Weibo Corp (WB) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Weibo Reports Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions).

Now I would like to hand the conference over to your first speaker for the day, Mr. Kevin Ja. Over to you, sir.

Thank you, operator. Welcome to Weibo's 2017 Third Quarter Earnings Conference Call. Joining me today are Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Vice President, Finance, Fei Cao. The conference call is also being broadcasted on the Internet and is also 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 non-recurring in nature or will 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 Third 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 an update of our key initiatives in 2017.

(foreign language) Let me first discuss our third quarter financial results. We continue to see strong revenue and user growth this quarter. Our revenue in the third quarter reached $320 million, up 81% year over year. Advertising and marketing revenue reached $276.8 million, up 77% year over year. 78% of ad revenue in Q3 came from mobile. Other revenues reached $43.2 million, up 114% year over year. Non-GAAP net income in the third quarter was $115.2 million, up 111% year over year. Operating margin in the third quarter has reached 41%. Overall, the company's operating efficiency has continued to improve.

(foreign language) On the user front, Weibo's MAUs reached $376 million in September 2017, 27% year over year. Average daily users in September reached $165 million, up 25% year over year. In September, 92% of Weibo's MAUs came from mobile devices.

(foreign language) This quarter, we maintained strong user growth and user engagement, mainly attributable to the continued efforts we made in expanding online marketing channel and carrying out promotional events on campus and over third and fourth-tier cities. Moreover, riding with rapid growth in mobile advertising market in China with the combined efforts of our sales team in marketing innovation and updated new advertising systems business, Super Fanstong, we saw a meaningful increase in the number of our ad customers and robust ad revenue growth of Weibo. Most notably, the number of KA customers grew 69% year over year. The reinforcing the business cycle of user growth, user engagement and monetization as Weibo has laid a foundation for Weibo's monetization at a greater scale.

(foreign language) As part of the third quarter operational update, I'll cover our progress in the area of user, content and customer.

(foreign language) First, on user growth. We have beefed up our efforts for user acquisition in third and fourth-tier cities. As highlighted in last quarter's call, we continued to strengthen our cooperation with domestic smartphone manufacturers and enhance our online channel marketing to achieve user base expansion and penetration into lower-tier cities. In the meantime, in January this year, we have accelerated our pace in regional operations by establishing local teams to target users and gain market shares by regions in an efficient manner. In September, we have covered over 200 cities in China, which effectively drove Weibo's user growth in third and fourth-tier cities. In September, we saw 34% increase in number of top content creators and 36% increase in the number of posts generated by top content creators in these cities, compared with the numbers in January this year. In the next few quarters, we will accelerate our pace to expand our coverage to all third and fourth-tier cities in China. On one hand, as we build user content from customers behavior, this in turn improved user engagement and time spent on a greater scale. On the other hand, through riding the process of urbanization, Weibo benefits from the progressing consumption upgrades.

(foreign language) To further penetrate into lower-tier cities, we have released Weibo light version, which is mainly targeted towards the mobile users in lower-tier cities. While this version only maintains Weibo's core features, it significantly improves user experience on relatively low-end smartphones or below-average Internet speed environment. Moreover, in order to cater to user behavior in lower-tier cities, Weibo Lite highlights regionals and hot Weibo information feeds, which are popular feeds on Weibo to lower the barrier to access and make their onboarding experience easier and consume content available. Going forward, combined with the efforts on online channel marketing, we will focus on improving user retention on Weibo light in the process of user penetration into lower-tier cities.

(foreign language) Next, on the product front, we are continuously revamping our feeds, including replacing the original recommendation engine with machine learning. As we continue to optimize our machine learning algorithm, this further drives user feed engagements. Refreshed feeds from our home timeline have increased 39% year over year in September. In terms of relationship-based feeds, we have adopted a personalized ranking algorithm which effectively improves social content consumption, as we saw a 10% growth of user engagement quarter over quarter. In terms of interest-based feeds, we have continued to optimize the algorithms to improve the content consumption experience. Going forward, we will continue to utilize machine learning and user data mining and content identification and selection to improve content consumptions for each user.

