion RMB, decreased by 16.1% year-over-year and 6.8% quarter-over-quarter, primarily due to decreased employee benefits expenses, including related share-based compensation expenses. Our operating loss for the second quarter of 2022 continues downward trend, narrowing to 3.1 billion RMB, an improvement from 7.2 billion RMB in the second quarter of 2021 and 5.6 billion RMB in the first half in the first quarter of 2022. As a result, our operation margin increased by 23.6 percentage points year-over-year and 12.7 percentage points quarter-over-quarter, improving from an active 37.7% in the second quarter of 2021 to an active 14.1% in the current reporting quarter. Suggested net loss for the second quarter of 2022 was 1.3 billion yuan, varying substantially from 3.7 billion yuan in the first quarter of 2022 and 5.0 billion yuan in the second half of 2021. This resulted in adjusted net profit margin improvement from negative 26.2% in the second quarter of 2021 to negative 6% in the second quarter of 2022, resulting in an increase of 20.2%. percentage points year-over-year and 11.7 percentage points quarter-over-quarter. We remain in healthy balance sheets with cash and cash equivalents, time deposits, restricted cash, and wealth management products of 41.26 billion RMB as of June 30th of 2022. Going forward, we will continue to reinforce the monetization capabilities of our various businesses while embracing change and adapting to the evolving macroenvironment. With its very fast commitment to sustainable growth and profitable improvement to our group level, we will enhance our operation efficiency and effectively execute our long-term development strategies. This concludes our prepared remarks. We are now open for questions. Operator, please go ahead.
spk03: As a reminder, if you would like to ask questions, please press star 1 and wait for a name to be announced. If you would like to cancel a request, you can also press the pound or hash key. The first question is from Alex Poon from Morgan Stanley. The first question comes from the line of Alex Poon from Morgan Stanley. Please ask your question.
spk01: 恭喜管理層非常好的業績 我的問題是關於電商的 雖然受疫情的影響 但公司二季度的GMV 應然實現超預期的增長 請管理層可否分享一下 快速電商生態建設取得的進展 Thanks management for taking my question. Congrats on a very strong quarter. My question is related to our e-commerce business. Our second quarter GMV growth was much better than expectation. and can management describe to us how our e-commerce ecosystem is developing so far, and how will we tackle the changes after the COVID for the consumer behavior change? Thank you very much.
spk02: Thank you for your question. First of all, in the second quarter, we will continue to build on the experience of trust-driven e-commerce, and accelerate the improvement and the conversion efficiency of the super sales node in the live broadcast room. That trust is the foundation of our live broadcast e-commerce. We continue to improve the user's full-fledged security system. Our trust-making related full-fledged orders have been further improved. Among them, the full-fledged coverage of fake clothes and wine has reached 50% in the second quarter, which is the leading level of the industry. Thank you for the question. In the second quarter
spk06: We continue to build our trust-based, experience-centric e-commerce ecosystem and speed up improving sales conversion by leveraging live streaming as the main venue. Trust is the cornerstone of our e-commerce system. And also, as such, we continue to improve our user rights and interests, production system, and penetration of orders under the trust purchase, which is part of a system further increase. In particular, our high compensation policy, nine times we found for each fake item, now covers more than half of orders, which is industry-leading, and we are confident to further improve it. We further enhanced platform governance and also presented user feedback at various points in the purchase process in the forms like repeat customer recommendation index, and to further strengthen users' confidence in merchants and our platform. We continue to lead industry in e-commerce monthly purchase rates, which had increased both quarter-over-quarter and year-over-year.
spk02: If the private domain is the basic platform of the business in the long-term business, then the traffic flow can help the business to quickly pass the cold start stage and improve the business ceiling. In this quarter, we focused on strengthening the traffic flow of the public domain, enriching and planning the labels of products and users, and increasing the accuracy of the match of people and goods. The GPM of the public domain e-commerce live broadcast If private domains is a foundation for merchants to operate effectively over time on Kuaishou, our public domain traffic can help merchants quickly get through the co-start stage and raise their operating savings.
