Weibo Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 6 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Weibo Results Reports Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sandra Zhang.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Welcome to Weibo's Q1 2023 earnings conference call. Joining us today are our Chief Executive Officer, And our Chief Financial Officer, Steve Hao. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the Safe Harbor statement in connection with today's conference call.

Speaker 1

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 Those contained in any forward looking statements. Weibo assumes no obligation to update the forward looking statements in this conference call and elsewhere.

Speaker 1

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 the future prospects, our non GAAP financials Excludes certain expenses, gains or losses and other items that are not expected to result in future cash payments were non recurring in nature or not indicators of our core operating results and outlook.

Speaker 1

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 and A session. With that, let me turn over the call to our CEO, Thank you. Hello, everyone. Welcome to Weibo's Q3 2023 earnings conference call.

Speaker 1

Today, I will share with you highlights in Weibo's product On user front, Weibo's monthly active users reached 605,000,000 An average daily active users reached 260,000,000 in 3rd quarter, adding approximately 21,000,000 and Our monetization from the supply side In Q3, benefiting from the promotions of popular TV series and movies during the summer vacation, Our user engagement continues to improve and the overall traffic on Weibo reached peak level this year in July August, Providing sufficient ad inventories on the platform. From the demand side, a few factors negatively impacted on ad revenues growth. First, the macro economy and consumption fell short of expectations. Secondly, a few unexpected adverse factors in late August Next is being impacted on some clients' budgets. Certainly, in Q3 last year, after the pandemic lockdown, Advertisers have been intensively launching new products and increased ad placement.

Speaker 1

Due to these factors, Our ad revenues in Q3 pick up modestly year over year with ad performance of And the performance of August September recovering month over month. In Q3, our total revenues reached US442.2 million dollars a decrease of 3% year over year and a flat quarter over quarter. On a constant currency basis, our total revenues would have increased 2% year over year and 2% quarter over quarter. Our total ad revenues reached US389.3 million dollars a decrease of 1% was an increase of 3% on a constant currency basis. 95% of our ad revenues came from mobile.

Speaker 1

This year, we continue to focus on improving operating efficiency and our non GAAP operating income reached USD163,900,000, representing a longer operating margin of 37%. Next, let me share with you our progress in product operation and monetization in the Q3. This year, our product operations shifted our focus On the channel front, Leveraging increased sales of pulp trends on Weibo in Q3, we'll continue to collaborate with handset manufacturers and step up our channel investments more directly and thus improving the scale of high value users acquired through channels and the conversion rate of these high value users to DAUs. In Q3, the average DAUs acquired from handset manufacturers achieved double digit growth quarter over quarter. In particular, with the promotion on iOS channels, The proportion of high Apple users from Apple handset reached 46% of our total DAUs, which also boosted user engagement on Weibo.

Speaker 1

On social attributes, in the first half of the year, we completed the structure upgrade of social network products, which improves the distribution efficiency of relationship based fee and continuously increase the average daily refreshments per user. As we pay more attention to the development of vertical conferences' ecosystem, the interaction efficiency between KOLs and their followers Improved in Q3 for relationship with speed. It motivated engagement with social content creators and thereby improved users' social fitness. We elaborate. On one hand, we operate the algorithm model to drive user interaction And effectively diverge more traffic to KOLs and content with more fast interactions.

Speaker 1

On the other hand, We improved the positive feedback mechanism for KOL activities, which means to reward KOLs in real time based on traffic and owner incentive system to encourage their content generation and spend interaction purposes. Our efforts in these two assets not only lead to a quarter over quarter increase in the number of average daily engaged users and the engagement efficiency of relationship based fees, but also boosted KOLs content generation in 3rd quarter. For interest based speed, we have also been refining its user interaction efficiency and have operated recommendation algorithm by modifying content tax and user demographics. As a result, the consumption of interest based feed and video feed per user grew 20% year over year. On the conference front, this year, we mainly focused on 2 aspects of our vertical content operation.

