Weibo Corp (WB) 2017 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Weibo Reports First Quarter Financial Results.

(Operator Instructions) I must advise you that this conference is being recorded today, 16th of May 2017.

I would now like to hand the conference over to your first speaker today, Lydia Yu.

Thank you.

Please go ahead.

Thank you, operator.

Welcome to Weibo's first quarter earnings call.

Joining me today are 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 broadcasted on 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, 2016, filed with the SEC on April 27, 2017, 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 nonrecurring 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 lines for a brief Q&A session.

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

(foreign language)

Thank you.

Hello, everyone, and welcome to Weibo's First Quarter 2017 Earnings Call.

(foreign language)

On today's call, I will share with you highlights on Weibo's user growth, products and monetization as well as our key initiatives in 2017.

(foreign language)

Let me first discuss our first quarter financial results.

We continue to see strong revenue and user growth this quarter.

Our total revenue in the first quarter reached $199.2 million, up 67% year-over-year.

Advertising and marketing revenue reached $169.3 million, up 71% year-over-year, an acceleration from the 25% year-over-year ad revenue growth from Q1 2016.

70% of our ad revenue in Q1 came from mobile.

Non-GAAP net income in the first quarter was $57.8 million, up 254% year-over-year.

(foreign language)

On the user front, Weibo's monthly active users reached 340 million in March, up 30% year-over-year.

Average daily active users in March reached 154 million, up 28% year-over-year.

In March, 91% of Weibo's MAUs were mobile.

(foreign language)

In the first quarter, we held a series of platform-wide marketing campaigns and events, such as the red envelope giveaway and the Chinese New Year Gala live streaming from various television stations, which contributed to Weibo's strong user growth and user engagement.

In March, we added 15.6 million DAUs and 27 million MAUs sequentially.

In the first quarter, our customers continued to increase their ad spending on Weibo, much to the credit of our sales force and Weibo's strong advertising product offering.

KA's ARPA in Q1 reached the highest level over the past year.

The continued growth of Weibo's user base and user engagement further solidifies Weibo's position in the social media space as well as empowers us to become an indispensable component of mobile marketing in China.

(foreign language)

In discussing our operational updates for the first quarter, I will cover Weibo's progress in the area of user content and customer.

(foreign language)

First, on user growth, as Weibo's content ecosystem further develops and our multimedia features become even richer, Weibo is becoming a primary distribution channel for top publishers, influencers and the like to share their content, optimize their reach and increase their media influence.

This phenomenon has improved our ability to acquire new users more efficiently.

This year, we plan to deepen our strategic cooperation with Weibo partners, such as smartphone manufacturers, variety TV show producers and top [ABT] partners to increase the reach of Weibo's differentiated content and further expand our user base.

(foreign language)

As an example, Weibo obtained the rights to broadcast live streaming and [short] videos of the 2017 Chinese New Year Gala programs from several satellite TV stations, including [BTV] and (inaudible) TV.

And for the first time, we obtained the rights to broadcast short videos of CCTV's Chinese New Year Gala, one of the most popular TV shows in China.

During the Lunar New Year period, Chinese New Year-related videos were watched 4.8 billion times in total, with DAUs reaching a historical high, increasing user growth.

In the area of sports, we have won strategic cooperations with top sports leagues, closely working with them to increase the consumption of sports content, attract more users and boost their level of engagement on Weibo.

(foreign language)

Our partnerships with sports leagues currently include the NFL, NBA and LaLiga.

Earlier this year, we obtained the rights to live stream a number of NFL games as well as broadcast NFL short videos.

Despite American football being a less familiar sport in China, live streaming of the 2017 Super Bowl on Weibo attracted 3.07 million users.

Super Bowl short videos were viewed over 80 million times within a 24-hour period.

In March, we partnered with the NBA to jointly announce our strategic cooperation, and Weibo was named the official social media of NBA China.

As part of this strategic arrangement, we were given the rights to broadcast NBA matches in short videos format.

