Weibo Corp (WB) 2015 Q3 法說會逐字稿

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  • Operator

  • Good day and welcome to the Weibo reports third-quarter 2015 results conference call. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Vanessa Chen. Please go ahead.

  • Vanessa Chen - IR

  • Thank you, operator. Welcome to Weibo's third-quarter earnings conference call. Joining me today are our Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Herman Yu. The conference call is also being broadcast on the Internet and is available through Weibo's IR website.

  • Before the management's presentation, I'd like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call, we may make forward-looking statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's Annual Report on Form 20-F for the fiscal year ended December 31, 2014, filed with the SEC on April 28, 2015, and other filings with the SEC.

  • Additionally I'd like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financials excludes certain expenses, gains or losses and other items that are not expected to result in future cash payments or that are non-recurring in nature or will not be indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures.

  • Following management's prepared remarks, we will open the line for a brief Q&A session.

  • With this I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

  • Gaofei Wang - CEO

  • (Interpreted). Thank you and good morning. Welcome to Weibo's third-quarter 2015 earnings conference call. During today's conference call, let me share with you updates on Weibo product, traffic and monetization.

  • Let me start with our third-quarter performance. In the third quarter of 2015, Weibo continued to achieve strong revenue growth and user growth. Weibo's total revenues grew 48% year over year to $124.7m. Advertising revenue grew 62% year over year to $105.9m, with 64% of our ad revenues coming from mobile. Our non-GAAP net income in the third quarter reached $22.1m.

  • On the user front, in September, Weibo's monthly active users reached 222m, up 33% from the same period last year. Daily active users reached 100m, up 30% from the same period last year. 85% of Weibo's MAU in September were mobile. Those numbers of Weibo users who have activated Weibo Pay reached 48m in September.

  • Turning to operations, let me elaborate on the progress we have made. Over the past year we have discussed the emphasis we placed on improving Weibo user experience and content consumption, such as reducing the clutter and improving the relevance of Weibo information stream. At the same time we have focused on building out Weibo Exchange as a public sharing and social platform, where Weibo's feeds and user engagement are viewable by the public. In other words, we are focused on improving Weibo's strategic differentiation in the areas of content creation and consumption.

  • On previous earning calls we discussed the steps that we have taken to optimize the information stream of Weibo users. On today's call we will elaborate on the progress that we have made to improve content sharing on Weibo.

  • Our efforts to improve content sharing consists of two parts. First is to grow the scale of key opinion leaders or KOLs, those who have a following and influence in China on Weibo. In the past few years we will have some very successful and attracting KOLs to curate content in Chinese popular vertical domains, such as entertainment, technology, news and so forth. However, this success has led to an imbalance of traffic across the verticals, where content from each vertical, such as finance, travel, education, etc., were not getting proportional exposure and following. KOLs in each vertical were becoming less active and Weibo users were challenged to discover content in such verticals. In other words, Weibo's unique proposition in content creation and consumption was not being fully realized across all the verticals.

  • To adjust the top line, we started a program at the end of last year to partner with very high KOLs and in a few dozen vertical domains and work with them to expand the coverage and exposure of their curated content on Weibo. Through our efforts we have seen measurable increases in both fan-based sites and feeds written by these KOLs on social media accounts who participated in our initiative. Compared to last December, the number of Weibo posts in September from the focused verticals increased by 64%. The number of Weibo social media accounts with at least 1m views per month increased by 39%.

  • Another example is the number of social media user accounts in the finance domain at the end September, grew 41% over the last three quarters. Monthly views of finance social media accounts increased 88% in September over the last three quarters. These factors further strengthened Weibo's advantage in content offering and will enable our ad consumers to better target users by verticals. At the same time we have created incentive programs for KOLs on Weibo that we test and we run gratuity program, where KOLs are compensated for reposting ads and tips for posting content respectively.

  • For the first nine months of this year we have paid RMB170m to content creators through our WeiTest and Weibo's gratuity program. Through these efforts we have increased the breadth and depth of Weibo's content offering. And through monetization we hope to attract more social media users who then contribute even more valuable curated content on Weibo's ecosystem and have them grow with us over time.