Speaker 1

First, we further solidified Weibo's advantage in the IP related conference ecosystem such as Social topics, entertainment, ACGN and sports will continue to improve our competitiveness in the user acquisition markets. Secondly, we allocated incremental traffic support to certain content verticals with strong commercial attributes to better support the industry market such as digital products, automobiles, fashion and beauty and healthcare verticals, as well as other interest based verticals that will drive user engagement, such as food and humor verticals. Regarding Weibo's IT related content ecosystem, Driven by numerous TV series and movies in summer and hot topics around the Asian Games, the traffic and user engagement of Weibo's IT related conference continues to increase quarter over quarter. In the entertainment vertical, engagement with celebrity and KOL was stimulated by the hot topics related to TV series, variety shows and movies. In Q3, the average daily traffic, The number of interactive users and total interactions grow year over year and achieved double digit growth quarter over quarter.

Speaker 1

For ACGM verticals, as its peak season in summer for game developers to launch and promote new games, The traffic and the user engagement for this vertical continue to grow quarter over quarter. For sports verticals, Thanks to our strategic cooperation with the Asian Games Organizing Committee, the whole contents of the Asian Games were fully covered by mainstream media and over 600 star athletes share their competition experience on Weibo, which led to the total discussion of the Asian games exceeding 100,000,000 times on Weibo. For the commercial vertical content areas, Traffic from digital products and automobiles sustained solid growth momentum in the past 3 years, leveraging robust Content and monetization ecosystem reviews as we focus on increasing the number and engagement as professional accounts in these verticals and strengthening clients' mindset for new product releases. In this quarter, Both traffic and user interactions generated from the digital product vertical was double digit growth year over year and quarter over quarter. As we tap into the industry health trends such as the full launches of Xiaomi and Huawei and Weibo mobile photography year.

Speaker 1

In the second half of the year, we expanded this system to other synergetic verticals With the client marketing ecosystem such as beauty, apparel, healthcare, etcetera, we're focused on inviting people with industry influence and professional KOLs to join Weibo and driving their engagement. Leveraging Weibo's strength and operation of our hot topics, we have built Weibo into the go to platform for the growth of professional KOLs and distribution and discussion of industry health topics and thus enhance client regulation of Weibo And further reinforce our market competitiveness. At present, we are pleased with the early results in the healthcare vertical. We have expanded partnerships with industry associations, increased the number and engagement of professional doctors on the platform and collaborated with media and top accounts across these to elevate the influence of macro professional content. As a result, the number of engagements and traffic from professional doctors grew significantly year over year, which also supported the sustainable development of health care clients in Weibo's marketing ecosystem.

Speaker 1

On top content creators, We focus on selecting more top KOLs with higher influence and social value and offer support to them in terms of traffic, Operation and monetization aiming to build a healthier ecosystem. As such, we introduced the GoVabash for influential content creators in the 2nd quarter and the OrangeV badge for high quality content creators in 3rd quarter. Since then, apart from traffic support, we're also focused on enhancing the monetization capabilities of the GoldenBee and OrangeBee accounts So that they could obtain business recommendation more easily and high quality commercial content, there is a better chance of traffic support. In Q3, the Golden and Orange Bee accounts generated a significantly higher proportion of all ad revenue derived from our VTech system with income to Visa accounts ramped up by 50% year over year, which further boosted their engagement. Additionally, the scale, average daily posts, average daily interactive users and interaction of the GoldenBee and OHP accounts achieved double digit growth quarter over quarter.

Speaker 1

We will adhere to this direction in the future and continue to facilitate the synergy between vertical KOLs and clients on the monetization front more accounts with original conference and social value to earn income on Weibo and to better support the business ecosystem. In LiDao monetization, in the Q2, driven by the Labor Day holiday and e commerce festivals, We encourage to see pent up consumption demand release to markets leading to a broad based ad recovery across verticals. Nonetheless, the recovery piece of the overall consumer market fell short of expectations for the full year. Customers from certain sectors remain cautious and hesitant towards market uncertainties, considering the soft consumption environment and sentiment. In Q3, we saw volatility of ad budget from Weibo's key sectors with a notable pullback of ad spend in July versus June.

