Phoenix New Media Ltd (FENG) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media fourth quarter and fiscal year 2011 earnings conference call. (Operator Instructions). I must advise you that this conference is being recorded today, Wednesday, March 7, 2012. I would now like to hand the conference over to your first speaker today, Mr. Matthew Zhao, Investor Relations Manager of Phoenix New Media. Thank you. Please go ahead.

Thank you operator and thank you and welcome to Phoenix New Media fourth quarter and fiscal year 2011 earnings conference call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu, our Chief Operating Officer, Mr. Ya Li, and our Chief Financial Officer, Ms. Lily Liu. For today's agenda management will provide us with a review on the quarter and fiscal year, and also include a Q&A session after the management's prepared remarks. The fourth quarter and fiscal year 2011 financial results and a webcast of this conference call are available at the Investor Relations section of www.ifeng.com. A replay of the call will be available on the website in a few hours.

Before we continue I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Thank you Matthew. Good morning and good evening everyone. We're very excited to report strong fourth quarter results, in terms of both financial and operational performance (technical difficulty) for 2011. For the full year 2011 we grew total revenue by over 80% (sic -- see press release) to CNY951m. This resulted in adjusted net income for the year growing by over 84% to CNY167m. The biggest drivers of this strong financial performance has been our tremendous user growth. This is exemplified by a major milestone we achieved last quarter. Among China's top five portals we've become number four in terms of total user time according to iResearch. This is a strong measure for determining user loyalty for websites' particular content.

With that, today I would like to discuss three key focus areas for Ifeng with you. (Technical difficulty) expansion plans. Two, plans for our premium content offering in both portal and video sites. And three, our strategy and efforts in mobile Internet business.

First, our strong user growth dynamics and expansion plans. This year our web portal, Ifeng, continued to significantly outpace our peers' growth rate. According to iResearch our year-over-year monthly and daily unique visitor growth rate was 75% and 78% respectively. This was more than twice the rate of any of the other top four portals' growth rates. For December 2011 the number of daily unique visitors exceeded 20m according to iResearch. Our number of daily page views also increased about 60% year over year. On the video front, last December Ifeng become the (technical difficulty) according to iResearch and the only one focused on short-form professional new contents among top 10 video sites.

We attribute the following two reasons for explaining why we have continued to outpace our peers' traffic growth. One, our content is truly differentiated and unique unlike the rest of China's aggregated and homogenization media market. Different from the other four major portals, which generally aggregate and disseminate news and other content from the same source, our DNA is very media-centric, which originated from our parent, Phoenix Satellite TV, the most influential global Chinese-language TV network, based in Hong Kong.

We own the exclusive online rights for all the global content produced by Phoenix Satellite TV. As many of you know, Phoenix Satellite TV is the Chinese version of CNN or BBC, providing coverage on both domestic and global events, but targeting a Chinese audience. In addition, our own over 300 staff internal editorial team's strong production capabilities offers Chinese viewers a more balanced perspective on real-time global news coverage and in-depth feature stories.

The second reason is because of the booming growth experienced on social media platforms like Weibo. This creates many new opportunities for the continuing evolution of the portal's media role in society. [2Q], a Weibo-like platform, extremely realtime, but the downside is that they're all so fragmented and they're organised as sometimes factually incorrect. Ifeng, in contrast, provides full coverage of major news and events across multiple channels, incorporating timely news updates, live videos, in-depth analysis, sourced promotion commentaries, online posts as well as collected social media content from multiple sources.

At a time when other portals seem to be turning their focus away from serious journalism to social media or entertainment video, or online games, Ifeng continues to show its commitment in playing a more fair and unbiased journalism role among the Internet media. Our ability to filter through mass information and organize it in a coherent way and provide different viewpoints enable us to better address the needs of our users, of educated urbanite white collars, for efficient and intelligent consumption of new media products in their fast-paced lifestyle.

As such, we have further enhanced our value proposition to not only our high-end users, who always seek in-depth and quality media products, but also our advertisers as a unique and indispensable means to connect the most desirable Internet user segments in China.

