Bilibili Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 17, 2023

There are 6 speakers on the call.

Operator

Good day, and welcome to Bilibili Second Quarter 2023 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. During this call, we'll discuss business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange. The non GAAP financial measures we provide are for comparison purpose only.

Speaker 1

Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website atir. Billability.com. Joining us today from billability center management are Mr.

Speaker 1

Ray Chen, Chairman of the Board and Chief Executive Officer Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer and Mr. Zeng Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr.

Speaker 1

Ken?

Speaker 2

Thank you, Juliet, and thank you, everyone, for participating in our 2023 Q2 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks On behalf of Mr. Chen, we set our sights on prioritizing profitability and DAU growth, And we have made solid steps toward these goals. In the Q2, we meaningfully improved our gross profit and narrowed our losses, while continuing to deliver healthy DAU growth and strong community metrics. I will share more color on both fronts.

Speaker 2

First of all, on our path to profitability, In the Q2, we further improved our commercialization efficiency, enabling us to convert our growing traffic To quality top line growth, the momentum we see in our advertising and live broadcasting business is encouraging. In the Q2, our ad revenues increased by 36% and live broadcasting revenues increased by 32% both year over year. Moreover, our gross profit increased significantly by 66% year over year, driving our gross profit margin to 23%, marking the 4th consecutive quarter of improvement. Meanwhile, we have continued to strengthen our expense controls. Our total operating expenses declined by 14%, including a 22% decrease in sales and marketing expenses, a 14% decrease in G and A expenses and a 7% decrease in R and D expenses all on a year over year basis.

Speaker 2

These margin enhancements and our effective cost management contributed to our bottom line improvement. We meaningfully reduced our non GAAP net loss by 51% year over year. Moving on to our community growth. Our DAUs increased by 15% year over year to RMB96,500,000 in the 2nd quarter, driving our DAU to MAU ratio up to 29.8%. Meanwhile, the users' average daily time spent on our platform reached 94 minutes in the second quarter, Driving total time spent up by 22% year on year, we are pleased to see this strong DAU growth has continued in Q3.

Speaker 2

As we move into the second half of this year, our main tasks will be in 3 core areas. First, we aim to further enhance our traffic commercialization efficiency by increasing our ad revenues and the live broadcasting revenues. Additionally, we will bring more high quality games to our users, including the highly anticipated game Pretty Derby. Secondly, we will continue to take a prudent financial approach We have strict control of our costs and expenses and further narrow our losses. Finally, Yet importantly, we are committed to achieving ongoing DAU growth and fostering an inspiring video community for young generations in China.

Speaker 2

With that overview of our progress, I'd now like to provide a brief update are our 3 core pillars of content, community and commercialization, starting with content. Content creators continue to be our ecosystem's most valuable asset, supporting these talented content creators In their ability to amass larger followings and to be able to earn more money are among our top techs. As always, we continue to optimize our algorithms and products to facilitate high quality content and enable creators to be recognized. In the Q2, the number of daily active content creators on our platform And our monthly content submissions increased by 19% and 43% year over year, respectively. In the second half of this year, we plan to shift our video watching metric from video views to video time spent, which will help our users discover more high quality content on Bilibili.

Speaker 2

We are also beta testing an AI powered search feature in our community that enables relevant videos to be found more easily. Creator monetization on Bilibili increased as well In the Q2, over 1,580,000 creators earned money through various Bilibili channels, Showing a 40% increase year over year. In addition to our cash incentive program, more creators are earning income through advertising and live broadcasting channels. For example, our video commerce ads have opened up new efficient Earning opportunities for content creators. In the Q2, the number of creators who earned money through video commerce grew by over 220% year over year.

Speaker 2

Resonant content and multi scenario products Like story mode continued to drive platform traction. In the Q2, our total daily video views were up 31 year over year to RMB4.1 billion, among which, store remote daily video views grew by 76% year over year. It has become one of the key video consumption scenarios for our users contributing to our growth in DAUs and ad revenues. Turning to our community. Our users remain highly engaged and sticky.

Speaker 2

The users' average daily Time spent on our platform was 94 minutes in the Q2, reaching the highest second quarter level in our company's history. Their monthly interactions reached nearly RMB15 1,000,000,000 in the Q2, up 19% year over year. Our core group of official members also increased by 26% year over year to 214,000,000 With a solid 12 month retention rate of around 80%, our signature offline events also bring our community Together in person, this July, we hosted 2 exciting offline events, Bilibili World and Bilibili Macro Link in Shanghai. Over 200,000 tickets sold out almost immediately. The tremendous response highlights Bilibili's strong influence among young generations as well as users' willingness to pay for our unique community experiences.

Speaker 2

Finally, let's look at our commercialization and financial progress. Total revenues for the 2nd quarter increased by 8% year over year to RMB5.3 billion. Specifically, revenues from our advertising and Businesses increased by 36% and 32% year over year, respectively. Meanwhile, we continued to improve our gross profit and margin. Our gross profit in the second quarter grew by a notable 66% year over year, driving our gross profit margin up to 23% from 15% in the same period last year.

