Weibo Corp (WB) 2016 Q1 法說會逐字稿

Good evening and welcome to the Weibo Corporation first-quarter 2016 financial results conference call. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to [Lydia Yu]. Please go ahead.

Thank you, operator. Welcome to Weibo's first-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 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, 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 the 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, 2015, filed with the SEC on April 28, 2016, 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 financial 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 and 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.

(Interpreted). Thank you. Hello, everyone, and welcome to Weibo's first-quarter 2016 earnings conference call. On today's call, I will share with you our key developments in user products and monetization areas, as well as Weibo's key initiatives in 2016.

First, on Weibo's financial results, in Q1 Weibo continued strong revenue growth. Our total revenue reached $119.3m, up 24% year over year. Advertising and marketing revenue was $99.2m, up 25% year over year, with 66% of our ad revenue coming from mobile. Non-GAAP net income in the first quarter was $16.4m, up 491% year over year.

Turning to user, Weibo's monthly active users reached 261m in March, up 32% year over year, while average daily active users reached 120m, up 35% year over year and 13% quarter over quarter. In March, 85% of Weibo's MAUs and 91% of Weibo's DAUs were mobile. Also in March, Weibo saw the highest sequential net user adds ever. Our DAUs increased by 14m and MAUs by 26m over the same period last quarter.

In the first quarter of every year, many Chinese in tier 1 and tier 2 cities will return to their home town in tier 3 and tier 4 cities to celebrate the Lunar New Year with their family. The period around the Lunar New Year, with city dwellers away from their offices, presents a unique opportunity for Weibo to accelerate its user growth.

Due to Weibo's high mobile usage, we are able to take advantage of this period to run a platform-wide red envelope giveaway marketing campaign, allowing business, brands and celebrities to participate in the giveaway of red envelopes and coupons in exchange for [buyer reposts] and [fan addition]. This campaign allows us to expand Weibo's user base further into second- and third-tier cities throughout China.

The uniqueness of Weibo being a public open social platform enables us to connect businesses, celebrities and users together in one large nationwide social campaign, which helped us achieve the highest sequential user growth to date.

Turning to Weibo's operation for the first quarter, let me discuss our progress in the area of user, content and customer. First on users. As stated on our previous earning call, a key focus for us in 2016 is to improve both the user experience in feed consumption as well as in speed posting, making the content sharing process easier and quicker.

In Q1, we further rolled out Weibo's upgraded information feed with a new upgrade for about half of our users. On top of time sequence feeds, our new information feeds serve content based on users' interests and users' relationships, which expands the time of -- the amount of interesting feeds available on one timeline. Whereas the previous information feed prioritizes speed chronologically, the new information feed adds back missed feeds that we've algorithmically identified would be appealing to our users. This change has resulted in an increase of content consumption and user engagement.

Our priority this year is to improve our users' content consumption experience through algorithmic adjustments and ultimately increase user stickiness. More importantly, this change will enable Weibo to expand our target audience from one that provides instant real-time information to one that also leverages users' interests and social networks to recommend interesting content. And this expanded product positioning will lay the foundation for us to meet the needs of a wider audience, increase our user base and a scaled content consumption on our platform.

On user, our user growth has been accelerating. We added 26m MAUs in March compared to the same period last quarter. In March, 85% of Weibo's MAUs were on mobile. This can be attributed to the success of our marketing effort.

In addition, we have been working with domestic smartphone manufacturers over the last two years to strengthen our relationship in the mobile ecosystem. Domestic smartphone manufacturers see us as not just as a high-usage app seeking to expand its presence on mobile handsets; Weibo is also becoming a critical platform for them to conduct online marketing and engage with customers.

Currently we have strong collaboration with key domestic smartphone manufacturers, deeper than most of the other Internet companies in China. As these smartphone makers become more dominant in the mobile Internet market and their hardware configurations improve, Weibo's users and user engagement derived from these smartphone manufacturers have seen an accelerated increase from the same period last year, such as those derived from Weibo apps installed on Huawei, Oppo and Vivo smartphones.

Furthermore, domestic smartphone manufacturers are seeking to expand their user base by increasing penetration in second-, third- and fourth-tier cities, much similar to Weibo's marketing strategy, and thus are allowing us to acquire new users more effectively.

Turning to product and our progress on the multimedia front, in Q1 we focused on improving the user experience for short videos, which is a key product area for us in 2016, especially in content creation and consumption. In Q1 Weibo's average daily video views reached 474m, up 489% year over year and 64% quarter over quarter.