Next moving on to our content offer, in the fourth quarter our independent news reports covered most of the major domestic and international news events from Taiwan election to the memorial of Steve Jobs, from APAC summit to Kim Jong-il's funeral. For example, our most popular featured topic recently was the Taiwan election. For this event we sent a dedicated reporting team to Taiwan early and had them set up a temporary studio in Taipei to monitor the event directly from the heart of the event. This was also the first time that we used satellite and outdoor 3G equipment to stream online live

On January 14, the election day, we ran a live streaming program for over 12 hours. The program's quality was comparable with any professional TV network's production. We combined interviews in Taipei with guests in our Beijing studio, making the entire dialogue extremely interactive and lively. In addition, our webpage displayed and refreshed in real time, both as they were being released. This feature page accumulated over 203m page views within two months and reached a peak of over 35m page views on election day.

In the fourth quarter of 2011 we also held a series of marketing activities to further improve our brand awareness. In November, uphold the idea of charity with social credibility, we hosted the Forever Happiness Charity Gala Dinner in Beijing. This event raised about CNY5m for the United Nations Children's Fund. In addition, we also created a special report around this event and the importance of the UN's Children's Fund, which attracted over 10m page views.

In December we hosted the third annual Chinese Business Leader Annual Awards ceremony, which was sponsored by Audi. In year 2012 we will continue to host similar events to further enhance our brand equity. And in process, we're planning to continue exploring innovative ways to provide sponsorship opportunities with our advertising clients through such events.

Moving on to our video content, we continue to execute a truly differentiated media strategy by focusing on professional-news-type shots from video clips, documentary and in-house-produced entertainment shows Our unique content and healthy cost structure has continued to allow us to pursue traffic growth without sacrificing profitability.

In order to further enrich our user-generated content we recently launched an online news media campaign to discover talented videographers. By doing this we hope to build a reporting team which can offer a more objective view, rational attitude and authentic perspective of their subjects and stories. We can then further utilize this high-quality content to be shown on Ifeng.

Lastly, our strategy of our mobile Internet business. We continuously work towards improving the ease of use for our users in accessing our premium content via any device, especially mobile devices. Earlier this month our mobile portal reached a historical high of over 200m daily page views. This sort of demand clearly demonstrates users' strong demand for high-quality content.

As of December 2011, two of our most popular free downloaded news application, Phoenix Mobile Station and Phoenix News, have been downloaded over 11m times in total. Also this month Phoenix News apps for Windows became available for free downloading. With this addition Phoenix News is now available on all mainstream mobile operating systems.

This covered media platform combined with a large and growing mobile Internet user provides a strong foundation to further leverage our existing relationships with advertisers, garnering additional ad spending opportunities. Looking forward we'll continue to leverage our unique media content while further developing our media convergence model across Internet-enabled device to enhance our user experience and ease of use in accessing our content wherever they may be. We believe by investing in branding, talent acquisition and technology we will further strengthen Ifeng's platform by remaining the media gateway of choice for Chinese Internet users.

With that, I would like to pass the floor to Lily, to go over our fourth quarter and fiscal year 2011 financial results.

Thank you Shuang and hello everyone. As Shuang highlighted, Ifeng experienced another strong quarter and a solid year in both revenues and earnings. For the fourth quarter of 2011 our total revenues grew by 77% year over year to CNY280m. And adjusted net income increased even more, growing by approximately (technical difficulty). For 2011 our total revenues increased by 80% year over year to CNY951m and our adjusted net income increased by 86% year over year. Both of these metrics demonstrate the potential of Ifeng's media platform to rapidly expand margins and grow our bottom line.

Let me now take you through the details of our fourth quarter and 2011 financial results. In the fourth quarter of 2011 net advertising revenues grew year over year by approximately 101%, reaching CNY150m or 19% sequentially. Our paid service revenues grew by 56%, to CNY130m year over year.