Through strategic cooperation like these, we hope to become the preferred distribution channel and social platform for organizations with media rights, while enabling our partners to distribute our content to a large user base, grow their fans base and increase their media influence and monetization potential, this will also help increase Weibo's user base and user engagement.

(foreign language)

On the user product front, in addition to optimizing relationship-based information feeds, we also focused on growing the scale of our interest-based information feed and improving its content quality, with goals to distribute breaking news in a more timely fashion, increase efficiency of interest-based consumption and promote follow relationships.

In Q1, we revamped the home time line of Weibo's ad client to include interest-based information feed in addition to relationship-based information feed, and partially rolled out (inaudible) version to certain Weibo users.

For new registered users, their home time line will start with interest-based information feed, which makes their on-boarding experience easier.

Based on preliminary test results, the overall consumption of Weibo's new home time line with interest-based information feeds and relationship-based information feed significantly increased.

In addition, preliminary results also show an increase in the retention rate of new registered users as well as their level of engagement.

We plan to roll out the new Weibo upgrade beyond the initial test pool of users over the next 2 quarters.

We hope that through these initiatives, along with Weibo's social ID, our content ecosystem as well as our user scale will not only help us increase our market share in the social media space, but also enable us to enter the digital news market, thereby increasing our user base and overall market share.

(foreign language)

On the multimedia front, with the rapid development and advancement of mobile phones and 4G networks, video is replacing photos as the preferred medium for users to showcase their lifestyle, share insights and socially interact.

As China's leading content distribution platform, we are making video a central focus of our future products.

(foreign language)

First, we will continue to improve the creation and consumption functionalities for professionally generated content and enable premium video content to reach a bigger audience, build a larger following and increase its brand influence.

Through our partnerships with a large network of video MCNs or talent agencies of video creators, we have strengthened Weibo's offering of premium original content.

We have invested significant resources to encourage top content creators from various verticals to shift their content creation to video format.

The number of videos shared by top content creators in Q1 increased 176% year-over-year.

In addition, through the optimization of Weibo's SIG recommendation engine, which improved push relevancy and content consumption efficiency, recommended videos made up more than 30% of the total video views on Weibo in March.

(foreign language)

Next, this year, we are also focused on improving the user experience for sharing and consuming UGC videos, encouraging greater video engagement and making video usage the core function of Weibo.

Since the second half of last year, our product team began to optimize user's experience in the creation of consumption functionalities of UGC videos, such as improving the user's experience in uploading videos in a mobile environment and innovating new ways for users to share videos and interact.

For example, last month, we began beta testing Weibo Story to a select group of iPhone users.

Weibo Story allows users to more easily share their moments throughout the day.

Close to 10% of our test group have become regular story users, and this percentage is growing.

As a result of our efforts in video, we continue to see strong growth in video views and videos shared on Weibo.

In March, video views grew more than 5x from prior year.

Going forward, we plan to further improve the user experience for video creation and consumption.

Video presents significant growth opportunities for our ecosystem.

(foreign language)

Moving on to content, this year, we will continue to concentrate on strengthening our vertical content offering.

So far, we have partnered with hundreds of MCNs, mainly in the fashion, beauty and wellness, food and live streaming areas, to collaborate on content creation, fan-based development and monetization.

By partnering with MCNs, we can more efficiently branch out into different content verticals and generate demand for our advertising business.

Our goal this year is to expand our partnership with MCN to cover over 40 verticals and help their content creators grow their fans base and brands.

As an example, in the education vertical, we have partnered with 8 MCNs and the number of posts shared by their content creators and related monthly views in Q1 have increased 62% and 93%, respectively, from prior year.

Our efforts to try and strengthen the vertical MCN network will help us further increase the competitiveness of our content ecosystem as well as our monetization abilities.

(foreign language)

Turning to live video.

Last year, despite intense competition, Weibo still maintained our market position within the media and overall live broadcasting market through strategic investments.

Our focus for live video this year will be on continuing to enhance user's experience in live broadcasting as well as deepening our cooperation with [E!] and collaborate on increasing professionally generated live content to increase our market share.

