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spk06: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Kuaishou Technology fourth quarter and full year 2022 financial results conference call. Please note that the English simultaneous interpretation will be provided for management's prepared remarks. This English line will be in listen-only mode. I will now turn the call over to Mr. Matthew Zhao, VP of Capital Market and Investor Relations at Kuaishou Technology.
spk02: Thank you, operator.
spk06: Good evening and good morning to everyone. Welcome to our fourth quarter and four-year 2022 financial results conference call. Joining us today are Mr. Chen Yixiao, co-founder, executive director, and CEO, and Mr. Jinping, chief financial officer. Before we start, we would like to remind you that today's discussion may contain forward-looking statements. which involve a number of risks and uncertainties, better 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 forelooking information except as required by law. And also, please refer to the information announced on our website as of the 31st of December of 2022. And also, during today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. And also, for a definition of non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to our results announcement for the fourth quarter and four-year report ended December 31st of 2022, issued earlier today. So for today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous English interpretation in the prepared remark session and conceptive interpretation during the 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. And also, for all the currency mentioned, it's in renminbi. Now I'll give the call to Yixiao. Hello, everyone. Welcome to Kuaishou's fourth quarter and full year 2022 earnings conference call. In 2022, amidst the challenging macro environment, we remain steadfast in our commitment to elevate an inclusive and diverse user and content ecosystem. With extensive video-lized scenarios and the mindset of embrace all lifestyles, our platform has attracted a broad user base. Average DAUs on Kuaishou have paid a record high of $366.2 million, We also continue to connect our dynamic community with our partners, including advertisers and merchants, to optimize their experience and financial returns on our platform while creating more monetization levers for our company. As a result, our total revenue increased by 16.2% to 94.18 billion RMB. In addition, we upgraded our organizational capabilities to set a foundation for even more integrated commercial ecosystem in order to further unleash the monetization potential of our integrated public and private domain. Today, our user, content, and commercial ecosystem are increasingly vibrant and mutually reinforcing, with trust at the core, thereby maximizing the flywheel effect of our platform. Next, I'll discuss our key business developments in the fourth quarter. First, User growth and ecosystem construction. In the fourth quarter of 2022, we continue to improve our user acquisition efficiency by upgrading our user growth strategy. We also further enrich our creative ecosystem and strengthen the supply of high-quality content through our in-house algorithm-based learning system targeted at different user groups. We also statistically optimize our operation metrics, such as user time span and interactions, and improve user retention. Average DAUs and MAUs on Kuaishou App both hit record highs in the fourth quarter of 2022, reaching $266.2 million and $640 million, respectively, representing year-on-year increases of 13.3% and 10.7%, respectively. In addition, the average daily time span per DAU on Kuaishou App increased by 12.6% year-over-year to 133.9 minutes, The steady growth in our user traffic demonstrates the strong appeal of our short video and live streaming community. Kuaizhou has become a one-step platform for more users to find useful and interesting short video and live streaming content and to obtain services. With a look back to our user growth strategy, we'll continue to refine our personalized subsidy strategy and optimize user retention efficiency through algorithms. In addition, we have been actively exploring user acquisition opportunities by leveraging more high quality native short videos and live streaming content. As we drive the growth of high quality users, The vitality of Kuaishou's community has also been continuously increasing. By the end of 2022, ads of mutual followers on Kuaishou app reached a curative 26.7 billion, increasing by 63.4% year-over-year. In addition, in the fourth quarter of 2022, average daily short video interactions increased by more than 50% year-over-year. In the fourth quarter of 2022, with a sound, creative ecosystem as our foundation, we continue to enrich our content supply across various verticals, Specifically, we further strengthened our leadership in the short play segment by the end of 2022. Project Estro produced over 100 short plays, each of which had achieved a cumulative streaming volume of over 100 million as of December 31st of 2022. In addition to ensuring the supply of high-quality short plays, we are actively striving to commercialize our short plays by advertising, e-commerce, and paid viewship to build a sustainable wing-wing ecosystem for creators and our platform. In the fourth quarter of 2022, revenue from the brand's sponsorship in the project has dropped more than double year-over-year, and the number of short-play creators earning income through e-commerce grew by nearly 35% year-over-year. With regard to knowledge-based content, we created a quiet show, New Knowledge, a pan-knowledge IP currently covering more than 10 fields such as education, humanities, art, and science. In the fourth quarter of 2022, the number of news uploads by professional media increased by more than 100% year over year, and the users who have been prompt to consume news on our platform by major events have gradually become our loyal users. Meanwhile, popular variety shows have also had a positive impact on the new user acquisition and fortified our brand image and the user's mindset. For example, the JHO online friend club held in the fourth quarter had over 11.29 million concurrent online users at its peak and received over 1.05 billion likes, making it a hot topic across the internet. We continuously and constantly optimize our search function in the fourth quarter of 2020 400 million users of quite show app use question search every month on average and the average number of daily searches nearly double year-over-year our efforts to establish users search mindset not only provide more user insights for us and more accurate content solutions for users but also add incremental room for the development of our online marketing and e-commerce services second online marketing services in 2022 we face challenges from slowdown in the macro economy and the online advertising market as consumption recovered after the pandemic control policies was adjusted in December, Kuaishou outperformed the industry in growth by virtue of our continuously growing traffic advantages, our rich product portfolio, and our enhanced organization efficiency. In the fourth quarter of 2022, revenue from online marketing services increased by 14% year-over-year to 15.09 billion RMB, accounting for 53.4% of our total revenue. In addition, we provided advertisers with comprehensive industry solutions