  • The other area of content sharing improvement is multimedia. Since inception, Weibo has enabled photo and video sharing. As smartphones become more widely adopted, we're seeing more and more Weibo users share photos in their feed. For example, 65% of Weibo daily feeds include photos.

  • It's probably safe to say that with photo sharing so prevalent on Weibo and WeChat, we have not seen a photo sharing app like Instagram grow to a large scale in China. On the other hand, we see video and long-form content as other areas of multimedia, with strong growth potential in China.

  • And third, we have ramped up our efforts in these areas. For example, we have taken a leading position in offering user-generated short videos through product enhancement and product integration with our investment partner. Weibo's daily video views in the third quarter increased 82% from the previous quarter. The combined views of Weibo native videos and (inaudible) videos in September grew 1.4 times sequentially. We are now beta testing video auto-play, which will lay a foundation for us to provide promoted video ads in the future.

  • On the monetization front, with verified enterprise accounts on Weibo surpassing 1m, as discussed on the last earnings call, our efforts made in this area can be described in two parts. First is to develop measurement for social marketing, which is critical to monetization on Weibo as well as for China's social networking industry as a whole. This is an important priority for us because advertisers in China are used to evaluating ad effectivity based on traditional metrics, like PPM and PPC, which do not fully reflect the value of user engagement with brands and businesses.

  • In June, we partnered with Socialbakers to launch Weibo Analytics to help businesses better understand the value of their social assets on Weibo. So far 240,000 businesses have beta tested this analytics tool. In addition we have partnered with TaoBao Admaster and others to provide social graph measurements and analytics for Weibo ads. Through these analytics and management tools, recruiters would be able to better understand the value of social marketing as well as measure the effectiveness of their ad campaign on Weibo.

  • The second part of our monetization initiative is to expand Weibo's tools and solution offering for businesses and enable them to improve the effectiveness of their social marketing efforts. For example, we are beta testing Weibo Showcase, which is a promoted feed customized to help ecommerce merchants to improve exposure of their products. Weibo Showcase will enable our users to browse products on participating ecommerce platform, like TaoBao, and sharing interesting products to their fans on Weibo. In other words, adding social recommendation to ecommerce.

  • Turning to revenue, we continue to witness strong growth in SME revenue, which grew 189% year over year and 31% sequentially. The number of SME ad customers surpassed 194,000, representing a 51,000 increase from last quarter.

  • On the KA side, Weibo has an advantage in offering event-based campaigns in China, particularly when compared to domestic mobile offerings. Consequently we are seeing event-based ads driving a big portion of KA brand as advertising revenue grows. In the third quarter of 2015, KA revenue grew 28% year over year, which is an acceleration from the previous two quarters.

  • Ongoing media buy is another growth opportunity for us. We plan to increase our focus on this area and expand our brand advertising business by growing our ad customer base while diversifying our ad product offers, including targeted brand ads, promoted ads and video ads.

  • With that, let me turn the call over to Herman for financial updates.

  • Herman Yu - CFO

  • Thank you, Gaofei. Good morning, everyone, and good evening to those of you in the west.

  • Let me now take you through Weibo's financial highlights for the third quarter of 2015. For the third quarter, Weibo's total revenues was $124.7 million, which was above our guidance between $120 million and $123 million. Total revenue went up 48% year over year or 53% on a constant currency basis.

  • Non-GAAP net income attributable to Weibo's ordinary shareholders came in at $22.1 million compared to a non-GAAP loss of $1.5 million last year. Non-GAAP EPS was $0.10 compared to a negative $0.01 a year ago.

  • As Weibo's revenue ramps, we are seeing meaningful profit margin expansion. During the quarter revenue was up 48% year over year while cost and expenses increased only 17%. Weibo's EBITDA grew to $26.5 million, reaching a 21% EBITDA margin from $1.9 million or 2.2% margin last year.