(foreign language) On the multimedia front, as we continue to optimize a video recommendation engine, video consumption on Weibo has improved. Daily video views in September grew 175% year over year. On video content creation, Weibo enables users to upload videos in high definition or in short HD. In September, 30% of total videos on Weibo were in HD. Although HD video will mean higher bandwidth cost, but it greatly improves user experience in video consumption and further supports videos to be displayed on large-screen television platforms alike. Moving forward, we will continue to simplify the video upload process and optimize user experience based on user feedback, which helps solidify our leading position in the short video market in China.

On the other hand, Weibo Stories have continued to gain traction as user-generated video product. Currently, Weibo Story MAUs have reached almost 40 million and the daily story posts grew over 200% from June. Going forward, we will keep enriching our features on Weibo Stories with focus on integration, location and interest parameters to further extend user-developed stories and content consumption.

(foreign language) On live broadcasting, we began to book revenue share from Yizhibo this quarter. On top of securing the leading position in the live broadcasting market in media and celebrity verticals, the focus on Weibo's cooperation with Yizhibo has gradually shifted towards showcase live broadcasting. The number of paying users on Yizhibo increased 45% year over year as we integrated our product and payment system with Yizhibo. Looking ahead, we will leverage our experience with top content creators and product integrations between Weibo Stories and Yizhibo live broadcasting. We hope that it would bring stronger traffic and revenue.

(foreign language) Lastly, let me introduce our progress in the Search product. We have invested in the Search products leveraging the massive information on Weibo. As the cumulative number of Weibo feeds exceeds 100 billion and Weibo's leadership position in real time content creation is solidified, our Search product has gradually formed the competitive edge and influence in the market. In terms of information accessed and distribution of top feeds, the hot trend, Weibo Search products recorded impressive user engagement over the past 3 years. In September, Weibo Search MAUs have reached nearly 100 million. Moving forward, we will further invest in our Search products. On one hand, the unique feature of Weibo Search will help us to attract more users. And on the other hand, Weibo Search could become a new revenue driver in the future.

(foreign language) Moving on to content. Let me share with you the progress in several of our key initiatives. First of all, our network alliance has reached over 1000 MCNs spanning across 52 verticals. 25 verticals have surpassed 10 billion monthly views, which further increased Weibo's user coverage and social influence. Weibo continues to lead as the primary platform that gathers top content creators and preferred channel for them to create and distribute content. In September, monthly feed views in top content creators have increased 41% year over year, and most notably the number of top content creators with over 10 million monthly views has increased 79% year over year.

(foreign language) On video front, the collaboration with online video websites has significantly enriched both content ecosystems. In Q3, Weibo has become the first to use an online video website to promote and distribute video content. We are working more closely with the site based on IP content of TV series and variety shows. We've partnered with major online video sites, Youku, Tencent Video and iQiyi on the promotion of 14 projects, including successful series, The Rap of China, The Coming One and Day and Night. For example, short video views of Rap of China have reached over 8 billion, views of related topics have reached over 7 billion and the number of engagements reached over 25 million. This show has become a phenomenal success this summer. We continue to see Weibo becoming an indispensable platform for video site to brand and market their IP content. Going forward, we will further deepen our collaboration with TV stations and online video sites in the promotion of movies and TV variety shows, leveraging our platform advantages and user engagement to drive mutual benefit for each parties to further integrate the value chain, content creation and distribution.

[Foriegn language) During demonetization, our focus remains on expanding our customer base, enhancing the efficiency of our ad system and developing new and innovative advertising products. We continue to see robust ad revenue growth in customer base expense in the third quarter. Key ad revenue grew 71% year over year, while SME revenue, including self service revenues, grew 70% year over year.

(foreign language) Firstly, as Weibo users increased, advertisers in China continue to shift their ad spend towards social platforms, we continue to leverage Weibo's uniqueness in social marketing and help customers to develop innovative marketing solutions on our platform. Meeting customer objectives, in turn has increased our wallet share in social marketing. In the third quarter, number of KA customers grew 69% year over year, surpassing a 1,000 for the first time. As for SME customers, as Weibo's traffic continues to increase combined with our improved ad writing capabilities, we have more effectively met marketing objectives of our customers. That said, the growth in the number of SME customers has also reached a historical high.

