Phoenix New Media Ltd (FENG) 2012 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 2012 earnings call. (Operator instructions) There will be a presentation followed by a question and answer session (operator instructions). I must advise you that this conference is being recorded today, Thursday 8th of March 2015. I would now like to hand the conference over to the Investor Relations Director, Matthew Zhao. Thank you sir, please go ahead.

Thank you operator and thank you and welcome to Phoenix New Media fourth quarter and fiscal year 2012 earnings conference call. I am 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 also include a Q&A session after the management's prepared remarks. The fourth quarter and fiscal year 2012 financial results and webcast of this conference call are available at Investor Relation sections 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 are very pleased to report '12 fourth quarter results in terms of both financial and operational performance that help us complete a challenging but solid year of strengthening our overall foundation for year 2012. Because of the strengthening of our convergence technology platform, unique and sought after content as well as our strong execution during a tough year, we were still able to achieve a major milestone of reaching annual revenue of over RMB1 billion. In addition, we grew net advertising revenue by over 31% to RMB610 million. This growth clearly demonstrated the deepening of our relationships and an increasing awareness from our advertisers about our fast growing, highly educated, higher income readers and viewers who depend on iPhone for obtaining news, finance, technology, entertainment and lifestyle content.

With that, today, I would like to discuss three key focus areas which are (1) elaborating on user based expansion on [premium company operations], (2) our year end activities in promoting our iPhone brands and extending our media [coupons] and (3) our strategy to further expand our mobile internet business.

First, our strong user growth and continued expansion. Throughout year 2012 our web portal continued to significantly outpace our peers' growth rates and narrowed the viewership gap with them. According to our research, our daily unique visitors grew by over 43% year over year, reaching 33 million viewers. Likewise, monthly unique monthly unique visitors grew dramatically by over 64% reaching 262 million. This growth was significantly faster than any other major portal website in China. Amidst that, over 50% of all Chinese internet users came to iPhone to consume our premium content. This average outs to over 338 million page views per day throughout December alone. We believe that our coverage of major domestic and international news events like the 18th CPC National Congress which generated over 38 million page views, or the Taiwan Golden Horse Awards with over 93 million page views and of course the famous wedding ceremony of the diving queen, Guo Jingjing, which generated an amazing 167 million page views, clearly demonstrates our differentiated focus on highly desired media in China.

On the video front, we experienced even greater growth because of our unique focus on short form professional-made news content, iPhone views grew with daily unique visitors count by over 94% year over year. This was over 30 million viewers watching over 60 million videos per day in December. This strong growth in our video business accounted for 18% of overall net revenue in the fourth quarter, up from 12% in the third quarter.

We continue to acquire the significant traffic growth for two primary reasons. (1) As media consumption habits continue to evolve at the portal and mobile access points, we are monitoring and evolving with it. This is necessary in order to provide improved and innovative content format that make it easier for Chinese readers to connect and consume our content. In addition, we continue to experiment with these formats to improve the advertising possibilities on (inaudible) for our advertising clients.

As an example, we have a new video program called iPhone Daily News or (spoken in foreign language) in Chinese. This shows leverages our audience appetite for updated news by providing a collection of 15 most followed stories twice a day. This segment is provided in a similar format that can be easily and quickly viewed by the audience. In addition, it is exclusively sponsored with a million dollar contract over the course of several quarters. This sort of innovativeness demonstrates our ability to evolve with our audience, leveraging our media centric DNA, plus one (inaudible) enabling us to offer Chinese viewers a more balanced perspective on real time global news coverage and in depth feature stories in new and convenient ways.

The second reason is because we continue to show iPhone commitment and the dedication in providing an unbiased journalistic voice in the online media world. Where other portals focus on social networking or entertainment videos and online games, we remain focused on what matters, providing Chinese with a well-rounded perspective of the world as it is. As an example of our attention here, on December 28, iPhone Video hosted the Year of Paike award to honor the best video news and documentaries produced by amateurs in China. To quickly define, Paike is the US equivalent to CNN's iReport.

