Weibo Corp (WB) 2022 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to Weibo First Quarter 2022 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

And now, I'd like to hand the conference over to Ms. Sandra Zhang from Weibo IR team.

Thank you. Please go ahead.

Thank you, operator. Welcome to Weibo's First Quarter 2022 Earnings Conference Call. Joining today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on Internet and is also available through Weibo's IR website.

Before the management remarks, I would like to review the safe harbor statement in connection with today's conference call. During today's 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 statements. 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 and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law.

Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financials excludes certain expenses, gains and losses and other items that are not expected to result in future cash payments or are nonrecurring in nature or are not 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 brief Q&A session.

With this, I would like to turn the call over to our CEO, Gaofei Wang.

(foreign language) Thank you. Hello, everyone, and welcome to Weibo's first quarter 2022 earnings conference call. (foreign language) On today's call, I will share with you highlights in Weibo's user, product and monetization in the first quarter of 2022. (foreign language) On the user front, Weibo's MAUs reached 582 million, and average DAUs reached 252 million in March 2022, adding approximately 51 million and 22 million users year-over-year respectively. In March 95% of Weibo's MAUs came from mobile.

(foreign language) On monetization, the macro environment, industry policy and recent domestic COVID-19 research has caused the short to medium impact on the production and operation of many companies to different degrees, causing most advertisers to defer or reduce their marketing budgets since March. Nevertheless thanks to solid growth of our user scale and traffic as well as our efforts in key industries such as gaming and apparel.

We have further gained recognition among advertisers for our differentiated market solution that integrated well with our user product and content operations. In the first quarter, our total revenue reached $484.6 million, up 6% year-over-year and our ad revenues reached $427.1 million, up 10% year-over-year and 94% of our ad revenue came from mobile. This quarter our non-GAAP operating income reached $141.7 million.

(foreign language) Next, let me share with you our focus mix in product monetization in the first quarter. (foreign language) On product front, we continue to focus on operating efficiency, driving steady user base expansion and engagement improvement so as to update our monetization efficiency.

On channel front, considering our user scale and the competitive landscape, we will emphasize on balancing user acquisition costs and monetization and improved ROI and user acquisition. On competition, we will continue to step up investment in operations of hot trends and social content, deepening strategic cooperation with partners from media, entertainment, gaming and sports verticals to encourage discussion around hot trends and IT and maintain our competitiveness in core user function.

(foreign language) In the first quarter, with the Spring Festival holiday and winter Olympics, our user base and traffic grew robustly, demonstrating Weibo's advantages in hot trends and social attributes. During the Spring Festival, content related to the Spring Festival gala of 25 television stations was distributed on Weibo via topics, videos, live streaming and et cetera.

With Spring Festival gala related topics, the viewership surpassed 20 billion and the discussion was more than 70 million, up 46% from last year. And moreover we launched the live topics and upgraded topic feature that allows users to discuss live while watching the Spring Festival gala. While the gala was on air; celebrities, KOLs and users were able to join in the live discussion altogether recognizing the willingness of discussion around the event. As a result the discussion of the gala-related topics created by users increased by 145% from last year.

(foreign language) Furthermore, our content operation of the Beijing Winter Olympics has attracted massive users to consume conference on Weibo. From the Winter Olympics season, the sports campaigns and the IPs of the (inaudible) we worked with the Winter Sports Administrative Center to encourage athletes to open accounts as they engaged on Weibo and build a content distribution metrics with the state media and Weibo among other media to enhance the dissemination and discussion of contents around the game.

Not only did the traffic driven by the Beijing Winter Olympics surpassed that of the Tokyo Olympic Games, but the athletes and their followers were also more engaged on Weibo. Based on historical data, as people returned to school and work after the Spring Festival, the user scale and traffic on Weibo will go back to a certain extent.

However, in March, we grew our user and traffic nicely, mainly attributable to more social events occurred and increased time spend online due to the disruption from COVID-19, coupled with our optimized channel strategy and improved operating efficiency of cultures and social contents.

(foreign language) On channel front, we further optimized our channel investment strategy, which focus on efficiency as the content operation of the Spring Festival and the Winter Olympic Games helped grow our user and increased those engagements. We cut the budget investment in ROI channels and try to shift more budget to channels with potentials of recent user visit frequency. And meanwhile we improved our capabilities of serving products to clients and increased the long-term retention of the monetizable traffic and users to continue to optimize channel ROI.