In March we further experimented with autoplay and suggested video feeds with a small set of WiFi users. Based on testing results, we will make adjustments to our short video offering and we plan to officially roll out these video features in the next two quarters.

The steps that we are taking will further solidify our position as the leading UGC video reach social platform in China and position us as the top choice for domestic short video content producers. For example, a recently made-famous KOL, key opinion leader, [Poppy Chang] shared 69 short videos on Weibo which generated a total of 246m views. The viewership of Poppy's short videos on Weibo is probably close to the total views of Poppy's videos on all other video platforms combined.

In Q1 we began testing live videos on Weibo. Compared to text, short videos and other types of content, live video is a better way to show what's happening right now and is well suited for the social, public and viral nature of Weibo. We worked with selected traditional media corporate partners in the first quarter to experiment live videos on Weibo. For example, People's Daily, the largest newspaper publisher in China, used Weibo to provide 18 live broadcast sessions of the Chinese Congressional meetings in March. And Oppo and other domestic smartphone makers used live video on Weibo to broadcast their product launch events.

Live videos are becoming quite popular in China and we're seeing very high user engagement and views on these broadcasts. In Q2, we will roll out live video capabilities to celebrities and other verified users along with tipping and pay subscription features to help them better leverage Weibo to display their lifestyle and talents.

Turning to content production, on our last call we discussed our efforts to diversify the content on Weibo by working with [self] media and essential content verticals. Weibo now has 12 verticals with a monthly view of over 10b, such as celebrities, comics, fashion, movie and finance. As we build up Weibo's content ecosystem, we also plan to enter the ecosystems of these individuals in 2016 to form deeper alliances. We plan to work with the key opinion leaders of each industry, provide operational support, incentivize them to share more content and gradually expand their presence to collaborate with key organizations of these industries.

Let me give you a few examples. In the fashion industry, we are a partner of the top local KOL agencies. And in the entertainment industry we are partnering with major local and international talent agencies. As we move into the ecosystems of key verticals, we hope to proceed from the perspective of our partners and collaborate in multiple areas, such as content sharing, fan-based development and monetization. In doing so, we hope to work closely with our partners in these verticals and jointly expand the size and influence of Weibo's vertical segment.

Over the past two years, an increasing number of KOLs have used Weibo to build a fan base, generate traffic and monetize, whether they be social commerce or advertising. A number of them have grown to stardom, developing strong personal brands, influence and commercial value. The system [learns] what occurred at the early stage of YouTube, which started out with [four] video KOLs, aka YouTubers.

KOLs in the US generated revenues through mainly advertising. However, in China we are seeing monetization opportunities for local KOLs to include also ecommerce sales, paid subscription, tipping and so forth. We think it is a healthy reinforcing cycle for KOLs to be able to derive commercial value on Weibo while helping us broaden Weibo's content offerings and increase user engagement.

KOLs share content and build their fan base on Weibo and then complete their monetization process on Weibo, Taba or other platforms. And working with Weibo, not only do KOLs become part of Weibo's content ecosystem, they can also grow their personal influence and commercial value.

In 2016 we will focus on enhancing our products and services to KOLs, enabling them to grow their fan base and create more monetization opportunities. Through these measures we hope to better service KOLs, while increasing Weibo's influence and impact on the monetization of this industry as well as increasing demand for Weibo [ads].

Turning to monetization, SME and key account advertising and marketing revenue was up 97% year over year. This revenue growth can be attributed to the new ad system we launched last quarter, which helped the performance of SME marketers. Ad revenue from SMEs for the first quarter was up 136% year over year. Weibo's SME customers, which includes self service, reached 832,000, up 25% quarter over quarter.

Turning to our key account business, our red envelope giveaway, Weibo Plus TV and other platform initiative campaigns have received positive feedback from the market and reactivated many users in the first- and second-tier cities, which has (inaudible) our KA customers and helped contribute to KA ad revenue growing 60% year over year.

In Q1 we began experimenting with video ads on a limited basis, the addition of which we believe will increase Weibo's attractiveness as an ad platform and secure additional branding ad budgets. Using Huggies as just an example. They purchased Weibo's [Big Day] campaign package in conjunction with video ads targeted towards women. Huggies' total ad campaign reached an audience of over 20m and its video was viewed 16m times, which was instrumental in helping them achieve RMB100m in revenue, four times that of their sales during the Double 11 ecommerce day of last year.