We plan to revenue share with E!

later this year.

(foreign language)

On monetization, KA revenue continued to grow rapidly in the first quarter, increasing 79% year-over-year.

We see 2 primary drivers.

First, top brand advertisers are beginning to recognize the value of Weibo's social marketing.

Second, customers are choosing Weibo to deploy their brand strategy and re-branding campaign due to our large user base, young user demographics and high virality.

Weibo is becoming a critical component of a customer's media buy, as evidenced by the increase in Weibo's wallet share.

For example, among the top 20 KA customers, we saw over a 200% increase in year-over-year spending in Q1.

In addition, we are continuously developing new and innovative social app products and formats to help our customers optimize their marketing effectiveness.

(foreign language)

As an example, (inaudible), or better known as (inaudible), a long-time domestic brand for household and personal-care products, who sought to generate better brand awareness to the post '90s demographics, leveraging video ads plus strong social elements.

In Q1, they launched a marketing campaign on Weibo and purchased video ads, hot topics and trending social trends to connect with their target audience.

A/B tests by ACNielsen showed a 23% increase in (inaudible) product brand satisfaction.

Campaign successes like these has resulted in attracting new customers to purchase video ads.

Plus, we have been working hard to educate market on the value of Weibo's social marketing.

Since the second half of last year, we have started to compile case studies on successful advertising campaigns on Weibo and shared them with the rest of our customers.

We believe that there is still significant room for KA revenue to grow.

(foreign language)

Turning to SMEs.

In the first quarter, SME revenue increased 86% from the prior year, driven by Weibo's app download performance ads and organic ads.

We are finding that as social advertising products like WeChat and Weibo gain increased market share in the SME ad market, SME customers are becoming more familiarized with social marketing, especially on how to utilize social platforms to achieve high virality and user engagement as well as increase their fans base and improve their marketing effectiveness and sales conversions.

As an example, [Beloved], a company that sells engagement rings, launched a marketing campaign on Weibo targeting young white-collar professionals.

Using Weibo's private messaging functions, Beloved interacted with interested customers and drove sales conversion.

As a result, Beloved's revenues jumped approximately RMB 1 million per month as compared to prior to advertising on Weibo.

Ad spending from the O2O industry, which includes photography, beauty and wellness, fitness, travel and education has continued to increase on Weibo.

This helped to diversify the SME customer base as well as validate that Weibo's brand popularity is expanding into traditional industries in China.

(foreign language)

Moving on to video ads.

As video content consumption increases on Weibo, an increasing number of customers are inclined to try video ads.

In Q1, the number of video ad customers increased 50% from prior quarter.

Our focus this year will be to increase video ads and information feeds and grow video advertisers.

In particular, we hope to attract more customers to create video ads suitable for Weibo's platform, ones that can gain high virality and user engagement.

In addition, considering that video consumption is increasing, we plan to focus on developing new video ad products as well as working with video creators to build a monetization ecosystem to capture more video ad budgets.

(foreign language)

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

Thank you, Gaofei.

Welcome to Weibo's First Quarter 2017 Earnings Call.

Let me now go through our financial highlights.

We had an amazing quarter in Q1, with Weibo's revenue growing the fastest at post our IPO in 2014.

We are benefiting from the fast growth of the mobile ad market in China, compounded by the increasing adoption of social marketing, similar to what we are seeing in other parts of the world.

As Weibo's revenue scale and our brand influence grow, we are seeing significant operating margin -- we are seeing significant operating leverage, excuse me, resulting from platform efficiencies.

For the first quarter, Weibo's total revenue reached $199.2 million, up 67% year-over-year or 76% on a constant-currency basis, exceeding the company's guidance between $185 million and $190 million.

Non-GAAP net income attributed to Weibo reached $57.8 million, up 254% year-over-year.

Non-GAAP diluted EPS was $0.26 compared to $0.07 a year ago.