spk06: This quarter we focus on enhancing on conversion rate of public domain traffic by enriching and refining product and user attacks and improving the accuracy of mentioned merchandise and users. During the period, the GPM of public domain ecommerce live streaming increased by high double digit percentage points year over year and continued to grow quarter over quarter. By offering high quality merchandise and services to strengthen repeat purchase and private domain traffic conversion, we have created a highly efficient dual engine model with public and private domain.
spk02: In this year's first half of the year, the number of new business owners has increased significantly from the same period last year to more than 90%. The advantages of live e-commerce products and interactive functions, as well as our higher conversion efficiency, are gradually recognized and valued by more and more business owners. We are also actively expanding the support of high-quality industrial belt. We plan to set up 100 industrial belts this year. In the first half of the year, it has exceeded 50% and covered more than 10 industries. In terms of brand supply, we continue to develop large-scale brands and large-scale fast brands to provide consumers with more rich and high-quality product resources and further establish brand knowledge. In the second quarter, the number of business partners increased by more than 200% in the month of June. Among them, an internationally renowned makeup brand entered the first quarter and achieved 200 million in the month of June. During the 616 shopping festival, the number of business partners increased by more than 5 times in the month of June. The number of fast brand business partners in the month of June also achieved a double increase. In addition to the advantageous clothing and makeup products, fast brands also expanded to
spk06: Also, our e-commerce business will not have achieved better than expected growth this quarter without our continued expansion in high-quality resources on the supply side. During the first year of 2022, the number of monthly new merchants increased significantly by more than 90% year-over-year. More and more merchants gradually recognize the value of live streaming e-commerce, lively product displays, and efficient interactions, as well as its higher conversion rate. We are also actively expanding our reach to high-quality merchants in in-store zones, And also our plan is to deploy services in a 100-meter zone by the end of this year. And at the end of first half, we were over halfway there with more than 10 industries covered. On the brand supply side, we continue to promote more brands, particularly pride brands, to provide consumers with more abundant and high-quality merchandise while further enhancing user awareness of brands to our platform. In the second quarter, the number of monthly access brand merchants more than doubled year-over-year. Among them, an internationally renowned beauty and cosmetic brand achieved average monthly GMB of 200 million RMB in the first quarter on our platform. And during the 2016 shopping festival, our total brand GMB increased more than five-thirds year-over-year. In terms of quiet brands, the number of monthly access quiet brand merchants doubled quarter-over-quarter. in addition to our presence in apparel and cosmetic categories where live-stream e-commerce holds an advantage. Our brands are also featured in categories such as food and beverages, home appliances, home furnishings, and also other products.
spk02: In addition, to combine your second part of the question, the epidemic has continued repeatedly in the first half of this year. Many merchants feel the pressure from the offline business, and the desire to explore the online channels is getting stronger. At the same time, the epidemic has also accelerated other traditional online businesses to explore new growth channels. This also helps us to accelerate the introduction of new merchants. This year, we continue to strengthen the support of cold-stripped merchants. We have established a dedicated flowchart to provide diversified products and marketing methods. and one-to-one operating services. At the same time, our service providers will also provide more targeted services to customers in the early stage of business, such as products, businesses, and other youth issues, to help customers quickly cool down and achieve their growth goals. In the second quarter, the productivity of new customers has remained the same as before, with a greater increase.
spk06: And as for the second part of your question, given the pandemic resurgence in many places in the first half of this year, with their offline operations under pressure, many merchants were more willing to explore online sales channels. At the same time, the pandemic also fueled the desire of traditional online merchants to find new growth channels even as we leverage to speed up signing up new merchants. So this year, we continue to strengthen our support for startup merchants, establishing an inclusive traffic core and providing them with diverse products and marketing tools and one-on-one operation services. Furthermore, our service providers are providing more targeted services to address new merchants' various sore points and also in relation to product selection and also operation at the early stage. helping them jump starting and also achieving GMV growth. In the second quarter, the net monthly retention rate of the new merchants increased significantly year over year and quarter over quarter both, and also the time between co-start to sales liftoff of new merchants shortened by nearly 15% year over year.