We are excited that Weibo's video traffic is growing at a rapid pace and that the initial results of Weibo's video ads are encouraging. Although the video ad market in China is huge, we recognize that this is also a very competitive space. But we will need patience to develop the right market entry strategy to attract meaningful video ad budget.

In Q1 we also tested matrix ads, which are interactive native ads with 3-by-3 displays, like a Tic Tac Toe board. This ad format was developed by observing the habits of Chinese Internet users. (Inaudible) is a popular format for displaying a set of photos on social networks in China, therefore Chinese Internet users are more accustomed to this type of ad format. Test results show that this ad format is well suited for ecommerce merchants and app developers because marketers can show nine sets of clothing or nine apps in one app feed.

Using a local wellness app, (inaudible), as an example, in Q1 they purchased matrix ads that targeted mobile users in the first- and second-tier cities between the ages of 20 to 30. And the matrix ads reached an audience of 20.8m and the ad conversion cost was half of Weibo's (inaudible) ads.

In Q2 our ad development team will continue to enhance the Weibo social interest graph recommendation engine. And we plan to have them collaborate with our mobile team to develop innovative ad products suitable for mobile users. We believe that our continuous innovation in mobile advertising will bring new business opportunities for Weibo.

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

Thank you, Gaofei, and good morning, everyone. And good evening to those of you in the west. Welcome to Weibo's first-quarter 2016 earnings call. Let me give you the top-level numbers.

The first quarter, Weibo's total revenue was $119.3m, up 24% year over year or 29% on a constant currency basis, exceeding the Company's guidance. Non-GAAP net income reached $16.4m, up 491% year over year. Non-GAAP diluted EPS was $0.07 compared to $0.01 a year ago. Adjusted EBITDA reached $19m, up 182% year over year, representing an adjusted EBITDA margin of 16% compared to 7% last year.

Let me give you more color on revenue. Advertising and marketing revenue for the first quarter was $99.2m, up 25% year over year or 31% on a constant currency basis. Revenue from small and medium-sized businesses and key accounts was $88.1m, up 97% year over year. On a constant currency basis, revenue from our SME and KA businesses together was up 106% year over year which is an acceleration from the 50% growth in the first quarter of -- first half of last year and 82% year-over-year growth in the second half.

Weibo's SME business continues to be robust while our KA business is experiencing accelerated growth. As advertisers and marketers in China shift their budget from PC to mobile, we are benefiting from Weibo's strong mobile usage. As Gaofei mentioned, 91% of our DAUs in March was mobile.

Historically the period around the Lunar New Year, which occurred on February 8 this year, is a slow season for PC-based online advertising companies. For Weibo, however, we saw strong mobile ad revenue growth in the first quarter, which was up 43% or 49% on a constant currency basis. Mobile ad revenue made up 66% of Weibo's total ad revenue in the first quarter.

Another driver of Weibo's advertising and marketing revenue is the adoption of fan marketing in China. Fan marketing allows businesses, brands and individuals to acquire both PC and mobile traffic by simply opening a user account on Weibo. Businesses and brands can focus on marketing their products and services while leveraging the business tools and services on our platform to increase marketing effectiveness and generate sales, such as WeiboPay, red envelope and coupon giveaway, campaign landing page, ID verification and so forth. We believe fan marketing is a cost-effective way for many businesses and brands to derive PC and mobile traffic compared to maintaining a website and HTML-5 site in an app.

In the first quarter Weibo's ad customers reached 832,000, representing an increase of 114% year over year. Although the majority of Weibo's customer ads came from self service, we also saw healthy growth in the number of SME customers to the channel.

Let me talk about our SME further. In the first quarter, Weibo's SME revenue was $51.9m, up 136% (technical difficulty) on a constant currency basis. Weibo SME is our largest advertising segment, making up 52% of our advertising and marketing revenue in the first quarter and our fastest growing segment. On a constant currency basis, revenue from the SME channel was up 138%, while revenue from Weibo's self-service ads grew 240% year over year.

For SME revenue through the channel, the majority of the revenue came from ecommerce merchants, app developers, and O2O customers and, to a much smaller extent, [P2P] finance companies.

Weibo's self-service ad platform allows a Weibo user to conduct fans marketing and purchase Weibo ads within the Weibo app on Weibo.cn or Weibo.com with a very small amount of dollars. One can grow his or her fan base through continuous engagement with the fans and supplement this with the purchased Weibo ads. The return on fans marketing is not just the initial period where one buys the advertising, but over the life of the acquired fans.