Our adjusted EBITDA reached $70.5 million, up 272% year-over-year, and adjusted EBITDA margin reached 35% in the first quarter compared to 16% last year.

Let me give you more color on first quarter revenues.

Advertising and marketing revenue for the first quarter reached $169.3 million, up 71% year-over-year or 80% on a constant-currency basis.

Mobile ad revenue was $118.6 million, up 80% year-over-year or 90% on a constant-currency basis, and made up 70% of our total ad revenues.

With 91% of our MAU mobile, Weibo is benefiting from the ad budget in China gravitating toward mobile, especially when we consider the unique characteristics of Weibo's social ads, including audience targeting, advanced marketing and closed loop solution.

Total advertisers reached 782,000 in the first quarter, down 6% year-over-year or up 14% quarter-over-quarter.

As discussed on previous calls, in the third quarter of 2016, we couldn't place a negative feedback system in an ad screening system.

Our goal is to grow the number of ad customers while taking into consideration user experience and encouraging higher-quality ads.

Self-service ads, which contributed to the decline in the total number of ad customers in the last 2 quarters, saw its customers grow sequentially this quarter.

We also saw key account customers grow 70% year-over-year.

Turning to ad load.

Our ad load in Q1 remained fairly stable from last quarter.

As we develop interest-based information feeds and other products, we will not only be able to add more ad inventory, but also be able to significantly grow our ad load rate.

Going forward, we will not disclose specific ad load amount due to the dynamic nature of the metric, such as pricing, traffic increases, new time lines created, et cetera, and also for competitive reasons.

Moving on to SME.

In the first quarter, Weibo's SME ad business was $96.6 million, up 86% year-over-year or 97% year-over-year on a constant-currency basis, continuing the strong revenue momentum.

Top categories of our SME business include app developers, e-commerce and O2O companies, which includes subcategories, such as photography, beauty and wellness, fitness, travel and education.

In addition, we also benefit from organic advertisers.

SME advertisers, for the most part, purchase performance-based ads.

Weibo has been quite competitive with innovative ad offerings to meet the needs of SMEs, such as audience targeting, action-oriented ads, including e-commerce buy button, app download and private messaging.

Our self-service platform enables a merchant to perform social marketing directly from a smartphone, and we also offer third-party ad agencies to service and consult SMEs.

Moving on to KAs.

Our key account business, made up of mostly large brand advertisers, has become our second pillar of Weibo's strong growth.

In the first quarter, our KA ad business -- KA revenues reached $64.9 million, up 79% year-over-year or 89% on a constant-currency basis.

As Gaofei mentioned, Weibo's strong brand in the marketplace has been an important driver of our revenue growth.

In addition, since last year, we have been seeing more and more KA companies earmarking a separate ad budget for social marketing.

As a leading social media platform in China with strong brand recognition in the marketplace, daily active users surpassing 100 million as well as innovative products with differentiated capabilities, such as audience targeting, strong virality arising from [influencer] marketing and measurement, we are benefiting from the increasing adoption of social marketing in China.

KA customers have a huge need for user targeting and premium content affiliation, which play to Weibo's uniqueness, with Weibo's audience targeting, topic ad and search ads to influencer marketing which boosts brand affiliation, enables preferred audience segmentation and amplify the impact of social ads.

Revenue from Alibaba was $7.8 million, down 30% year-over-year and down 68% quarter-over-quarter.

Revenue from Alibaba is highly correlated with their marketing campaigns and initiative spending, which can fluctuate significantly on a sequential and annual basis for any given quarter.

Our strategic cooperation with Alibaba is to help them and their merchants reach more customers from branding to interest generation to purchase conversion.

Thus, the value that Weibo derives from the partnership is not only the ad spending from Alibaba, but also the revenue that we can derive from their ecosystems -- from the ecosystems of Alibaba's platforms.

Moving on to other revenue.

Weibo's other revenue reached $29.9 million in the first quarter, up 49% year-over-year or 57% on a constant-currency basis.

Game services is still declining year-over-year but now makes up only 1/4 of our total other revenue.