Our net advertising revenues were primarily driven by growth in average revenue per advertiser or ARPA, year over year. ARPA grew by 104% to CNY479,000 in the fourth quarter, as compared to CNY235,000 in the fourth quarter of 2010. This reflects our ability to garner a greater percentage of our advertisers' marketing dollars. Our top five industry contributors for this quarter are auto, food and beverages, ecommerce, financial services and IT products.

For paid service revenues (technical difficulty) mainly comprised of digital reading, mobile games and WVAS businesses, representing approximately 43% of total revenues in the fourth quarter as compared to 48% in the prior year. Video value-added services or Video VAS represented approximately 3.9% of total revenues in this quarter versus 4.7% in the fourth quarter of 2010. We continue to believe that both of these components will decline as percent of total revenue and will be more than made up by the momentum for our advertising revenue growth.

Our adjusted gross margin, which adds back share-based compensation expenses of CNY1m, was 41.8% compared to 40% in the fourth quarter of 2010. The four components of cost of revenues are revenue-sharing fees, relating to paid services, content and operational costs, bandwidth costs and business tax. On a GAAP basis revenue-sharing fees as a percent of total revenue increased slightly to 28% as compared to 27% in the fourth quarter of 2010. This was a result of sliding scale of paying -- payout ratio as our overall business volume increases.

Our content-related costs as a percent of total revenues declined to 19% from 23.5% in the fourth quarter 2010 primarily due to improved operating leverage and increased synergies we experienced, due to our convergence platform. Bandwidth cost as a percent of revenues increased to 4.4% from 4% in the fourth quarter 2010, reflecting the strong traffic growth.

And lastly business tax as a percent of revenues increased to 7.1% from 5.9% in the fourth quarter of 2010, reflecting higher contribution from advertising revenue growth, which has a higher business tax rate, compared to paid services revenue.

Moving on, our adjusted operating income increased by 55% to approximately CNY31m from approximately CNY20m in the (technical difficulty). Adjusted operating income has excluded a share-based compensation expense of CNY3.8m. Adjusted operating income margin was 11% in the fourth quarter of 2011 as compared to 12.6% in the prior year.

Adjusted sales and marketing expenses as a percent of revenue increased to 17.7% in the fourth quarter compared to 15.5% in the fourth quarter 2010 due to additional spending on a series of year-end marketing events, as Shuang discussed earlier. Adjusted G&A as a percentage of revenues increased to 6.9% from 6% reflecting increased expenses associated with being a public company. And adjusted R&D expenses as a percent of revenues increased from 6% to 6.2% reflecting increased investment in our infrastructure and technology.

Our GAAP net income increased by 210% to CNY35.6m in the fourth quarter, compared to CNY11.5m in the fourth quarter of 2010. Adding back total share-based compensation expenses of CNY4.8m, adjusted net income attributable to Phoenix New Media increased by 120% to approximately CNY40m. This resulted in adjusted net margin increasing to 14.4% from 11.6% in the fourth quarter of last year. Adjusted net income attributable to Phoenix New Media per diluted ADS was CNY0.5 or about $0.08 per ADS, up by 78% from the fourth quarter of last year.

For our fiscal year 2011, our total revenues increased by 80% year over year to CNY951m. Total revenues excluded the top end of our earlier guidance range of CNY917m to CNY934m for the full year. This was primarily driven by net advertising revenues increasing by 128% year over year to CNY466m. Paid service revenues increased by 49.5% year over year to CNY485m.

Cost of revenues increased by 85% year over year to CNY555m. Gross profit in 2011 increased by 73% year over year to CNY396m. Gross margin declined to 41.6% in 2011 from 43.4% in 2010. Adjusted gross margin, which excludes the impact of share-based compensation expense, improved to 43.7% in 2011, from 43.5% in 2010.

Total operating expenses (technical difficulty) year over year to CNY310m. Income from operations increased by 4.4% year over year to approximately CNY86m. Operating income margin was 9% in 2011 as compared with 15.5% in 2010. Adjusted income from operations, which excludes share-based compensation expenses, increased by 54% year over year to CNY152m. Adjusted operating income margin was 16% in 2011 as compared with 18.7% in 2010.