and elevated their performance and conversion efficiency through refined operations algorithms and products with in-depth integration of industry attributes. With a focus on holistic health of our advertising ecosystem, we promoted advertiser growth via various channels and through proactive industrial-specific support policies and other measures. The number of advertisers maintained high year-over-year growth in the fourth quarter. And also, we can see that the main growth driver of our online advertising revenue in the fourth quarter was our native e-commerce advertising. As the macroeconomy and consumption gradually recovered, fueled by various e-commerce promotions in the fourth quarter, revenue from our e-commerce merchants continued to grow at a happier pace, particularly in the FMCG food and beverage industries. We also improve advertising conversion through a dual strategy employing both short video and live streaming, which boosted short video's contribution to our online marketing revenue. In addition, the advancement we made in our original content programs allowed us to tap further into the organic traffic pool. This helped native e-commerce advertisers enhance traffic efficiency across public and private domains and realize long-term operational targets. With regards to brand advertising, we increased our brand advertising inventory and optimized our sell-through rates by leveraging key promotions and our marketing programs in the fourth quarter. We also boosted this result by continuous iteration of brand products. During the Double 11 sales promotion, we teamed with Henan TV to organize the China Chic Ceremony Evening Gala, which we customized our advertisers' needs. Through characteristics, content planning, and co-creations with KOLs, we achieved high-quality content dissemination with realizing commercial values. Advertisers have further recognized the value of promoting brands on a quite short platform, driving an over 20% year-over-year increase in our brand advertising revenue in the fourth quarter of 2022. Third, our e-commerce business. To foster long-term trust among customers and merchants on our platform, we have taken various initiatives, including building merchandising for structure and enhancing our ecosystem governance. These efforts are intended to develop a worry-free, trust-based community for merchants and consumers. In the fourth quarter of 2022, disruptions in the merchandise supply and fulfill costs by pandemic challenge the traditional e-commerce peak season. We responded swiftly to ensure logistic capacity and availability of e-commerce streamers. These actions, coupled with algorithm-based, are minimizing the pandemic impact on our user experience. As a result, our e-commerce GMV maintained fast growth in the fourth quarter of 2022, up 30% year-over-year, successfully taking our four-year GMV beyond our 900 billion RMB target. On the supply side, we focus on long-term initiatives, including merchant operations, branding, and merchandise infrastructure. We continue to onboard new merchants with an emphasis on growing the number of high-quality active merchants by adopting classified and more precise promotional policies. We upgraded our service provider team to our merchant development department by integrating the capacities of service providers, products, and also our traffic capabilities to provide a one-stop service for merchants, especially high potential medium to small merchants that they need support, helping them to make a smooth transition from co-starts to sales ramp up. We're going to need to refine products and operating strategies, updating the store, scores system based on merchandise quality, logistics, timeliness, and service competencies to better identify high-quality merchants to trap the support adopted more refined tiered operations. Furthermore, we can use strength in relationship modeling between long-term high-value users and merchants through algorithms, which then hopefully contributed the increase in our overall GMB. At the same time, we further improve the accuracy of merchandise recognition and matching and live streaming GPM of public domain traffic. In the fourth quarter of 2020, we continue to maintain a rapid year-on-year growth. As a result, the number of monthly active merchants grew by over 50% year-over-year in the fourth quarter of 2022, while the average monthly unit store sales of heading merchants increased by double-digits year-over-year. In 2022, we achieved strong progress in the brand e-commerce in the fourth quarter, on the back of grand sales promotions during the period, Leveraging high-quality private domain traffic and trust-based private domain traffic in our dual-engine model, we established an end-to-end path from recommendation to transaction, driving consistent growth in our brand GMB, overall brand GMB, including quiet brands, group at an accelerated pace, quarter over quarter, and shared of a total GMB, GMB, total e-commerce GMB expanded further to almost 30% in the fourth quarter of 2022. For Quiet Brands, we focus on the development and launch of the SuperQuiet Brands event to increase brand exposure and reinforce brand awareness through the integrated online and offline activities. As a result, Quiet Brands delivered GMB growth above 80% year-over-year during the November 6th round promotions. We also set up a disqualification system for lower performers to make Quiet Brands able to continue to provide high-quality products and services. As a result, white brands achieved better results in this return and repeat purchase rate compared with their overall platform. For more established brand merchants, we fully harnessed the high-quality KOL resources and helped refine their product and content operations to better cater to our ecosystem and users. This fostered more cluster products and facilitated deeper connections with our brand followers. In the fourth quarter, levering the various promotions, we strengthened the closed loop from user acquisition to order replacement and repeated purchase, all together resulting in Merge in the brand's share of voice and shadow sales and fourth quarter of 2022 the number of brands with sales above 100 million may be increased by over 50% a year and more brands have adopted quite as the main platform for operations with growing recognition of a user value and unique e-commerce ecosystem. In 2022, the number of brand merchants maintained rapid growth and more than 19 of famous brands were active merchants. in fourth quarter of 2022. To further strengthen our e-commerce merchandising capabilities, we continue to increase the accuracy, diversity, and coverage of product labels, gaining deeper insights into merchandise prices and brand attributes and transaction trends. At the same time, we profile good merchandise for quite short users, based on users' needs before, during, and after sales. We continuously optimize the system from the moment of merchandise landed on platform, providing relevant, reliable, and high-quality information to whatever user's shopping experience. We also incorporated merchandise characteristics into our algorithm-based recognition system to enhance user and merchandise matching efficiency and users' product awareness, further fortifying the shopping mentality. On the consumption side, we continue to improve user conversion efficiency by refining our user operation strategies and constantly