spk02: In addition, we have observed that in the post-pandemic era, users are more sensitive to prices, and their consumption is more rational. This is very in line with the concept of fast hands, real goods, and real prices. We have the ability to provide high-experience, cost-effective businesses with more exposure opportunities, and encourage these businesses to continuously optimize their products and services. At the same time, we continue to improve the service quality of products, contracts, and post-sales, so that consumers can buy with confidence, even if it is affected by the pandemic, and the non-must-buy consumption is not good. But in the short term, we see that products such as make-up and home appliances still show a better recovery trend during the pandemic. During the pandemic, consumer goods such as food and drinks have gained opportunities for rapid development. Although live e-commerce has a relatively low penetration rate of food and drinks, the anchorage has given live e-commerce a greater space to develop precisely in terms of taste and flavor.
spk06: In addition, we could see users being more price sensitive and are more rational in the post-pandemic era, which resonates well with our honest people, quality food, and reasonable prices philosophy. So we bring more exposure to merchants capable of providing a high value experience ratio. And this, in turn, encourages merchants to keep refining their products and services. At the same time, we continue to improve the quality of product fulfillment and after-sales services so consumers can buy affordably and also the trustworthy products. So although affected by the pandemic and the unaccessible consumption overall was depressed, during the 2016 promotion, we noticed beauty and cosmetics, also the home appliances and other categories on quite show managing relatively healthy recovery. Furthermore, consumer staples such as food and beverages saw rapid development during the pandemic. Although in a food and beverage vertical, the penetration rate of live streaming e-commerce is still relatively low. We believe there is a great upside potential with the streamers providing precise expression and also vivid displays of food taste and flavor, as well as the bulk sales model.
spk02: The high-speed growth of the traffic advantage and the continuous improvement of the matching efficiency and product supply make us believe that the standard products also have a lot of penetration space in QS. At the same time, we are also expanding the construction of product functions such as QS shop entrance, search box, guess what you like, etc. to help us help users with clear shopping goals to quickly find the purchase entrance of the product to better meet the customer's resale needs and continue to strengthen the customer's desire to buy quickly. In the long term, we believe that by using the short video platform as the core of the live broadcast e-commerce industry, GNV will have a chance to reach 60 million RMB, and QS will continue to strengthen our advantageous position in the industry.
spk06: As a trust-based e-commerce platform with fast-expanding traffic advantage, increasing matching efficiency, and also the product supply, we believe standard products also have much room for penetration to our platform. We are stepping up efforts to develop shopping more like functions, including quiet shops, entry point, search blocks, and also guess what you like feature, which can help users who have a clear shopping target to find where exactly to get what they need better cater to users' repeat purchase demand, and keep reinforcing their purchasing mindset on Kuaishou. We believe in a medium to long-term, the total GMV of the live streaming e-commerce industry centered on short video platforms can reach 6 trillion RMB, and we will continue to strengthen our leadership in this industry.
spk08: Next question.
spk03: Next question is from Thomas Chong from Jefferies. Next question comes from the line of Thomas Chong of Jefferies. Please go ahead.
spk07: 晚上好,謝謝管理層接受我的提問。 恭喜公司提前實現了國內的業務達平。 想請問管理層我們如何在將本增銷的同時 取得更好的業務的增長。 Thanks management for taking my questions and congratulations on a very strong set of results as well as making profit for the domestic business. May I ask management, when we think of operational efficiencies and ROI approach on investment, how should we think about our top-line growth and achieve a better result?
spk04: Thank you. Okay, thank you.
spk05: Our two-week implementation of domestic business balance is indeed very exciting. The specific optimization aspects are divided into several parts. The first is at the green level. First of all, while maintaining a steady growth in the scale of business revenue, we also made a breakthrough in the control of business share costs. As core business gradually increased, business scale and influence increased, we also carried out more effective innovation and optimization of share mechanism, causing the overall share cost to decrease by 2.5%. So thank you for the question.
spk06: It is indeed very exciting that our domestic business broke even two quarters ahead of schedule. We made efforts on several fronts. First of all, our growth margin. To begin with, while maintaining steady revenue growth, we made breakthroughs in our revenue sharing cost management. As our core business grew in scale and influence, we innovatively designed and optimized a more effective revenue sharing mechanism, lowering the revenue sharing cost and also related taxes as a percentage of revenue by 2.5 percentage points quarter over quarter.
