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spk01: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Kuaishou Technology Third Quarter 2022 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management prepared remarks. The English line will be in listen-only mode. And please be noted that we have a recording. I will now turn the call over to Mr. Matthew Zhao, VP of Capital Market and Investor Relations at Kuaishou Technology. Thank you, operator. Good evening and good morning to everyone. Welcome to our third quarter 2022 Financial Results Conference call. Joining us today are Mr. Cheng Yixiao, Co-Founder, Executive Director, and CEO. Mr. Jim Bing, Chief Financial Officer. Before we start, we would like to remind everybody that today's discussion may contain forward-looking statements. which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and discussion. The company does not undertake any obligation to update any forelooking information, except as required by law. As for the important information, including the forelooking statement, please refer to the company's public information or the announcement of its third quarter of 2022 results of the period ending 30th of September of 2022, published earlier today on the company's iWebsite. During today's call, management will also discuss certain non-RFIRS financial measures for company's purposes only. And for a definition of non-RFIRS financial measures and a reconciliation of RFIRS and to non-RFIRS financial results, please refer to our results announcement for the third quarter report ended September the 30th of 2022 issued earlier today. For today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous interpretation into the prepared remarks session and conceptive interpretation during the Q&A section. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail. Finally, all references to currency, units, in the conference call aren't going to be unless otherwise stated. Now, give the floor to Yixiao. Hello, everyone. Welcome to Kuaishou's third quarter 2022 earnings conference call. The third quarter of 2022 was full of challenges for our company and our organization. Like everyone else, we faced multiple headwinds such as macroeconomic slowdown and resurgence of the COVID-19 pandemic. Amidst these challenges, We continue to achieve breakthroughs in both business operations and financial performance by making our remaining efforts to overcome external difficulties. In third quarter of 2022, our domestic year use increased 13.4% year-over-year to a record high of $363 million. At the same time, operating profits for our domestic businesses in the third quarter remained positive for the second consecutive quarter, increasing by nearly three times compared with the second quarter. Our group suggested EBITDA also continue to improve in the third quarter of 2020. Before going into detail about our business progress in the third quarter, I would like to share with everybody the consideration behind our recent organizational and personnel adjustments and my thoughts now that I'm directly responsible for our e-commerce business. Over the past few months, we have reviewed our organizational capabilities, structure, and personnel with respect to the construction of our commercial ecosystem and made corresponding adjustments to continue shifting our efforts and resources to a sustainable and healthy development of our ecosystem of commerce. We established a company-wide commercial ecosystem committee. We also named a new head of online marketing, appointed an algorithm expert to lead QISO's apps, products, and operations, and upgraded our local services unit into an independent business department. We made these adjustments based on our plan for Kuaishou's future development and transformation. Specifically, the Commercial Ecosystem Committee will facilitate the coordinated development and integration of our monetization avenues, including e-commerce, online marketing, and live streaming. It will promote collaboration and resource sharing among business units, achieving the goal of healthy and sustainable commercialization through in-depth collaboration. Our adjustment with respect to the head of online marketing was intended to better respond to a quickly evolving and increasing tough challenges in the online advertising market. Through the Commercial Ecosystem Committee's coordination, we realized the tremendous potential of integrating our traffic ecosystem and commercialization. Wang Jianwei, our new head of online marketing, is deeply involved in the Commercial Ecosystem Committee and is very adaptive at identifying problems and opportunities. He has also profound customer insights and understanding of traffic monetization. We believe he's well-equipped to dissect complex problems and create synergy between online marketing and traffic and the content ecosystem. In addition, Mr. Yu Yue, as a recommendation algorithm expert and head of the algorithm team, has an in-depth understanding of our community-based ecosystem. Also, our algorithms have always been one of the key drivers for our DAO growth. Going forward, as Mr. Yu Yue takes charge of Kuaishou SaaS products, operations and algorithms, we can further unlock the technological power of algorithms in product operations and our content ecosystem, thereby discovering more business breakthrough opportunities. At the same time, we will seek to reinforce our organization's competency and efficiency by implementing cross-departmental rotation for our mid-level managers. This will help them expand their capabilities and at the same time enhance their abilities to cross-business collaboration through sharing practical experience in different businesses. As for the e-commerce business, you may be curious as to why I'm heading it directly. E-commerce is one of the key growth engines for the future development and the center of our commercial ecosystem. I'm in charge of it directly, not because anything is wrong with the business and its CEO is coming to rescue. On the contrary, we recognize and appreciate the unrelenting efforts that our e-commerce team has made, as well as their outstanding achievements. It is precisely because our e-commerce business has quickly grown to its current size and scale that we need to think about its development direction and model from a long-term perspective. We