Speaker 1

That said, benefiting from advantages in hot IP and new product marketing, we highlighted Weibo's core competitiveness in the ad market, which resulted in gradual recovery in August September with a month over month growth of over 20%, respectively. By industry, the further resumption of online and offline entertainment activities and sports events, We are encouraged to see numerous blockbuster IP Conference widely distributed and discussed on Weibo in the 3rd quarter, especially in the areas of entertainment and sports. As such, we'll continue to optimize our monetization product system and marketing model. We'll leverage Weibo's cost IP traffic and hit a discussion to show the combo of organic call topics and marketing content to users. This approach enabled us to better go view customers brand exposure campaign goals and also based up Our monetization efficiency around hot trends.

Speaker 1

As a result, ad revenue generated from the food and beverage and entertainment sectors demonstrated notable recovery trends, both delivering double digit growth year over year in 3rd quarter. Moreover, the digital product sector continued to outperform in the 3rd quarter With over 50% year over year growth in revenue, mainly thanks to the synergy between content and monetization ecosystem, Weibo has become the go to platform for new products or brand launch. As mentioned before, we also beat up Operation efforts in these business verticals. For example, the healthcare industry is on the trajectory of steady growth With ad revenue maintaining double digit growth year over year in the quarter, we are also encouraged to see greater quantity and diversity as customers In the healthcare sector, some performance oriented aesthetic medical institutions originally and now to various kinds of Clients across upstream equipment manufacturers, pharmaceutical companies, healthcare platforms, etcetera, Finally, let me share some color on the beauty and personal care as well as online gaming sectors. This year, the beauty and personal care industry has experienced twists and turns in its overall recovery pace, which was negatively impacted by a choppy branded marketing environment.

Speaker 1

We saw customers cut back investments in new products Due to headwinds from their own operation, in response to such marketing environment on the demand side, we focus on capturing opportunities Broadly hot topic traffic related to celebrities during summer vacation and strengthening Weibo's competitive edge around celebrity marketing. Consequently, we effectively solidified AdWallet as the overall beauty and personal care sector, looking sequential growth in the 3rd quarter. As for the gaming industry, with normalization in game license approval, We expanded the coverage of new games and built more partnership with key customers on the content marketing front. We not only strengthened content ecosystem and hot topic operations during the public testing period of new games, but also reinforce the routine buildup of content ecosystem and optimize technology to improve ad performance of game clients for existing blockbuster titles. In the 3rd quarter, driven by the summer vacation peak season and anniversary celebration, As revenues from gaming industry booked a double digit growth from the 2nd quarter.

Speaker 1

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

Speaker 2

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's Q1 20 2 Earnings Conference Call. Let's start with user metrics. In September 2023, Weibo's MAU crossed the $600,000,000 milestone reaching $605,000,000 An average DAU grew 260,000,000 representing an addition of 21,000,000 and 8,000,000 users on a year over year basis, respectively. Turning to financials, as a reminder, my prepared remarks will focus on non GAAP results.

Speaker 2

All monetary amounts are in U. S. Dollar terms and both comparisons are on a year over year basis unless otherwise noted. We continued to experience headwinds to our financials due to the volatility of foreign exchange rates this quarter. Since our business primarily operates in China, while we report our financials in U.

Speaker 2

S. Dollars, Our financial performance was affected by the growth of currency movements. Now let me walk you through our financial highlights for the Q3 of 2023. Weibo's Q3 2023 net revenue were 422,200,000 a decrease of 3% or an increase of 2% on a constant currency basis. Operating income was RMB163,900,000 representing operating margin of 37%.

Speaker 2

Net income attributable to Weibo reached RMB 136,600,000, up 15% of 17% on a constant currency basis, representing a net margin of 31%. Diluted EPS was $0.57 compared to $0.50 last year. Let me give you more color on the 3rd were RMB389,300,000, a decrease of 1% or an increase of 3% on a constant currency basis With a relatively soft July, well accelerated growth in August September, Mobile ad revenues were $368,900,000 contributing approximately 95% of total ad revenues. In terms of growth, we are encouraged to see strong momentum of handset, entertainment and online services sectors As the largest contributors to top line growth for the handset sector, our years of cultivation around the content ecosystem In the 1st day vertical continued to pay off, which enable hands on manufacturers to target high value users and built market hub during high end product launch. We also benefited from solid traffic performance, Build upon blockbuster effect during the summer vacation, leading to further ad recovery from the entertainment sector and online platforms.