Currently iPhone has more than 2000 nationwide Paike contributors offering us exclusive, first hand, semi-professional video news. We believe our talented Paike will provide us with a significant advantage in gallery and delivering the best onsite video news to our Chinese audience.

Next, moving on to our year end activities in promoting the iPhone brand and the strengthening of our media position. As a part of strengthening our reputation and exposure through the Chinese media space, year 2012 was a year of brand building for the iPhone media platform. During the fourth quarter with help from fierce marketing activities to further improve our brand awareness among both the Chinese viewers as well as advertising clients, on December 1st we hosted the Chinese Business Leader Annual Awards which was co-sponsored by Audi, to honor the most influential and outstanding entrepreneurs in the greater China area. Since its inception in year 2009, we have awarded more than 40 business leaders this title.

On December 16th we partnered with our parent company, Phoenix Satellite TV, to host the year 2012 iPhone Financial Summit. This year's theme was new portal reform, that focused on key areas of reform needed to help China sustain its growth for years to come. The summit was streamed live on the Internet to leading figures including government officials, academics and entrepreneurs, offering them options and solutions in helping to address the major issues affecting China. In addition, we hosted thousands of internet viewers also joining the discussion with guest speakers through iPhone's interactive online forums and blogs.

As a part of our effort to diversify audience and attract more female users, on December 16th we hosted the iPhone Fashion Leader Annual Award ceremony. This was an event to acknowledge, nominate and reward Chinese fashion leaders crossing global boundaries an helping China emerge on the international fashion scene in multiple areas, including clothing, jewelry, watches, art, hotels, entertainment, culture and many others. These events continue to help differentiate iPhone's content and exposure on many levels and significantly enhance our brand equity.

Lastly, our strategy about mobile internet business. As we have discussed before, we continuously strive to improve the customization and seamlessness of accessing our premium content from any internet enabled devices. In choosing so, we have realized much success with two of our most popular free downloaded new applications, iPhone News and iPhone Media which have already been downloaded over 25 million times as at the end of December. In addition, our app iPhone FM, which offers new news and all new content, has also become one of the most popular non-musical audio apps available for both IOS and Android devices.

We offer new innovative means for advertisers to advertise alongside our audio content. In addition, in an effort to streamline our overall editorial department, we recently merged the mobile internet department editors with our overall editorial department. We believe this will provide additional leverage of our media resources in offering seamless content to our mobile internet users. Going forward, we will continue to invest more on developing innovative ways for users to access and interact with our content and increase advertiser spending on our expanding media platform.

In conclusion, we are fortunate to stand at the crossroads of TV, mobile and internet convergence. With the support of the convergence model we have implemented, we are able to realize increased [core setting] opportunities, enhanced cost synergy and improved cost savings across all growth media platforms. Because of this, we are confident in maintaining our profitability level, as well as achieving further market penetration. We aim to continue leveraging our unique media content while further developing our media convergence model across internet enabled devices to enhance our user experience and ease of use in accessing our content wherever they may be. We believe that by investing in branding, talent acquisition and technology, we will further strengthen iPhone's platform and remain the media gateway of choice for Chinese internet users.

With that, I will like to hand the floor to Lily to go over our fourth quarter and fiscal year 2012 financial results.

Thank you Shuang and thank you all for joining our conference call today. Let me take you through our financial highlights for the fourth quarter and whole year 2012 results. The amounts mentioned here are all in RMB unless otherwise noted.

iPhone total revenues for the fourth quarter came in at RMB302 million which exceeded the high end of our guidance by over 9%. Non-GAAP net income for the fourth quarter was RMB25.8 million or RMB0.33 non-GAAP net income per diluted ADS.

Let me now run through the other key financial highlights, starting with net advertising revenues. Net advertising revenues for the fourth quarter came in at RMB193 million which beats the high end of our guidance by over 13% and represents a respectable year over year growth of 28%. Our top five industry contributors for this quarter are auto, food, beverage and wine, e-commerce, financial services and medical services.