also need to make right choices that will truly elevate our user experience and promote merchants' healthy development. When it comes to making choices and trade-offs, I'm in a position of strength in terms of courage and confidence than others in our organization. As a result, in addition to my responsibility as CEO to oversee strategy, business decision-making, and organizational management, I will spend most of my time and effort on e-commerce for a considerable period of time. I hope to work with the team so that our e-commerce businesses can play a greater role in crisis commercial ecosystem by better servicing our users and empowering merchants, brands, and co-els. We believe that although the e-commerce industry has entered a mid to late stage of intense competition compared with the traditional shelf-based e-commerce, Content-driven live streaming and short video e-commerce still hold immense potential that can be tapped into through innovation. First, we need to build a merchandise system. Among the three key elements of e-commerce, buyers, merchandise, and platform, we need to continue enhancing our standing and control of the merchandise element. We will build out a merchandise system to strengthen our knowledge in this regard and that cost-effectiveness valuation of merchandise to our traffic allocation logic. At the same time, we will improve our merchandise distribution library to guide and help KOLs to choose the right high-quality products. As a result, we will postpone the official launch of our Shopping Mall service until we further develop our merchandise understanding and control and cultivate our users' mindset and time spent on merchants or brands. Second, we will establish holistic public domain traffic allocation logic. Right now, We allocate traffic relatively independently and evenly for advertising and e-commerce. But we need to consider these two holistically when deciding on traffic allocation. For example, merchants can leverage advertising traffic to make recommendations to potential buyers. Consequently, we will align the advertising traffic allocation mechanism with e-commerce needs and direct traffic with the same end goal. gradually forming a positive cycle from the public domain to private domain. In the meantime, we will strengthen e-commerce's own traffic allocation mechanism through top-down planning. We will pay attention to the competition mechanism and business health indicators and continuously improve our merchandise mix and revenue structure. Third, we will continue to optimize user experience and LTV through algorithms. In the past, Our e-commerce algorithms mainly focus on user interest exploration and the matching between buyers, sellers, and merchandise before orders were placed. Going forward, we will place more emphasis on algorithms' continued contribution along the entire e-commerce value chain, such as enhancing mid- to long-term conversion by monitoring the relationship between long-term high-value users and merchants. In addition, we will incorporate key experience indicators such as the product return and the negative user feedback and complaint rates into our recommendation algorithm to constantly enhance user experience and the overall e-commerce ecosystem. In the future, we'll make persistent efforts in these areas and I will share my strategic thinking on e-commerce business with you from time to time. Next, I will discuss our key business developments in a third quarter. First, user growth and ecosystem construction. In the third quarter of 2022, we achieved high-quality user growth. We seized opportunities during the peak user growth season, including summer vacations to implement our effective user acquisition and retention strategy and achieve a healthy ROI. In the third quarter of 2022, average year use of QysoApp increased by 13.4% year-over-year to reach a new high of $363 million. An average annual use grew by 9.3% year-over-year to a record-setting $626 million. The DAUs to MAUs ratio remained relatively high at 58.1%. Average daily time spent per DAU increased by 8.6% year-over-year to 129.3 minutes, demonstrating robust user sickness and vibrant community activity on our platform. In addition, continuing the momentum from last quarter, our total video views grew at a faster pace compared with total user time spent in the third quarter. Notably, our daily peak video views passed the milestone of $100 billion. Thanks to a refined management and improved efficiency of our user acquisition system, we reached our expected user growth target while continuing to strictly control our investment scale in user growth. Specifically, we expanded our efficient customer acquisition channels through algorithm strategy optimization and retained users at a constantly low cost per DAU by refining our algorithm-based operations to target different users groups. In addition, as we reinforce our differentiated social platform and user mindset, as of mutual followers on Kuaishou app grew substantially by 63.1% year over year in a third quarter to reach a cumulative 23.5 billion. Our original short video content ecosystem is the foundation of our platform. as of September 30th of 2022. We had more than 2 million creators who had more than 10,000 followers each, and our creators had accumulated a total of nearly 300 billion fans. The number of works released by our creators and the total number of generated interactions have both increased considerably. At the end of third quarter, the number of cumulative video uploads on Kuaishou app exceeded 550 billion, and during the quarter, our short videos sparked more than 4 billion interactions on a daily basis, up 40% year-over-year. Meanwhile, strengthened by our supportive policies, the commercial value of our creators' content continues to grow. Over the past year, more than 6 million creators have received traffic support on a scale of 100 million RMB. And in addition, we helped 20 million creators earn revenue every year for three consecutive years. In July, we hosted our annual Photosynthetic Creators Conference. And going forward, we will continue to upgrade our services, resources, and products for creators. We also subsidize outstanding creators through traffic incentives and revenue opportunities to maximize the flywheel effort in the creator ecosystem. We have also been active expanding