Speaker 2

Looking at this in more detail, revenues from our value added services business grew 9% year over year to RMB2.3 billion in the 2nd quarter, primarily driven by increased revenues from our live broadcasting business, which grew by 32% year over year, as we further integrate live broadcasting within our video operations, We have opened up multiple opportunities to expand and diversify our live broadcasting content by converting content creators into live broadcasting hosts. In the Q2, the number of monthly active live broadcasting hosts increased by 15% year over year. In addition, we are exploring new live broadcasting products to create more paying channels for our users, Including live celebration events, we expect our ongoing integration activities to support our revenue growth In the second half of twenty twenty three, by the end of June, we had 20,500,000 premium members, Over 80% of whom are on an annual subscription or auto renew package, highlighting our trust based user relationships. In Q3, we released several highly anticipated Chinese anime titles, including Fog: Hill of 5 Elements, To bring more exclusive high quality content to our premium members, Turning to our advertising business. As we progress our initiative to integrate sales conversion with ad products, We believe we have found an effective way convert our high quality traffic to advertising revenue growth.

Speaker 2

For the Q2, our advertising revenues grew 36% year over year to RMB1.6 billion, mainly led by our performance based and revenues growth, which increased by over 60% year over year, Revenue from our brand and Sparkles offerings also grew by a double digit percentage year over year. Our top 5 advertising verticals in the Q2 were games, e commerce, digital products and home appliances, Skincare and Cosmetics and Food and Beverage. Our continuous improvements to our integrated industry ad solutions have also helped us gain more ad budget spend from industries such as games and e commerce, Specifically, by introducing video commerce products and revenues from the e commerce industry increased by 144% year over year in the Q2. Meanwhile, content creators were able to benefit from more ad opportunities. The number of creators who earn income through video commerce grew over 220% year over year.

Speaker 2

Moving forward, we will continue to build our commercial database, refine our algorithms, as well as optimize our ad product offerings. We are confident that we can improve our ad revenues per DAU and achieve solid growth in the second half of twenty twenty three. As for our games business, our revenues were RMB891 million for the 2nd quarter, a 15% decline from the same period last year. The year on year decline was mainly due to a lack of new game launches In the Q2 and a grossing decline for certain titles, our top 2 performing games, Azure Lane and FGO, remained stable, Particularly, during Azure Lane's 6 year anniversary, the game reached a new peak in paying users and revenues. In addition, we have also successfully extended our exclusive license of Azure Lane for another 5 years.

Speaker 2

In July, we launched our 1st self developed game in the female romance genre Al Qaeda Land Records, Welcome by a host of female users, the game ranked number 1 on the iOS We download the chart shortly after its release. We are actively working on developing more games that users love. In the meantime, we have 7 new titles that we plan to release in domestic and overseas markets in the second half of the year, Including the highly anticipated game, Pretty Derby, Shanyao, Liu Jin Shaoyu. Pretty Derby is scheduled to launch on August 30 and is now available for pre registration. Over 2,000,000 players have already pre registered as of today.

Speaker 2

Given said that, the launch of Pretty Derby as well as few self developed titles were delayed by several months than we initially planned. Due to lower revenue contribution from games and other non core businesses, such as IP Derivatives and others, We now expect the full year 2023 revenue to be between RMB22.5 billion and RMB23.5 billion. As I mentioned earlier, our key financial goal for this year is to improve our gross profit and narrow losses. We have delivered on this goal with 66% increase in gross profit and 51% cut on adjusted net loss in the Q2. Look ahead, we are committed to further improve our gross profit and control our expenses and meaningfully cut down losses in the second half of this year and reach our breakeven target by 2024.

Speaker 2

As we progress on achieving our financial target, we will continue to lead the healthy growth across our platform and enrich the everyday life of young generation in China. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the Q2 of 2023. As mentioned in Mr.

Speaker 2

Chen's remarks, our financials continue to improve. We are improving our margins and showing clear results In our bottom line with narrowed losses, total net revenues for the Q2 were RMB5.3 billion, Up 8% compared with the same period last year. Our total net revenues breakdown by revenue Stream was approximately 43% vast, 30% advertising, 17% mobile games and the 10% from our IPV Derivatives and other businesses. Our cost of revenues decreased by 2% year over year to RMB4.1 billion, driving our gross profit to RMB1.2 billion, up 66% year over year. Our gross margin was 23%, up from 15% in the same period last year.

Speaker 2

We That gross margin to continue to improve throughout the back half of the year, our total operating expenses were down 14% year over year to RMB2.5 billion. Tight control of our expenses is ongoing, while we improve our monetization at the same time. We cut sales and marketing expenses by 22% year over year to RMB918 1,000,000, While our DAUs grew by 15%, as a percent of total revenues, sales and marketing was 17%, compared with 24% in the same period last year. G and A expenses were RMB539.7 million, down 14% year over year. R and D expenses were RMB1 1,000,000,000, down 7% year over year.