Turning to paid service revenues, for the fourth quarter iPhone generated RMB109 million paid service revenues which beats the high end of our guidance by over 4% and it represents a sequential decline of 16%. As the market in China shifts towards mobile internet, we expect traditional WVAS revenues will continue to decline as a percent of total revenues but that they will in turn be offset by growth of our 3G data services such as mobile video, digital reading, as well as web page themes going forward.

Turning to gross margin, our gross margin for the fourth quarter was 45.4%, up from 41.4% for the same period in 2011. The four components of cost of revenue are revenue sharing fees relating to paid services, content and operational costs, bandwidth costs and sales tax. On a GAAP basis, revenue sharing fees as a percent of total revenues declined to 15.6% from 28% in the fourth quarter in 2011. Content related costs and operational costs as a percent of total revenues increased to 24.2% from 19% in the fourth quarter 2011, primarily due to increase in staff related costs and acquisition of third party content. (Technical difficulty) cost as a percent of revenues increased to 6.3% from 4.4% in the fourth quarter of 2011 reflecting the website's strong traffic growth and lastly, sales tax as a percent of revenue increased to 8.5% from 7.1% in the fourth quarter of 2011.

Turning to operating expenses, on a GAAP basis, operating expenses for the fourth quarter were RMB118 million compared to approximately RMB90 million for the same period of last year. The increase in operating expenses were primarily due to increase in staff related costs, sales and marketing expenses associated with the Company's marking and promotions and increase office rental fees. iPhone's operating margin for the fourth quarter 2012 was 6.2% as compared to 9.3% from the same period last year, but it has improved significantly from the third quarter at 1.3%.

Adjusted sales and marketing expenses as a percent of revenue increased to 22% in the fourth quarter, compared to 17.7% in the fourth quarter of 2011 due to an increase in staff related costs and marketing and promotional events. Adjusted G&A expenses as a percent of revenue increased to 9.4% from 6.9%. Adjusted R&D expenses as a percent of revenues increased to 8.0% from 6.2% in the same quarter last year.

Non-GAAP income from operations for the fourth quarter was RMB16.6 million compared to RMB30.8 million from the same period last year. Turning to net income, non-GAAP net income attributable to iPhone for the fourth quarter was RMB25.8 million compared to RMB40.4 million for the same period last year. Non-GAAP net income per diluted ADS for the fourth quarter was RMB0.33 compared to RMB0.50 last year.

Turning to balance sheet items, as of December 31st 2012, iPhone's cash and cash equivalents as well as bank term deposits totaled RMB1.2 billion or approximately $185 million. Let me briefly run through the key figures for whole year 2012. Total revenues for 2012 were RMB1.1 billion, representing a year over year growth of 16.9% from 2011. Net advertising revenues grew by 31% year over year to RMB610.2 million. Paid service revenues grew by 3.3% year over year to RMB500.8 million. The shift in product mix in our paid service revenues is a reflection of resource allocation away from traditional WVAS to our 3G data services such as mobile video and digital reading and webpage games going forward.

Total 2012 non-GAAP gross profit was RMB480.7 million which represents 43.3% non-GAAP gross margin, which was stable as compared to 43.7% in 2011. Non-GAAP operating income was RMB91.4 million which represents a non-GAAP operating margin of 8.2% as compared to 16% in 2011. The decrease was primarily due to our increased staff related costs, content and bandwidth cost as a result of very strong traffic growth, increased marketing and promotional activities, as well as increased rental fees. Non-GAAP net income attributable to iPhone for 2012 was RMB114.1 million or RMB1.42 non-GAAP net income per diluted ADS. Non-GAAP net margin for 2012 was 10.3% as compared to 17.7% in 2011.

Lastly, I would like to reiterate our business outlook for the first quarter 2013 where we are targeting total revenues to be between RMB271 million to RMB280 million, representing an increase of 13.4% to 17% year over year. For net advertising revenue, we are targeting between RMB161 million, to RMB166 million representing a growth of 25% to 29% year over year. For paid service revenues, we are targeting between RMB100 million(sic-see press release "RMB110 million") to RMB114 million RMB representing a decline of 0.2% to a growth of 3.5% from the first quarter of 2012.