Hence in the first quarter, we optimized our products from several aspects, driving to precisely targeting users with the recommended content. We also focused on optimizing the push core strategy and improving the product experience to increase the frequency of user consumption. In March the per capita consumption of channel user increased by 40% from the first quarter last year.

(foreign language) On social attributes, we continue to strengthen the social features of our user products by focusing on promoting scale and engagement of Weibo's core users. On a relationship-based feed, the number of feeds refreshment continues to improve from December, benefiting from the optimization in content distribution of the relationship with the feed. We effectively retained and engaged users to our platform by hot trends.

Additionally, we continue to invest in social content enrichment, personalized content distribution and front-end product spirits to improve the experience of user consumption and the social stickiness of the relationship based feed.

On community products, we focused on improving the product mechanism to better serve user consumption and enable users to discover content, (inaudible) relation and interact with each other with communities. At the same time we strengthened the integration of products and operations to further expand community to more verticals, enrich vertical content so as to better fulfill users' needs for social relations based on interest and location within the communities.

In March, the number of users who used community products continued to increase, up by double-digits from last December. The number of posters and post in the community search and users in gaming, sports, animation and campus continue to be engaged. We have seen that community can effectively increase user engagement and promote user intention in the long run, which boosts our confidence in Weibo's new positioning and growth potential in the market of social attributes.

(foreign language) On videos, we continue to focus on the scale and engagement of video accounts, especially on verticals that can drive more traffic and engagement and also high-quality content creators. In 2022 we will provide more support on product and operations to these video content creators to encourage video generation and interaction with spend and ensure the quantity and the quality of video content, which in turn drives user engagement.

As of the end of March, the number of video accounts exceeded 30 million. In the first quarter, we provided video content creator with more editing tools and features to promote social interaction around video content to increase video generation and engagement. At the same time, we encouraged user consumption in core information-based feed to continuously optimize the recommendation mechanism for high-quality video content creators and data content.

For example, for the relationship based feed, we optimized the recommendation of video accounts based on users' social relations, which significantly improved the distribution of video account and efficiency of user consumption. We also launched the hot video list in the discovery page, which not only stimulated video consumption, but also further strengthened the positioning of discovery page in the consumption of hot trends and the popular content.

(foreign language) Finally, let me share some color on our work in the region of battle against domestic COVID resurgence. Since March, new case has been reported across the country. During this outbreak we fully leveraged (inaudible) advantages in the resource application and information distribution.

On one hand, we worked with Shanghai release People's Daily, CCTV news and other official accounts of government and state media and organized more than 2,200 topics on the COVID situation in Shanghai, which generated nearly 200 million views and over 22 million discussions in total. We have also established an efficient rumor refuting mechanism in cooperation with government department to promptly address rumors and misinformation, we optimized our product mechanism to amplify information reach to more users.

On the other hand, we continue to enhance Weibo's efficiency and the capability in public rescue system. We quickly upgraded our rescue channel based on the existing Super Topic product to better converge requests for help. Up to now, we have reported more than 5,000 valid requests to government departments, resulting in more than 2,600 at risk cases. In addition, this year, we also attempt to coordinate with NGO's business, media, volunteers, (inaudible) et cetera, to build a society-wide rescue system against COVID, providing assistance and support for people seeking medical treatment, supplies, physiological consulting, so as to further amplify our value in the society-wide emergency relief and assistance.

(foreign language) On monetization, in 2022 we continue to focus on enhancing our potential and efficiency of traffic monetization and thus beefing up our overall monetization scale underpinned by the resilience of Weibo's brand plus performance that add offerings in key verticals. We are dedicated to expanding the marketing combo of brand plus performance ads with content operations to more industries and clients, aiming to strengthen our industry base and marketing capability as well as our marketing competitiveness -- market competitiveness.

(foreign language) From an industry perspective, our ad revenue increased by 10% year-over-year in the first quarter, mainly benefiting from the Spring Festival and the Winter Olympics as well as our improved capability to fulfill customers' brand plus performance marketing needs in key industries. For example, during the Winter Olympics, we helped some Olympic sponsors to build hype in the market, featuring a combo of our ad offerings such as topic, hot trends, launch screen ad, et cetera, to uplift their brand recognition, leveraging hot trends of our Olympic sports event and athlete endorsement.