spk05: to obtain the best unit resource cost. In the first half of this year, our total market share grew by more than 40% in China. However, the market exchange cost of 1,000 minutes in China has decreased significantly. The exchange and server cost has decreased by more than 3% compared to the previous year, which has made a significant contribution to the growth of the group's net profit. In the field of audio and video technology, advanced technical PR and applications have been implemented. Combined with multiple video coding algorithms, image enhancement and audio compression algorithms have significantly reduced the total bandwidth usage. Among them, KVC is the industry's first large-scale 4th generation video algorithm that promotes online applications. Large-scale online PCDN and other integrated technologies have greatly improved the use of free low-cost bandwidth.
spk06: Secondly, upholding the principle of using technology to heighten efficiency and with efficiency keeping costs under control, we focus on tech upgrade to achieve the ultimate in cost effectiveness. In terms of server technology, we advanced the dedicated management of resources and implemented the technological innovations which improved computing and storage resources utilization rates, helping us to minimize the unit resource cost. In the first half of the year, while the total domestic time span grew by over 40% year-over-year, our bandwidth costs per 1,000 minutes in China fell significantly year-over-year. So the ratio of bandwidth and server costs to revenue dropped by over 3% points, and that contributed markedly to our overall gross margin improvements. As for audio and video technologies, we carried out advanced technology research and developed applications which, combined with multiple video codec algorithms, image enhancement and audio compression algorithms, reduced considerably our total bandwidth usage. Our self-developed codec algorithm KVC is the industry's first next-generation video algorithm standard, widely promoted and used online. And also, the large-scale launch of PCDN and other device cloud interaction and integration technologies have substantially increased the promotion of free and low-cost bandwidth usage. 二是在费用层面,首先在销售及营销费用方面。
spk05: Since the beginning of the third quarter of last year, while ensuring the growth of users, we have adjusted the structure of the organization, optimized the efficiency, and used technology and other means to maintain the decline in the demand for single users and single BAU maintenance costs, and to gradually strengthen the business management. The competitive environment has also been reversed compared to last year. In the second quarter of this year, in the case of high growth in traffic and new users, sales and sales costs have decreased significantly,
spk06: And regarding expenses, in terms of selling and marketing expenses, since the third quarter of last year, while ensuring user growth, we have been able to keep lowering the acquisition and retention costs per DAU through organizational restructuring, efficiency enhancement, and technology iterations. We also strengthened refined management of our operations, plus competition eased compared with last year. In the second quarter, with rapid traffic growth maintained and also user number reaching a new high, selling and marketing expenses as the percentage of revenue declined by 18.5% year-over-year. And lastly, we think we can optimize our personnel-related costs to revenue ratio through a series of organizational restructuring, efficiency, and cost initiatives, moving closer to the industrial leading level. At the concerted efforts of all in the company, we notably narrowed our losses. We will continue to explore more monetization models and improve the monetization efficiency while following an efficient growth path to increase revenue while reducing costs. and also which will give us a solid foundation to unlock the value in the medium to long term.
spk08: Next question.
spk03: Next question is from Credit Suisse's Kenneth Fong. The next question comes from Kenneth Fong of Credit Suisse. Please ask your question.
spk00: Thank you, Mr. Guan, for accepting my question. Congratulations on a very strong performance. I have a question about QI recruitment. Can you update us on the latest progress, growth strategy, as well as the plans for monetization? Thank you.
spk04: Thank you for your question.
spk02: First of all, the population of Lanling is more than 4.5 billion, which accounts for 50% of the national labor population. It is the largest recruitment group. However, with the decline of the population and the emergence of labor shortage, the Lanling recruitment market has turned into a supply or user-driven industry. However, we are concerned that these users have not been served well in the past, which leads to a lot of problems in the recruitment industry. For example, the information is not symmetrical, the false information is horizontal, the contract quality is not good, etc. At the same time, for the labor companies, the recruitment conversion rate is low, the recruitment cost is high, the size of the performance is poor, etc. The problem of waiting to be solved. In the post-pandemic era, Thanks for the question.