This concludes the [recent] portion of our call. We are now ready for questions. Operator, please go ahead.

Thank you. We will now begin the question and answer session. (Operator instructions). Our first question comes from the line of Alex Yao from Deutsche Bank. Please go ahead.

Hi, good morning and good evening everyone and thank you very much for taking my questions. I have two questions. Number one is the operating expense side, this quarter the revenue mix continued to shift towards online advertising which is a high margin business and also gross profit increased, but operating expense increased much faster than revenues, so the operating margin declined. So this suggested the operating efficiency is weaker than one year ago. How should we think about operating efficiency in 2013?

Second question is on the paid service outlook in 2013. Given the structural challenge to the traditional mobile value added service, can Management talk about the solutions you identify to grow the paid service and what is the initial feedback from these initiatives? Thank you.

Alex, I'll take that question. First question regarding operating efficiency or operating margin, in the fourth quarter our operating margin was approximately 5.5% which is down from last year. Most of that is due to increased marketing and promotion activities, increased staff related cost as well as increased rental fees. Going forward, for 2012 we actually increased our sales and marketing efforts, so in the fourth quarter we held two new industry-wide marketing events that we did not have in 2011. We believe that these two events significantly increased our brand awareness and industry penetration, especially for our finance vertical as well as fashion vertical. Going forward, for 2013 we expect to at least maintain the same level of efficiency, if not improve that slightly as time goes. So that is for the first question.

Second question regarding our traditional mobile value added service, you are right, mobile value added services within that our traditional wireless value added services which is specifically SMS and MMS related products will experience a decline for the first time in our Company history for 2013. However, we believe that this will not have as much impact on our bottom line and we are growing our 3G related data services such as mobile video and digital reading going forward which, for both of these areas, still carry a healthy growth rate going forward. We also launched a gaming platform in 2012 which is growing much faster. So going forward for 2013, we don't expect our total paid services to decline, we are expecting our total paid services to maintain at least the level in 2012 or even grow a little bit.

Thank you very much. I will get back to the queue.

Right, thank you and our next question comes from the line of Gillian Chung from Morgan Stanley. Please go ahead.

Hi, thanks for taking my question. Can you please provide a breakdown of your advertising sector and can you please also share your view on the outlook of the major sectors. Do you think the advertising recovery is across the Board or just focused on a few sectors? Thank you.

Thanks Gillian. This is Ya. Our top five sector breakdown is auto by 29%, food, beverage and wine 15%, e-commerce 10%, financial service 8% and medical and healthcare services 4%. Right now we are cautiously optimistic about the advertising outlook and we believe that the economy is better than we feared. Part of the strong growth of our fourth quarter advertising revenue also came from the completion of our realignment of our sales force, as well as the new video ad strategy. For this sector, also all our top sectors, we believe the food, beverage and wine, we still enjoy a relative stronger growth than auto and e-commerce and financial services because at last year's [CCTV] auction, the food, beverage and wine accounted for 44% of the entire auction revenue. That's one of our focuses. So auto, we believe that the mixture of the Japanese auto ad revenue, ad budget concern and also the restrictions from the concern for pollution and traffic jam, will keep the sector remaining where it is today. So overall, I think that's our outlook for our top sectors.

Thank you.

Thank you.

Thank you and our next question comes from the line of Jiong Shao from Macquarie. Please go ahead.

Hi good morning everyone, this is George Chang on behalf of Jiong. I have a couple of questions. The first one is regarding your advertising revenue. Can you provide us the video advertising contributions this quarter to total advertising revenue and also among the video advertising itself can you also give the breakdown of the banner and the sponsorship as well as the pre-roll?

Okay. Yes, thanks. This is Ya. The video ad revenue accounted for 18% of the fourth quarter revenue, up from 12% in the third quarter and the actual number actually is over 100% growth from the third quarter and mainly because firstly the completion of the realignment of our sales force, so we have a centralized video ad strategy team with the actual sales team across all regions and all sectors and secondly because of our new video product and video ad product including the example of iPhone daily news which enjoyed over $1 million sponsorship support.