(foreign language) Secondly, this quarter, Weibo's new ad system Super Fanstong was officially launched to the market, consolidating all our ad products into one unified ad system. Super Fanstong fully utilizes Weibo's traffic and enables more efficient real time bidding. Super Fanstong has also been open to all our advertisers and enables personalized targeting and automatic pricing maximizes ROI for our advertisers. This has in turn greatly enhanced our monetization efficiency and from the customer perspective the new ad platform fulfills customers' different marketing needs during their product campaign period. We believe this will further help our customers recognize unique aspect and value of social marketing. We are pleased to see double-digit growth eCPM and engagement.

(foreign language) Lastly, moving onto new ad products, we have focused on video ad innovation. In Q3, number of video ad customers continued to grow at a double-digit rate from the last quarter. However, video ad revenue as a percentage of total ad revenue has remained stable. As highlighted last quarter, as our video traffic increases, we have been continuously optimizing Weibo's video ad product to meet various marketing objectives of our customers. For KA customers, we began testing ads embedded and Weibo Story and the feedback has been encouraging so far. KA customers welcomed the ad products that combines the full screen features with privilege spotlight on the homepage. For example, Oppo collaborated with TF Boys and the Weibo Stories ad campaign had brought in 300 million impressions and total views over 7 million within 24 hours. We also released a new ad product that has effectively enhanced sales conversions, combining video and app download or purchase gateway features for the app for e-commerce customers. We believe it will drive a more scalable monetization on video and contribute more meaningful revenue post next year.

(foreign language) With that let me turn the call over to Fei Cao for the financial update.

Thank you, Gaofei. Welcome to Weibo's third quarter 2017 Earnings call. Rising on the ads spending shift to mobile, social and video, we delivered another strong quarter with impressive user base expansion, more diversified revenue streams and improved monetization efficiency.

Let me now go through our financial highlights. For the third quarter of 2017, Weibo's total revenue reached $320 million, up 81% year over year, exceeding the midpoint of the company's previous guidance by 8%. Non-GAAP net income attributable to Weibo was $115.2 million, up 111% year over year. Non-GAAP diluted EPS was $0.51 compared to $0.24 a year ago.

Our adjusted EBITDA reached $135.9 million, up 136% year over year and adjusted EBITDA margin reached 42% in the third quarter compared to 33% last year. The 9% lift in EBITDA margin from last year once again demonstrates the strong operating leverage of Weibo's platform and the competitive edge of Weibo's unique ecosystem.

Turning to ad revenues. Advertising and marketing revenue for the third quarter was $276.8 million, up 77% year over year. Mobile ad revenue was $216.7 million, up 110% year over year, representing 78% of our total ad revenue. With 92% of Weibo's MAUs were mobile, Weibo is benefiting from ad budgets shifting to moible. As Gaofei mentioned, our upgraded new ad system, Super Fanstong rolled out in late August, which has significantly improved Weibo's ad targeting capabilities and advertising efficiency with more effective real-time bidding and more comprehensive ad measurement.

Total advertisers in the third quarter reached 909,000, up 21% year over year. Weibo is benefiting from higher ad budget commitments from advertisers as on the one hand, they continue to recognize the unique social marketing value that Weibo has created. On the other hand, advertisers also have gained the increasing returns that generated from Weibo's rich selections of products and services.

Moving on to SMEs. In the third quarter, Weibo's SME ad business was $143.8 million, up 70% year over year, continuing the strong revenue momentum. Revenues from both SMEs through the channel and self-service had strong growth year over year. Key industry sectors contributing to the strong revenue growth include app downloads, e-commerce and O2O.

SMEs, for the most part, purchase performance based ads equipped with our new ad system, Super Fanstong. The SME advertising business has improved in two areas. First, advertisers are provided access to a broader selection of targeting parameters based on users' backgrounds, characteristics, activities and their engagement inclination with specific forms of content, such as hot topics and native ads. Second, advertisers are also given the opportunity to optimize a specific marketing objective such as growing fan base, increasing the number of application installations, increasing the number of video views and more.

In short, our upgraded ad system enables small merchants to exceedingly optimize their budget to maximize their objective in Weibo's platform with a wider targeting selection. As Gaofei mentioned, we believe this will further help our customers recognize the uniqueness and the value of social marketing.