The declining portion of game services is helping margin improvement as well as lessening the offset of revenue growth by the other revenue streams.

Membership fees was up 76% year-over-year and data licensing was up 84% year-over-year on a constant-currency basis.

Turning to costs and expenses.

Total non-GAAP costs and expenses were $132.5 million, up 28% year-over-year.

Cost of sales was $45.8 million, up 27% year-over-year, while operating expenses totaled $86.7 million, up 29% year-over-year.

The increase in non-GAAP costs and expenses was primarily due to an increase in marketing expenses and in turnover taxes, resulting from higher revenues.

Non-GAAP operating income in the first quarter was $66.7 million, up 320% year-over-year.

Non-GAAP operating margin in the first quarter reached 33% compared to 13% for the same period last year.

Nonoperating income for the first quarter was $2.1 million compared to $0.6 million for the first period -- for the same period last year.

Income tax expense was $11.3 million compared to $0.5 million for the same period last year, primarily due to higher profitability and the change in tax status of our PRC subsidiary from being fully tax-exempt to being subjected to 50% of the enterprise income tax rate in 2017.

Non-GAAP net income attributed to Weibo in the first quarter was $57.8 million, up 254% year-over-year.

Adjusted EBITDA reached $70.5 million and adjusted EBITDA margin reached an impressive 35% compared to 16% a year ago.

As a leading social media in China, Weibo's revenue scale and brand strength is allowing us to grow with platform efficiencies.

Turning to balance sheet and cash flow items.

As of March 31, 2017, Weibo's cash, cash equivalents and short-term investments totaled $444 million -- $444.2 million.

Cash provided by operating activities for the first quarter was $72.5 million.

Capital expenditure totaled $4.5 million, and depreciation and amortization expenses amounted to $3.4 million.

On shares in the market, per ADR depository firm, approximately 23% of Weibo's shares outstanding were represented by American depositary shares as of the end of March.

Turning to Weibo's second quarter 2017 guidance, we estimate our second quarter revenue to be between $240 million and $250 million, which does not take into consideration the impact of foreign exchange rate fluctuations.

Before I turn the call over to the operator, let me quickly recap our achievements in the first quarter.

We have entered 2017 with another solidly executed quarter.

We added 79 million monthly active users and 34 million daily active users from the last year.

Revenue growth has been at the highest rate post our IPO and adjusted EBITDA margin in the first quarter reached an impressive 35%, rising 19 points from last year.

Around the world, we are seeing a secular trend where creators and publishers are moving to social media and sharing the content from social accounts.

This phenomena has given social media an advantage to enter the mobile news and video space.

These trends play to Weibo's strength, and we hope to leverage these trends to enter the mobile news and video markets, which are huge markets in China.

To take advantage of the mobile news opportunity, we have revamped our home time line on Weibo's app to add interest-based information feeds, and test results are showing meaningful incremental growth with home time line consumption.

We are also making great strides in bringing live and short videos to Weibo, starting with co-vetting premium video content by partnering with organizations with media rights, such as CCTV and other television stations; and the NBA, the NFL and so forth.

We have launched Weibo's live show.

And a few weeks ago, we have begun to beta test Weibo Stories, which is showing to be quite popular.

Video is more immersive when combined with mobile and social.

We are making strong progress in Weibo's video offering and optimizing Weibo's functionality for better content creation, sharing, discovery and consumption to building a large content ecosystem of premium video content to launching products like Stories to further strengthen the UGC element of Weibo.

These initiatives, along with the strong nature of celebrity and influencers on Weibo, make the video experience on Weibo quite unique.

On monetization, our SME and KA businesses continue to witness robust growth; in aggregate, up 94% year-over-year on a constant-currency basis.

As a leading social media in China, we are well-positioned to capture the opportunities presented by the convergence of mobile, social and video.

With that, let me turn the call to our operator for questions.

Thank you.

(Operator Instructions) Your first question comes from the line of Alicia Yap from Citigroup.

Congrats on the strong results.