Net income attributable to Phoenix New Media increased by 38% year over year to approximately CNY103m. Adjusted net income attributable to Phoenix New Media, which excludes share-based compensation expenses, increased by 86% to approximately CNY169m. Adjusted net margin increased to 17.7% in 2011 compared to 17.1% in 2010. Adjusted net income attributable to Phoenix New Media per diluted ADS for the full year 2011 was CNY2.23 or about $0.35, up by 41.5% from 2010.

Lastly, I'd like to reiterate our business outlook for the first quarter 2012. We're expecting our net advertising revenues to increase approximately 66% to 73% year over year, to between CNY125m to CNY130m. Paid services revenues are expected to increase approximately 6% to 11% year over year to between CNY102m and CNY107m. As a result, for the first quarter 2012 our total revenues are expected to be between CNY227m to CNY237m, up approximately 32% to 38% year over year.

With that, I'd like to open the call for questions. Operator, please go ahead.

Thank you very much. (Operator Instructions). Your first question comes from the line of Alex Yao from Deutsche Bank. Alex, please go ahead.

Hi. Good morning everyone and thank you very much for taking my questions. I have two questions. One is on the online ads part of the business. Can you talk about 2012 growth outlook and also can you walk us through the key advertiser category spending pattern in this year you would expect?

And secondly is can you talk about the paid service, especially the mobile value-added service, outlook for this year? And how do you think about the impact from China Mobile management shake-up? Thank you.

Hi Alex. Thanks for the question. This is Ya. I will answer the first part of the question and Lily will address the second one. First for outlook for 2012 I think our guidance was for a 70% to 80% growth overall. And the sectors affecting growth the most include (technical difficulty) and FMCG sector.

And for ecommerce sector we have witnessed some stabilization in terms of compared to the rapid growth a year ago and we do expect the situation to remain the same. However, we have been keeping up with the strong clients base compared to other competitors.

For the auto sector the overall budget allocation for 2012 as perceived by us is I think going to remain the same or slightly decrease. However, the allocation to online budget for the auto sector will increase. And so for us, we -- our outlook is for the auto sector growth rate to be the same, about our average growth rate of 70% to 80% for 2012.

And for FMCG, which is a strong driver for online advertising growth resulting from the budget shifting from TV advertising and also from demand in luxury goods, the cosmetics.

And so far I think auto will keep strong at an average growth rate, FMCG will be the strongest growth sector and ecommerce will remain probably relatively slower than average growth rate.

Overall for 2012 we believe we are continuing to take market share away from other portals and we do expect our newest video advertising and mobile internet advertising will pick up. As a matter of fact, for the fourth quarter mobile internet advertising increased its share from 2% in the third quarter to 4% in to fourth quarter. We believe that percentage will increase in 2012, but probably still remain single digit as we experience overall high growth rates.

For 2011 the five strongest sectors are the auto center 22%, the food and beverage sector 11%, the ecommerce sector 10%, financial/IT sector accounts for 8% and 7% respectively.

Lily?

Regarding (technical difficulty) financial impact on our paid services from recent management shake-up at China Mobile, we believe that's isolated event. Overall we are expecting China Mobile may have some business-related policy adjustments this year which will have industry-wide impact and therefore, as you can see from overall our outlook for paid services revenue, we have already baked that in. We're expecting our overall paid services revenues to grow somewhere around high single digit for the year.

That's very helpful. Thank you very much.

Your next question comes from the line of Gillian Chung from Morgan Stanley. Gillian, please go ahead.

Hi. Thank you for taking my question. My question would be on the mobile advertising business side. May I know the -- can you please add some color on your plan to further develop the mobile advertising business this year?

And is it possible to know the how many percentage of the revenues comes from the mobile advertising? Thank you.

Okay. Yes, first of all, as mentioned earlier, the fourth quarter 2011 4% of the advertising revenue comes from the mobile internet advertising compared to only 2% in the third quarter of 2011. And recently we have been working with both interested direct clients, including some international brands and ecommerce companies, and also we are working with mobile ad agencies and mobile technology advisory service providers.