optimizing our smart subsidy promotion. In these efforts, we benefited from our efficient identification of potential consumers. In the fourth quarter of 2022, monthly active e-commerce paying users further increased year-over-year and quarter-over-quarter, representing a penetration rate of high double digits. Monthly purchase frequency also improved quarter-over-quarter, while average order value expanded year-over-year and quarter-over-quarter. Moreover, our user review system gradually matured in the fourth quarter of 2022. By monitoring order-specific recommendation scores, we collaborated with the merchants to address those issues or user issues in a timely manner, sequentially improving our platform over recommendation score during November 6th grant promotions and New Year Day promotions. With increased weight of user satisfaction metrics and algorithms, we constantly decrease negative merchandise feedback and also customer complaint rates, demonstrating notable improvement in e-commerce shopping experience with us. In addition, upholding the standard of reliable quality and worry-free after-sales service, We have rolled out over 20 consumer rights and interest protection services on our platform. Meanwhile, our coverage of e-commerce orders with trusted purchase rights grew by 460% compared with 2021. Next, regarding our live streaming business, in the fourth quarter of 2022, Live streaming revenue increased by 13.7% year-over-year to 10.03 billion RMB, reaching a quarterly high. Average MPUs for live streaming grew by 20.4% year-over-year to 58.4 million. Our efforts to consistently diversify our content offerings, optimize our live streaming ecosystem, and iterate our algorithms propel these achievements. On a supply side, We continue to strengthen our operation with top talent agencies and streamers while attracting more high-quality streamers to join our platform. We also launched a recruitment policy to sign up top-notch streamers and promote the development of live streaming as a professional. We have attached increasing importance to the healthy and sustainable development of our live streaming ecosystem. To enrich high-quality live streaming content by applying various verticals on our platform, we arranged vertical programs in folk music, opera, and dance in our annual live streaming ceremony. Through the top 100 streamer selection, we encourage leading streamers from all walks of life to continue providing users with high-quality live streaming content. We also screwed up traffic support to accelerate growth and improve the retention of new streamers while guiding the traditional KOLs to further enhance content quality. Through refined recommendations and algorithms, We improved the conversion of users' rewarding behavior in the public domain based on the generalized modeling of users' gifting interests, growing our public domain live streaming revenue by over 150% year-over-year in the fourth quarter of 2022. In addition, we make continuous efforts to expand live streaming usage scenarios and build associated infrastructure to better satisfy users' and business partners' needs. In the fourth quarter of 2022, the average daily resume submissions, some quite higher, doubled compared with the first quarter of 2022. Meanwhile, cumulative transaction volume on ideal housing exceeded $10 billion just half a year after its launch. Finally, in terms of our overseas business progress, In the fall quarter of 2020, we continue to focus on developing our market presence in key countries, optimizing resource allocation, and elevating operation efficiency. These efforts help us further improve the bottom line of our overseas business. In addition of improving the customer acquisition costs across all channels, our overseas user base achieved healthy, steady growth. Through rich, constructive content offerings, we built the mindset for consuming news on our platform as a short place and other content verticals in which we excel. Moreover, we kept upgrading our products and algorithms to further strengthen user engagement, with average daily time spent per QU grew to over 65 minutes in our overseas markets in the fourth quarter. We also steadily improved our commercial ecosystem and enhanced our monetization capabilities, leading to rapid revenue expansion in overseas markets. On the advertising front, we constantly created success cases and expanded our advertiser base. Through refined customer operations, we empower advertisers to broaden their brand influence and achieve more growth upside with enhanced marketing and campaigns. In terms of live streaming, we onboarded more streamers and talent agencies. which enriched our content offerings and deepened our live streaming penetration. Meanwhile, we continue to grow our live streaming revenue via refined operations and diverse entertainment activities. Additionally, we have been actively exploring e-commerce opportunities in overseas markets. Looking ahead, we will continue making strides in our content infrastructure algorithms, user scenarios, and also the multiple growth engines of our business. These efforts will be in tandem with optimizing our cost structure and improving our operation efficiency. We are confident our efforts to create value for all our ecosystem participants and our inclusive and balanced traffic distribution strategy will draw in more users, creative talent, advertisers, and e-commerce merchants to our platform. As such, taking our unique trust-based user live streaming and short video content communities and our commercial ecosystem to new highs. This concludes my prepared remarks. Thank you. Next, our CFO, Mr. Jin Bin, will discuss companies' financial performance for the fourth quarter and full year of 2022. Thank you, Risha, and hello, everyone. Our solid fourth quarter performance capped a year of significant business progress against challenges in quite short. In 2022, we achieved high-quality growth in our user scale and content ecosystem, and strive to further enhance our monetization capabilities enabling us to deliver increasing value to our users, content creators, and business partners. For the full year of 2022, our group's total revenues reached 94.2 billion RMB, up 16.2% year-over-year. At the same time, we realized significant increase of operating efficiency leading to continuous improvement in our financial performance. For the full year of 2022, the operating profit of our domestic business and our adjusted EBITDA at the group level both turned positive. In addition, the operating loss of our overseas business in 2022 narrowed by 44.7% year-over-year, driven by our RA-oriented global strategy. Next, let's walk you through our performance for the fourth quarter of 2022 in details. In the fourth quarter of 2022, our group revenues increased 15.8% year-over-year and 22.3% quarter-over-quarter to R28.3 billion. This increase was primarily driven by growth of online marketing services and other e-commerce business, which is included in other services. Our online marketing services demonstrated strong resilience. In the fourth quarter of 2022, its revenue reached 15.09 billion RMB, representing an increase of 14% year-over-year and 30.2% quarter-over-quarter. Our comprehensive industry solutions and our dual content strategy employing short video and live streaming delivered strong results in facilitating advertiser-consumer connections and ad conversion. This, coupled