Weibo Corp (WB) 2018 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Weibo Reports Second Quarter Financial Results Conference Call.

(Operator Instructions)

I must advise you that this conference is being recorded today, Wednesday, August 8, 2018.

I would like to hand the conference over to your first speaker today, Ms. Wen Li.

Thank you.

Please go ahead.

Thank you, operator.

Welcome to Weibo's 2018 Second Quarter Earnings Conference Call.

Joining me today are our Chairman of the Board, Charles Chao; our CEO, Gaofei Wang; and our Interim CFO, VP, Finance, Fei Cao.

The conference call is being broadcasted on the internet and is available through Weibo's IR website.

Before the management presentation, I want to review 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 of 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 these and other risks, including the Weibo's Annual Report on Form 20-F and other filings with the SEC.

All information provided in this press release is occurring as of the date hereof, and Weibo assumes no obligation to update such information, except as required under applicable law.

Additionally, I'd like to remind you that our discussion today include 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 the future prospects.

Our non-GAAP financial exclude certain expenses, gains or losses and other items that are now expected to result in future cash payments or that are now recurring in nature and will now be indicative in 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'd like to turn the call over to our CEO, Gaofei Wang.

(foreign language)

Thank you.

Hello, everyone, and welcome to Weibo's Second Quarter 2018 Earnings Call.

(foreign language)

On today's call, we'll share with you highlights of Weibo's user growth, product and the monetization, as well as our key initiatives in 2018.

(foreign language)

First, let me discuss our second quarter financial results.

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

Our total revenue reached $426.6 million, up 68% year-over-year.

Advertising and marketing revenue reached $369.9 million, up 69% year-over-year, with 82% of our ad revenue in Q2 from mobile.

Non-GAAP operating margin during the second quarter reached 39%.

(foreign language)

On the user front, Weibo's monthly active user reached 431.1 million in June, an increase of 19% year-over-year or up 20 million on a quarter-over-quarter basis, representing the largest net addition of MAUs since the second quarter 2017.

The average daily active users in June reached 189.9 million, up 19% year-over-year.

In June, 93% of Weibo's MAUs were from mobile.

(foreign language)

With the recent FIFA World Cup and other events, Weibo has once again achieved strong user growth and user engagement this quarter.

Leveraging our enhanced platform ecosystem in user engagement and content distribution, as well as our insights into market opportunities, Weibo's monetization capability was further improved.

We have diversified our advertising and marketing solutions tailored to different customer segments, from individuals to small and medium-sized enterprises to key accounts to offer better marketing experience, and higher investment return to our customers.

Advertisers are increasingly recognizing our social marketing capabilities.

(foreign language)

In discussing our operational Opdate for the second quarter, I will cover Weibo's progress in areas of users, content and the customers.

(foreign language)

First, on the user growth.

We continue to increase our channel coverage and the efficiency in user acquisition.

This quarter, our strategic partnerships with the smartphone manufacturers, TV programs and other channels have allowed our products to reach a broader user base more rapidly.

In particular, our partnership with key domestic smartphone manufacturers have shown meaningful results.

During the first half of 2018, our mobile direct coverage increased by double-digit year-over-year, setting the stage of our strong MAUs growth.

Our continuous investment in user acquisition is essential to help us enhance our network effect, achieve user base expansion, increase penetration into lower-tier cities, and solidify our leading edge in the social and media competitive landscape.

In the meantime, our efforts to promote the user discussion over hot events and to strengthen the social attributes of our user product have resulted in greater user engagement at each level of our platform compared to the last quarter.

(foreign language)

This quarter, leveraging Weibo's unique market position within the social media space, Weibo was able to form strategic partnership with FIFA, CCTV, Youkou and China Mobile and to distribute licensed World Cup content generated by the partners.

Weibo has become the primary platform for users to consume World Cup related content.

Users, other than enjoy the consumption of the premium contents, were able to participate in World Cup related Weibo activities lead by celebrity and sports KOLs, in a number of interactive formats.

The significant participation by the users on World Cup helped by the platform to attract new users and boost our user engagement.

The FIFA World Cup brought together over 100 million users on Weibo, generating more than 1 billion topic-related interactions.

Meanwhile, related short video posted nearly 700 thousands and were viewed more than 17 billion times, while related topic had viewership by nearly 100 billion times during the World Cup.