  • Let me give you more colors on revenue. Advertising and marketing revenue for the third quarter of 2015 was $105.9 million, up 62% year over year or 67% on a constant currency basis.

  • During the quarter we saw healthy revenue growth from the advertising segments across the board. Revenue from Alibaba was $32.5 million, up 18% year over year or 22% on a constant currency basis. Non-Alibaba ad revenue was $73.3 million, up 94% year over year or 100% on a constant currency basis.

  • Let me talk a little bit more about SMEs. Revenues from the small- and medium-sized enterprises was $44.6 million, up 189% year over year or 198% on a constant currency basis and represented 42% of total ad revenues. Revenue through the SME channel went up 99%, while revenue from Weibo's self-service ad, which we began promoting at the end of last year, also contributed significantly to the year-over-year ad revenue growth.

  • Weibo self service enables fans marketing, which is unique in that it allows our users to build social assets on Weibo, the ROI of which is measured over the lifetime of these fans. In addition to contributing to Weibo's SME ad revenue growth, fan marketing is a major driver of the fast growth of SME customers, which reached 494,000 in the third quarter.

  • Moving on to KAs, revenue from key accounts, mostly large brand advertisers, was $28.8 million, up 28% year over year and 32% on a constant currency basis. The growth of KA revenue can be attributed to Weibo plus TV and the popularity of Big Day campaigns.

  • Summer months are high season for variety shows in China. And the success of Weibo plus TV not only brings TV ad customers to Weibo, but also leverages TV shows and personalities to increase Weibo's brand awareness and user engagement.

  • Big Day ad campaigns about business and brands to make a big splash in the promotion of a new product or special event. With monthly active users of 222m and millions of verified key opinion leaders, Weibo is becoming is the go-to Internet destination for new product introduction and special event announcements. For example, we see this in the launch of new smartphone models, for movie premiers, for online promotional events and so forth.

  • Mobile ad revenue in the third quarter was up 136% year over year to 145% on a constant currency basis, representing 64% of total ad revenue compared to 44% a year ago. With 85% of Weibo's MAU on mobile and this user segment growing 43% year over year, Weibo is poised to take advantage of the trend of ad budgets shifting to mobile Internet.

  • Moving on to value-added services, Weibo value-added services generate $18.9 million, up 1% year over year. Game services and membership revenue was up 45% year over year, while data revenue went down 72% year over year.

  • As Gaofei mentioned, we have started to work with Socialbakers and other data companies to offer free analytic reporting to businesses on Weibo. Next year we plan to introduce a deeper builddown using social asset analytics and ad effectiveness measurement, which means the right incremental data revenue. Nevertheless, we believe that bigger opportunities in sharing with our customers' insights into the impact of the social marketing campaigns, which we believe will attract more ad budget as we have seen the impact of ad measurement on other social platforms.

  • Turning now to cost and expenses. Total cost and expenses were $103.2 million, up 17% year over year. Cost of sales was $36.9 million compared to $20.5 million last year. The increase in cost of sales can be primarily attributed to higher value-added taxes or higher game and other revenue share resulting from higher revenues, as well as an increase in bandwidth cost resulting from an increase in video consumption and from overall category in general.

  • Operating expenses totaled $66.4 million compared with $67.6 million last year. During the quarter we collected almost $2m in long past due accounts receivables, which offset our bad debt expense and deflated our general and administrative costs. Normalizing this item, we can see that operating expenses grew negligibly from last year, reflecting the efficient business controls that we have put in place to emphasize spending effectiveness as well as our ability as a social media platform to scale profitably.

  • Operating income for the third quarter was $21.5 million compared to a loss of $3.9 million last year. Non-GAAP net income attributable to Weibo's ordinary shareholders was $22.1 million compared to a loss of $1.5 million last year. Non-GAAP diluted EPS was $0.10 compared to a loss of $0.01 per share last year.

  • Non-GAAP EBITDA, defined as earnings before interest, tax, depreciation, amortization and other non-operating income and share-based compensation expenses, was $26.5 million compared to $1.9 million last year.