spk06: First, China's blue-collar population exceeds 450 million, accounting for half of the country's working population and are the most in-demand workers in the country. With the population bonus diminution and also the labor shortages arise, the blue-collar recruitment market has become supply or user-driven. However, we have noticed that in the past, these users have not been adequately served and blue-collar recruitment market has many pain points. such as inadequate access to information, false information, inconsistent contract performance quality, et cetera, et cetera. And for employers, they also face challenges that require urgent attention, such as low recruitment conversion rate, high recruitment costs, and also poor economies of scale. In a post-pandemic era, we have spotted opportunities in blue-collar recruitment. Also, as the most favored short video and live streaming platform of blue-collar users, we see it as our responsibility to step up and deliver better solutions to industries, giving superior user experience to blue-collar workers and higher conversion efficiency to enterprises.
spk02: Qunshou, in terms of the efficiency of online marketing, is based on three core capabilities. First, it is the basic capability of user size. In the second quarter of this year, our fast recruitment business, Qichong's MAU, has exceeded 250 million. It is the largest domestic user-sized online marketing platform. Another important thing is the impact of user base on the business transformation model. Compared to the daily entertainment consumption, the demand is relatively low. Blue-collar users have to change jobs three to five times a year. For traditional platforms, users will download or no longer be active after finding a job. Therefore, a large amount of budget will be invested in customers. In the end, higher business and traffic costs will be paid by hiring companies. And Queshou's advantages in online blue-collar recruitment efficiency and experience are primarily built on our three core competencies.
spk06: The first one is the scale of our user base. In the second quarter of this year, the unique MAUs of Kuai recruitment reached 250 million, making it online blue-collar recruitment platform with the largest user base here in China. Equally important is the impact of our user base on the business conversion model. Compared with daily recruitment or entertainment consumption, job hunting is a low-frequency user behavior. As blue-collar workers change jobs three to five times a year, for conventional recruitment platforms, users will uninstall the app, or the app will become idle after a job is found. So consequently, a larger budget has to be used on user acquisition, and eventually, recruiters pay the bill for higher operations and traffic costs. However, here at Kuaishou, Our rich, short video and also live streaming content play a crucial role in driving user acquisition and retention. Building on this advantage, we provide recruitment services effectively improving CME operating efficiency while also lowering recruitment costs for enterprises.
spk02: The second benefit is the long-term long-term contract. Trust is an extremely critical factor in the recruitment process. For example, 80% of the second-tier blue-collar applicants are low-income applicants. The impact of the COVID-19 pandemic on companies and positions is very important, so it is very good to reduce the number of applicants. The live-streaming interaction mode is also used to better understand the key information of the working environment and work content. At the same time, it builds trust in the broadcaster and the enterprise. This kind of real-time interaction and trust-seeking experience is not satisfied by traditional search and information display modes. Entering the offline booking phase, because the broadcaster has already accumulated valuable user assets on the quick hand, the broadcaster has greater motivation to make good bookings. Then the quick hand is also for users. And second factor is our ability to build trust.
spk06: Trust is absolutely critical in blue-collar recruitment. Taking the secondary industry as an example, 80% of the blue-collar job seekers are job hunting across provinces. Considering the impact of the pandemic, it is very important for these job seekers to have a better understanding of potential employers and also positions so that they can save relevant expenses. And also the interactive model of price show live streaming allows users to obtain crucial information such as work environment and job content, while establishing trust with live streamers and employers. A trust-based, real-time, interactive job-hunting experience cannot be satisfied by traditional search experience or job listing. In addition, since our streamers have accumulated valuable user assets on Kuaishou, they are motivated to honor their service agreements for offline stages of the recruitment process. Kuaishou also provides users with a complaint channel. Our long-term operation mindset and trust-based model gradually cultivated through the mutual trust and public supervision, provide recruitment experiences and conversion rate far exceeding the traditional bargaining model, and also ultimately reduce the dispatch of false information and fraud against users during contract fulfillment offline.
spk04: The next is the ability to distribute and match.