(foreign language)

Moreover, our deep collaboration with online variety shows helped Weibo further solidify its competitive edge in content distribution, and helped our celebrities increase their influence.

For example, as part of our strategic partnership with the Tencent talent show "Produce 101", Weibo was one of the official voting channels.

This collaboration has promoted the show and its contestants to interact with a broad user base.

As a result, "Produce 101" related topics nearly 37 billion viewership.

Meanwhile, short videos exceeded 11 billion viewership, and the fan base of "Produce 101" contestants reached 40 million.

This partnership has enabled "Produce 101" to become the blockbuster variety show in 2018, while Weibo benefited from the increased user engagement, including the rising in daily user posts on platform.

(foreign language)

Other than our continuing investment in channel marketing, we have increased our efforts and investments in user product to more efficiently acquire new users and reactivate old users.

For example, we launched a number of social-focused activities, such as giving away red envelope to new users when they complete designated tasks in content creation, content consumption or social relationship cultivation.

In addition, we have achieved a meaningful result by deploying more effort in machine learning, which have helped the users establish more social connections and optimize their content consumption experience.

During the quarter, the user consumption rate of both relationship-based and interest-based feeds continues to grow.

Moreover, the number of users on Weibo Lite, which mainly targets mobile users who possess relatively low-end smartphones, grows sharply.

In June, MAUs for Weibo Lite had a triple digits sequential increase.

This has further expanded our channel network, and the product coverage and increased efficiency in acquiring new users.

(foreign language)

Moving to the relationship-based feed.

We continued to strengthen the relationship-based feed with social attributes and promote fans interactions.

In June, the user's engagement rate in the relationship-based feed maintained double-digit growth year-over-year.

Pertaining to the interest-based feed, we allocated considerable resources associated with the content safety, such as implementing manual review of content compliance in the first quarter.

These actions have resulted in lower traffic growth of the Hot Search and the Hot Weibo feeds in the first quarter.

However, as our operations gradually return to normal during the second quarter, we were able to improve our content offerings and the user consumption rate of the interest-based feeds and trending topics.

(foreign language)

In the second quarter, we have enhanced the distribution scale of full-screen vertical short video to users on Weibo to promote user consumption and the content creation by allowing users to distribute Weibo Stories in the feeds, and add a separate fee to recommend other Stories to users in the Discovery Zone of the Weibo app.

In the second quarter, daily post of Weibo Stories increased by double digits sequentially and the daily Stories viewership increased by triple digits sequentially.

We are confident that our effort to increase the distribution of full-screen vertical short videos will help build a stronger content ecosystem, and attract more top KOLs from other platforms to accumulate incremental social assets on Weibo.

In addition to vertical short videos, our focus and efforts were primarily on horizontal short videos.

We will leverage our deepened collaboration with content creators in multiple fields to focus on content creation with IP and the programs in the period.

In the second quarter, we revamped Weibo's app client to allow users to access video content at a primary entry point, rather than asking users to navigate to the video section.

We also partially rolled out this version upgrade to certain Weibo users.

As the new version of the app will prioritize the consumption of premium video content, the preliminary test results showed a significant increase in the user scale of video feeds and user time spent.

We plan to roll-out the new Weibo upgrade beyond the initial test-pool of users in the third quarter.

We believe this revamp will help increase our market share in the mobile short video industry.

(foreign language)

Moving on to content.

One of our key focus areas has been to further verticalize our content to build stronger engagement throughout every level of Weibo platform.

To support this goal, in June, we expanded content category to 60 verticals, and we partnered with more or less 1900 MCNs.

We're noted both the number of daily posters by top content creators, and the number of monthly views maintained double-digit growth year-over-year in this quarter.

(foreign language)

Now I would like to share few thoughts on our strategy on how to work with the top content providers, and differentiate Weibo in operation from other content offering platforms.

A key product function of Weibo primary focus on facilitating social relation cultivation, and enabling top content creators to express themselves, grow social assets, and interact with followers fans leveraging Weibo's diverse media formats, including text, picture, live-broadcasting on the video.

For example, SAMA, a KOL in food vertical, was originally using Bilibili to build her personal brand.

When she opened an account on Weibo and started posting content in various formats, in June, both the viewership of SAMA's feeds and the fan engagement increased by 20 times on a year-over-year basis.

Another example is Qiming Fei, a KOL originally from Douyin, who has grew his fan to nearly 5 million followers in 1 year on Weibo.