Speaker 2

As we said, the automobile and the luxury sectors Showed weakness this quarter, reflecting the seasonal pullback post an eventful first half of the year. The ad product, Promoted Feed ad was the largest, followed by social display on the topic and search. Ad revenues from Alibaba for the 3rd quarter were $21,700,000 an increase of 44% or 50% on a constant currency basis of a relatively low base driven by incremental ad spend on brand exposure, seasonal shopping festivals, as well as the Asian Games. Before turning to web segment, let me share preliminary color on the trends entering the Q4 of 2023. On the upside, Advertising market continues to demonstrate bottoming off trend post a split in July, in line with the macro and consumption data trajectory.

Speaker 2

We hope to close this year with further recovery of our ad business in the Q4 benefited from opportunities brought from the Manga Fan's e commerce festival. That said, We may have to wait a while for a turning point of consumption sentiment, especially in certain discretionary categories to pick up in light of current macroeconomic conditions. Value added service revenues were $52,900,000 in the 3rd quarter, a decrease of 12% or 7% on a constant currency basis, primarily due to decrease of game related revenues. Turning to costs and expenses. Total cost and expenses for the 3rd quarter were $278,300,000 a decrease of 5%.

Speaker 2

Operating income in the 3rd quarter was RMB163,900,000 representing operating margin of 37% compared to 36% in the same period last year. Turning to income tax. Under GAAP measure, Income tax expense for the 3rd quarter was $25,400,000 compared to $19,800,000 last year. Net income attributable to Weibo in the 3rd quarter increased 15% or 17% on a constant currency basis to $136,600,000 representing a net margin of 31% compared to 26% in the same period last year. Turning to our balance sheet and cash flow items.

Speaker 2

As of September 30, 2023, Weibo's cash, cash equivalents and short term investments totaled RMB 2,770,000,000. In the 3rd quarter, Cash provided by operating activities was $131,600,000 Capital expenditures totaled 7,800,000 And depreciation and amortization expenses amounted to $13,900,000 With that, let me now turn the call over to the operator

Operator

We will take our first question. Your first question comes from the line of Miranda Zane from Bank of America. Please go ahead. Your line is open.

Speaker 2

Thank you. So can management provide more details On the recent ad business recovery in

Speaker 1

the 4th quarter, especially given we have the

Speaker 2

Double 11 ecommerce promotions. And then how will the company increase the competitiveness of the ad business? Thank you.

Speaker 3

All right. Thanks for the question. So first of all, as we have already stated terms of the Q3 performance of the advertising performance, so in the Q3, advertising revenue increased on the basis of the year by 3% year on year and also quarter on quarter, which is actually basically in line with our expectations. And also this was Primarily due to the concentrated release of the consumer demand and advertising placement requirements during the e commerce event on 6/18. And also, after that, we've been seeing a quite weak performance during the July and also August and also a much better performance in August and also September.

Speaker 3

Got it. And also, let me share some of the colors on the Q4 expectations. So actually for the Double 11 shopping festival and also the e commerce events, we've been seeing a very good trend. For instance, we expect to have also in Q3, We've got over 50% of the growth of Big Elevation gained by Alibaba. And also in Q4, We've been seeing also activation of the ad placements by all kinds of different e commerce platforms, like the Double 11 and also Double 12 shopping festivals, So that we are expecting a year on year growth for the Double 11 and also Double 12 e commerce events, especially for the e commerce, Including all kinds of different brands and also platforms.

Speaker 3

Okay. And also let me talk to you about some of the verticals. So first of all, in the second half of this year, We had a very good momentum of the growth for the verticals like the automotives and also digital products, food and beverages as well as the healthcare as we have already stated. You can see that because of a very good recovery of the traffic for those verticals and a very good works around the ecosystem building and also the accounts recovery as well. And it's quite special in terms of the automotive industry because we really had a very good growth in the first half of this year.