We will aggressively promote and shape the growth path of mobile advertising in China. I think that this is primarily driven by the continued growth in mobile internet usage. And also the advantage in mobile advertising ability for its ability to reach, target, engage and viral and transaction potential. So I think the mobile advertising growth rate is expected to be the highest compared to any other form of online interactive advertising. And also very importantly our over 200m daily mobile page views on the 3g.ifeng.com website and also the strong growth in our mobile applications as well as the 4m mobile newspaper user base provides an enormous valuable user base for monetization through mobile advertising.

And so we do expect the mobile growth rate for 2012 to accelerate but will remain single-digit contribution for overall mobile advertising revenue.

Your next question today comes from the line of Karen Gu from Macquarie Securities. Karen, please go ahead.

Hi, morning. Thanks for taking my questions. My question is about for Q1 2012 and full year 2012. Can you, can management talk more about the potential price increase?

And also increase in the ad inventory? Thanks.

Okay. Thanks for the question. This is Ya again. We have just announced our first rate increase effective on April 1 and meaning that any execution, and campaign booked after this stage will be using the new rate. The overall rate increase is about 35%. 50% of the increase is a result of our rate card, the CPT rate card increase of existing ad inventories. Another 50% contribution is from newly added ad inventories.

We are able to add new ad inventories because of rapid traffic growth such as new channels and new pages and also our ability to provide the effective ad result for the advertisers what allows us to increase the CPT rate. And compared to our competitors, we noticed that both SINA and NTES announced their rate card increase. SINA is about 4.2%. For NTES, which only increased rates once a year, it's about 16%. And so for the first quarter of 2012, that will provide us the first rate increase for 2012 and we are rather confident that in 2012 our advertising growth will be, continue to be leading the competitors and far outpacing the internet portals' average of expected maybe 35% growth in terms of total revenue for 2012.

I don't know if that answers your question.

Yes. Thank you.

Your next question today comes from the line of Chenyi Lu from Cowen. Chenyi. Please go ahead.

Great, thank you. I have two questions. The first question regarding the revenue growth you guide for, the advertising spend revenue for 70% to 80% in the 2012. Can you give us a breakdown as to what percent is coming from the number of advertiser growth and then also from the ARPA growth? Thank you and then I have a follow up.

Okay. Thanks Chenyi. This is Ya. I think, I believe the majority of the growth would still come from the improvement in ARPA. However, great percentage will come from the number of advertisers compared to that of 2011. In 2011 we only had 11% increase in terms of total number of new advertisers -- total number of advertisers.

I think that is a result because of our -- because in 2010 we had a large, rather large number of advertisers through third-party companies such as [Ad-china], [HTD] etc. However, these advertisers contribute averagely very low ARPA and also these client relationships are not controlled by ourselves directly. So in 2011 we decided to decrease the number of corporations through the third-party for some branded advertisers rather to develop those client relationships through our own efforts. That is why I think in 2011 the increase in number of advertisers only showed 11% improvement.

After we have completed that effort in 2012, we believe our target is for more than 20% or 30% of the growth will be from new advertisers. But still majority of the growth will be driven by improvement in ARPA. It demonstrates our ability to take market dollar share (technical difficulty) advertisers budget allocation to other online players.

Okay, great. My next question regarding the gross margin. Again the 4Q gross margin improved year over year and then I just want to get a view as to gross margin, what you guys expect in 2012. Thank you.

Gross margin for 2012, we're expecting a slight improvement. The overall, as advertising revenues contribute to a bigger proportion of total revenues, gross margin will improve and revenue sharing fees or revenue sharing payout ratio for paid services will trend up only very slightly in 2012. So overall the effect is improvement in gross margin for 2012.

So you are talking about a slight improvement year over year? That means improvement from 41.6% into 2011. Am I correct?

That's correct.

Great. Thank you. That's all my questions.

Your next question today comes from the line of Martin Brough from CICC. Martin, please go ahead.