The interesting part that we observed recently is that despite selected vertical small and medium content creators, such as beauty/handsome on Weibo might distribute their contents on other platform, they have returned to Weibo after establishing a baseline of influence.

Weibo is reflected as the ultimate platform for KOLs to expand thier horizon, and again their public influence, thereby achieving effective monetization.

(foreign language)

Lastly, turning to monetization.

We achieved strong ad revenue growth in the second quarter.

More and more key accounts have realized the value of social marketing on Weibo, and our successful marketing campaigns have demonstrated Weibo's ability to help advertisers generate a high marketing return rate.

As a result, both the number of KA advertisers and KA ad revenues continued to grow rapidly in the second quarter.

Our KA ad revenue was up 91% year-over-year, while per customer standing hit a historical high at more than 50% year-over-year.

Despite the price increase of our display ad products earlier this year, our product sales rate hasn't been affected.

Moving forward, we will continue to strengthen our cooperation with the third-party to share brand marketing data across the full Weibo chain.

We expect this will help our KA customers better recognize Weibo's marketing value.

In return, we anticipate generating increased KA ad spending.

In the second quarter, we launched "Weibo Uni Marketing" program with Alibaba.

Through the program's data analytical and integration, we were able to help brand advertisers more precisely reach a larger group of target users, and better understand ad conversion.

This program optimizes the brand advertiser's marketing models by studying the market reaction to their product, marketing campaigns and their celebrity collaborations.

(foreign language)

Turning to SME.

In the second quarter, SME revenues were up 48% year-over-year.

Both the number of SME advertisers and RPA continued to grow.

This growth were primarily driven by the increased sales rate after introducing the new app inventories, and the continuous optimization of our ad algorithm, which has helped SME customer achieve marketing goals more efficiently.

In the second quarter, both ECPM and the ad engagement rates grew sequentially.

We have made a number of adjustments on our ad products, and have adapt our strategy to face the fiercely competitive information feeds advertising market in the following three aspect.

First, grow the sales rate of new ad inventories we added in the video feeds in the discovery zone of the Weibo app, the recommended video feeds and the feed in the main page.

However, it may take time for our customers to adjust their campaign creative to accommodate the new ad formats available in the ad inventories we added.

Second, further enhance our ad algorithm, especially on those new ad inventories to boost targeting capability in different dimensions, as well as to improve the ad conversion rate.

Third, further expand our customer base, and to deploy tailored products and marketing solutions to advertisers in different verticals.

(foreign language)

With that, let me turn the call over to Fei Cao for our financial update.

Thank you, Gaofei.

Welcome to Weibo's second quarter 2018 earnings call.

As a reminder, we adopted new revenue guidance, ASC Topic 606 on January 1, 2018.

In order to provide investors with meaningful comparisons, and also indicate our revenue or expense figures under the old revenue guidance, which excludes barter transactions and adds back value-added tax to the reported figures included in our earnings release.

Now let me go through our financial highlights.

All comparisons are on a year-over-year basis, unless otherwise noted.

For the second quarter, Weibo's net revenue reached $426.3 million, up 68%, or up 67% under the old basis.

We are pleased to deliver this growth, despite the general weakening of the China RMB relative to the U.S. dollar had unfavorable impact on revenue during the quarter.

Notably, the foreign exchange rate assumption of RMB 6.35 to the US dollar that we provided last quarter deviated approximately 2% in the second quarter as we saw a precipitous depreciation of the RMD since June 2018.

Looking ahead, we expected to face continued foreign currency headwinds in the second half of this year due to the depreciation of the RMB.

Non-GAAP operating income reached $167.3 million, up 67%.

Non-GAAP net income attributable to Weibo was $156.1 million, up 80%.

Non-GAAP diluted EPS was $0.68, compared to $0.38 a year ago.

Advertising and marketing revenues for the second quarter reached $369.9 million, up 69%.

Mobile ad revenue in the second quarter was $305 million, up 91%, representing 82% of our total ad revenue.

Given our unique market position of China's premiere social media platform, and with 93% of our MAUs for mobile in June, Weibo is continuing to benefit from the shift in corporate ad spending towards mobile, social and video.

As a result, total advertisers exceeded 935,000 in the second quarter, up 6%.

Turning to KAs.

In the second quarter, our KA ad revenue reached $153.3 million, up 91%.

This strong KA advertising revenue growth was driven by both an increase in ARPA and an expansion of Weibo's advertiser base.