My questions is related to the margins.

So despite the weak seasonality, your Q1 margins improvement is very impressive.

And then -- but with more sales and marketing planned, right, for the rest of the year, should we think about a more gradual improvement of margins rather than a step functions?

So what would be the optimal margins level that you could share that you would like to achieve for 2017 and 2018?

Alicia, this is Herman.

Yes, so if you look at our margin expansion, we've been pretty consistent over the last few quarters.

And we think that with the operating margin at 33% in the first quarter, we typically see our seasonality where we should be able to continue to scale this and increase our operating margin as our revenue grows.

So I would expect, with our revenue to continue to grow in the next few quarters, that our operating margin and our net margin would continue to grow.

And we see a pretty consistent pattern over the last 3 quarters.

I see.

Can I ask a follow-up questions related to the revenue share that you mentioned, that are starting second half, you're going to start to share the live broadcasting revenue with (inaudible).

So can you give us some colors in terms of how should we think about on the modeling side?

I think, right now it's probably a little bit too early to consider that part.

I think for that, what we're looking at is we're not only looking at our relationship with (inaudible), we're looking at the overall live broadcasting market, and we want to help (inaudible) to help them grow.

At the same time, we want to be able to benefit from the growth by getting more content from the video bloggers and also be able to get advertising revenue from their broadcasters.

So I think at this point, it's more just helping them to be able to grow to even a bigger scale, and then we'll consider that at the second half of this year.

Your next question comes from the line of Fan Liu from Goldman Sachs.

Congrats on this great quarter.

So my question is regarding the competitive landscape.

Would the management share with us, how do you think the current industry dynamic?

And what do you think the Weibo's position amid this competitive market?

And also, would you mind sharing with us the headcount of your sales and marketing persons right now?

And also second question, apologies if I missed, what's the percentage of advertising revenues for the videos in this quarter?

Would you mind to share with us as well?

(foreign language)

What we're seeing in the market with regards to competition is we're really competing in 2 areas.

(foreign language)

So for our -- with regards to the first area of time line consumptions, we look at our competition in this way.

In addition to further optimizing our relationship-based information feeds, we're also adding information -- interest-based information feeds to our home time line.

And as a result, we're seeing incremental growth of the home time line by adding the interest-based information feeds.

And we think that by doing this, we're also seeing that we're able to acquire new users more effectively, especially users with a low social relationship.

We also -- we see that interest-based time line is competing in a pretty fierce market; however, Weibo has an advantage in content offering and also being a follow model with -- and having a social ID.

We believe that we can further increase our market share after entering the market for a long-form interest-based content.

And also, in competing with the social market based on our experience for news apps and other type of apps that just have a time line, it would take time for them to actually be able to develop the social ability of a social network.

(foreign language)

So with regards to competition, the other part that we're seeing is maybe competing in short videos.

In the past few years, we've been focusing on developing our professionally generated content.

And we recently started focusing also UGC content, user generated content, by launching Stories, which is to create short videos.

And in a short amount of time that we have launched this product, about 10% of our test base pool are already using this on a daily basis.

If you look at Instagram, we understand that their daily users are up to maybe 40%.

So over the next 2 quarters, we're going to continue to optimize this UGC function to help more video creation and consumption.

(foreign language)

The other question you mention is, what percentage of our revenue comes from video.

Approximately 18% of our advertising currently derives from video.

And I think you had also another question with regards to how many people we have in sales.

When you look at our sales model, we actually don't have -- much of our sales is not through direct, it's either self-service or it's through the agencies.

So we have a few hundred employees that's focused on supporting the front-end as well as the back-end for sales support.

Your next question comes from the line of Alex Yao from JPMorgan.

Congrats on a fantastic quarter.

I have 2 questions.

Why the -- you guys mentioned that you are moving into the interest-based reading or time line market, which essentially puts you in a very highly competitive market.

What does it take for you guys to become more competitive in this market?