Our unique solution of hot trend marketing has earned wider recognition among most of the advertisers, especially the Chinese footwear and apparel brands during the 2 Olympic game seasons. As a result, we are pleased to see higher ad demand for the apparel vertical, which add revenue from this vertical growing very nicely year-over-year.

Next let me share our progress in the gaming vertical as well. Ad revenues from the gaming vertical sustained strong growth momentum with over 50% year-over-year growth in the first quarter. We primarily attribute the growth momentum to a differentiated ad playbook we developed for the gaming industry in the past 2 years.

To elaborate, we have strengthened the synergies between sales, products and operations to amplify the distribution and discussion of new games as well as facilitate the accumulation and activity of social assets, coupled with our ongoing optimization in performance ad offering, we managed to capture incremental brand ad budget for new game release from clients which traditionally only value our conversion results.

Considering the approval policy of (inaudible) the game license, we launched event-based type offering and service for top gaming clients in the first quarter to better align with clients' event pipeline and fulfilled their marketing needs in connection with major version upgrade -- updates and new character promotion.

A good example is Weixin, we worked closely with the game advertiser and aggregated all marketing events on Weibo, including version updates, brand ambassador official announcement and branding events, et cetera. On the public test now, the official accounts of (inaudible) have accumulated over 4 million followers. The number of views and discussion around the major Weixin topic exceeded 12 billion and 6 million, respectively, with over 4 million long-term active fans of Weixin Super Topic.

(foreign language) Undoubtedly the first quarter has -- recent trends, in the first 2 months we had pretty good start both in terms of user traffic and financial performance. However, we have seen an inflection since March amid geopolitical issues and COVID-19 resurgence, multinational customers and offline customers start to cut back marketing spend. Some of our channel marketing campaigns were also negatively impacted.

As a result our ad revenue was also negative impact in March, entering the second quarter with more regions stepping up lockdown and prevention measures, various aspects of economic activities has been significantly disrupted, including production, logistics and other offline activities, which directly weigh on the growth of the overall advertising market.

(foreign language) For the second quarter, despite many market headwinds, we are dedicated to join together with our customers to navigate through the difficult times and reinforcing our own competitive edge in the hope of capturing market opportunities post the normalization.

For one thing, we offer targeted favorable policies and resources to support several customers and industries hit hard by the COVID-19, inviting customers to exploit our brand plus performance ad offering so as to boost their confidence in the social media marketing, while raising the utilization rate of Weibo's core ad inventories at the same time. For another, we proactively take the window to further refine our product offering and reinforce our core competitiveness. Our major initiatives include optimizing our brand plus performance ad offering to improve efficiency beefing up our content marketing service and expanding customer scenario, just to name a few.

We are making solid progress against all of these initiatives as critical moves to further strengthen our competitiveness in the ad market.

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

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's First Quarter 2022 Earnings Conference Call. Let's start with user metrics. In March 2022, Weibo's MAUs and average DAUs reached 582 million and 252 million, respectively, representing a net addition of 51 million and 22 million users respectively on a year-over-year basis. We're delighted to achieve solid user growth momentum with disciplined marketing spend.

Turning to financials. As a reminder, my prepared remarks would focus on non-GAAP results. All monetary amounts are in U.S. dollar terms and all comparisons on a year-over-year basis, unless otherwise noted.

Now let me walk you through our financial highlights for the first quarter of 2022. Weibo's first quarter 2022 net revenues were $484.6 million, an increase of 6%. Operating income was $141.7 million, representing operating margin of 29%. Net income attributable to Weibo reached $132.9 million, representing a net margin of 37%. Diluted EPS was $0.56 compared to $0.57 last year.

Now let me give you more color on revenues. Weibo's advertising and marketing revenue for the first quarter 2022 reached $427.1 million, an increase of 10%. Mobile ad revenues were $401.9 million, contributing approximately 94% of total ad revenue. We had a solid start to 2022. Weibo delivered a relatively resilient ad growth in the first quarter, even though the overall advertising market was tapping off amid the macro uncertainties, resurgence of COVID-19 and lockdown disruptions for first quarter 2022.

Our leading verticals in terms of ad revenue contributions were FMCG, 3C products and gaming. In terms of growth, the fastest growing verticals were gaming and luxury among major ones. Despite regulatory and the macro challenges (inaudible) the relatively resilient performance of FMCG and 3C product sectors demonstrated that Weibo's brand plus performance ad offerings resonated greatly with customers in these sectors and enabled them to build around major events such as the Winter Olympic Games.