Weibo has become a "must-have" for an increasing amount of KA advertisers, as more brand advertisers have seen the impressive results from their Weibo social marketing campaign.

Weibo's ability to drive the highest levels of social traffic, combined with competitive edge we have with our unique celebrity access, KOLs, network effect, content diversity and integrated marketing solutions, will continue to generate increased KA ad spending.

Moving on to SMEs.

In the second quarter, Weibo's SME ad business delivered revenue of $185.3 million, up 48%.

Both number of SME advertisers and ARPA continue to grow.

The top categories of our SME business include app downloads, O2O companies and e-commerce, which includes sub-categories such as beauty and wellness, gaming apps, entertainment app, travel, education and others.

More notably, the advertising spending of SME customers from both the travel and education segments increased by triple digits year-over-year.

Revenue from Alibaba was $31.3 million, up 137%, up 19% quarter-over-quarter.

As we mentioned the last 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.

In the second quarter, Alibaba further increased its investment on Weibo's platform, mainly to support its June 18th marketing campaigns and other new brand promotion events.

Weibo also has a unique position in Alibaba's ecosystem, not only providing the marketing channel for Alibaba's core e-commerce business, but also integrating into O2O, payment solutions, entertainment and video businesses.

Value-added service net revenue was $56.6 million in the second quarter, up 62%.

Membership fees, which include individual membership, enterprise account verification and V-Plus memberships, were up 52% and game revenue was up 46%.

Membership fees and games revenue together make up more than 50% of Weibo's VAS revenues.

Turning to costs and expenses.

Total Non-GAAP cost and expenses were $259.3 million, up 69%, or 68% under the old basis.

Excluding the barter transactions related marketing expense of $25.2 million recognized under the new basis, the increase in costs and expenses was primarily due to the increases in marketing fees and product development costs.

We are taking a more focused approach to increase user acquisition and retention, as well as expand user engagement over multiple channels.

As such, the Non-GAAP sales and marketing as a percentage of net revenue was 26% during the second quarter under the old basis, up from 23% last year.

The rise in sales and marketing as a percentage of revenue is driven by the increase in channel marketing spending, our investment on the collaboration with several online variety shows and the investment on the promotion of Weibo Lite.

The increase in product development expenditure was primarily attributable to an increase in personnel-related costs.

Non-GAAP operating income was $167.3 million in the second quarter, up 67%, representing a non-GAAP operating margin of 39%.

Income tax expense was $25.1 million compared to $16.4 million last year, a result of higher profitability.

Non-GAAP net income attributable to Weibo in the second quarter was $156.1 million or up 80%.

Turning to our balance sheet and cash flow items.

As of June 30, 2018, Weibo's cash, cash equivalents and short-term investments totaled $1.6 billion.

Cash provided by operating activities was $117.2 million.

Capital expenditures totaled $7.5 million, while depreciation and amortization expenses amounted to $4.8 million.

As leading social media platform in China, Weibo's scale and brand strength have allowed us to grow the platform efficiently.

As a result, we delivered free cash flow of $109.7 million in the second quarter.

According to our ADR depositary form, as of June 30, 2018, approximately 28% of Weibo's shares outstanding were represented by American Depositary Shares, 86% of which were considered floating shares.

Turning to Weibo's third quarter 2018 guidance.

We anticipate our third quarter revenues to be in the range of $465 million and $475 million or an increase of 49% year-over-year to 52% year-over-year on a constant currency basis.

This forecast reflects the currency translation risks, and assume foreign exchange rates of RMB 6.8 to USD 1 during the third quarter.

With that, let me now turn the floor over to the operator to begin the Q&A portion of the call.

(Operator Instructions) Our first question comes from the line of Juan Lin of 86 Research.

I have 2 questions.

My first question is on user acquisition and channel strategy.

I'm curious about the split of new users contributed by different channels and the change of the mix.

Are we seeing any change in terms of user acquisition cost?

And are we addressing our user channel strategy in case of slowing down sales?

Now second question is on our user growth target.

I wonder whether there's any change to the 15% to 20% MAU growth target for this year.

(foreign language)

We have no specific line to this decrease or change on our initial plan of MAU growth of 15% to 20%, which we indicated at the very beginning of the year, despite there's slower shipments in the smartphone and also in overall internal market.

From the user growth point of view, has shown some business in new market.