Speaker 3

However, in the second half of the year, we've been seeing a slowdown of the sales both for the ICE vehicles and also the electric vehicles. But of course, for the electric vehicles, we do see actually a revenue increase, especially for the ad revenue increase. But actually the ad revenue for the ICE vehicles actually was decreasing. So as a result, We are expecting a lower performance in the second half of the year in terms of the revenue from the automotive industry than the first half. But throughout the whole year, we expect to have a double digit growth for the automotive industry as a whole.

Speaker 3

Okay. All right. And also in the first half of the year, we do see some of the challenging Of course, for instance, the fashion and also the beauty products and also the gaming industry. And of course, for the gaming industry, We returned to the track of a positive growth in Q3 because of the growth of some of the new games And also the optimizations in terms of the algorithms and also the paid gamers. So as a result, We do actually see a very good recovery starting from Q3 for the gaming industry because of the better performance and also the better of the advertisement budget for some of the medium to high end games and also it is going to be the momentum that has continued all the way to Q4 for gaming industry.

Speaker 3

And also, it's pretty much challenging for the beauty and cosmetics industry, because in Q3, The operational FX was decreased. And also, as a result, the budgeting the budget for the marketing of some of the new products for the cosmetic and also beauty industry was also decreased. So you can see that for Weibo, of course, we do actually now see A lower than expected recovery of the ecosystem or the content ecosystem. And also, of course, we've been dedicated a lot on the investments Our resources and also the operational effects to this particular area. And also we do see a traffic that actually has recovered Before to the level before the COVID, however, still the account structure wise, it is not as good as the situation before COVID.

Speaker 3

So still meaning that we are in lack of the number of those influential and also impactful accounts in this area. So this does take time for us to see a full recovery for this industry of fashion and also beauty care products. So as a result, We expect to have a year on year decrease for this one. Okay. And also, second Part of your question was pretty much about the enhancement of our competitiveness of our ecosystem of the advertisement.

Speaker 3

So I had several Points to be sharing with you. The first one is that still we are going to be focusing on the value and also the ARPU of the Weibo users. So in the second half of this year, our strategy was not only focusing on the volume or the number of users, but actually on the total structure of the users, meaning that we have to focus on those high ARPU users, for instance, the users of the Huawei and also the iPhone users. So these if we can really increase the number of those high ARPU and also high value users, we do see a more willingness for them to allocate their budget On Weibo for the advertisement, also judging from the feedback that we've got for the Double 11 shopping festival Last year, we did see that particular effectiveness if we're trying to focus on those high ARPU and also the high value users. Got it.

Speaker 3

And also, second one on the service provision capabilities, especially talking about the competitiveness Of our advertisement service, I have 2 points to be sharing with you. The first one is that actually for those branded consumers and also customers. Nowadays, we did see fewer and fewer customers of those brands that were actually procuring The advertisement for the purpose of exposing their brands only. So we do see actually because of our very unique competitiveness In terms of the KOL ecosystem and also the hot trends and also hot topics on Weibo, we do see those customers Choosing Weibo as a platform for them to place the investment. For instance, we did have a very good endorsement of those important accounts or the KOLs To really emphasize on the advertisement and also some of the, for instance, placements of their products in the advertisement.

Speaker 3

So because of this, We do see a very good competitive edge comparing with the other media like the newspapers or video accounts Or some of the other like television and also radio stations, for instance, we did see still Weibo is keeping our competitiveness and also the competitive edge Over the other platforms for those branded consumers or customers. Got it. And also second point is on those performance based ads. So especially I would like to make an example of The recovery of our gaming vertical. So as I have already stated that we have been optimizing on the algorithms And also which is going to generate the positive ROI for the customers.

Speaker 3

And for instance, we are really On the conversion and also the increasing, increasements of those conversion rate for those paid users in this area. Also this particular thing is also related to our strategy of focusing on those high ARPU value users. And for instance, the very important thing is that not only for gaming industry, but also for e commerce and entertainment and also the other relevant For consumption, for instance, as verticals, we do actually see the better optimization of our algorithm, which is around the area of making those pay users to actually consume the contents in those different verticals. And also you can see that this is advancing very much well in this gaming industry first and also by heavily and continuously investing into the technologies around this area. This is also helping us to gain a sustainable growth for the future.