Moving to KAs, revenue from key accounts, mostly large-brand advertisers, in the first quarter, was $36.2m, up 60% year over year or 67% on a constant currency basis. Revenue came primarily from advertisers in the fast-moving consumer goods industry, as well as the tech industry, which we include Internet services, ecommerce and smartphone manufacturers.

We are seeing increasing interest for social marketing from our KA customers this year compared to last year. As the largest social media in China that allows for public sharing, Weibo is well positioned to benefit from the growing popularity of social marketing in China. In addition, Weibo initiated campaigns, such as Weibo's red envelope giveaway and Weibo Plus TV, were drivers of strong Q1 revenues.

Revenue from Alibaba was $11.1m compared to $34.5m a year ago. As previously discussed, the strategic collaboration agreement we signed with Alibaba in 2013 expired in January 2016. Although we expect to continue our relationship with Alibaba, we will be working with different business units of Alibaba to derive revenues after the expiration of the strategic collaboration agreement.

Revenue from Alibaba in the first quarter was 11% of our total ad revenue. We expect revenue from Alibaba to decrease significantly in 2016 from the 2015 level, which was 36% of our total ad revenues.

At the same time we're seeing our SME and KA ads together growing quite strongly, which, when taken as a whole, should allow Weibo to have a respectable revenue growth in 2016.

Moving on to value-added services, Weibo VAS grew to $20m in the first quarter, up 17% year over year or 22% on a constant currency basis. Game services, membership and other revenue was up 21% year over year, while data licensing revenue was down 3% year over year.

Turning now to cost and expenses, total non-GAAP costs and expenses were $103.4m, up 9% year over year. Cost of sales was $36.1m, up 26% year over year, while operating expenses totaled $67.3m, up 2% year over year. The increase in non-GAAP cost and expenses was primarily due to an increase in bandwidth cost resulting from the strong video consumption and overall growth in traffic, increase in revenue share, value-added taxes associated with higher revenues and higher personnel-related costs.

Non-GAAP operating income for the first quarter was $15.9m, compared to $1.4m from the same period last year. Non-GAAP operating margin in the first quarter reached 13% compared to 1% last year, which exemplifies the strong operating leverage of Weibo as a social platform, powered by user-generated content. We expect our profit margin to continue to rise over the long term as our revenue scales.

Non-GAAP net income was $16.4m, up 491%, year over year. Adjusted EBITDA, defined as non-GAAP earnings before interest, taxes, depreciation and amortization, was $19m, up 182% year over year. Adjusted EBITDA margin for the first quarter was 16% compared to 7% last quarter -- last year.

Turning to balance sheet and cash flow items. As of March 31, 2016, Weibo's cash, cash equivalents and short-term investments totaled $373.4m. Cash provided by operating activities for the first quarter was $40m. Capital expenditure totaled $4.1m and depreciation and amortization expenses were $3.5m.

On Weibo shares floated in the market, according to our DS -- DR -- ADR depository firm, approximately 70% of Weibo shares outstanding are available for trading in the open market.

Turning to Weibo's second-quarter guidance, we estimate that Weibo's total revenues for the second quarter of 2016 to be $138m to $143m, which do not take into account the foreign exchange rate fluctuation.

Before I turn the call over to the operator, let me quickly recap our call. We began 2016 on a strong note. In March, Weibo saw the highest sequential net user ads ever, with MAUs increasing, reaching 260m and average DAU reaching 120m, giving us significant reach in both users and consumers in China. We further rolled out Weibo's upgraded information feed, inserting suggested content based on interest and user relationship on top of time sequence content to improve Weibo users' content consumption experience.

We also are executing on our UGC video and content verticalization strategies. The prior is adding great excitement to Weibo and the latter will allow us to better tag users and improve Weibo's social interest graph, also known as SIG recommendation engine, which internally will allow us to push more relevant content and targeted ads to our users.

Last quarter we launched a new ad system that opened up Weibo's advertising margin offerings to all of our customer segments. This quarter we launched matrix ad, an interactive ad format that we believe will help us derive more ad revenues from app developers and ecommerce companies.

These are example of product innovation from Weibo's development team. And we expect to officially launch video ad later this year, which will help us tap into the tremendous video ad market in China.

SME and KA revenue in the first quarter grew 106% on a constant currency basis, which is acceleration from last year. As we enter the second quarter of 2016, Weibo is well positioned to continue our ad revenue momentum, leveraging our strength in social, mobile and soon video advertising.

As Weibo's revenue scales, we believe there is much room for Weibo's profit margin to expand further.