spk02: The fast hand is large and the flow structure of the wind is very good for national distribution. For blue-collar photos, it is more conducive to do high-efficiency flow matching to form a scale effect. It is very suitable for doing large-scale batch photos in a short time. Our industry-leading MMO technology can deeply understand the content and combine user characteristics identification to better do data cold start. The long-term accumulation of algorithmic technology is used to provide accurate matching, increase the flow rate of power, increase the number of views and bid rates, and finally form a high-efficiency, accurate, and real service chain. According to the feedback from the recruiters, our entry success rate is very competitive in the industry. The third advantage is our distribution and matching capability.
spk06: with vast and diverse traffic, special Excel nationwide traffic distribution. Our efficient traffic matching and economies of scale make us well-suited for large-scale and rapid blue-collar recruitment. Our industry-leading MMU technology is capable of deeply understanding the multimedia content, which, combined with user characteristics recognition, enables better recruiting whole staff of data. In addition, we introduced algorithm technology to precisely match supply and demand while also boosting public domain traffic allocation, thereby improve both number of views and specific conversion rates. And also ultimately build a highly efficient, accurate, and authentic service chain. From recruiters' feedback, our placement conversion rate is very competitive in the industry, and we are one of the most effective options for enterprises. In summary, The advantages of our vast business model, the real-time interactive nature of live streaming, and the trust factor deeply embedded in our DNA have lowered the job hunting threshold for blue-collar workers and increased the recruitment conversion rate for enterprises.
spk02: We have achieved some key results and observations in our recent business. In June this year, when we launched our fast-growing business for half a year, the daily income of the fastest-growing business has exceeded 360,000 yuan, and the volume has quickly risen to the second-largest in the industry. However, our investment in related production resources is significantly lower than that of other online recruitment platforms. With the rise in business volume, our online recruitment industry has also formed a certain volume. More and more companies, intermediaries, and anchors actively seek and cooperate with QS, and even sign up QS as the center of the business. This is conducive to the formation of non-reliable sales and the establishment of new users and content mutual integration. By the end of June, our number of cooperating companies has exceeded 100,000. At the same time, we have seen that Lanling's recruitment business and platform core consumption indicators have appeared in the same direction. We recently made some key milestones in the recruitment business and also have some observations. In June of 2022, the half-year SYNX coin recruitment was launched. The peak number of daily
spk06: resumes submitted reached a high of over 360,000 and also seeming rather quickly the second place in the industry in this scale. However, the resources that we have invested in products and research related to the business is considerably less than those of other blue-collar recruitment platforms. Furthermore, as the business grows, so does our brand recognition and voice in the blue-collar recruitment industry. increasing number of enterprises, agencies, and live streamers who are actively seeking cooperation with Kuaishou and even relocating their focus offices onto Kuaishou conducted to producing a flywheel effect as well as building a mode for defending user mindset and relevant content. At the end of June, we had more than 100,000 corporate partners. Meanwhile, We have noticed that our blue-collar recruitment business and our platform's core consumption indicators are trending in the same direction. This shows that our industrial content, such as blue-collar recruitment, has a good extent to satisfy users' livelihood needs and, in turn, encourage them to make quite sure of their preferred platform. And, as such, we have reached the cross-business communities.
spk02: We also started a small-scale marketing business on the blockchain. The results are not bad. Other more advanced business blockchain models are also exploring. This year, we will continue to polish the business and content, increase the registration size, increase traffic efficiency, and run the commercial mode. We expect the blue line to reach 30% by 2025-2026. On monetization, we've initiated small-scale trials of advertisements and achieved promising initial results.
spk06: We are also exploring more in-depth monetization models. This year, we will continue to refine our operations and content, expand the scale of job applications, improve traffic utilization efficiency, and test our business models. We expect the online penetration rate of blue-collar recruitment to reach 30% in 2025 or 2026, and the market size to reach around 100 billion. We hope to capitalize on advantages to enhance the recruitment experience for the entire industry, while improving online conversion rates and capturing a leading share of $100 billion worth of online blue-collar recruitment markets.
spk04: Today's Q&A session is over. Now, let's have Heather make a summary speech.
spk08: Thank you once again for joining us today. If you have any further questions, please contact our capital market and investor relations team at any time.
spk06: Thank you.
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