with our vast and continuously growing traffic, have attracted increasingly more advertisers. The robust growth of our native e-commerce and brand advertising also played an integral part in defending our relatively rapid growth in an uncertain market. Other services revenue from the fourth quarter of 2022 increased by 37.7% year-over-year and 22.1% quarter-over-quarter to 3.16 billion RMB, mainly due to the strong growth in e-commerce revenues. As we build out our merchandising infrastructure and enhance our ecosystem governance to further differentiate our trust-based e-commerce model, our e-commerce GMV reached 312.4 billion RMB in the fourth quarter of 2022, increasing 30% year-over-year despite the supply chain logistics disruptions caused by the pandemic. Our four-year e-commerce GMV was 901.2 billion RMB, representing an increase of 32.5% year-over-year and demonstrating the further market share expansion of our e-commerce business. Revenue from our live-streaming business market, a new quarterly record in the fourth quarter of 2022, reaching $10.03 billion, up 13.7% year-on-year and 12.2% quarter-to-quarter. This is primarily attributable to the continuous enrichment of our high-quality content and expansion of contextualized live-streaming user scenarios on our platform, all of which inspire more user-gifting behaviors. During the fourth quarter, average MPUs on our live-streaming business increased by 20.4% year-over-year, amounting to $58.4 million. Our cost of revenues for the fourth quarter of 2022 increased by 7.9% year-over-year to 15.4 billion RMB, representing 54.5% of the total revenues. This increase was due to the increase in revenue sharing costs and related taxes in line with our revenue growth. This was partially offset by the decrease in employee benefit expenses and the appreciation of the poverty and equipment of right of use of assets and amortization of intangible assets. Our group's gross profit in the fourth quarter of 2022 reached 12.9 billion RMB, growing 26.9% year-over-year, representing a profit margin of 45.5%, expanding 4 percentage points from 41.5% in the fourth quarter of 2021. This benefited from our optimized revenue mix and improved cost management. Setting and marketing expenses were 9.7 billion RMB for the fourth quarter of 2022, representing a 4.8% year-over-year decrease, This decrease of selling and marketing expenses was primarily due to our more efficient and disciplined spending on user acquisition and retention. Selling and marketing expenses as percentage of total revenues decreased from 41.9% in the fourth quarter of 2021 to 34.4% this quarter. Administrative expenses for the fourth quarter of 2022 increased by 12.5% year-over-year to $1 billion, primarily due to an increase in the employee benefits expenses, including the related share-based compensation expenses. The fourth quarter administrative expenses represented 3.7% of the total revenues, roughly in line with the fourth quarter of 2021. Research and development expenses were 3.4 billion RMB for the fourth quarter of 2022, decreasing by 14.2% year-over-year, primarily due to the decrease in employee benefit expenses, including related share-based compensation expenses. Our R&D expenses represented 12.2% of our total revenues in the quarter, down from 15.3% in the previous quarter, and 16.4% in the fourth quarter of 2021. Our group's operating loss narrowed to 1.2 billion RMB in the fourth quarter of 2022, improving substantially from the loss of 2.6 billion RMB in the third quarter of 2022 and 5.8 billion RMB in the fourth quarter of 2021, as we achieved an operating profit of 1.3 billion RMB at our domestic business and a significant loss reduction overseas market. Operation margin expanded by 19.3 percentage points year-over-year and 6.9 percentage points quarter-over-quarter to negative 4.4% in the quarter, from negative 23.7% in the fourth quarter of 2021 and negative 11.3% in the prior quarter. Our group's adjusted net loss also narrowed significantly to 45.3 million RMB for the fourth quarter of 2022 and from 671.9 million RMB in the third quarter and 3.6 billion RMB in the prior year period. And our adjusted net margin improved 2.7 percentage points quarter over quarter and 14.4 percentage points year over year. Our balance sheet remained healthy with cash and cash equivalents, time deposits, restricted cash and wealth management products of 44.7 billion RMB as of December 31st, 2022. Thanks to our multiple monetization revenues and efficient working capital management, we generated positive operation Nash cash flow of 2.2 billion RMB for the full year of 2022. Let me briefly review our performance for the full fiscal year of 2022. For the full year 2022, our group's total revenues reached 94.18 billion RMB, up 16.2% year-over-year, These included online marketing services revenue 49.04 billion RMB, increasing by 14.9% year-over-year. Revenue from live streaming business increased by 14.2% year-over-year to 35.39 billion RMB. Revenue from other services, including e-commerce business, reached a 9.75 billion RMB, representing an increase of 31.4% year-over-year. Gross profit margin expanded by 2.7 percentage points year-over-year to 44.7% in 2022. For the full year of 2022, our adjusted net loss was 5.75 billion RMB, significantly narrow from the loss of 18.85 billion RMB in 2021. Our adjusted net margin was negative 6.1%, improving by 17.2 percentage points year over year. Adjusted EBITDA turned positive and reached 1.81 billion RMB in 2022, compared to negative 12.95 billion RMB in 2021. In conclusion, As we weathered the external challenges in 2022, we took important steps to strengthen our infrastructure, monetization capabilities, and efficiency. We are now on our way to establishing more integrated user content and commercial ecosystems, which sets us on a stronger footing for our future business growth. Going forward, we will strive to further unlock the monetization potential across our business segments while continuing to scale our trust-based ecosystem. We'll also continue to try to operate efficiency improvement and cost reductions, aiming to deliver long-term sustainable profitability. This concludes our prepared remarks. Now we're open for questions, operator. Please go ahead.
spk11: Just to advise, to ask a question, please press star 1. To withdraw your question, please press star 2. 我们现在进入问答环节。 第一道问题来自于Credit Suisse的Kenneth Fong. We shall now begin the question and answer session. Our first question comes from the line of Kenneth Fong from Credit Suisse. 请提问,please ask your question.
spk01: 嘿,易小总,金总,Matthew,你们好。 Thank you for accepting my question, and congratulations on another strong business. My question is about e-commerce. We see that before and after the Spring Festival, there is a decline in consumption. I would like to ask, how is the e-commerce business of the company? We also see that other e-commerce platforms have started some subsidies, such as 8-1 subsidies, etc. What impact will it have on our e-commerce business? How will we deal with it? Thank you, management, for taking my questions. And congrats on another strong quarter. As we see consumption recovery along with Chinese New Year, can management share with us some of the latest trends of your live streaming e-commerce business? As we see increased competition with some e-commerce platforms by stepping up subsidies, how would we respond to that? Thank you.