With that, let me now turn to Q&A. Operator, we are ready for questions. Thank you.

(Operator Instructions). George Meng, Goldman Sachs.

Good morning, management. Thank you very much for taking my question. Congratulations on a great quarter. So my question is regarding your user growth as far -- your DAU up 35% year on year, which is the fastest in the past two years. And also MAU also sustained about -- above 30% growth for the past few years, which is in contrast with some of the other applications, who we saw the -- I would say most of the other applications where the growth rate will tend to decelerate relatively quickly.

So my question is what do you think about the total addressable market of your users, both MAU and DAU in the long run? In particular I think you mentioned before that in top-tier cities your user growth is already slowing down, but you do have a lot of room to grow in lower-tier cities. So [net of the] 260m MAU and 120m DAU, what do you think about the room left for your user growth in the lower-tier cities. Thank you very much.

(Interpreted). Our current MAU is about 261m. And we can see that in China other mobile apps, such as [Q2], WeChat, and QZone have MAUs over 500m.

If you look at how our users are geographically dispersed, in tier-one cities we have a penetration rate of probably around 50% and we're growing probably around 10%. And then if you look at tier two to tier four, we probably have a penetration of 20% to 30%. So we have still plenty of opportunity to actually grow.

So in the next two to three years, we think that our users in tier-two and tier-three cities will probably approach our penetration rate in tier-one city. And then below our tier four, probably not as fast, but still we think that there's still a great opportunity to grow.

Yes. And I think the other thing is, George, we mentioned that historically we've been focusing on the social market. But as you've been seeing in the last two quarters, we've been -- in China, especially from last year, you're seeing a strong growth in video market, especially on mobile. And as Weibo starts entering the space, with user-generated content, our short videos and also with live streaming and so forth, I think that probably enlarges the market to go beyond social and to focus on video-related users, especially consuming through mobile devices.

Got it. And I have a quick follow-up, if I may. So you also mentioned on the call that you're basically catering to more users because previously it's more about the information. And now you're going to do more social-related stuff. I think a few years ago you also tried to do more social network. So this time what -- how are you going to do it differently?

And also if you can achieve that, what's the incremental users that you can cater to, where, in the previous case, when you are focusing more on instant -- sorry, instant information that you cannot address? Thanks.

(Interpreted). Yes. First of all, in the last two years, we weren't positioning ourselves as information consumption. We've been -- positioned ourselves as a social media. So comparable companies in the US, we would be addressing users like those of Twitter and Instagram. So on top of these markets, we will also focus on user-generated content, video, short videos. And we think that this market could be bigger than social.

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

Thanks, George.

Dick Wei, Credit Suisse.

Hi. Thanks for taking my questions. I have two questions. The first question is about the new information feed and ranking. I wonder if you can give a little bit more details on the new algorithms and how you weight between different attributes, and maybe the results from the testing, before and after.

And the second question is on KOL. I wonder, any progress you can share in terms of KOL-related advertising currently and maybe in the future? Thank you.

(Interpreted). Yes. So our original information feed is based off of what the user follows, the content from the account that the user follows. And it's basically a time sequence. But the new information feed will also take into consideration user interest in the information that one user [fan] follows.

And this will be added to a user if, for example, if a user is looking at the content and the user hasn't been using the content for several days. For content that's probably old, that the user missed, we'll add back what we think are more interesting content and we'll suggest those content to the user.

Yes. So we can take an example of -- if a user comes onto Weibo and looks at Weibo two to three times a day, some of the users may not have much content to read after they come on a couple times that day because over the -- and then what we will do is we'll look at the content that the user missed, probably over the next three days, and then we'll also consider the content from the information that the followers -- the users/followers view in the last few days and then recommend this kind of content so that it increases the amount of interesting content that the user will be able to see.

So if you look at first quarter, you'll notice from rolling out this new information feed to 50% of users that the refresh of these users' growth is faster than the growth of our DAU, which is faster than the growth of our MAU. So we're seeing that this rollout actually is increasing the content consumption on Weibo.

So we push out this information feed. We started beta testing in Q4 and we've been testing this for the last two quarters. So this year we're going to continue to roll out to the remaining user at the same time. Our development team is going to look at ways to actually improve further the information feed relevancy.

Yes. So the second question, Dick, I believe you talked about the KOL advertising and the revenue we derive from that. So basically the KOL that we've been talking about is KOL revenue derived from ecommerce. We see a lot of people on Weibo creating their fan base and then directing this traffic to Taobao, into other ecommerce sites.