(foreign language)

I think, Gaofei indicated in his prepared remarks what, the views today in terms of the penetrate into the fourth, fifth, even sixth tiered city very much like the time if we went back to year 2013, when we start to penetrate into the third tier city.

So that's sort of a time spot.

In the other words, we are at the very beginning for the company to penetrate into cities lower than the third tiers.

I think what Gaofei indicated is as we penetrate more into the lower-tier city, we start to see some of the benefits being a social media product.

As a result, to further strengthen our collaboration with smartphone manufacturers, our top-tier TV programmers or even the Miaopai video sites given their contents are very essential to the lower -- their channel and their contents are essential to the lower tier city, and also once our penetration rate to reach to a certain level, we will start to see the social aspect of our product to be further amplified.

(foreign language)

If we break our user into 2 categories, one category being the third tier city above and a third tier city below, over 50% of our new user acquired and either acquired or recalled are from cities below the third tier.

(foreign language)

So our strategy in doing with the penetration into the 4th, 5th and even 6th tier city is quite similar to what we have done few years back, when we try to penetrate into the third tier city.

We leveraged our channel with smartphone manufacturers.

We're using premium contents generated from TV programmers, and the important corners in the video site.

For example, our third tier cities penetration, if you look back 3 years ago, that's about 15%, and now it's over well above 30%.

(foreign language)

This year, we have done quite significant pre-installation to penetrate into the fourth tier city.

(foreign language)

Other than the pre-installation, which is a quite similar strategy, we have deployed, compared to certain fourth tier city users, we try to adopt other differentiated methodology to increase our engagement level for the fourth tier city.

As I indicated in my prepared remarks that we have initiated a few social focused activities such as giving away red envelopes to fourth tier city users when they create contents or consume contents or even when they establish certain social relationships.

As a result, we see our engagement level for our fourth tier city users has been improved, and in terms of retention rate for the fourth tier cities compared to 1 year ago has been also rising.

(foreign language)

For users from the third tier city above, we believe we have really achieved a reasonable penetration rate.

(foreign language)

In terms working with those users from third tier cities above, our relevant cost to maintain or recall those group of user are forecast compared to the cost incurred to attract users from third tiers below.

Reason for that is these group of users are relatively mature and they know our products very well.

And all we need to do is to ensure that our app is pre-installed or show up on their handset, and be close to our ID system in place.

So they will be returning right after they install our products.

Our next question comes from the line of Tian Hou from T.H. Capital.

(foreign language)

Regarding competition, so last quarter, when we're on the call, we're talking a lot on the new players like Tencent.

So they cause some pressure to a lot of leading vendors such as Tencent, such as you guys.

But this quarter, if we look at the performance, which really are either much better in the older opposition of data.

So what's the main driver for that?

Is that because media discussion for their actions that can track or what have or the government give a pressure?

What's the major driver?

If those are not the major driver, what is it and what is the sustainable driver for the future growth?

Number one question.

Number two is that one of your biggest shareholders, Alibaba, also became a shareholder of Douyin.

So will there be some handles in the cooperation in the future?

And so that's my 2 questions.

(foreign language)

In terms of the competition, I will really like to address from 2 aspects.

One is on the short video site, and another angle is from the social future of our product.

(foreign language)

I indicated in my prepared remarks, in the second quarter, we have significant upgrades for our product experience in the full screen vertical video penetration and also the distribution of content in our ecosystem.

As a result, we have observed that top content creators who use to generate or create or distribute their content on other platform, have been moving their content distribution to Weibo in the second quarter.

And also I indicated as, our viewership for the full screen vertical short video has grown more than 100% on a year-over-year basis for this particular quarter.

(foreign language)

In terms our core competence, to meet our users demand, we have carefully studied our core competence and believe our product features are quite significantly different from those platforms who solely distribute video content.

(foreign language)

What we have seen that the other short video platform had very little impact in terms of our MAU scale growth in this quarter.

However, we did notice that our user product frequency could have been impacted by some of the select platforms, particularly targeting those age group from 20 to 25.

(foreign language)

As a result, we have some modification in our strategy since the first quarter.

Instead of purely focusing on the video content itself, we have shift more our attention to the social relationship establishment, and it boosted the engagement level between our content generators and their fan base.

(foreign language)

In terms to the competition with the short video product, where focus continue to be to our social attributes for our product.

So we've been focusing our product enhancement or upgrade with our content generators with how they engage or how they interact with their fans.