short video content supply in various verticals. In the third quarter of 2022, we continue to tap into the potential of short plays and explore more diversified themes, such as Benevolence, a portrait of the professional lives of medical staff, which has ranked in more than 170 million streams since its launch. Our sports vertical has been growing in its diversity. For example, the collaboration with NBA, we launched a unique IP in September, the Village Basketball Championship Cup of the Village Basketball Association, which registered 120 million live streaming viewers and 244 million total streams. By organizing village basketball content, we connected grassroots KOLs with top-tier competition events, promoting basketball in rural Chinese areas. As the riders show vertical, our self-produced intergenerational interactive experience reality show, Let's Go Mom, satisfy our users' more diverse video content needs through a narrative and dissemination format that combines long video, short video, and live streaming. When the show ended September 25th, cumulative video views on our platform surpassed 524 million, now generating 94.34 million cumulative interactions. In addition, Our ability to constantly optimize and iterate our content algorithms is a key to enhance the user experience and satisfaction. In the third quarter, we optimize user retention and long-term content consumption satisfaction rates by modeling users' long-term interests. We also use reinforced learning tools combined with the undervised intellectual technology. Meanwhile, we sought to motivate users to break through their information cocoons and further improve the experience by leveraging methods that foster diverse interests and also promote exploration second our progress in commercialization at each of our business lines in the third quarter of 2020 revenue from online marketing services was 11.6 billion rmb up 6.2 percent year-over-year macroeconomic headwinds compounded by various external factors have challenged the online advertising industry as a whole and we are no exception Due to the muted rebound in the advertising market, year-over-year revenue grew from the online marketing services decelerated, with third-party advertising particularly impacted in the third quarter. As customers slashed their marketing budgets, we sought to unlock users' commercial intent by constantly improving our product commercialization and utilizing content and user labels. Users' commercial intent then feedbacks to our content recommendations thereby establishing a virtuous cycle of user content and commercial ecosystem. With these efforts, our monthly active advertisers increased by more than 65% year-over-year in the third quarter. We also continuously improve advertising ROI on our platform through algorithm optimizations. And as such, the advertiser retention rates continue to increase. As our e-commerce business expands, the advertising services that we have provided our native e-commerce merchants have maintained healthy growth momentum, Thanks to our platform's massive traffic and high conversion efficiency of our closed-loop ecosystem, we encourage advertisers who are leading live streaming consumption but below average in short video consumption to increase the short video usage and vice versa. By doing so, we promoted native advertising merchants' combined usage of short video and live streaming. As a brand advertising, we capitalized on customized promotion projects such as August 28th Car Shopping Super Festival, and the Blooming Chinese Ingredients Beauty and Skincare Promotion Event. These promotional projects serve to explore brand advertising tailored to advertisers' specific needs and to open more possibilities for advertisers to increase their marketing effectiveness. Our product iteration and enhancements, Advantage in Traffic, Content, and Killwell ecosystem were key efforts and efforts. Recently, we established a service team for various industry verticals with deeper insights into industry characteristics and more data analytics, Along the value chain, we aim to meet the precise needs of advertisers in different industries. We also aim to improve our overall service capabilities and drive higher ROI for advertisers, ultimately boosting our overall commercialization efficiency. In the third quarter of 2022, our e-commerce business grew at a faster pace than the market and continued to gain market share. Our e-commerce GMV reached 222.5 billion RMB, up by 26.6 percent year over year. On the supply side, we attracted more merchants by leveraging our traffic advantage, conversion efficiency, and our constantly improving promotional policies. In the third quarter, new merchants joining our platform increased by nearly 80% year-over-year. We also enhanced our merchant empowerment system through strengthened merchant services and governance, which in turn improved the operational capabilities. Meanwhile, more efficient Traffic allocation strategies and more precise buyer-seller and product matching allow us to actually increase the conversion efficiency and the operational environment of our platform. As a result, the number of active merchants on our platform grew at a high double-digit rate year-over-year in the third quarter of 2022. In addition, we made progress in helping the new merchants with co-starts by establishing a dedicated traffic pool for the startup merchants, which is including high traffic efficiency quarter-over-quarter. We also consolidate service provider resources to facilitate rapid merchant growth and sales ramp up. Furthermore, we have been identifying new efforts in brand e-commerce. We continue to foster distinctive quiet brands to bolster their operational service capabilities through dedicated traffic and also supported policies, providing customers with products and services with a high value experience ratio. Powered by these initiatives, a number of quiet brands grew by double-digit growth over quarter over quarter in the third quarter of 2022. accounting for an increasing large share of e-commerce GMB. In addition, we have bought in more well-known brands and teamed up with established brands to launch Super Brand Day during the August 18 brand promotions. Our brand merchants' GMB increased by 192% year-over-year. On the consumption side, we're constantly emphasizing the trust-based community