Thank you. Thanks for taking my questions and I have two questions. The first is one is about the online advertising and I would like to know the percentage of the online advertising from our online video business.

Is there any monetization on this particular online video business? If there is none currently will we have plans to monetize this business line? And I have a follow up question. Thank you.

Thanks for the question. The first part of the contribution for video advertising, remain the same for the fourth quarter compared to the third quarter. It's about slightly less than 20% and I think it's because of our ability to grow the online revenue across mobile advertising, online digital advertising as well as online video advertising. We expect that -- our goal is to have the contribution of video advertising increase in 2012. That -- so we will have no more visibility towards the end of this quarter.

And your second part of the question is related to the, if I heard you correctly, amortization of our video?

Monetization.

Monetization. Yes, can you repeat your question again?

The second part of the question, yes.

Actually, you already answered my second part question. Sorry for the confusion. And my follow up question is regarding the mobile application service. And what is your plan on the monetization for the mobile application, as you mentioned early in the opening statements?

Yes, hi. This is Liu Shuang. For the mobile applications right now our strategy is to develop this market, to have the bigger market share, to focus on the user experience, to have more people, especially white collar, to use our mobile applications. So monetization is not our top priority right now. But given our very strong brands and very exclusive contents we are very confident it's an ideal platform for brand advertiser to put their advertisements on. But it's going to be a process so this year our top priority for mobile applications is still to develop the product to have bigger market share, to improve the user experience.

Thank you very much.

Your next question comes from the line of William Huang from Barclays Capital. William, please go ahead.

Hi, good morning. Thank you for taking my call and congratulation to a good quarter. Just want a follow up a question about online advertising outlook. Looking at your first quarter guidance it seems like 60% to 73% year-over-year growth is quite good. And how should we just -- quantitatively -- qualitatively look at the impact from earlier than before Chinese New Year, and also after Chinese New Year to now? Can you just share with us, most of your advertisers basically maintain their budget or slightly upgrade or downgrade the budget? Okay. Thank you.

Thanks for the question. I think it's a little difficult to quantify the impact from the earlier Chinese New Year to the advertising round in first quarter. However, when we look at the impact from the peers I noticed that for SINA and SOHU average about 20% quarter-to-quarter decrease of advertising revenue. And for NTES more than 40% and that is based on -- NTES didn't to have their official guidance. I use some Morgan Stanley data. For us we are also experiencing about 13% decrease from the fourth quarter. That's quarter-to-quarter decrease. Year to year we are growing 72% and SINA and SOHU are growing 10% and NTES is growing 34%. So we are showing a very strong number.

And in terms of their budget after the Chinese New Year we are seeing a strong, a very strong budget increase, especially for events like the annual legislators meeting in China. We have achieved the highest advertising sponsorship for such major event. And also across (technical difficulty) that our guidance for the 66% to 73% growth for the first quarter should be achievable.

Okay. Thanks. Can you also update us on your outlook on real estate advertising?

Okay. Yes, real-state sector actually is something we are in the process of developing the content and growing the user base even though we have seen the strong momentum. We are very strong in terms of real-estate news and information (technical difficulty) weak compared to the vertical services provided by SINA and SOHU's affiliated vertical real-estate companies. And so our outlook for real-estate advertising is that it's going to grow (technical difficulty) base for our overall advertising revenue. However, it probably doesn't -- it's not a good benchmark for the sector.

I think in more difficult market the developers, real-estate companies actually rely more on websites like us with valuable user base which are their targeted consumers. That's where our confidence comes from for high growth for this sector even at low base.

Okay. Sorry, I just missed a number or the trend that. You expect the real estate to be in line with your average or slightly outperform?

It's going to be higher. It's going to be higher than our average because our real-estate sector contribution right now is not among our top 10 sectors yet. So it's going to be higher than our average growth rate, yes. That's why I --

Okay. Last question is in terms of your fourth quarter advertising revenue. May I know how much percentage of revenue's attributed to the FMCG? Thank you.