(foreign language)

The data has demonstrated that a quite significant improvement in engagement level in between our top content generators and with their fans.

Our view towards the barrier for us to continue to our (inaudible) from a content distribution point of view, content creators can switch from the platform to platform in terms of their distribution capability.

However, to switch their social assets from one platform to another, that is a very different story and have much higher barrier to overcome.

(foreign language)

In terms of your question regarding the Ali's investment in Douyin, we have not noticed the related reporting or news.

As a result, we will not be able to comment on this particular issue.

In terms of the relationship between Weibo and Ali, as I indicated, we have developed quite significant cooperating efforts between these 2 companies from a user front from a data exchange point front.

Not only in the data exchange for our key accounts campaign, we have started more collaboration in terms our SME customers, the data exchange and the local.

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

I have 2 questions.

The first one's about your KA and SME revenue growth.

So can you help us understand the growth outlook of both in the second half?

And my second question is about your story.

So can you help share some updates of operating metrics and plan to monetize Stories?

And do you think that, going forward, story will be a key revenue driver?

And as this quarter, we see Facebook actually substantially cuts second half revenue growth outlook partially due to the Stories promotion.

So we just want to have a better understanding of your monetization plan on story.

(foreign language)

In terms to Weibo story, we see quite significant viewership and the traffic that is being consumed on story products in the second quarter.

(foreign language)

As I indicated in my script, we have opened some advertising inventories since the first quarter.

For example, our main page inventory and our video feed and also commentary.

currently, their sell-through rates have been relatively low.

(foreign language)

So our key task in terms of monetization for the second half of 2018, would be shift to more client budget and allocate more money into those new inventory we opened up in the first half.

This is quite similar to those years when we had a transition from a PC inventory utilization to mobile inventory utilization.

(foreign language)

Currently, we have opened up commercial monetization for key accounts to use with the Stories inventory, and the result has been quite up to our expectations, and we have noted that the first DAU viewership per DAU usage in frequency of Weibo story has been significantly increased in this quarter.

However, we are not in a hurry or has the urgency to monetize beyond what we have done so far.

In terms your first question on your key accounts and SME revenue growth for the second half, we generally do not break out our growth rate for each customer segment.

I think our overall revenue growth target has been very clearly outlined in our guidance in the earnings release.

But I think in the prior calls or in the communication with the sell-side analysts, we have made it very clear that our second half growth in terms of revenue growth will be slower than the first half.

That's primarily as a result of a higher comparable base we are experiencing.

And also, the second half, I'm sure everybody's aware of, we also indicated in our prepared remarks that we are facing a very volatile foreign exchange market with the RMB being depreciated a lot faster than everyone has initially expected.

Our next question comes from the line of Alicia Yap from Citigroup.

I have 2 very quick ones.

One is on the margins.

Your second quarter OP margin came in better-than-expected despite the increase in the sales and marketing.

I wanted to know how much of the increase in sales and marketing versus the first quarter is attributed to the spend in the World Cup?

And then how much of those World Cup spend will also be recognized in 3Q?

And how should we think about the margin trends for the second half?

Second question is quickly on if there's any update or color on the new contract framework from the Alibaba budget commitment for this year.

And given the enhanced relationship, especially on the collaboration on the uni-marketing and data integration, how should we think about the Ali revenue for this year?

Alicia, this is Bonnie.

I think to answer your question on margin, we expect our margin for the second half will be very similar to the levels we were able to achieve in year 2017.

Even though we have been writing off our selling and marketing expenses as a percentage of revenue, we continue to see that we're able to derive certain operating leverage from our G&A expenses and also our product and development expenses.

For your question on the expenses we spend on World Cup, that's quite limited.

Most of the content licensed content, we were able to obtain is through the partnership we indicated with CCTV, with Youkou, with China Mobile.

So we have not incurred significant incremental cost in terms of World Cup event.

So that's the case for the second quarter, and that will be the case for the third quarter as well.

In terms of your question on the Ali, Alibaba's claim contract, they have the basic frame contract with us and the remaining RMB amount of 700 million.

But similar to prior years, this year, they are spending on Weibo is largely depending on their own strategy and their marketing efforts.

So things could have go well beyond the RMB 700 million if they decided they needed to beef up their marketing expenditures.

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

Please continue, sir.

That concludes today's conference call.

Thank you for joining us, everyone.

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

Thank you for participating.

You may all disconnect.