advantage to elevate users' shopping experience. With trust as our cornerstone of our e-commerce ecosystem, we upgrade our user review system to improve feedback collections, monitoring, and handling. and more effective by identifying users and scenarios with super experiences. These allow us to build up the positive and proactive service capabilities, cultivating user mindsets, and recognizing of the utmost user protection on our platform. We also integrated our shop experience scoring system in a third quarter to help us discover high-quality merchants. With a widened coverage of our user system, including trusted purchase, we effectively improved our sales service fulfillment on our platform and increased our repeated purchase rate by 1.1% in the third quarter of 2022. Furthermore, our e-commerce preparation and also penetration and coverage and conversion deepened further, driven by continuous upgrades in our merchant supply content and merchandise user matching. In the third quarter, we focused on expanding users consumption is now risk beyond traditional live stream and to show video to boost the user activity. Meanwhile, we offered the payer shopping guidance across the different merchandise categories, as well as more refined subsidy processes. This drove number of monthly active e-commerce paying users to only 100 million and third quarter along with the continuous expanding our pool quarter over quarter. Regarding traffic use and matching, we have also strengthened our public domain traffic efficiency to create a dual engine model driven by both public and private domains. We increased accuracy of merchant user matching by in-depth exploration of the user experience. And also, thanks to Zephyr, the GBV of the public domain e-commerce live streaming and short video nearly doubled in September compared with that of the June. In third quarter of 2022, our live streaming business discovered and delivered a stronger performance that exceeded our expectations. Our revenue increased by 15.8% year-over-year to 8.95 billion RMB, driven by the continued requirements to our live streaming operation. We further increased diversity and also entertainment value of our interactive features in live streaming and fulfill users' social needs. Meanwhile, we built a user life cycle management mechanism to improve our live stream paying ratio in the third quarter of 2022. Our monthly paying ratio continued to expand year-over-year, and average MPUs for the live streaming rose by 29.3% year-over-year to 59.6 million on quiet apps. And also, on the supply side, our collaborative strategy with the talent agencies continued to evolve and become more diverse. Through joint operations and onboarding external streamers, talent agencies have become more deeply involved in our live streaming ecosystem, increasing the number of monthly active streamers that manage by more than 200% year-over-year and third quarter. Empowered by talent agencies, the live streaming frequency and average daily income of the streamers in joint operations increased by about 10%, relatively preparing the growth in both scale and total income for streamers managed by talent agencies. In addition, we further expanded the contextualized live streaming user scenarios such as quiet hire, ideal housing, and quiet date, providing users with a richer live streaming content and meeting their service needs in more scenarios. Finally, an update on our overseas business. Building a solid foundation with every penny well spent remains our guiding principle. Filled by our constant adherence to ROI-based growth, strategy, and disciplined spending, we achieved effective and healthy user growth, and our user retention continued to improve in the third quarter of 2022. And the average time spent per DAU in OBSIS market remained a high level of over 60 minutes. Drastically, the key markets have been focusing on the Brazil and Middle East and Indonesia. In Brazil, cultivating user mindset through a differentiated content strategy that diversify internal results and initial results to build on this success, we are expanding the number of content verticals to further enrich the content ecosystem as we're enforcing the virtuous cycle between content generation, consumption, and creative monetization. With respect to monetization capabilities, thanks to our commercialization team's continuous optimization of product and service capabilities and our efforts to promote quiet brand awareness among the advertisers, our revenue from advertising services grew rapidly. For live streaming, we have constructed a more comprehensive set of ecosystem infrastructure, even in collaboration with Italian agencies to further diversify content supply and enhance the content quality, and hosted diverse operating activities across various regions, all of which have proven a continuous increase in live streaming revenue. Going forward, we also actively explore cooperation opportunities with local e-commerce partners. By simultaneously increasing revenue and controlling expenses, we seek to further enhance the operational efficiency of overseas businesses and gradually reduce negative impact on our group's overall financial performance. In conclusion, looking back to our performance and looking forward, we have and will always uphold and practice our core belief at Kuaishou Being customer obsessed, despite the many internal and external challenges faced, creating value for creators and customers is the starting point and endpoint for everything that we do. We firmly believe that we study to improve our commercial ecosystem through unremitting efforts. We will undoubtedly create sustainable value for our users, partners, employees, and shareholders. This concludes my prepared remarks. Thank you. Next, our CFO, Mr. Jin Bing, will discuss companies' financial performance. Thank you, Vishal. And hello, everyone. We will have a closer look at our financial performance for the third quarter of 2022. Despite the ongoing macro headwinds, we continue to drive healthy traffic and top-line growth while sustaining the upward trend in profitability. Our domestic business delivered operating profit for the second consecutive quarter, which reached 375 million RMB, with a quarter-over-quarter increase of nearly three times. Meanwhile, enhancements to our monetization capabilities in an overseas