Thirdly, because improves of video ads technology, like the video ad serving system and fourthly, because of the effectiveness of certain sectors including the food beverage, regional travel, wine and also the relationship with the TV news advertising agencies. Actually most of our video ad is sold in integrated format including both banner and sponsorship and so we are working on two legs. We are fortunate to have very rich program resources and so we are selling the video ad by two approaches. One is following the TV program advertising approach which tends to be more by sponsorship and at the same time sell by CPM based pre-roll or mid-roll and also our video costs are lower due to the short form sector and the margin structure is different from other non-form video providers.

That's why our video business itself is already profitable unlike the other TV drama or movie focused pure video players and we believe with the shift of viewership from TV to online or mobile devices the video ad growth will continue to drive our overall revenue advertising revenue growth. Thanks.

Thank you a lot, Ya, that's very helpful and my second question is regarding our web game operations. So can you actually update is on the revenue contribution in the fourth quarter from the web game operation and what is your target going forward in 2013? Thanks a lot.

Okay, thanks for the question. Yes, at this stage actually we are still focused on our core existing business. While we realize that that game is a valid need from mainstream internet users in China, so with our huge user base and their strong purchasing power it is an area worth exploring but we are very careful and at very early stage and so fourth quarter contribution are still relatively small. At this time we are not providing any guidance on that. I think going forward we will update you at a more appropriate time. Thanks.

Okay, thank you very much. It has been very helpful.

Thank you. Our next question comes from the line of (technical difficulty) from Merrill Lynch. Please go ahead.

Hi, good morning. Thank you for taking my questions. I have a couple of questions. The first one is about your advertisers. I'm curious on the number of advertisers you had in the fourth quarter and more interestingly could you also talk a little bit about the (inaudible) of your video advertising advertisers? Should we expect almost all of the video advertisers coming from your portal site or are we seeing any new advertisers that you obtained purely on the video business? So that is my first question and then secondly, could you also discuss your plans on your cash? It seems to be a very big cash balance sitting on your balance sheet, so any plans for dividends, share buyback or acquisitions? Thank you.

Okay, thanks. I will address the first question and Lily will address the second one. Yes, for our overall advertiser in the fourth quarter was 319 and it represented a 7% sequential growth from third quarter and 1% growth from a year ago and in the previous quarters, couple of quarters, the number of our advertisers didn't grow much. We had disclosed that we proactively tightened our payment terms with some smaller advertisers during the difficult economic times and also we changed the way we count small advertisers through third party agencies, which caused the overall advertisers to reduce in the second and third quarter.

However, the number of event advertisers mostly remained the same. In the fourth quarter finally we are seeing the growth coming back, both sequentially and also over the year ago, and the main driver for the advertiser growth comes from both the video advertising and also mobile advertising which account for 9% of our fourth quarter revenue, up from 6% in the previous quarter and also the new sectors which fits well with this video and mobile advertising, including the ones I mentioned, regional travel, food beverage and wine and there are indeed advertisers who are pure video advertising or mobile advertising clients and we do expect the number of advertisers to grow because of the efforts of high growth in video and mobile advertising as well as from the new sectors. Yes, for the second question, Lily please.

Sure. For cash currently the Company does not have plans for paying a dividend and we have authorized a $20 million share buyback and we're still in the process of that, so we will wait until that is depleted before we go to the Board and decide on what to do next.

Yes, for the acquisitions let me just add that we are very careful how to use our cash. Our overall goal is to maximize shareholder value and we are actually looking at different investment or acquisition area, mostly they fall into two categories. One is to increase our profitability by investing in certain vertical areas, whose revenue model is already clear, such as the online travel, online healthcare, online financial services. The second category falls into for future growth, especially for the wireless internet. For example the mobile Internet, mobile SMS and mobile video but overall as I mentioned we will try to maximize shareholder value using the acquisition investment vehicle.

A few more words I want to add. Our goal is to build a nice large portfolio of media assets or kind of the media platforms. Our priority is to build these assets organically but we don't want to rule out possibility of acquisition and the new targets have got to be supplementary to our existing business, got to help us to expand new market shares and can create huge synergy. So the bottom line is to maximize shareholder value but the priority is to build our business organically.