Speaker 3

So this year, we do see a very good outcome from the gaming industry and also from this year onwards. So we are going to see a very positive impact to the business of the entertainment and consumption and e commerce, etcetera. Okay.

Speaker 2

Thank you. Thank

Operator

you. Thank you. We will take our next question. Your next question comes from the line of Daisy Chen from Haitong International. Please go ahead.

Operator

Your line is open.

Speaker 4

I'll translate myself. Thank you for taking my question. My question is about the RealM display rule. We have noticed that many social media platforms in China, including Weibo, We have recently announced that they will display the real names of the online influencers on their front account pages. So about this, I would like to ask the management what is the progress of Weibo's real name display work of those deliveries and how we should evaluate the Impact of real name rules on Weibo's content ecosystem and the user activity.

Speaker 4

Thank you.

Speaker 3

So for this question, first of all, since the birth of Weibo, we've been always emphasizing on the real name registration mechanism. So I don't believe that this is actually a kind of a new rule or new regulation for Weibo. And also, for instance, if you want to be identified as a V account, Normally, you have to provide the real name and also the other relevant information to facilitate this accreditation process. So Weibo actually did that when we were appearing in this market to solve the issue of the trust. However, in the future, after that, we did see the emergence of Many different social platforms and also because of the requirement of the personal and privacy information protection, this is becoming less So stringent as we required before, but still, we still are performing the regulation of the front end real name registration.

Speaker 3

For instance, if you still apply for the certification of your accounts, you need to provide the name or the position and also your company's name. So this is kind of a real name registration process. Okay. And also for this time, for the real name registration process of this time, Actually, the major purpose is actually to emphasize on the authoritativeness and also the responsibilities and also the obligations that should be showed by those top notch We media accounts and specifics. So that's where we are able to facilitate and also lead The process of creating a more harmonious environment of the Internet.

Speaker 3

So of course that at this particular round of the real name administration process, Especially those kind of channels of news and the military and also the legal and the council related accounts are in the forefront of this round of the real and real inflation, Yu. But of course, that this is not going to impact the accounts of the food and beverage or the Automotive and also cosmetics and beauty products, etcetera. Okay. Got it. And also another thing is that for this round of this regulation, So the impact is quite limited.

Speaker 3

For instance, it's only influencing 5 to 6 different areas. And also, as I have already stated, Those big V's already had their real name registration conducted before. So over 40% of those big V accounts Actually, you had already realized this real name registration and also the real name demonstration on the front end or on the front page. So we believe that this particular round of the impact is pretty much limited. And also another thing is that this round of the real name administration process it's not compulsory and also is going to be carried out by different phases.

Speaker 3

So if this round the Account is choosing not to go on this particular process, particular traffic and also certain revenue are going to be impacted. And also, this for this round, it started in about 10th October. And also in the short period of time, this will generate a certain impact and limitation in terms of the traffic and some of the others. But in the longer run, I think that it's beneficial To create a more trustworthy environment with a more trusted information and public information, so we will be still Observing the impact for a while. Okay.

Operator

Thank you. We will take our next question. Your next question comes from the line of Timothy Zhao from Goldman Sachs. Please go ahead. Your line is open.

Speaker 5

Thank you management for taking my I have two questions here. First is regarding the progress in building the vertical ecosystem Could management elaborate more on what is the way we progress so far and how does that affect your monetization capabilities? And secondly, it's regarding AIGC applications. I think we discussed last time, but I was wondering if there's any updates It's regarding content generation and also the efficiency improvement in your monetization capabilities. Thank you.

Speaker 3

All right. So for this particular question, We were always trying to emphasize on the Weibo strategy for the past several earnings report sessions and also especially touching upon the concept of the building of vertical ecosystem. So for instance, after the COVID, we had several strategies of focus. The first one is that focusing on establishment of the IP ecosystem, the definition of which is actually for those areas that Could attract a lot of eyeballs and also intentions from the society, for instance, the hot topics and also the entertainment and culture And also, sports as well as the gaming industry as well. So, you can see that these different verticals were regarded as the IP ecosystem And also these IP ecosystems were growing still even during the COVID period for the past 3 years.