market and our ROI-based approach to user acquisition and retention spend narrowed our operating loss margin with our international business. Our revenues for the third quarter grew by 12.9% year-over-year to R23.1 billion. This increase was mainly driven by revenue growth in our online marketing services, e-commerce business, and live streaming business. Revenue from online marketing services reached 11.6 billion RMB in the third quarter of 2022, up 6.2% year-over-year, which was largely driven by growing advertisers on our platform. We are constantly working to improve the effectiveness of our ad products and services as such drive ROI for advertisers' partners. This allows us to achieve positive growth in an on-search and macro environment. In particular, as the e-commerce business on our platform expands, The advantage of our closed-loop system in the conversion efficiency and traffic has become even more evident, underpinning the resilience and healthy growth of our online marketing services provided to our e-commerce merchants. Other services revenue for the third quarter of 2022 increased by 39.4% year-over-year to 2.6 billion RMB, mainly due to the strong growth in e-commerce revenues. To leverage in our unique trust-based e-commerce models, to attract and empower more merchants, including both well-known brands and quiet brands, and expanding user consumption scenarios beyond traditional live streaming to short video and more. We gain further market share in e-commerce and our e-commerce GMB increased by 26.6% year-over-year to 222.5 billion RMB in the third quarter of 2022. revenue from live streaming grew by 15.8% year-over-year to 8.9 billion RMB. This was primarily attributed to the continuous improvement in both our live streaming content quality and user content matching efficiency, which boosted the average live streaming MPUs by 29.3% year-over-year to 59.6 million. Our cost of revenues for third quarter of 2022 increased by 3.7% year-over-year to 12.4 billion RMB, representing 53.7% of our total revenues. The year-over-year increase was mainly due to the increase in revenue-sharing costs and relative taxes, which were in line with our revenue growth. We partially offset this by optimizing the efficiency of our bandwidth usage and reduction of bandwidth expenses and server custody costs. Gross profit for the third quarter of 2022 reached 10.7 billion RMB, growing 28.5% year-over-year. Gross profit margin in the third quarter of 2022 was 46.3%, improving 4.8 percentage points year-over-year and 1.3 percentage points quarter-over-quarter. Our year-over-year increase in gross profit margin was primarily a result of further optimization of bandwidth and server efficiency, which drove a decrease in the ratio of bandwidth and depreciation to revenue. The quarter-over-quarter improvement in gross profit margin was mainly due to the reduction in other costs. Selling and marketing expenses decreased by 17.1% year-over-year to 9.1 billion RMB for the third quarter of 2022, or 39.5% of total revenues. This marks a significant improvement from the prior year period in which sales and marketing expenses were 11 billion RMB, or 53.8% of total revenues. as we adopted more disciplined and efficient user acquisition and retention methods while sustaining strong traffic growth. Research and development expenses for third quarter of 2022 were 3.5 billion RMB decreased by 16.2% year-over-year, primarily due to the decrease in employee benefit expenses, including the related share-based compensation expenses. Administrative expenses for third quarter of 2022 were 1.1 billion RMB increasing by 16% year over year, primarily due to the increase in employee benefit expenses, including share-based compensation expenses. Our operating loss for the third quarter of 2022 continued to narrow, improving to 2.6 billion RMB from 7.4 billion RMB in the third quarter of 2021 and 3.1 billion RMB in the second quarter of 2022. As a result, Our operating margin expanded by 24.8 percentage points year-over-year and 2.8 percentage points quarter-over-quarter, improving from negative 36.1% in the third quarter of 2021 and negative 14.1% in the second quarter of 2022 to negative 11.3% in the current reporting quarter. Adjusted net loss for the third quarter of 2022 was 0.67 billion RMB narrowing substantially from 1.3 billion RMB in the second quarter of 2022 and 4.6 billion RMB in the third quarter of 2021. This resulted in the adjusted net margin improvement from a negative 22.5% in the third quarter of 2021 and negative 6% in the second quarter of 2022 to negative 2.9% in the third quarter of 2022, representing an increase of 19.6 percentage points year over year and 3.1 percentage points quarter over quarter. We maintain a healthy balance sheet with cash and cash equivalents, time deposits, restricted cash, and wealth management products of 43.5 billion RMB as of September 30th of 2022. In conclusion, we will further monetize our massive user traffic that is continuing to grow by promoting tighter integration between our user content and commercial ecosystems and providing expanded opportunities for advertisers and merchants. We also continue to focus on the cost control and operation efficiency to advance our domestic businesses operating profit and close the gap on our loss in the overseas businesses, which will further enhance our resilience and brings us closer to our goal of long-term sustainable profitability. It concludes our prepared remarks. We will now open for questions. Operator, please go ahead.
spk08: We will now begin the question and answer session. To ask a question, please press star 1 on your telephone. If you would like to cancel your request, please press the pound or hash key. 我们现在进入问答环节。 第一道问题是来自 Credit Suisse的 Kenneth Fung. The first question comes from Kenneth Fung from Credit Suisse. 请提问。 Please ask your question.
spk06: 我想請教一下這管理層,廣告組在投放預算以及信心的恢復的情況如何呢? 我們應該怎麼看待廣告市場在未來6到12個月的趨勢? 以及在宏觀不確定的情況以下,我們公司會如何應對呢? 我繼續翻譯一下。 Thank you very much for taking my questions and congrats on the solid quarter. I have a question on advertising monetization. What have management seen so far from advertisers? in terms of their budget and sentiment. How should we think about the advertising market outlook for the next 6 to 12 months? Amid the challenging macro, any active measures that we are doing? Thank you.