spk00: Thank you for your question. After the beginning of 2023, the company's e-commerce business trend is still good. During the Spring Festival, the platform launched the Spring Festival No-Hunting event to encourage the opening. Compared to last year's Spring Festival, JNV has grown healthily. After the Spring Festival, we have passed through e-commerce events such as Samba Shopping Festival to further meet the consumer demand that has gradually increased. During the Great Leap Forward, our household numbers and the industry growth of fresh flowers is relatively strong. Thanks for your question. Our e-commerce business has been doing well since the beginning of 2023. During the Chinese New Year holiday, we launched Spring Festival non-stop activities on our platform
spk06: to encourage e-commerce live streaming. As a result, our e-commerce GMB achieved healthy growth compared to the Chinese New Year period last year. After the Chinese New Year, we further capitalized on the gradual consumption recovery through events such as the March 8th shopping festival. During the promotion, sales of home furniture, 3C, fresh produce, plants, and pet products achieved strong growth momentum. Those of our advantageous non-standard product categories such as apparel, beauty, and cosmetics also continue to grow rapidly. Overall GMB of brand and merchandise during the shopping festival more than doubled year-over-year, driven by both brand's self-operated live streaming and KOL live streaming, as well as our content-based product recommendations.
spk00: For live e-commerce, it's just like home e-commerce. If the comparison is complete, it is very difficult to do. In the live broadcast, it is often aimed at the needs of fans and platforms. And it is a unique product, SKU and price strategy. For Kuaishou, we have a natural community attribute advantage. Customer purchase behavior is not driven by price, but by the core purchase. We also have a strong trust in our sponsors and platforms. Of course, we also pay attention to the profit and loss ratio of our customers, and we also guide our customers to increase their turnover by building low-cost products. In order to better deal with the external competitive environment, we believe that in addition to fighting for value, it is also important to train our internal workers and continue to improve our system. Next, I will talk about some of the key points of our recent work.
spk06: So for live streaming e-commerce, apples to apples price comparisons like shelf-based e-commerce are difficult. Live streaming rooms usually have unique product SKUs and pricing strategies catering to the needs of fans and potential buyers on our platform. Given Kuaishou's natural advantage in community attributes, users' purchasing behaviors are not only driven by price, but their core purchasing power is also based on their trust in the streamers and our platforms. Of course, while paying attention to merchants' profitability, we also guide merchants to enhance sales conversion through affordable, high-quality products. To better respond to the competition, we believe rather than engaging in price wars, it's more important to build our own strength in the e-commerce business, namely continuously or continually improving product quality and operation efficiency. Next, I would like to share some of our latest priorities with respect to e-commerce.
spk00: First of all, we continue to carry out platform ecosystem management to strengthen the basic platform of trust in e-commerce. This year, we have built a more mechanismized, process-based, and dynamic user recommendation system and consumer return system to monitor the problems raised by consumers in real-time and improve them in real-time. At the same time, we have integrated shopping experience, First,
spk06: We continue to strengthen the governance of our e-commerce ecosystem and reinforce trust as the cornerstone of our business. This year, we created a more systematic, process-based, dynamic user recommendation mechanism and consumer complaint system, featuring real-time monitoring of issues raised and timely rectifications. Meanwhile, we integrated shopping experience scores into the system to recommend higher quality merchants and products to users. We also continue to expand and strengthen user rights and interest protection, increasing the coverage of each of our consumer rights products to enhance users' trust in our platform. Regarding fulfillment, we continue to improve logistics and update customer services, our after-sales service system, and product functions, altogether elevating consumers' shopping experience.
spk00: Once again, in terms of algorithmic matching efficiency, by strengthening product infrastructure, strengthening product power construction, and deepening the understanding of the customer and the product, we continue to use the behavior of the users to recommend products that meet their potential consumer needs to improve matching accuracy. In this quarter, not only does the flow of public housing transition efficiency continue to improve, but also the GPM of private domain is further strengthened. The overall live broadcast and short-time video GPM of the platform has increased by nearly 30%.
spk06: Second, to enhance algorithm matching efficiency, we continue to fortify our merchandising infrastructure and capabilities and deepen our understanding of merchants and products. We make product recommendations based on users' behaviors to meet their potential consumption needs, which leads to enhanced matching accuracy. This not only drove continued improvement in the conversion efficiency of public domain traffic in the fourth quarter, but further reinforced our private domain GPM. As a result, overall live streaming and short video GPM of our platform rose by nearly 30% quarter-over-quarter.
spk00: Third, this year we will also increase our efforts to promote e-commerce into a brand. We have upgraded the solution of the brand's comprehensive management, encouraging the brand to use e-commerce management as the core While doing a good brand live broadcast, we will use high-quality staff resources to support marketing and improve brand influence. At the same time, short-term evaluation live broadcasts are mutual, and we will do a good job of creating a full network of people. In the future, we will also strengthen the search, commercialization, and other goods and services scenarios to do a good job of gathering new users. In addition, at the beginning of this year, we launched a trend plan to encourage people to have high-quality content creation capabilities.
spk06: Third, we will significantly step up our efforts this year to promote brand e-commerce. We upgraded our all-domain solutions for brands, encouraging them to focus on store operations and deliver solid self-operated live streaming. while leveraging high-quality KOL resources to assist with product distribution and enhance brand influence. Meanwhile, we promoted the complementary usage of short video and live streaming and established an end-to-end path from product recommendation to transaction. Going forward, we will emphasize pan-shelf scenarios such as search and shopping mall to capitalize on user shopping mentality, in addition, We rolled out the stream initiative earlier this year to encourage merchants with high-quality content creation capabilities and well-recognized products to self-operate live streaming on our platform. By offering them incentives and traffic support, we hope to help more high-quality merchants and brands take root on Kuaishou.