For gaming sector, our cultivation in the content vertical as well as the improvement of ad performance for the sector boded well for us to tap into higher ad wallet share of gaming sector as previously said, e-commerce, entertainment and education categories booked these trends due to sluggish consumption data and regulatory impact.

From an ad product perspective, promoting fees continues to be the largest part, followed by social display ad and search and topic ad offerings. That said, as we entered mid-March and second quarter, particularly national wide Omicron outbreaks and subsequent restrictions and lockdown measures have significantly disrupted the advertising market on demand side, industries with high offline exposures such as offline merchants and auto industry cut ad budget due to suspension of offline activities and disruption of production.

The restriction and lockdown in major areas in China, especially Shanghai, has also negatively impacted consumption sectors such as FMCG and e-commerce. We suspended ad campaigns originally scheduled for the quarter and cut ad budget accordingly. Additionally, we also faced a major sales and ad company execution challenges due to lockdown in Shanghai.

As COVID-19 resurgence rapidly involves national-wide and the restrictions and lockdown disrupt economic activities, including production, consumption, logistics and offline activities. Based on our current observation and our best estimate, we expect the potential impact on advertising business in the second quarter is material and even more severe than the COVID-19 impact on our business in 2020.

Given the major areas impacted, duration of restrictions and lockdown as well as the current macroeconomic conditions, we are closely monitoring the evolving situation and will make relentless efforts to mitigate such headwinds, leveraging our diverse industry mix and broader sale network coverage national wide, while doing our utmost to protect our employees, partners and communities.

Despite near-term challenges ahead, we are encouraged to see our user and engagement metrics remain solid momentum, laying foundation for us to further tap into a wider demographic and increase monetization scale as business recovers. We remain confident in our long-term monetization opportunities that our unique value proposition and a diversified content ecosystem will unlock.

Ad revenues from Alibaba for the first quarter decreased 22% to $25.9 million, primarily attributable to its own conservative marketing strategies amid low consumption and lockdown, as mentioned earlier. Value-added service less revenues were $57.5 million in the first quarter, a decrease of 17%. The decrease of VAS revenues was mainly due to less revenue from -- less revenue contribution from membership service and a decrease of live streaming revenues.

Turning to cost and expenses. Total cost and expenses for the first quarter was $342.9 million, an increase of 7%. The increase was primarily due to, first, higher personnel-related costs. Second, step-up in content costs, mainly associated with Winter Olympic Games. Third, recognitions of culture business, construction fee (inaudible) of the exemption policy this year. The increase was primarily offset by a decrease of sales and marketing expenses with disciplined channel investments and reduced offline events.

Operating income in the first quarter was $131.7 million, an increase of 3%, representing operating margin of 29%, exceeding our expectations as we continue to effectively balance growth and margin performance amid uncertainties.

Turning to income tax, under GAAP measure, income tax expense for the first quarter was $11.7 million compared to $14.9 million last year. Net income attributable to Weibo in the first quarter was $132.9 million, representing a net margin of 27% compared to 28% last year.

Turning to our balance sheet and cash flow items. As of March 31, 2022, Weibo's cash, cash equivalents and short-term investments totaled $3.3 billion compared to $3.1 billion as of December 31, 2021. In the first quarter of 2022, cash provided by operating activities was $248.6 million. Capital expenditures totaled $8.5 million and depreciation and amortization expenses amounted to $15 million.

With that, let me now turn the call over to the operator for Q&A session. Thank you.

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

(foreign language) My questions is related to the COVID impact in the second quarter. So if management can give a little bit more detail or the color in terms of the direction that we see in April and May, what kind of the magnitude of the decline that we are seeing for the online ad budget? And what is our expectation for June and also into the second half of this year. Which industry vertical actually seeing biggest pullback in terms of the spending in the past few months? And then which industries vertical that you think will actually see a bigger rebound once this reopening is actually happening?

(foreign language) Okay. So thank you for this question. So first of all, I would like to talk to you about the situation since Q2 because of COVID. So you can see that if we're talking about in mid-March as well as the Q2. In China, due to the COVID, we have been seeing the escalation of the control policies due to COVID here in China. And this is impacting a lot of marketing campaigns offline of our customers as well as those -- ad budget as well.