Understood. Very helpful, thank you.

Right, thank you. Our next question comes from the line of Martin Bao from CICC. Please go ahead.

Thank you for taking my questions. Two questions regarding (technical difficulty), and the first one is (technical difficulty) traffic growth within our mobile segment and the second question is what kind of mobile advertising formats you think will grow the best in the 2013? Thank you very much.

Martin, can you repeat the first question.

Actually the first question is regarding the traffic growth trend with our mobile business with the mobile apps and all the other 3G mobile services.

Martin, I'll take this question. I think we have experienced very rapid traffic growth on our mobile platform. The product, we have a nice portfolio of media applications and wireless products. The product I think is still at the developmental stage, so it's probably not the best time to elaborate too much on the exact numbers of the mobile traffic growth but we feel very comfortable with the traffic growth and on the PC5 tablet side we also experienced the same kind of rapid growth.

I think there's lots of factors behind us. First, our media driven approach toward content aggregation is different from other players. We are one of the very few internet companies in China openly advocating serious journalism in the internet world, we are proud of our media D&A. We believe in value of organizing professional generated content and we are committed to instilling media spirit in our products.

So if you look at our portal you will find very strong media type of user interface and very sharp viewpoints commenting world events and intensive use of online interview and offline investigatory reports and unique angles in certain news. So this fundamentally sets aside us from other players and also plus our branding power, our premium content, these are all helpful for our traffic growth and the second thing, as I mentioned in my opening remark, our portal as a product is evolving. We evolve our portal to get adapted to market changes especially the changes of consumer habits.

You will find a lot of unique features on our portals like user friendly format, targeting at the recommendation consumption of media and high emphasis on user interaction, especially online surveys and lots of micro level innovations. So fortunately we are still very committed to involve our product, so while the other players are losing focus, are distracted by some (inaudible) head start, so that's helpful as well.

Going forward we are still very confident about the future traffic growth. I think the outside market changes are in favor of us. The new cabinet leadership changes further aroused people's interest in political and economic life in China and the rise of the middle class further enhanced people's demand for quality news and the lifestyle content and all of these are very helpful for our future traffic growth.

Across all these platforms I think we're going to continue to grow our traffic, continue to grab shares from competitors but given the huge size of our user base I think the growth rate will slow down. So the next priority will be our monetization.

Martin, this is Ya. I'll address your second question about mobile advertising format. In the early days most of the formats fall into banner mini sites but we are in (technical difficulty) along with our industry peers and we have noticed that the loading page advertisement on the mobile video advertisement and also the newly emerged native advertising format could become, could grow much faster.

I think for the mobile video advertising, especially for the pad, pad screens, I think that's one area we are experimenting. And for the native advertising, it's an area which the portals or mobile portals can maintain its CPM rate while seamlessly include the advertising message within the information flow. And so we are carefully learning and also cooperating with our peers to emulate and so better monetize, but as Shuang mentioned, and our current focus is still on the [account and] user experience and user growth.

One more thing I want to add, we didn't see that much cannibalization for user migration from PC side to mobile side. This situation is fundamentally different from other players. We see very robust traffic growth on every major front, on PC, on tablet, on wireless. So that provides further room for future monetization, both PC side and mobile side.

Thank you very much. That's very, very helpful.

Thank you. Our next question comes from the line of William Huang from Barclays. Please go ahead.

Hi, thank you for taking my call. I just want to, first question is follow up on mobile monetization. In terms of the mobile ads from there you've just commented, we're just curious, have we talked to any advertisers previously? What kinds of the mobile ads from there? What is the highest interest from advertisers so far, such as mobile portals or mobile video ads, and what is their feedback or concerns right now? And when do we expect a meaningful REM in terms of the mobile advertiser revenues? Thank you.

Yes, thanks for the question, this is Ya. Actually we are at the very early stage of mobile ads monetization so we are experimenting with all kinds of advertising formats and at different times different formats will emerge as effective way. For example, on November 11 on the so called single stage promotion and the loading page format was most effective and earned the most dollar revenue for many advertisers, many media, mobile media including us.