FMCG, okay, if we look at food and beverage it's 11%. And we have some cosmetics and we also have -- it depends on how you define that, the word FMCG. And so I think food and beverage is 11%, of which is the second largest sector in terms contribution. Cosmetics is really from our rapid growth of our, for example, our female and fashion channel, which ranked number two according to iResearch in terms of daily or monthly unique visitors. And also the fashion and female sector also contributes to rapid growth in luxury brands or personal growth sector. Personal growth sector will also be a driver for our 2012 growth amount with the FMCG sector. Is that what you -- okay. Thank you.

Thank you. Very helpful.

Your next question today comes from the line of Eric Wen from Mirae Asset. Eric, please go ahead.

Thanks very much for taking my questions. I have just a very simple question. Regarding the wireless value-added service business, earlier you mentioned that the policy change at China Mobile is going to reduce the growth rate and I see that your first quarter wireless guidance was pretty low compared to the fourth quarter number. Can you just share some more colors on what kind of policy change or environment change that China Mobile is going to impose in 2012? Thanks.

Hi Eric. It's Lily. For our first quarter guidance as well as for our full year paid services revenues, I want to first clarify that one, part of the reason that we're reducing the growth rate is also because our overall scale for this business has reached a very high --- has reached a high level. Overall in the industry we are probably one of the top players in terms of this business. So our growth rate cannot continue at the high double-digit as before. That is one of the reasons.

The second reason regarding some of the business, potential business policy changes, one of the examples is, for example, for our mobile video, China Mobile has announced plans before to perhaps a spin-off this part of the business and a form a joint venture with CCTV. So business policy changes like that will have an industry-wide impact on players who are trying to do mobile value added services.

Okay, so is it more Company-specific on the video side or it is industry-wide, that it will affect other companies like Tencent, which I think is also very big in the league table?

Sure, this is an industry-wide -- this will have industry-wide impact. So this is one of the potential changes that China Mobile may implement this year.

Okay. Thanks. I appreciate it.

Your next question comes from the line of Chao Wang from Merrill Lynch. Chao, please go ahead.

Hi. Thank you for taking my questions. Just given that your ARPA doubled so I guess you saw your customers shifting their budget significantly, I'm just wondering if you have any sense that mainly from whom you are gaining market share? Are there other portals or other media forms such as TV and magazine? Thank you.

Yes, thanks Chao. This is Ya. I think, of course I think, first, we are gaining -- overall the online advertising is taking market share away from the outlying marketing. Especially because for the TV regulatory change, the TV ad rates grew a lot and ad inventory decreased a lot. That helped the transition from offline to online advertising. And also because of the measurable results of the targeting ability of online advertising. So online marketing continues to gain market share away from all other forms of advertising.

And secondly, I think probably equally important is our ability to take market share from potential otherwise higher growth rates from other players such as the portals. And we have seen that our growth rate far outpaced other portal's growth rate. If there were no ifeng.com they would have grew at a much greater rate. So our ability to grow at such rate didn't prevent them from growth, but it did -- certainly we took their growth rate, growth potential away. And so I think those two factors contributed to our ability to grow our ARPA.

Even at this stage many of our key clients' and key sectors' budget allocation for ifeng still lags behind our traffic or mindshare compared of our users. So that's why we believe that with our variable use base, the continued high growth in traffic and the branding power, we should continue to expect ARPA growth to outpace the competitors in 2012 and beyond.

I have a second question, a very quick one. Just how much of your advertising revenues from ecommerce sector? Very rough number is okay, like is it between 5% to 10%, or above 10%? Thank you.

Yes, the fourth quarter is 10%. In fourth quarter it was 10%, yes.

So how about in the first quarter guidance, how much are you assuming?

We expect it to be probably about the same. We didn't -- we wouldn't know at this time, but we are not expecting major changes at this stage.

Okay. Great. Thank you very much.

(Operator Instructions). If there is no further questions today, I would now like to hand the call back to your presenters. Please continue.

Thank you operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us on this call today. Have a good day.

Ladies and gentlemen, that does conclude our call for today. Thank you all for participating. You may all disconnect.