spk00: With a more in-depth understanding and awareness of merchants, products, and users, we will think and plan more seriously about the future of the merchant version, and make sure that users are sure to meet the shopping needs. Currently, for QS, the merchant is still a new traffic scene that has not yet been excavated. We believe that as the purchase behavior gradually intensifies on the QS platform, the shopping experience will continue to be optimized. Users' consumer needs will not be limited to opening and sending, 我们已经看到了用户购物心智的逐渐强化的趋势 在三八节大促期间 搜索成交的订单同比提升267% 未来更多确定性购买需求将进一步助力我们的GNV增长
spk06: With the deeper insights we acquire into merchants, products, and users, we will more carefully think about and plan our shopping mall to meet users' intent-based shopping needs. Currently, for Kuaishou, the shopping mall remains a new traffic scenario that has yet to be fully tapped. We believe, as users grow accustomed to shopping on Kuaishou's platform with an increasingly optimized shopping experience, They will desire more than live streaming and push promotions. Moreover, it is clear that users' shopping mentality are strengthening on our platform, as demonstrated by the 267% year-over-year increase in the number of search orders during the March 8th shopping festival. In the future, more intent-based shopping from users will further drive our GMB growth. On the whole, looking ahead into 2023, we're confident that Kuaishou's e-commerce business will continue to grow at a faster pace than the industry and create more value for consumers and merchants.
spk03: Over to our next question, please.
spk11: Thank you. The next question is from Goldman Sachs' Lincoln Kong. Our next question comes from Lincoln Kong of Goldman Sachs. Please ask your question.
spk07: Thank you, management, for taking my question. My question is about the commercialization and advertising business. So I want to understand more in terms of how advertising customers sentiment improvement amid this whole macro recovery situation. What about those annual contracts, our progress, as well as how do we think about the overall 2023 advertising revenue growth outlook? Thank you.
spk00: Thank you for your question. Regarding the signature situation of the advertising year frame, currently, the framework of 2023 is cooperating in the process of continuous signing and completion. Overall, advertising customers are cautious and optimistic about the third half of 2023. Considering the post-economic recovery of the economic recovery rhythm and the relatively economic recovery of the advertising market, we believe that the overall online advertising market will have a more obvious rebound in the second half of 2023. Our inner-circle advertising needs to maintain a fast-growing trend, and drive our overall online marketing revenue to run the advertising market. The main customers of outer-circle advertising are mainly online businesses. We expect to gradually see outer-circle advertising recover and grow this year. From the segment industry point of view, as the offline activities reopen and consume more and more, food and drinks, personal care and breastfeeding products, and other consumer must-haves, travel, The related industry supported by entertainment and economic policy, such as real estate, transportation, and housing, will have a further recovery. Our key e-commerce retail platform customers have a more clear growth expectation. The development and application of tools and apps and short-term budget will have a further recovery. The investment of game and online media-based advertising customers is expected to continue to improve.
spk06: Thank you for your question. We are in the middle of signing four-year framework agreements with advertisers. Overall, they are cautiously optimistic about 2023. Given the current pace of economic recovery and the lag in the advertising market versus the overall economy, we expect a noticeable rebound in the online marketing services market in the second half of 2023. We expect our native advertising services to maintain its rapid growth momentum, driving the continuously and continued outperformance of our advertising revenue versus the overall market. Speaking of external advertising services, as our key external advertisers businesses are mailing online, we expect this segment to gradually resume a growth in the second half of this year. Our industry verticals, with the resumption of offline activities and the gradual consumption recovery, we believe advertisers ad budgets will improve in the consumer staples such as food and beverage, personal care, maternal and baby care, as well as tourism and entertainment. In addition, we expect to see the momentum from industries that will benefit from the government's economic policy support, such as real estate, transportation, home furniture, and furniture. Our major e-commerce clients have shown clear growth expectations. We also expect gaming and online news media customers to be more willing to place ads and recovery of budgets from the development and applications of their dating and tool apps, as well as short plays.
spk00: From the point of view of e-commerce, for online marketing, the key direction of 2023 is also to train internal workers and constantly improve the ROI of advertising customers on the platform. Specifically, first of all, We pay attention to the trend of commercialization. We match the content's traffic value with the traffic value of the business in a more precise way. For example, we noticed that there is still a big difference between the target audience and the current advertising exposure audience in the gaming industry and the financial industry on the platform, and some of them have affected the investment effect. For online marketing services, just like with e-commerce, our priority this year is to build strength from within and to consistently increase advertisers' ROI on our platform.
spk06: Specifically, first, we will continue to enhance the efficiency of advertising traffic. We will more accurately target users based on the traffic value of content and advertising. For example, we noticed that there is still a considerable difference between users interested in gaming and financial industries on our platform and those being exposed to related ads. Yet conversion efficiency differs widely between interested and uninterested users and is a key to ROI. As such, we will explore how to better identify and understand users' preferences and commercial value through content to optimize traffic allocation, hence enhancing conversion rates for advertisers and improving post-click ROI.
spk00: The second is the construction and service upgrade of the product-based product capability. In terms of data infrastructure, by improving our model and sourcing awareness and distribution capabilities, we will ultimately achieve the core capabilities of commercialized models, as well as the efficiency of matching and the smoothness of input and output networks. At the same time, these data will also be stored in the DMP data management platform, which will greatly improve the labeling capabilities and定向 capabilities. In terms of traffic expansion, we plan to launch search advertising products, In the fourth quarter, the search traffic has increased nearly threefold, combined with the accurate conversion efficiency of search ads, gradually forming good content on the platform. Search is a key link between business, bringing new space for commercialization. We will also actively explore the new model of the磁力万和, using the huge amount of ad creators' main page traffic and high privacy.
spk06: Second, we are further building out our advertising product capabilities and upgrading our services. With respect to data infrastructure, by enhancing our algorithms, cognitive, and allocation capabilities, we aim to empower our advertising model to reach a broader audience as well as improve matching efficiency and enable seamless ad placements. At the same time, the data generated in the process will be stored in a DMP data management platform of our data-driven marketing engine, Magnetic Kaleidoscope, significantly elevating our labeling and targeting capabilities. To further expand our traffic, we plan to launch search ad products. In the fourth quarter of 2022, search traffic nearly doubled year-over-year. which, aided by the strong conversion efficiency of search ads, allow us to develop a sound closed-loop system of content search and advertising, bringing new upside to our advertising business. We will also actively explore a new model called Magnetic Alliance. By leveraging the tremendous traffic, strong user stickiness, and value on creators' private domains, we will expand high-quality traffic resources and provide advertisers with more personalized services on creators' homepages realizing an all-win outcome between users, KOLs, and advertisers.