Speaker 3

So that you can see that both in terms of the revenue and also the influential power, we've been seeing a very good growth and a very good momentum. And also by Q3, we've been seeing the statistics showing that we had Over 70% of the growth in terms of the traffic for this particular, what we call the IP ecosystem and also for the past Several years during the COVID. So originally, the traffic from the IP ecosystems actually was accounting for about 40% to 60% of the total think of Weibo. And also during the COVID period still we had a much better growth from the IP ecosystems Then the verticals of Automotive and Digital or Cosmetics and Beauty and also the other like electronics area. So this pretty good growth was pretty much stable in the past.

Speaker 3

However, this year, we would like to shift our attention of our strategy. So after the COVID, we would like to change the traffic structure, meaning that we should not be too dependent on the traffic gain from the IP ecosystem Because this is too much hot trend and hot topic oriented. So since this year onward and after the COVID, We would like to focus and also divert more traffic to the other vertical industries, for instance, the cosmetics and beauty, Digital products and also automotive, etcetera, because the users are more interactive and also the user stickiness is better And also the KOL ecosystem is much better for those vertical industries. And also, we do have our own advertisement customers Actually from these different verticals. So if we actually divert and also try to get more traffic to those verticals, this is also going to help us To increase our revenue of the budget, the revenue of the advertisement as well.

Speaker 3

Okay. And also for those verticals as I have already shared a color on PON, So we've been seeing a very good recovery and also the growth for the traffic in Q3 and also in the whole second half As we expected. So of course, for instance, for the cosmetics and beauty vertical, we had an over 50% of the growth quarter by quarter And also around 30% and more growth for the digital products and also healthcare verticals in Q2. So, but of course, having said that, still we've been seeing actually a quite differentiated performance across different verticals for those areas in terms of the recovery speed. So there are actually 2 points that we are making comparison upon.

Speaker 3

The first one is the recovery of the ecosystem as a whole and or the KOL system ecosystem and another one is the traffic recovery. So for the verticals like the electronics and the healthcare, We actually have observed a very good recovery of both the KOL ecosystem and also the traffic. However, for the fashion and cosmetics Vertical, the traffic has recovered, but not for the KOL system, meaning that the influential accounts Some of the really valuable accounts recovery was not as good as that of the traffic. So we still need to have another 2 quarters more For us to have a total recovery both on the KOL ecosystem and also the traffic. Okay.

Speaker 3

And also in terms of AIGC, as we have already stated in the past that we have several focus of this year. First one is still we have to focus continuously on the accumulation and also the collection of data by using and applying AIGC, So that it is going to help those bloggers in generating the content in a more efficient and higher quality way. So for instance that the contents generated by AIGC have more user stickiness and also interactive rates And very efficient as well. So in Q3, so we have been actively applying the LLM, a large language model on different verticals to increase the efficiency of the content generation. Let me give you example.

Speaker 3

So in Q3, in the area of the fashion and Cosmetics and also in the gaming industry, on a daily basis, AIGC is facilitating the vlogger in generating over 5,000 pieces of information a day. And also if you're comparing the content generated by AIGC versus naturally or written by the bloggers themselves, You can see a 50% better interactive rate and also user stickiness for the AIGC generated content. So we, of course, plan to apply the AIGC well in the beauty and cosmetics vertical, Gaming vertical and also the digital and electronics products area. And next year, we are thinking about rolling this technology out to the rest of the other verticals. And also last but not least, we are also having some innovative trials and experiments.

Speaker 3

For instance, using the middle AI to learn the characteristics and also the features or the languages that those big fees always use to generate an AI chat box or some of the virtual characters. So we did that in Q3 To actually really using AIGC to learn from those important KOLs and influences, learning the way that they talk And also the style of the interaction, so that the AI chatbot was interacting with the fans. So in August, for instance, We had experiment this particular technology upon 4 to 5 KOLs And also on a daily basis generating tens of thousands of interactions together with the friends and followers using AI chatbot feature. But of course, at the current moment, we are not opening this to the rest of the ecosystem of the old big leads, But still we are thinking about doing that in the future still. And nowadays, we are trying to perfect the whole system And also trying to really find out the final effectiveness of this application.

Speaker 3

Okay.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Weibo Q3 2023
00:00 / 00:00