  • Turning to balance sheet and cash reliance, as of September 30, 2015, Weibo cash, cash equivalents and short-term investment totaled $353.3 million. Cash provided by operating activities for the third quarter 2015 was $71m. The high balance was partly due to the improvement of AR aging and DSO.

  • Capital expenditures totaled $0.6 million, and depreciation and amortization expenses of $5.1 million.

  • And Weibo shares floated in the market. According to our ADR depository form, over 15% of Weibo's 209 million shares outstanding as of September 30, 2013, are registered and can be traded in the open market.

  • Turning to Weibo's fourth-quarter 2015 guidance. We estimate that Weibo's total revenues for the fourth quarter of 2015 to be between $146 million and $149 million, assuming flat foreign exchange rate.

  • Before I turn the call over to the operator, let me quickly recap this quarter. We continue to see strong growth in Weibo's traffic and user engagement as our recent initiatives to improve user experience are reaping dividends. We have made great progress to reduce the clutter of Weibo users' information feed and recruiting key opinion leaders and broadening our content coverage and expanding our multimedia offer.

  • On the monetization side, we are seeing growth momentum across the board, from key accounts to SMEs, to the channel to SME, to SME self-service. The strong growth of advertising customer base is a testament to the growing adoption of fans marketing and social marketing in general. We are also poised to gain from the shift of marketing budget in China from PC to mobile.

  • With that, let's now turn to Q&A. Operator, we're ready for questions.

  • Operator

  • (Operator Instructions). Dick Wei, Credit Suisse.

  • Dick Wei - Analyst

  • Hi. Good morning. Thanks for taking my questions, and congrats on the good quarter. Maybe just two quick questions. First one is maybe in terms of the end user targeting. Is there anything you can update us in terms of the progress, maybe over the past year or so? I understand we have different categories of interest groups. I wonder with more of the additional data from other platform, I wonder how -- any kind of sense you can share with us in terms of the user targeting, what kind of improvement?

  • And maybe secondly, if you can share with us what current ad loads right now and what's the expansion plans down the road? Thank you.

  • Herman Yu - CFO

  • The first question regarding the user targeting, are you talking about user targeting for advertising purpose?

  • Dick Wei - Analyst

  • That's right. Yes.

  • Gaofei Wang - CEO

  • (Interpreted). We have several types of ad inventory. Inventories such as FSG within that information feed, this is -- we -- advertisers can buy this by targeting specific type of user profile. On the other hand, we have more display advertising, such as app opening and also the brand display ads in mobile and also in PC. And those are -- we still sell it in the form of CPL.

  • Going into 2016, we plan to have the majority of our products through promoted information feed would allow the ad customers to buy by targeting a user's data, user profile and also user interest, social graph. And all this would be using real-time bidding. Most of our users now already have a real ID registered. They have registered through a real ID so we have a pretty complete profile information of our users.

  • And I wanted to highlight what we just talked about in our prepared remarks. We talked about focusing on verticals such as finance and auto. By verticalizing our users and providing content to them, we would be able to allow advertisers to have a better way of reaching users who are interested in these vertical domains.

  • The second question was on ad load. Our ad load today is 2.3%. And we expect this to rise -- continue to rise in the future.

  • Dick Wei - Analyst

  • Great. Thank you.

  • Herman Yu - CFO

  • Thank you.

  • Operator

  • Juan Lin, 86Research.

  • Juan Lin - Analyst

  • Hi. Good morning, Gaofei and Herman. Thank you for taking my question. My question is related to the video auto-play ad. You mentioned that you were testing this new format of advertising. Could you please share the timeline of your video auto-play app? And how should we look at the potential influence on the gross margin from ramping up this new format?

  • Gaofei Wang - CEO

  • (Interpreted). So we're already testing auto-play. And we expect this auto-play to be gradually rolled out over the next two quarters. And with regards to the timeline of advertising, video advertising, we will see, depending on the current viewership of short videos, short clips.