spk00: Thirdly, we launched a new business concept for all-in-one LRs. As the market situation continues to change, we feel that advertising customers are more concerned about long-term growth and more decisive revenue. This requires us to adjust and satisfy customers' changes from lightness to depth. As a result, we launched a new concept of e-commerce ROI at the QSYC conference not long ago. The goal is to increase the overall business growth of customers. We rely on the content of the customer's QSYC, fans, and crowd assets. Through the algorithm and the 5R crowd model, we select high-priced people from the target crowd of the brand, and combine them with QSYC's full flow. Third, we introduced a new business philosophy of platform-wide ROI. We noticed recently that advertisers' needs are changing. They are beginning to care more about long-term healthy growth and income certainty.
spk06: which requires timely adjustments on our side to accommodate their shift from pursuing superficial targets to deeper goals. As such, at our recent Kuaishou magnetic conference for commercialization, we unveiled a new concept of platform-wide ROI, which aims to promote advertisers' overall business growth. To that end, we screen for high potential users from brands, target user groups through algorithms and the 5R four-user lifecycle model, leveraging advertisers' content, followers, and user assets on our platform. With a full domain portfolio-based approach for placement budgets, clients can optimize their overall operation efficiency across all private and public domains, achieve an end-to-end sales funnel conversion from brand promotion to performance ads, and eventually transactions, ultimately ensuring the realization of their overall ROI goals on Kuaishou.
spk00: In conclusion, with all these efforts,
spk06: We are confident that we will capture the opportunities afforded by the economic recovery in 2023 to accelerate the development of our online advertising services. As we provide better services and ROI to advertisers, we will continuously gain market share in China's online advertising markets.
spk03: I'll go to our next question, please. Thank you.
spk11: The next question is from Jefferies to Thomas Chong. Our next question comes from Thomas Chong of Jefferies. Please ask your question.
spk08: Good evening. Thank you for accepting my question. My question is about our DAU. I saw that when we were in Q4, the DAU was in a very good growth trend. I would like to ask you about our DAU. Thanks, management, for taking my questions. My question is about our medium-term DAU target of $400 million. How should we think about the user growth in 2023, as well as the cost trend? Thank you.
spk05: Thank you for your question. As we mentioned in the previous talk, in the whole year of 2022, we have continuously improved the performance efficiency of the main growth channels, refined the algorithmic model of user growth and maintenance, and supported the supply and demand of high-quality content, and improved the ROI of the user flow strategy. This has led to a significant drop in growth and maintenance costs in the year of 2022, while the DAU has still achieved the same 15.4% growth rate.
spk06: Thanks for your question. As mentioned earlier, in 2022, we continuously enhance customer acquisition efficiency across major user growth channels, refined user growth and maintenance algorithms, and further improve our retention ROI through high-quality content offerings and constant iteration of traffic allocation strategies. Thanks to these efforts, Our DAUs registered robust year-over-year growth of 15.4% despite significant year-over-year reductions in our user growth and maintenance costs in 2022.
spk05: At the same time, with the higher penetration rate of short videos for the Internet community, we also feel that the difficulty of future user growth will gradually increase. This will also lead to a gradual slowdown in the editing improvement curve of unit cost.
spk06: Meanwhile, as raw video penetrates deeper into the internet user base, we are keenly aware of the increasing difficulty in driving future user growth. This will gradually slow down the rate of improvement in our unit acquisition cost. Nevertheless, We will strive to achieve a high-quality user growth target within RI constraints, while strictly controlling spending in user acquisition and maintenance.
spk05: and hope to use high-quality content, products, and services to encourage and encourage more users to consume on the platform. Next, we will expand the headquarter of high-quality original content. Specifically, we will combine advanced audio-video understanding and algorithm technology with artificial selection, create a richer high-quality content pool through cross-department collaboration, and attract more users to join the platform through better original short-video content. Finally, We will also focus on specific people, especially those who had relatively low quick access rates in the past, to carry out growth. At the same time, we will maintain the advantageous position of the mainstream people in the core two and three-line and townships. Thus, in 2023, we expect users to achieve steady growth. In the long term, we are also fully confident in the goal of achieving a DAU of 400 million per quarter in the second half of 2024.
spk06: Specifically, our user growth strategy is threefold. First, we will continue to improve customer acquisition efficiency and user retention through refined user growth, operations, content strategies, and algorithms. Regarding user subsidies, we will promote personalized and functional subsidies while guiding and encouraging more users to span our platform by providing high-quality content, products, and services. Second, we will strengthen user acquisition through high-quality native content, We will build a richer, high-quality content pool using advanced audio and video technology, as well as algorithms aided by mutual and manual screening and through cross-departmental cooperation. Better native short video content will attract more users to join our platform. Lastly, we will launch dedicated user growth programs targeting specific demographics, especially those we have underpenetrated. Meanwhile, we will maintain our core user base advantage in the key second and third tier cities, as well as towns and villages. As such, in 2023, we believe we can realize steady year-over-year user growth. In the medium term, we are confident we will cross the 400 million mark in DAUs on a quarterly basis in the second half of 2024.
spk11: Next question is from Zhang Xueqin from CICC. Our next question comes from Xueqin Zhang of CICC. Please ask your question.
spk10: Good evening. Thank you for answering my question. I would like to know more about CICC, such as local business and fast-paying. Can you share more details? Thank you. Thanks, management, for taking my question. My question is about the progress of our new business, such as local service and choir hire. I appreciate it a lot if management could give us more comment on that. Thank you.