Moving on to KAs. Our key account business, made up of mostly large brand advertisers, is the second engine of Weibo's strong growth. In the third quarter, our KA ad revenue reached $107.6 million, up 71% year over year. The number of KA customers has reached a historical high with 69% growth year over year this quarter, which illustrates the continued adoption of social marketing in China.

We have seen an increasing number of KA customers allocating more digital ad budget to social marketting. Weibo is leveraging its unique and leading position in China's social advertising market and creating more innovative marketing solution to seize the spectacular uptrend, as Gaofei pointed out.

Revenue from Alibaba was $25.3 million, up 174% year over year and up 92% quarter over quarter. Revenue from Alibaba is highly correlated with their marketing campaign and initiative spending. Weibo has been a key platform for Alibaba in fields of e-commerce, marketing, fans accumulation and fans interaction. Alibaba has always been our key strategic partner. The value that Weibo derives from Alibaba is not only ad spending from Alibaba, but also other cooperation, such as social e-commerce, O2O, payment solutions, entertainment and video and more. We believe such cooperation will continue going forward.

Moving on to other revenues, Weibo's other revenues reached $43.2 million in the third quarter, up 114% year over year. Membership fees, which include individual membership and entertainment account verification, was up 95% year over year and data licensing was up 132% year over year. Other revenue has becoming the third engine of Weibo's growth and a key driver for the growth is the fact that over 80 million Weibo accounts have activated Weibo Wallet.

As live broadcasting revenue steadily growing, we are entitled to receive a fixed amount of service income in Q3 and Q4 2017, respectively, based on our agreement with Yi. In the third quarter, the live broadcasting revenue as a portion of total net revenue was not material, although it contributed an incremental profit to the company. Currently, from a strategic perspective, we will focus more on integrating and improving the technical aspect of live broadcasting, making it a must-have, real time and unique interaction tool for media, organizations, celebrities and KOLs in Weibo ecosystem to further enhance our differentiated attributes as a social media platform.

Our priority is still on the content creation and social communication that we can benefit from the growth of live broadcasting, with lower importance on the income we can derive from this business. Although currently we don't expect material revenue from this revenue share from Yi, we believe it is a sustainable approach and will allow us continuously improved returns from our investment in Yi.

Turning to costs and expenses. Total non-GAAP costs and expenses were $188 million, up 54% year over year, primarily due to increases in marketing expenses, turnover taxes and the development expense. Sales and marketing expenses grew at a faster pace year over year, which were mainly attributable to increased channel marketing spending and for brand promotion of newly launched Weibo Stories.

Non-GAAP operating income reached $132 million in the third quarter, up 142% year over year. Non-GAAP operating margin in the third quarter reached 41% compared to 31% for the same period last year.

Income tax expense was $22 million compared to $1.9 million last year, primarily due to higher profitability and the change in tax status of our PRC subsidiary from being fully tax exempted last year to 12.5% this year. Non-GAAP net income attributable to Weibo in the third quarter was $115.2 million, up 111% year over year.

Turning to balance sheet and cash flow items. As of September 30, 2017, Weibo's cash, cash equivalents and short-term investments totaled $737 million. Cash provided by operating activities for the third quarter was $110.6 million. Capital expenditures totaled $4.4 million and depreciation and amortization expenses amounted to $3.9 million.

On shares in the market, per our ADR depository firm, as of September 30, 2017, approximately 28% of Weibo's share outstanding were represented by American Depository Shares and 85% of which was considered floating shares.

Turning to Weibo's fourth quarter 2017 guidance. We estimate our fourth quarter revenue to be between $355 million and $365 million, which assumes a foreign exhcange rate of RMB 6.70 to $1.

Before turning to the questions, I'd like to let you know that on October 30, 2017, we completed an offering of USD 900 million convertible senior notes due 2022 with an annual coupon rate of 1.25%. The notes will be convertible into Weibo's ADSs based on an initial conversion price of approximately USD 133.27 per ADS, which represents approximately 47.5% conversion premium over the closing trading price of Weibo's ADS on October 25, 2017. We plan to use proceeds from the offering for AI-related investment and potential acquisitions of complementary businesses. After the CB issuance, we have a more balanced cash position in terms of offshore US dollar and onshore RMB.