  • And with regards to the pricing for brand advertisers, short video ads, we will use a CPM model. And then with targeting SME customers, especially ecommerce, we believe there's a demand there and we will try to price close to -- for the brand advertisers and should be priced higher -- ultimately should be priced higher than the current FSG advertising.

  • We don't think introducing video ads will cannibalize too much of our existing advertising and we think that ultimately it will increase our CPM for the overall advertising.

  • Herman Yu - CFO

  • Okay. Thank you.

  • Juan Lin - Analyst

  • Thank you, Gaofei. And also the potential impact on gross margin from the ramp-up of auto-play video ads.

  • Herman Yu - CFO

  • Yes. So because we -- the model for video advertising is we're going to first install automatic play of the short video clips. So initially it's going to hit our margins as we roll out this product. But I think if you start looking at -- depending on when the revenue kicks off, I think it will take some time for the Chinese market to accept this new video advertising format. But as this revenue comes in, I think over the long term our margin should be pretty good. But I think in the short term it's hard to say. It really depends on how fast we can actually push auto-play and then how fast the market can expect video advertising.

  • Unidentified Company Representative

  • I just want to add one thing, that actually the impact on the margin not from the advertising revenues but really on the consumption of video on our platform. And so the cost of revenues increased in our current quarter and if you look back in the last couple of quarters. And going forward will be a lot to do with more consumption on the video on our platform, with or without the advertising revenues. So it's a little reflected in our costs right now. So if we can generate more revenues in the future, that will help our overall gross margin going forward.

  • Juan Lin - Analyst

  • Thank you very much.

  • Operator

  • Tian Hou, T.H. Capital.

  • Tian Hou - Analyst

  • Yes, Gaofei and Herman. A question related to Alibaba. So in last quarter you did mention about revisit the deals with Alibaba. I wonder, what's the update on that? I will have a follow-up after this.

  • Herman Yu - CFO

  • Hi, Tian. Good morning. With regards to Alibaba, I think last time we gave you guys -- I think we're still in negotiation with them. Bear in mind that Ali year end is at the end of March. So when we're talking about [2013] for them, they really haven't set their 2016 budget because their 2015 really ends three months after us. So we're still in negotiation.

  • The way we look at this problem, basically our relationship with Ali, strategic alliance, comes in three parts. We have brand advertising. We have the vertical piece. And we also have the Alibaba piece. And we think that for brand advertising and also for the vertical, for the brand advertising, we think that we can at least keep it consistent with what we have this year, and potentially there could be more.

  • With the verticals, we're currently in discussion. We think that we could probably keep it similar to what we have at this year. And then with Alibaba, as we talked about earlier, that anything within the information flow, what we're hoping to do is have real-time bidding across all these channels, including with SMEs and KAs and so forth. So from that perspective, because real-time bidding, we want the optimal price, we don't necessarily need to have that piece of revenue come from Alibaba. It's whoever can actually pay more. So that's how we're looking at the Ali deal.

  • Tian Hou - Analyst

  • Okay. So the second question is related to your fans economy. So as we see in US in Facebook, so each fan wants some kind of money. So I wonder, what's the progress for Weibo on that front in terms of making money out of selling fans to whoever needed. That's one.

  • The other question is also related to that, regarding your key opinion leader. I wonder how many key opinion leaders you will have now? And how do we measure their engagement level and activity level? That's all my questions, Herman.

  • Herman Yu - CFO

  • Yes. Let me try to answer that. With regards to fans marketing, as I mentioned, Tian, on my prepared remarks, the majority of our revenue coming from self-service ads is our fans market. And this is really a big driver of our SME revenues.

  • With regards to KOLs, KOL, it's a pretty generic term. If you look at our total KOLs on Weibo, the way I see it, we really see it in three parts. Number one is those verified individuals, people who are celebrities and personalities and so forth. We have about 1m of those on Weibo. And then you have the verified enterprises, businesses and so forth. Those we have over 1m. And then we have about 8m what we call socialites or online influencers. So when you add those three segments up, we're talking about 10m roughly verified accounts.