spk00: And at the same time, the demand for commercial goods is constantly increasing. We need to strengthen the consumer's awareness through online channels and content. The online rate and currency rate of e-commerce and e-commerce services have a space for further improvement. Small products can show products and services in a deeper way, providing a higher conversion efficiency for customers. So we also see that the video platform is becoming more and more local life. It is an important choice for customers to expand and increase. Thanks for your question.
spk06: The local services segment has attracted a lot of attention. Let me share some of our reflections. Currently, local services have a low online penetration rate, but demand of local services merchants for traffic continues to increase as they work to strengthen consumers' consumption mindset through online channels and content, leading to significant growth potential in online penetration and monetization. SyncStroke videos can display goods and services more vividly and provide merchants with higher conversion efficiency. Short video platforms are becoming an important choice for more and more local services merchants to drive incremental growth. Huishou is particularly well positioned as the third largest app in China with sound user base in the second and third tier cities where local services are relatively under-penetrated. Recently, the number of users with daily consumption related to local services has exceeded 100 million on our platform. By leveraging KOLs to create high-quality content, combined with the actual recommendation algorithms and the new goods-to-person model we are building, we are confident that we can foster local services consumption mindset among Kuaishou users.
spk00: Now, let's talk about the main work in the new stage of our life and business. First of all, if the internal completion is completed, the team will build and gradually improve the way of setting up and setting up. We comprehensively evaluate the advantages of flow, content supply, etc. Combined with local users' consumption habits and product supply resources, choose the core program as MVP run-through verification. At the supply end, we mainly cooperate with service providers and third-party platforms. At the same time, we provide samples to service providers through a small amount of supply and demand. Thank you very much. At present, our work in local services mainly focuses on the following.
spk06: As we completed our team setup, we have developed an increasingly mature set of strategies and tactics. Following our evaluation of Kuaishou's advantages in traffic and content, and in consideration of local users' consumption habits and merchandise supply, we chose a number of key cities as our MVPs, and we are now in the process of validating our model. On the supply side, we primarily work with the service providers and third-party platforms to continuously enrich our supply, while providing service providers benchmark cases through a few direct business operations. Moreover, through coordinating a vast number of KOLs and users' resources, we will accelerate the development of user mindset with a focus on in-store catering and gradually extending to other business categories. At the same time, we have conducted detailed evaluations of consumers in diverse consumption scenarios aiming to further enrich our product functions. To summarize, we will maintain operational flexibility based on gradually maturing strategies to respond to the growing market competition. As a comprehensive service platform with unique advantages in traffic, content, and community, we believe Kuaishou is capable of building a bridge to better connect merchants' resources with users' needs.
spk00: There are more than 200 second-tier projects. In addition to the factory's general public service that everyone knows about, the number of jobs in the service industry, including in-house, home and health care, and supermarkets, has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of jobs in the service industry has continued to increase. The number of We believe that after a period of time of exploration, the commercial mode of QuickPin will gradually mature and explore a more advanced and effective development path for relatively traditional blue-collar recruitment channels.
spk06: Regarding QI Hire, since its official launch over a year ago, we have made rapid progress across various operating metrics. Average daily resume submissions in the fourth quarter of 2022 doubled from the first quarter, with peak submissions exceeding 500,000 during the spring festival period earlier this year. Furthermore, we have made a steady advancement in region job postings, solidifying data infrastructure, and exploring viable business models. In terms of enriched job postings, our platform currently covers 22 level one job categories and over 200 level two categories. In addition to manufacturing jobs, active positions in catering, housekeeping and cleaning, supermarket and retail, and other service industry categories continue to increase. Growing job categories will further meet the diversified job seeking needs on our platform's massive user base. In terms of the data infrastructure, we are focused on enhancing resume quality and improve the data infrastructure by developing end-to-end process metrics. As to business model explorations, QuaiHire will adopt the CPQL or Cost Per Qualified Leave model for monetization in the future. We believe with another quarter or two of exploration, QuaiHire's business model will gradually mature and establish a more advanced and effective path to hiring compared with the traditional recruitment channels for blue-collar workers.
spk02: Thank you all for your time. Next question, please.
spk11: Our next question comes from Lei Zhang from Bank of America Securities. Please ask your question. Hi, good evening.
spk09: Thank you for accepting my question. My question is mainly about AI. How does the company evaluate the impact of chat CBT on the short-term industry? And I would like to ask if our company has this kind of layout. I will share it myself. Thank you very much for answering my questions about chat CBT. Can you share with us any impact to online shop video industry? And do we have any strategic move regarding the tech, CBT, or AI area? Thank you.
spk00: Thank you for your question. With the help of our QS AI team, QS AI has accumulated many years of technology and applications, especially in large-scale language models, multi-mode training models, and smart creative tools. In terms of LLM, we launched a series of specialties at the end of last year, covering the field of LLM model training, text-based automatic creation, dialogue system development, and fast model content generation. In addition to the text, we are also working on the content generation of various models such as voice, images, videos, 3D images, and so on. The fast multi-model content understanding and generation technology is growing day by day.
spk06: Thanks for your question. Leveraging our artificial intelligence team, over years, Kuaishou has accumulated a deep technological foundation of generative AI, especially large language models, LLMs, and multi-modal pre-trained large models, AIGC tools, et cetera, as well as these technologies applications. So with respect to LLMs, we launched a special project toward the end of last year covering LLM training, automatic content creation and generation, dialogue system development, cross-modal content generation, and other fields. In addition to text, we are making active deployments in content generation across diverse modalities, such as voice, image, video, and 3D graphics. ISO's multimodal content understanding and generation technologies are becoming increasingly mature.
spk00: How about the future? Looking forward, we believe there are rich scenarios and significant potentials in integrating generative AR into our business. We will allocate manpower and other resources in a rational manner.
spk06: make long-term investment in the innovation and breakthrough of related technologies, and promote their organic integration with our business.
spk02: Back to you, Operator.
spk11: Thank you. 好,谢谢。今天的问答环节到此结束。 现在有请Matthew做总结性发言。 好,谢谢,Operator。 感谢大家今天的参与。
spk03: 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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