So short answer is that we are trying to make all different formats and the ones which I mentioned earlier, the loading page format, the mobile reader format or the native advertisement format along with the more traditional ones, mini size, they can be very effective for different kinds of advertisers ranging from FMCG to ecommerce or to other online services advertisers.

This is Shuang, a few more words I want to add. We're very encouraged that even though the portal is still at the developmental stage, we see the advertisers' enthusiasm on the mobile advertising is huge. They are trying different kinds of pilot projects on our platform.

Further, we believe that the wireless competition is a long battle. It's not a six months or one year thing. So top priority will be given to improving the portal, improving the user experience. So we don't want to compromise by building user experience too much at this stage. So we want to strike a balance between our market expansion and the monetization.

Okay, just a quick question on advertising. Moving to 2013, can you update us in terms of your pricing hike, increase for both portal and the video ads? Thank you.

Thanks, yes, we disclosed that we had a price hike on January 1, and for the video advertising, inventory grew by 48% and the A class price cost increased by 15%. And for the long video card, the A class price hike was 18% on January 1. That's a more significant price hike compared to the previous one in 2012. Next one will come, hopefully will be on July 1, but at this time we have not decided on the actual rate.

Okay, very helpful. Thank you.

Thank you. (Operator instructions)

Next we have a follow up question from Jiong Shao from Macquarie. Please go ahead.

Thank you very much for taking our follow up question. Sorry being a bit late on the call.

I just want to have a follow up question again on the mobile side. Could you please share with us some of the user metrics if you are able to? For example, how many downloads you have for the mobile app, what's the sort of the daily DAUs or MAUs. Anything you can share would be helpful.

Okay, Jiong. This is Ya and for the mobile platform we have two categories of main products. One is the 3g.iphone.com mobile website. It has 235 million daily page views or 17 million daily unique visitors. And for the mobile apps, the flagship apps are the iPhone news and iPhone video apps. They have accumulated $25 million.

And we are still working on improving the product and user experience to grow the daily user base for these apps.

Jiong, a few more words to add. I think the product is still at the development stage. I think we take a different approach towards developing our apps. Rather than spending a lot of money on marketing, on advertising campaign or buzz [generation], we want to focus on the product itself. There are numerous ways to improve the traffic, improve the users, but right now, at this stage, we want to focus on the product itself. It's going to be a long battle.

Okay, thanks. I just follow up on that. Now obviously your strength has been in the news and this media area, but once you get into the mobile outside of the media and news area, are there other segments that you think in the mobile area, either advertising or commerce related, you are thinking about entering down the road once you build up a very big base of mobile app users?

Thanks for that question. I think fundamentally our competitive advantage comes from the brand power and also the huge user base, existing user base, and their purchasing power. And right now if you look at overall mobile revenue contribution, even excluding the traditional [WES] revenues, we have mobile advertisement, we have mobile digital reading, we have mobile game and mobile video. Add them all together, it's about more than 20% of our overall revenue and these are all 3G related mobile revenues. It's leveraged on, as I mentioned, the purchasing power and the brand power.

And even just for the apps category, we did mention in our CEO script that we have audio app which is now number one music audio app in China for iPhone FM. And that's a platform category of application which provides [accountants] much more than what Phoenix of even iPhone provides online. So that's just an example of how we are. We are expanding into related areas on the wireless platform.

Jiong, this year our focus will be on our two flagship apps. We want to take a step by step approach towards developing our wireless business. I think we are, we need to strike a balance between market share expansion and margin improvement. So we want to make investment in wireless also controllable, so we want to take a step by step approach.

This year, we're going to leverage these two flagship apps to jumpstart our whole wireless business. So later on we'll definitely be aggressive to tap into new territory like commerce, like some paid driven models.

Okay, sounds like good plan. Thank you very much, guys.

Thank you.

Thank you.

Thank you. (Operator instructions)

Thank you. It seems that there are no further questions in the queue. We would just like to hand it back to management for short closing remarks.

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

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.