  • And then with regard to engagement, we look at whether -- how much feeds they post regularly, the type of engagement they have with fans, whether their fan base is growing, so forth. So there's many different metrics that we look at just to look at their activities.

  • Gaofei Wang - CEO

  • (Interpreted). So what Mr. Wang just said was that the way we look at our KOLs, we look at from three areas. Number one is we measure them based on the number of posts that they provide on a regular basis. We look at the amount of input, meaning, for example, when they post something, the amount of viewership and engagement with the fans. And number three is the type of value that they can actually bring to the Weibo platform. And we measure this by, for example, how much revenue they generate with [Wei Pass] also how much [tipping] they receive from their fans.

  • Tian Hou - Analyst

  • Okay. That's very helpful. Thank you.

  • Operator

  • Piyush Mubayi, Goldman Sachs.

  • Piyush Mubayi - Analyst

  • Thank you very much, and congratulations on the super number. Can I just go through a few points on the Company -- on the numbers that are reported, pretty much housekeeping questions? First, a quarter ago you talked about Weibo Pay being about 46.5m. Could you give us an update on where we stand on that?

  • The second is with regards to mobile revenues. Could you just spell out what that number was for the quarter?

  • Third, looking at the incorporation of native videos, could you give us a sense of what sort of difference in time spent you've started to see on your platform? What is the average video viewership and how are you measuring that metric? I know you talked about CPMs being potentially higher. On the cost side, are you adequately prepared for potentially bandwidth pressure that will emerge on the back of that? Thank you.

  • Herman Yu - CFO

  • So Piyush, good morning. Let me answer the first two questions for you. With regards to mobile, with mobile revenue, as we mentioned in the prepared remarks, 64% of our advertising revenue is coming from mobile right now.

  • And with regards to the number of Weibo paying users, we have, at the end of September, the number of registered Weibo pay users reached 48m.

  • And then Gaofei will answer the third question with regards to video.

  • Gaofei Wang (Interpreted). So with regards to video auto-play, we're going to -- we started our beta testing in the fourth quarter, so I think if you give us a few more months we would be able to better answer the user metrics on this thing. We have to recognize that in China, most of the people, they have very limited mobile 3G, 4G services and so forth. So for auto-play, what we'll do is initially we'll just allow auto-play to occur for WiFi users. And that -- WiFi users should be about half of our DAU.

  • With regards to videos today, most of our videos on Weibo is less than three minutes. So we don't expect the bandwidth cost on Weibo to be at the kind of level that we see, for example, for online video sites in China.

  • And then additionally, with regards to our advertising model, what we'll do is we'll probably just include, at least initially, include advertising within the regular feed and not put it in front before or after existing video content, because each content -- most of the contents we have is like a three-minute play.

  • Piyush Mubayi - Analyst

  • Thank you. And Herman, may I ask a question about the cost? Your margins have been improving extremely nicely every quarter. And if I look at it on an incremental basis, it's running at between 90% and 70%, i.e. that's the delta in operating profit over the growth in revenues. Till what point can we expect this to continue?

  • Herman Yu - CFO

  • You're talking about net margins?

  • Piyush Mubayi - Analyst

  • I'm looking at operating margins, operating profit.

  • Herman Yu - CFO

  • Yes. Yes. I think, Piyush, it's hard to say that on a short-term basis. If you look at a long-term basis, I think what we have with Weibo, is a social platform that's powered by user-generated content. Because we don't have to pay for content, I think that our model is pretty scalable on a long-term basis. So I think that you'll see that -- we believe that over the next few years that you're going to see our margins continue to increase.

  • What you're really seeing, for example, in the last few quarters is that our revenue -- as our revenue growth is increasing, things are more direct to our revenues, such as business tax and revenue share and so forth, in addition things related to our traffic, such as bandwidth. The other type of component, such as sales and marketing product development, G&A and so forth, those are growing in absolute dollars but not as a percentage of revenue.

  • Piyush Mubayi - Analyst

  • Thank you very much.

  • Operator

  • Chi Tsang, HSBC.