spk07: In 2022, the number of online advertising ads will be in the middle. This also reflects our online marketing service income in this quarter. But as I mentioned in my previous presentation, we will improve the business-oriented product infrastructure, and better deal with market environment and make breakthroughs in services such as detailed industry management and service management.
spk01: Thank you for your question. As we move through the second half of the year, the recovery in the advertising market has been relatively weak. According to the third party forecast, online advertising growth rate will be around mid single digit in 2022. The declaration in the year-over-year revenue growth of our online marketing services in the third quarter reflected this dynamic. But as I mentioned previously, We will better respond to the market environment and make breakthroughs by improving our commercial products and infrastructure capabilities, as well as refining our management and services based on industry verticals.
spk07: In terms of internal circulation, thanks to the advantage of platform traffic and the transition efficiency of the closed-circuit ecosystem, internal circulation advertising revenue has maintained a healthy growth. In addition to continuous pull, short-time products, live broadcasts, and internal circulation users, we also carried out product strategy upgrades, and optimized the delivery of short-time products by recommending methods such as short-time products, flow, and mix strategy.
spk01: Advertising from our e-commerce merchants maintained healthy growth due to our traffic advantage and the strong conversion rate in our closed loop ecosystem. We have continuously encouraged native advertisers to adopt short video plus live streaming formats for merchandise promotions. In addition, we have upgraded our product strategy and optimized our advertising performance by iterating our recommendation algorithms and driving traffic acquisition through short videos, among other strategies.
spk07: In terms of external circulation, our central industry of external circulation advertising customers For example, online clothing, e-commerce, and games were all affected by the flood in the third quarter. Many customers in these industries have continued to reduce their costs from the beginning of the year. So the three-weeks have had a greater impact on the budget. We are also recovering the pace of some of the relatively fast-growing industries, such as fast food, food and drink, and transportation. These industries are continuing to grow. But in the background of the entire industry growth method, We believe that only by continuously training our internal workers and making commercialization a top priority, we can seize more sales opportunities and market share in the foreseeable future when the market recovers and consumption recovers.
spk01: In terms of advertising services for external advertisers, the key industries in which we used to focus, such as online services, e-commerce, and games, were all impacted by the macroeconomic environment in the third quarter. Since the beginning of this year, many customers in these industries have been controlling costs and improving efficiency, and as a result, their ad budget declined fairly significantly in the third quarter. At the same time, industries such as FMCG, food and beverage, and transportation have recovered more quickly on a relative base. In these industries, we will continue to intensify our efforts. However, given the industry-wide slowdown in growth, we believe that we can only gain more opportunities and budget allocations in this foreseeable future when the market improves and consumption recovers by continuing to cultivate our strength from within and solidifying our underlying commercialization capabilities.
spk07: for example, the increase in traffic, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, and the increase in traffic by using the original advertising method in the Y-Circle, the accuracy of the model, and the effect of the investment, and improve the effect of the transition after-line through the data and experience advantage of the closed loop.
spk01: Specifically, our initiatives are as following. First, we have continued to promote the growth of our advertiser base and attract local customers through location-based traffic support and customer acquisition channels. Second, we have constantly optimize our ad products, performance, and infrastructure. Our initiatives include strengthening our user commercial label system, improving our algorithm model, and enhancing the accuracy of our ad recommendations, all aimed at enhancing conversion efficiency. Third, we will continue to expand our traffic resources and promote native advertising for external advertisers. Native advertising can attract more traffic to external advertisers. which will in turn drive an increase in both exposure and eCPM. We will also continue to optimize our traffic strategy to improve our sales funnel conversion rate, as well as our ad exposure and performance. For example, we changed the order of users' browsing context to recalibrate the advertising exposure, click-through, and conversion forecast, thereby improving our model's accuracy and conversion efficiency. We also improved the funnel conversion efficiency through leveraging our closed-loop data and advantage in user experience.
spk07: we believe that the long-term share of the online advertising market will continue to grow.
spk01: In short, we continue to monitor the recovery pace of the overall online marketing market, or I mean advertising market, and also hold a strong confidence in the long-term market development. No matter how the short-term market fluctuates, through honoring our team and strengthening our foundational and fundamental capabilities, We firmly believe that our share in online advertising market will continue to increase in the long run.
spk08: Thank you. The next question will be from Goldman Sachs' Lincoln Kong. The next question will come from the line of Lincoln Kong of Goldman Sachs. Please proceed to ask your question.
spk05: Thank you, Daniel. Thank you for my question. My question is about e-commerce. Can you share with us some of the trends in the third quarter of the company, such as active buyers, orders stopped, and customer orders? Now that we are in the fourth quarter, can you tell us about the situation of Double 11 and whether GMV's goals have changed throughout the year? We also saw that the company opened the outside chain of Taobao and JD. How should we think about the overall environment of our company's closed-off e-commerce? My question is about the e-commerce. So I want to understand more about the third quarter trend in terms of monthly active customer, purchase frequency, and average ticket price. As we enter the fourth quarter, how is the single-state performance any change in terms of the annual GMB target? Can Benjamin also share the rationale for opening I will talk about JD external links and what's the implications for our inclusive e-commerce ecosystem.