(foreign language) And also talking about the different ad, for example, the performance ad, we can see that, especially the information flow ad, this kept quite stable in terms of the volume. However, the pricing wise, this has been a little bit reduced. And second of all, talking about those brand advertisements, so you can see that because majority of the agents are located in East China. So I think that in terms of the budget and this has been impacted due to the COVID.

(foreign language) And also talking about the situation here, since the late March, we have been seeing a driving down trend in terms of the booking. And also talking about the April because of the impact to the logistics as well as the execution of a lot of the projects in East China, we have been seeing a driven down trend of the brand advertisement. And also talking about May, we used to believe that it will recover very soon. And actually it was recovered very well and to the level of the March. However, still also in -- after June, originally, we saw that it will be fully recovered. However, because of another COVID broke out in Beijing area, we've been seeing some kind of a fluctuation of our performance there.

And also because Shanghai just resumed work and also all the kind of lifestyle since 1st of June, so there was a lot of uncertainty here in terms of Shanghai and also the performance in the second half. So we are not going to be as optimistic as we used to be in May. And also talking about the effectiveness of the performance ad, the impact to that particular category will be the minimized. And also, however, talking about the brand customers because they have a whole process which is going to be followed if they want to resume the kind of budget and also resumed advertisements in terms of the budget allocation and in the marketing plans as well as the execution, et cetera. So we expect that the brand customers are going to recover slower than the performance.

(foreign language) And also talking about industrial verticals. First of all, we believe that the gaming industry has been least impacted. And also in Q2, there is a kind of upward kind or going upward. And also in May, of course, we had a little bit of impact because of the unavailability of the gaming license, but still that particular impact could be controlled.

(foreign language) And also because the 50% of our businesses are focusing on FMCG, luxury products as well as the automotive industry, so you can see that for these 3 verticals, they've been impacted heavily in April because of COVID.

However, when there was a little bit of recovery of the control and also containment of the COVID in May, we've seen a very quick and also robust rebound of these 3 verticals. So that is to say that in the future, if the COVID could be better contained, we're going to see, for example, more marketing campaigns organized by the customers in those categories or those verticals.

We're going to see a very good recovery and rebound of their budget to us. And of course, that in Beijing, we've got cancellation of the auto show. And this does -- or did impact the budget allocation.

However, this brought with us more opportunities to the future because most of the OEMs are now moving their published and also the launch event of their new models from offline to online. And this is exactly the same that we experienced in 2020 in terms of the mobile and also the smartphone industry, right?

So a lot of people move up their campaign from offline to online. So this is going to give us more confidence for us to see a very good increase of the budget, especially for the automotive industry.

(foreign language) Okay. And then next, I would like to say that talking about the other verticals, especially those off-line activity-oriented industries, for example, the aesthetic medicine and also O2O customers. They have been -- they will also receive the impact after Q3 even.

And even if now we've got a reopening of Shanghai, still there will be a little bit of impact. And also talking about the mobile or smartphone industry, we also have experienced a driven down of the sales of this particular industry vertical. And of course, in Q2, there wasn't a big impact to the smartphone industry.

However, we really believe that in the future that this is going to be impacted negatively. And of course, in-turn, if we're talking about the smartphone, this is not only the customer that we have, but also this should be regarded as the channel for us to do the marketing and also ad. So in terms of the expenses, savings and the fee saving, this actually has brought with us a positive impact.

So if we are talking about the offsetting of these 2 parts, we are not seeing a big impact to our profit margin.

(foreign language) And also, lastly, I would like to say that in Q1 of this year, we had about more than half of the month of the impact. And also in Q2, the impact would have been lasting for about 1.5 months to 2 months. And also, I think that this particular impact is larger than our expectation because Shanghai just reopened itself in 1st of June.

And also in Beijing, there are still certain areas that are having people working from home still. So -- and also because talking about the brand customers, they're having a longer process to follow to restart and also removed their business. And also this requires collaboration closely between publishers and also agents.

So we really think that we are going to have a slower recovery of our business than our expectation in June and also the second half.

Our next question comes from Thomas Chong from Jefferies.

(foreign language) I have a question regarding our cost control and the trend in operating expenses in 2022. And on that one, what should we think about our margin outlook in the remainder of the year?

(foreign language) So first of all, talking about the cost control. So first of all, we are having a stricter control and also a stricter policy in terms of the ROI and also keeping it quite preservative in terms of the placement among different channels and also the purchasing of the feeds, for example.