Or put it another way, based on your current infrastructure engineering capability, R&D capability, et cetera, et cetera, what other incremental investment do you guys need to do to be more competitive in this market?

And then secondly, regarding the video, given that a lot of the video consumption on your platform is a PGC, especially short-form PGC, what does it mean for monetization?

Do you see issues in terms of monetization because of the viewing time is short versus long-form?

Because advertisers require a certain period of viewing time, maybe 15 seconds, 30 seconds, et cetera, et cetera.

Can you talk about the monetization outlook for short video form on your platform?

(foreign language)

So we can currently see that in the relationship-based information feed, we already have a very big advantage.

As we enter the interest-based feeds, we're going to leverage our existing attributes, such as social ID, such as our content ecosystem.

(foreign language)

So when you look at our interest-based time lines, you'll see that it's a little bit different than some of the other time lines because ours is more multimedia-centric.

We have more photos, we have more videos, more short-form information rather than long articles as other interest-based apps would have.

So this is more consistent with the creation and also the consumption of our Weibo product.

(foreign language)

So as we enter 3, 4 and perhaps Tier 5 cities, what we notice is that these users probably have not been on a mobile Internet for a very long time.

So they're probably not as accustomed to relationship-based -- interest information feeds.

So as a result, we believe by introducing them interest-based information feeds, it would lower the on-boarding experience, making it easier for them to actually adopt our product and then maybe slowly, gradually also build relationships.

(foreign language)

So with regards to developing video ad market, we see this in 3 phases.

The first phase is to focus on building a video advertising product and also building the content ecosystem so that you would have users -- we would increase users to consume videos and also time spent consuming video-related content.

(foreign language)

So phase 2 would be to work with our sales -- work with our channels to actually educate the customers so that we can increase the number of customers.

By this, we would mean to help and encourage them to create more video ads that would foster more engagement and also have more virality as they get launched on Weibo.

(foreign language)

So phase 3 would be to open our inventory to allow more -- a larger proportion of our total ad inventory using video ads.

So in doing that, we will be able to monetize in a very large scale.

So at this conjunction, we don't believe that the length of our content video ads, whether it's short or long, would be that important.

I think it's because these video ads appear in the time line, it's about users consuming the feeds rather than looking at it one feed at a time.

(foreign language)

So if you look at -- in March, when we look at users who consume video content, we see it growing 40% sequentially.

And we hope to continue to grow this user base and we should be able to increase then more content being consumed over video, which will allow us to actually insert more video ads.

So your next question comes from the line of Gregory Zhao from Barclays.

Congrats on the strong quarter.

My first question is a follow-up on the video ad.

So I just want to understand now what kind of the metrics or measures we are using to track and measure the video advertising efficiency, such as ROI.

And my second question is just on guidance, for the revenue guidance, can you share more color on the guidance like such as key account and SME advertising growth trend and which lines you think may grow faster?

(inaudible) revenue guidance.

(foreign language)

So currently, when we evaluate effectiveness of the video ads, we're looking at it very similar to, for example, photo ads looking at basically click-through rate.

We have not yet set up a specific set of metrics to measure video ads.

(foreign language)

So as we mentioned earlier, at this conjuncture in phase 2 of our video ad rollout, we're more focused on getting more customers to purchase video ads and also to use video ads more often.

And thus, at this point, we have not focused on increasing our video ad prices for KAs and SMEs.

With regards to your second question, Greg, on advertising guidance, we don't typically give specific guidance on a customer segment, but we will say this, that if you look at the last few quarters, we've been growing very strong both with SMEs and with KAs.

So it hasn't been anything different as we go into Q2.

We just continue to see that both SMEs and KAs are 2 strong engines and pillars of our growth -- Weibo's growth.

So we should expect both of them to do fairly well in Q2.

And unfortunately, we have run out of time for any further questions.

I would now like to hand the conference back to today's presenters.

Please continue.

That concludes today's conference call.

Thank you for joining us, everyone.

Okay.

Ladies and gentlemen, that does conclude our conference for today.

Thank you for participating.

You may all disconnect.