spk07: Thank you. Thank you for your question. First of all, regarding the consumer data of the third quarter, the number of active buyers in the third quarter has exceeded 100 million. The supply penetration rate has exceeded 15%, and the share price has continued to rise. The driving factors include, one, we focused on multi-layer scene penetration, In addition to the traditional live broadcast environment, we expanded the short-time frequency scene. At the same time, we strengthened the basic facilities such as fast-charging small stores and guess-what-you-like to improve the activity of users. Second, we realized a more accurate and economic supplementary strategy. Third, we continued to strengthen the anti-loss strategy of active buyers, perfect the user rating and feedback system, and optimize the user experience. At the same time, we actively identified
spk01: Thanks for your question. First, regarding our e-commerce data on the consumption side in the third quarter, the number of monthly e-commerce paying users surpassed the 100 million milestone, with a paying user penetration rate of over 15%, thereby sustaining year-over-year and quarter-over-quarter growth momentum. The main growth drivers were, first, a focus on increasing multi-scenario penetration by expanding short video scenarios beyond traditional live streaming and strengthening our infrastructure, such as QuiShop and the Guess What You Like feature to boost user activity. Second, implementing a more precise and granular subsidy strategy. And third, continuing to reinforce our anti-turn strategy for active e-commerce paying users, enhancing the user review and feedback system, optimizing user experience, and actively identifying users with subpar experience for targeted reactivation and user care.
spk07: Although the pandemic and the economic environment have led to a short-term loss of consumption, users' purchasing power has been further affected. However, as the platform continues to supply and cultivate fast-growing brands, strengthen e-commerce ecosystem construction, further optimize compatibility and transformation efficiency, and continuously transform the efforts of high-end buyers, users' shopping minds are also gradually strengthening.
spk01: Our users' monthly order frequency maintain an upward trend on the quarter-over-quarter basis, and average order value on our platform continue to grow both year-over-year and quarter-over-quarter. Although users' purchasing power has been somewhat impacted by short-term weaknesses due to the COVID-19 pandemic and the macro economy, users' shopping mindset has been gradually strengthening. This improvement has been driven by our effort to continuously enrich supply, cultivate quiet brand, strengthen our e-commerce ecosystem, further optimize mention and conversion efficiency, and continuously convert users to high-quality buyers.
spk07: Secondly, regarding the case of Double One, during the 116 e-commerce festival, we continued to explore the potential of e-commerce short-term products, The number of orders for e-commerce short videos has increased significantly. The share has increased by more than 500%. The number of buyers has increased by more than 40%. The number of orders for search has increased by more than 70%. In addition, this year, through policies, traffic flow, and other support, we have been accelerating the growth of fast brand businesses and improving the service capabilities of fast brand businesses. During 2016, the performance of fast brand businesses was outstanding. The share of GNV has increased by more than 80%. In terms of brand business, through the strong marketability of e-sports, the strong management of small and medium-sized brands, and the strong foundation of long-term efficiency, this year's 116 Super Brand Day event, several brands, through a few of their own creative ways, with a small number of fans, and the marketing method of the challenge match, entered the main event. The brand's self-published GNV in the whole week of the event increased by 238%.
spk01: Second on our double 11 performance during the Kuaishou 116 e-commerce festival, we continue to unlock the potential of short video e-commerce. We increased short video e-commerce orders by over 500%, the number of buyers by more than 40% and the number of orders resulting from searches by more than 70% all compared with the same period last year. In addition, we have been accelerating the growth of Quai brand merchants and improving their service capabilities through policy and traffic support. Quai brands produced outstanding performance with year-over-year GMV growth of more than 80% during the 116 Festival. Furthermore, brands are building a strong foundation on our platform for their long-term operations through in-store live streaming. This will serve to effectively attract and retain private domain traffic. During this year's 116 Super Brand Day event, many brands fostered deep connections with users through various marketing strategies, such as creative gameplay in live streaming rooms, short video recommendations, and customized competitions. GMV generated by brand self-operated live streaming increased by 238% quarter over quarter.
spk07: Regarding the recent opening of Taobao Jindong Foreign Chain, the main background is that our e-commerce ecosystem is growing day by day, opening Taobao and Jindong Foreign Chain in large numbers. We hope to further enrich the supply chain and meet the needs of diversified users. In the short term, opening a foreign chain will have very limited contribution to the overall GNV market, and will not be a major factor in GNV growth. In the long term, we will further evaluate from the perspective of user experience,
spk01: And we recently resumed affiliated links or external links to Taobao and JD. The main backdrop for this decision is that as our e-commerce ecosystem matures, we hope to further enrich its supply and fulfill our users' diverse consumption demands during the e-commerce promotion season by enabling these links. In the short term, the external link contribution to overall GMV will be very limited, and it will not be the primary driver for GMV growth. In the long run, we will make further evaluations based on users' experiences and maintain flexibility with respect to future corporations.