  • Chi Tsang - Analyst

  • Hi. Great. Thank you very much for taking my question. And congratulations on some nice results. I had two questions. Firstly, just in terms of margins, again a very nice set of margin numbers. I'm wondering just in terms of housekeeping, your G&A was down materially both Q on Q and year on year. I was wondering if there's anything in there that needs to be called out.

  • And secondly, in relation to your guidance, it's 40% to 40% year on year. What are the implications for 3P advertising revenue growth in the fourth quarter? Thank you.

  • Herman Yu - CFO

  • Hi, Chi. Good morning. Let me answer the first question. With regards to G&A in the third quarter, what you see here is that -- is G&A on a non-GAAP basis is $3.1m. What you need to do is to normalize that and be able to be comparable to last year and in prior quarters, that you need to add back about $2m for bad debt. What happened is during the quarter we have a situation where we have a very long-aged due bad debt that we originally had accrued for but were able to collect. So therefore you have this positive $2m.

  • With regards to your second question on 3P, can you expand on that a little bit more?

  • Chi Tsang - Analyst

  • Yes. I'm just wondering. Your guidance is 40% to 40% year on year, so I'm wondering within that what should we be expecting for growth coming from third party advertising, i.e. non-Alibaba advertising for the fourth quarter?

  • Herman Yu - CFO

  • Okay. Yes. I think when you look at our guidance in the fourth quarter, I think if you look at our third quarter, it's pretty representative. We still expect growth from Alibaba, although it's been pretty consistent over the last two quarters. I think the majority of the growth is going to come from our SME and also our KA advertising. Okay?

  • Chi Tsang - Analyst

  • Thanks.

  • Operator

  • Wendy Huang, Macquarie.

  • Wendy Huang - Analyst

  • Thank you. Can you give us update on Alibaba's holding in Weibo right now? And also given that Alibaba already fully acquired one of the companies that used to hold a minority stake Youku, do you think there is a possibility or is there talk between Baba and Weibo about a similar progression?

  • And secondly, on the competition front, I think today Weibo is not only competing against social networking platforms like WeChat, but also the emerging news app in the market, like today's headlines (inaudible) or the Tencent news app, etc. Can you comment on that? Thank you.

  • Herman Yu - CFO

  • Okay. Yes. I'll -- hi. Good morning, Wendy. I'll talk about the first -- I'll answer your first question and then I'll have Gaofei answer the second question. With regards to the first question on Alibaba holdings, Alibaba's ownership of Weibo should be around 30% right now.

  • You asked a question that Alibaba decided to take over Youku. For us, we don't have anything that's concrete and tangible to discuss at this point. Until something that's concrete and tangible has happened, it's hard for us to comment on rumors.

  • With regards to the second question?

  • Gaofei Wang (Interpreted). So our advertising comes from two areas. Number one is it's based on the social networks. So it will be similar to something like Weixin's friend circles.

  • And secondly, in addition to social advertising, we also have the piece on brand display. And in this instance, very similar to the news apps that you talked about, and this really depends on the amount of inventory that we have. Right now our ad load in relative terms is quite low, and this is an area that we will be able to focus on next year.

  • At the same time, when you're talking about news apps in China, if you look at Weibo's DAU compared to the next five in China, Weibo's DAU is bigger than the sum of the next five apps -- news apps in China. So I think with regards to that, this is an area of advantage that we have and we'll leverage this as we foray into brand advertising on mobile.

  • And in talking about competition for user time, there's no question that news apps will also allow our users to consume compared to our social platforms. On the other hand, when you look at social apps around the world compared to our news app, you can see that news apps have not been very successful against social apps because of the user engagement and so forth, that you're able to add the commentaries and so forth, you're able to add in addition to the professional media content.

  • Operator

  • This concludes our question-and-answer session. I would like to turn the conference back over to Vanessa Chen for closing remarks.

  • Vanessa Chen - IR

  • That concludes today's conference call. Thank you for joining us, everyone.

  • Operator

  • The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

  • Editor

  • Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.