The way we look at this is that we think that from a monetization perspective for Weibo, it really comes into two steps. The initial step is that if an ecommerce KOL is trying to generate revenue, they need to build a fan base. So we see in the initial stage that these KOLs would be buying impressions on Weibo to increase their fan base and then also buying other types of fans marketing so that they build up the engagement, they build up the scale of their audience.

And I think once they have a certain level of audience then they can probably generate meaningful GMV. And at that point we'll start pushing them enterprise services, which we're developing now, so that they will have more effectiveness in their marketing push to these ecommerce sites.

So this is a two-step process. And we started -- we tested a Weibo showcase in the fourth quarter, which allows closed-loop purchase to ecommerce sites like Taobao so that when a KOL pushes a particular set of -- line of clothing and so forth, that from a user perspective they could go from branding to interest generation and to actually making that purchase on Weibo and remain in the information flow. So this is how we're progressing with the monetization of KOLs.

All right. Great. Thank you very much and congrats on the good quarter.

Thank you, Dick.

Claire Cao, Morgan Stanley.

Hi. Thanks, management, for taking my question. I have three questions here. First one is that Gaofei mentioned going forward Weibo may cooperate more with the institutions. So I'm just wondering what kind of monetization model will probably becoming the major contributor in the future and what could be the margin profile?

And the second one is regarding our sales and marketing expense in the quarter. I noticed that this line declined on a year-over-year basis. So I'm wondering what's the reason behind that and how should we think about the magnitude of operating leverage going forward.

And my third question is just a housekeeping one regarding the CPM and ad load for the promoted feed ads. Thanks.

(Interpreted). Working with agencies, KOL agency is just a part of our overall KOL strategy. Yes. So when we look at the current development of KOLs on Weibo, we're seeing that it's very similar to the early stage of YouTube, where KOLs was developing. And we see that actually today that on KOLs on YouTube and other social platforms that there has been agency forums, what they call multichannel networks, MCNs. So we're seeing that in China these MCMs are also forming that started to represent KOLs and that these KOLs are branching into different industries.

So we will work with these KOL agency on two levels. Number one is on content collaboration. So we will help them build their -- the scale of their fan base for the KOLs, help them improve the quality of the content.

So in terms of monetization, as I mentioned earlier, it really comes into two formats. One is initially what we see KOL agencies actually investing in these KOLs by spending marketing dollars for fans marketing and helping their KOLs build their fan base. And once their fan base becomes a meaningful scale, then they -- we will probably help them with enterprise services to allow their KOLs to be more effective on Weibo. And then we'll also look at other, perhaps, revenue-sharing models.

So the second question, Claire, I understand, is you asked about our sales and marketing dollar amounts on a year-over-year basis. On a non-GAAP basis, sales and marketing dropped very little, dropped a little bit over $1m. I think in the first quarter of 2015 we had more marketing spending, especially around the red envelope. So I don't think that small drop is too meaningful.

I think overall, I think this is a year where our revenue -- we expect our revenue to grow more meaningfully. And then on top of that, we expect our margins to also be growing in correlation. We think that we have great potential as a social media platform with UGC content to expand our margin. So we should see that, as our revenue grows, that our margin will continue to grow.

And then the third question is on ad load. First of all, let me clarify in regards to ad load. If you look at our platform, there's really three type of advertising. One is the advertising information flow. The second one is display ads. And then the third one is based on events.

So ad load only pertains to the advertising portion from the information feed. And that makes about 49% of our total advertising revenue in the first quarter. So we're only talking about that. And in terms of ad load in the first quarter is over 3%. It's about 3.3%.

Okay, Claire?

Okay. Herman, can you also talk about the CPM in this quarter?

CPM? We don't -- you're talking about the pricing of our advertising?

Yes. I think during the last quarter we mentioned the CPM is about RMB18 in the quarter. So I just want to have the comparable number.

(Interpreted). Yes. So our CPM, because of our inventory makeup, as I mentioned earlier, we have a different type of inventory. Our CPM actually varies very drastically across the different type of inventory type. But with regards to information feed I think you were alluding to earlier, for the RMB18, comparable in Q1, that has dropped to RMB15 per CPM. But we also have, for example, looking at CPM for our brand advertising, and that has been pretty stable quarter over quarter.

Okay. That's very helpful. Thanks.

Thank you.

This concludes our question-and-answer session. This concludes the time allocated for it. I would now like to turn the conference back over to Lydia Yu for any closing remarks.

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

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line. Have a pleasant day.

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.