spk08: Thank you. The next question is from Alex Poon from Morgan Stanley. The next question comes from the line of Alex Poon of Morgan Stanley. Please proceed.
spk04: My question is regarding our financial margin performance. Can management share with us our progress on cost efficiency so far this year and whether we will continue to proceed these efforts into next year? And the timetable for the overall group. Thanks very much.
spk02: Thank you for your question. Looking back at the past three seasons, we have shown a very positive effect. Two previous seasons of domestic business have achieved profit at the management level. The profit margin of domestic business has also continued to rise. This is mainly due to the optimization of our cost structure and the improvement of operating efficiency. At the same time, our overseas business revenue has steadily grown, and the loss of business is also greatly reduced.
spk01: Thank you for your question. Looking back on the first nine months of this year, our cost reductions and efficiency enhancements produced positive results. Our domestic business became profitable at the operation level two quarters ahead of schedule, with constantly improving operating profits sequentially. This was primarily a result of our optimized cost structure and improved operational efficiency. Meanwhile, Revenue from overseas businesses grew steadily, and its operating loss narrowed significantly year over year.
spk02: As Yishao discussed, we recently made organizational and personnel adjustments. I believe
spk01: the commercial ecosystem committee's leadership will further facilitate ecosystem development and integration and integration within our monetization avenues including e-commerce online marketing and live streaming this will enhance our businesses resource utilization efficiency allowing us to better match our spending with various businesses development needs As to the timetable for us to reach profitable at the group level, we are in the middle of making our 2023 annual budget. We will have more details to share next March when we release our fourth quarter and four-year results.
spk08: Thank you. Thank you. The next question will come from Thomas Chong of Jefferies. Please proceed. Please go ahead.
spk00: My question is about our new business initiatives, for example, online recruitment and local service strategies. Thank you. Thank you for your question.
spk07: After upgrading our life to a land-based business department, we are currently working on the following aspects. First, we have recently completed the organization structure adjustment, and the business is still in the process of running through the system. Second, through continuous optimization of the trading chain, promotion of algorithms, and the experience of western users, we have improved the efficiency of operations. Third, the focus of the development is on the areas where the advantages of fast hands and the needs of users can be further met and where there is a rich supply of business. Thanks for the question.
spk01: Having upgraded our local services unit to an independent business department, we are focusing on our following areas for its development. First of all, we are still in a validation phase for this business following our recent organizational adjustments. Second, we will improve our local services operational efficiency through continuously optimizing our transaction progress or process, our recommendation algorithms, and our users transaction experience. Third, We will focus on regions with rich merchant resources where Kuaishou already has an advantage and where we can further satisfy users' needs. In short, we will build local services MVP cities. Fourth, we will tightly manage the magnitude of our investments. Currently, our investments for local services primarily include personnel costs, user subsidies in the early stage of local services development, and revenue sharing, with service providers. In the future, we plan to continuously and dynamically adjust the investment scale for local services according to its business progress.
spk07: More than 30% of active jobs in the second quarter have been reduced than in the second quarter. In addition to the factory supply, which is commonly known, active jobs in the third quarter, such as catering, service, home affairs, and supermarket retail, have increased by more than 70% in the third quarter. We will share the progress with you when the future business model becomes more mature.
spk01: We upgraded choir recruitment to choir hire in the third quarter aiming to enhance its brand influence among users and merchants. We also enriched diversity of our job postings, improved our applicants' resume quality, and sought to better match applicants and positions, raising the number of active positions for which users submitted resumes by over 30% quarter over quarter. In addition to manufacturing workers, Active positions in the catering services, housekeeping and cleaning, and supermarket and retail categories grew by more than 70% each in the third quarter versus the second quarter. Job promotions via short video also achieved good results in the third quarter, with a percentage of resumes submitted through the short video channel rising to about one-third in the third quarter from about 10% in the second quarter. As for monetization, Since we are still in the process of building our data infrastructure, refining our content, and validating our business model, we have yet to engage in large-scale monetization.
spk07: In summary, short video and live streaming are still in a higher dimensional position in the content and social networking fields of the overall Internet industry.
spk01: They have very strong penetration capability and could generate more diverse social interactions and scalable user case scenarios. In addition to local services and recruitment services, we will continue to provide users with richer short videos and live streaming content by exploring product forms such as real estate brokerage services and dating services to fulfill users' needs in more different types of scenarios.
spk08: Thank you. That's all for today's Q&A session. Now, Matthew, please make your closing remarks. Thank you, Operator.
spk03: Thank you for your participation today. If you have more questions, please contact the Capital Market and Investor Relations Team at any time. Thank you, everyone.
spk01: Thank you once again for joining us today. If you do have any further questions, please contact our Capital Market and Investor Relations Team at any time. Thank you.
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