With that, let me now turn the call over to the operator.

(Operator Instructions) We have the first question from the line of Alicia Yap from Citigroup.

My first question is regarding the fourth quarter guidance. Can you give us -- can you share with us and quantify how much of the revenue do you expect to come from Alibaba this quarter and how many of the bigger brands on Ali platform are currently adopting the social commerce lead from Weibo? Then second question is on the Search business. Can you elaborate a little bit on the prepared remarks, more detail about this search potential revenue? Is this more targeting on the content search within the Weibo platform or for the general search? And how do you plan to monetize these search functions, is it more content creator could potentially bid for advertising slot order (inaudible). (Foreign Language)

Hi, Alicia. This is (inaudible) I am going to take your first question. We don't provide a breakdown for our revenue guidance for the upcoming quarter. It is our practice to disclose one number, but to everyone's knowledge, Alibaba has generally spent a lot more in the fourth quarter given the specific events such as Double 11, Double 12. And with that -- and I think the market understands, we operate our ad system on a bidding -- on a real-time bidding process. So every customer, they had a equal chance to get inventory on our platform. So with their marketing events and their initiatives to meet their marketing demands, we anticipate that during the fourth quarter, they might be much more willing to bid higher price for our inventory. So this is very much consistent with their practice with Weibo for the last couple of years. So hopefully that answers your first question. (Foreign Language) Right now, our search feature is largely focused on the search for people and the hot news on Weibo. (Foreign Language) We started the search monetization in the second half of this year. Currently, the feature of the monetization in the search area is quite similar to our in-feed advertising from our main page, and this is particularly true for the hot news search. However, in the vertical area, we do provide a different approach on things.

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

So my first question is about -- would you mind to share with us the breakdown between the promoted fees, display ads and also advertising, including topics? And also would you mind sharing with us what's the revenue contribution from video ads this quarter? And also separately, following (inaudible), would you mind sharing with us what's with the (inaudible) for the video ads and also non-video ads for the effective CPM? And also I think Gaofei has mentioned that 30% of the videos right now are actually high definition videos. Would that be -- I mean, improve the effective CPM for the video ads going forward? And also on the other hand, I think the high definition will also have some pressure on bandwidth cost. How should we look at the margin profile for this segment particularly? Thank you.

Hi, Fan. This is (inaudible). I am going to take your first and the second question. In terms to your breakdown of your current promoted fees as a percentage of revenues, that number is very similar to last quarter. It's up a bit like a 2 percentage points in this particular quarter representing about 54%. So that's continued to be our largest piece of ad format in our ad revenue. In terms of your question on the revenue percentage -- video revenue percentage of the total revenue, I think it was part of Gaofei's speech that, that number was quite consistent on a quarter-over-quarter basis. And the third question?

(foreign language) Right now, it's about 30% of uploaded video using high definition format. (foreign language) The purpose of shifting more to high definition format, the first part is to really try to improve the experience for users. So on the other hand, that part of the content, we would like the user to be shared into other platforms such as PC, pad or TV. (Foreign Language) Following the adoption of high definition format, we actually see some customers who used to be running campaign on TV station or online video platform have shifted their -- some ad budget to our platform. They've become much more willing to running their campaign on Weibo, that very effectively help us to enlarge our customer base.

Just a quick follow-up, so what's the CPM for video and non-video right now?

We generally don't disclose that information on a separate term for video or non-video. This is a consistent practice we have done in the past. I think Gaofei has given some indicators in his speech talking about the adoption of the new ad system, which had a positive impact on our ECPM as well as our engagement rate.

The next question comes from the line of Gregory Zhao from Barclays.

So my question is about a competitive landscape of the news feed advertising market in China. So recently, Baidu reported very solid feed advertising revenue, and there was also some of speculation that concerned the change of official account news feed -- news format. So how shall we expect the impact to the users [point share] and advertisers budget spend on Weibo? That's my first question. And my second question is for our -- still about our new advertising system, so can you share some recent progress or help us quantify like how much, I mean, the new advertising system will contribute to our Q4, and how much incremental monetization shall we expect from the new system in next year, I mean, 2018? Thank you.