And also talking about Q1, however, still we had a strict rules on the appraisal ROI and also if the channel, for example, could not provide with us the returns as required within 3 months or 6 months, we are going to cancel collaboration with that channel. And also as a result, we have been seeing a quite good performance in terms of margin in Q1.

And second of all, especially in Q1, we were talking about the cancellation of already the decreasing of the tax related the culture establishment by 1.5%. And also second point is about the activity of the related expenses. And due to the COVID, we could not organize a lot of activities as planned.

So this has saved some of the costs relating to the activities and also campaigns. However, those kinds of activities are also profit-making. So this did impact our revenue at the same time.

Okay. Maybe I can add some color on the margin. So in terms of margin, as a result of better monetization, larger business scale and higher operating leverage, we achieved a good profit margin in the first quarter and last year. And historically, we have always maintained a healthy margin level and heading into the second half of 2022, as Gaofei mentioned, earlier, we expect a negative impact on advertising business is material.

So I mean the difficult market environment and combined effect of numbers of other factors such as expiration of the certain tax incentive, the culture business construction fee will be reliable. And we have to investment in some sports IP such as Beijing Winter Olympic and NBA.

So we do expect a decline in operating margin compared to last year. But the management has reached the consensus that the highest priority this year is to optimize our cost structure with more disciplined channel investment and other spending strategy.

Vivo, as you know, Vivo has always maintained a conservative style. Our goal is improving operating efficiency with stricter ROI assessment to control our overall spending and striving for higher operating leverage to mitigate the margin decline as more as possible and ultimately keep our healthy financial metrics. Thank you, Thomas.

Next question comes from Tian Hou from TH Capital.

(foreign language) It's about the user, so what is the eventual goal for the company to accomplish regarding the total number of the MAU DAUs? And also what's the company's plan in 2022 to acquire new users in China? And also how to use campaign of provisions to improve user retention and user activity level on the platform?

(foreign language) I think that this question has been answered previously, while we were listing our company and also did the secondary road show in Hong Kong last year. So we were saying that if we were not operating any video-related content and also strategies and then the social media or the upper limit of the social media will be only 60% of that of the social network.

But that was about 2013. Every time is different, right? So we are now emphasizing a lot on the differentiation points between Weibo and also Twitter and also the other pure social media. We have been doing more complicated works and also more works as well that in terms of our business operation or business development, especially we're talking about a video.

So in terms of the video, the impact is actually going to be bigger than the social media. And also the business driving courses are going to be more as well than the social media only. So that's why that even if we've had a lot of headwinds as well as the market competition in the video content area, we're still trying to invest as many as possible.

And so we believe that when we have a very key positioning and also important positioning in the video area, and then we are going to further uplift the upper limit of the number of users and also the others. And now in terms of the total traffic and data, the video part accounted for about 1/3 of the total traffic now we have.

So this is extremely very important for us to uplift further the upper limit.

(foreign language) And also, lastly, I would like to say that talking about the business value of a company, this does not only relate to the DAU and also MAU number. But I think it's more relevant to the activity of the users. So especially in Q1, we've been saying that our total traffic has been reaching the kind of the upper limit or the kind of a peak level before any reconciliation and also some ratification conducted to the entertainment industry, right?

So because activity was all about the stickiness of the users. And also, we really believe that with a business model of Weibo combining social media together with the media hot trends, for example, this is going to be our key strategy to be sustainable in the future. And also in Q1, because of the ratification conducted to the entertainment industry, we already said that the entertainment industry will not be recovered until the second half, and this is still the case right now.

And also, that's why we've been doing a lot of other work, for example, the launch of hot trends and Super Topic as well as the community, et cetera. So those businesses are now offsetting the decline activity that we experienced because of that change happened to the entertainment industry.

And also, as a result, we are saying that MAUs and also DAUs are important. But this is not the only thing that we are focusing. But we are focusing more on the provision of better quality services to users and also enhanced the stickiness of users and enhanced the activity of users and activity of the users as well.

So these strategies are going to be the long-term strategy and also making us sustainable in the future.

Thank you. Ladies and gentlemen, we reach the end of the question-and-answer session. I'll now hand the call back to Ms. Sandra Zhang for closing remarks.

Thanks, operator and thank you all for joining us. This concludes our conference call. We'll see you next quarter.

Thank you. This does conclude our conference for today. Thank you for participating. You may all disconnect.