(foreign language) We have noted the increased competition within the news feed such as the few names you have mentioned, like Baidu or Tencent, but in my, I think, previous note, we indicated we are much more focusing on the social elements or social budget in China. Right now, that piece of the budget as as the percentage of a digital marketing compared to our U.S. peers continued to be at a low level. I would believe there's another 50% or double the opportunities for this company. (foreign language) Okay. With that our focus has been on the -- expanding our customer base, and our sales team has been focused to track more user to using Weibo as system in a tri-social marketing solution. And our historical experience has indicated any retained customer, they will increase their [ARPA] or per customer spending with us once after they had a trial run with us. (foreign language) On the SME front, we do recognize that they are much more focusing on the performance ad and giving the unique aspect of Weibo, which owns social ID, we can provide a much more targeted performance ad results to our customers. In particular, with the incorporation of Ali, we will be able to targeting our customer with particular attributes through data exchange from Alibaba, and our CTR rate and engagement rate currently in the marketplace has warrant our market position in terms of SME spending. (foreign language) Well, the biggest difference between the old and new system -- ordering new ad systems resides with the traffic. Prior to the new system, we have separated traffic allocated for key accounts, small and medium enterprises and the self-service clients. Now we have converged all this traffic altogether. (foreign language) So with the new model, everyone's based on the same platform to bid on a real time basis, which significantly enhanced the bidding efficiency, and also we provide more choices to our customers to have more focused or targeted bidding process. (foreign language) Yes, with the adoption of the new ad system in late August, we see above 20% of increase in our ECPM price as well as our engagement rate in terms of our ad performance. With your question on the fourth quarter, which elements attribute the most be the increase in our revenue for that particular quarter? There's many more variables. One quarter, we will see increased budgets from our customer in results of the events, such as Double 11, and at the same time, we will increase our (inaudible) to meet their demand so that everyone has opportunity to use our inventory, our traffic to run their campaign. So it will be very hard for us to quantify which elements specifically attribute the increase in the fourth quarter revenue forecast.

The next question comes from the line of Juan Lin from 86 Research.

My question is related to your channel strategy for next year. I'm wondering whether the inventory piece related to (inaudible) with mobile phone manufacturers will hold for next year and whether more expenses is required as competition intensifies. And also in terms of rating those channel strategies, could you please elaborate a little bit on on how the (inaudible) improve efficiency and whether we will continue to see a significant improvement going forward? My second question is on sales and marketing expenses. I noticed that sales and marketing expenses increased significantly on a sequential basis this quarter. I'm wondering whether this is the one-time scheduled marketing promotion or whether this is recurrent expenses related to user acquisition and channel strategy. Thank you.

(foreign language) In my script, I already touched upon our channel strategy. We will continue our cooperation with handset manufacturers in order for us to penetrate into lower-tier city in the third and fourth-tier cities. At the same time, I touched upon the local operations that we are currently running that helps our user retention and engagement once we penetrate into these cities. (foreign language) Well, we have to admit that in the channel area, we see more intensified competition among companies. (foreign language) Because the unique aspect of Weibo products, what we have seen the retention rate of the user -- the new users we acquired is higher than other products. As a result, per customer acquisition costs in comparison to other platforms, we have a significant advantage. (foreign language) Right now what we see is we continue to increase per MAU -- revenue per MAU and in comparison to per cost -- the acquisition cost per user, we still see quite significant delta. As a result, we think this is quite a sustained model we can run for a period of time.

On the second question, I think, John, you had in terms of selling and marketing expenses. In the third quarter, the significant bulk of that expense is coming through -- came through from channel marketing, and also we did notice there was a bit of one-time expenses, such as Weibo Story launch-related expenses that you can consider -- you probably can consider one time. I think for -- to build your model going forward, you should anticipate in terms of the absolute dollar for sales and marketing will continue to go up in the years to come. However, we should expect selling and marketing as a percentage of total revenue will stay relatively flat or with very modest increase in next year.

We have no further questions at this time. I'd like to hand the call back to the speakers. Please go ahead.

Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. (inaudible) Thank you.