Speaker 2

Our net loss and adjusted net loss were RMB1.5 billion and RMB964.1 million, respectively, narrowing by 23% 51% year over year, respectively. Our adjusted net loss ratio in the Q2 was 18%, improving from 40% for the same period a year ago. Turning to our capital allocation and liabilities management. In June 2023, We completed the repurchase write offer for our 2027 notes with a total principal amount of US746 million dollars As of the end of the Q2, our outstanding convertible bonds totaled a principal amount of US176 million dollars As of June 30, 2023, we had cash and cash equivalents, Time deposits and short term investments of RMB14.3 billion or US2 $1,000,000,000 We believe this amount is sufficient to cover all of our remaining convertible bonds and fund our future operations. Thank you for your attention.

Speaker 2

We would now like to open the call to your questions. Operator, please go ahead.

Operator

And wait for your name to be announced. For the benefit of all participants on today's call, if you wish to ask question to management in Chinese. Please immediately repeat your question in English. Please limit your question to one at time. We are now taking the first question.

Operator

And the first question from Qing Zhong from CICC. Please go ahead. Your line is open.

Speaker 3

Betty, my question is about user engagement. The DAO further increased in the Q2, so what's the DAO trend going And can management share more details on the user engagement during the recent summer holidays? Thank you.

Speaker 1

Since last year, I have been emphasizing Increasing our earnings power and achieve healthy and sustainable DAU growth are the top two priorities of our company, and we have been executing on that strategy. In the Q2 with sales and marketing down 22% year on year, we have Grow our DAU by 15%, reaching RMB 96,500,000 And our daily time spent daily user time spent reached 96, 94 minutes. This is the record high of same period in our operating history. And our overall time spent The entire community grew by 22% year over year. All of above metrics Shows a very healthy and robust growth of the community.

Speaker 1

The reason why we have been emphasizing on the healthy growth of our DAU is because we believe the healthy growth of DAU is The foundation and preliminary requirement for Bilibili to achieve sustainable profit. And we believe We have already discovered an effective way to convert our high quality traffic into Increasing top line through advertising and live broadcasting. And we believe With this effective route and methods, we can achieve DAU and top line growth and this will be a virtuous cycle. In the Q2, our ad revenue and live broadcasting revenue achieved 36 Percent and 32% year on year growth, respectively, which exceeded the industry average growth a lot. As for the outlook into the summer, given that we're in August in the period of The summer vacation, we have been witnessing and experiencing a strong DAU and daily User time spent growth.

Speaker 1

We do expect that in the Q3, our DAU can Surpass a very exciting milestone of RMB100 1,000,000 and we also expect our average daily time spent can reach a We are very confident With tight control on sales and marketing expense, we can continue to attract our users with high quality content and return our user with our engaging community and achieve DAU sustainable and healthy growth. And we also believe this high traffic can be effectively converted to our sustainable top line growth. Next question, please. Thank you.

Operator

Thank you for the question. We are now taking The next question. Please stand by. And the next question from Lee Zhang from Bank of America Securities. Please go ahead.

Operator

Your line is open.

Speaker 4

Thanks management for taking my Congrats on solid advertising growth. My question also relates to ad business. Can you Share with us the major driver of the ad business follow the strong base of second quarter. Also, can you give us some updates on the June 2018 promotion growth on our platform? In addition, how should we look at the second half ad growth on Bilibili?

Speaker 4

And How should we think about the new business, e commerce streaming development to our ad business? Thank you.

Speaker 1

In the Q2, our ad revenue grew by 36% year on year. And overall, for the first half of this year, our ad growth rate has exceeded The industry average. At the same time, if you look at the ad revenue per ad revenue as a percentage of total revenue, It has increased from 25% same period last year to 30% in the second quarter, which directly leads the growth of our gross profit. The one horizontal, one vertical strategy we mentioned last quarter is beginning to Pay off, and that's been driving our advertising revenue growth. The one horizontal, actually referring to the technology middle platform And the data capability includes optimizing the recommendation model, improving the advertising inventory and matching efficiency and the application of AIGC to improve overall ad efficiency.

Speaker 1

The one vertical is referring to the 6 customized industry app models, including games, e commerce, FMCG, Automotive and Internet service, among which E commerce and games starting to show very positive results. In the Q2, ad revenue from e commerce industry grew by over 140% year on year and game and advertising revenue from game industry grew by over 40% year on year. The second reason is that since last year, we have Stick to the integration of content and commercialization and expand ad inventory in different scenes of the community on the basis of ensuring user experience. In the first half of this year, it has formed very good growth momentum and drove the accelerator at revenue growth. Thirdly is that Many of you probably are already aware that we have established the trading ecosystem center to focus on building video e commerce related capability in the Q2 by integrating the transactional Scenario into the advertising products to further boost the revenue growth.

Speaker 1

We expect the video e commerce related ads We'll generate about 10% to 15% of ad revenue this year. And in the next few months, We also plan to upgrade the membership shopping huyuan go tab on our main page to our Guang shopping tab and creating a new entrance for more commercial opportunities. As for the June 18 period promotions, how you performed? Through our in-depth data collaboration with e commerce platform, the revenue Of the e commerce industry, ad revenue from e commerce industry, including transaction scenario during June 18 period, actually grew by 200% year over year. And we expect to achieve 15% to 16% ad revenue year on year increase from e commerce industry during upcoming Double 11 Festival.

Speaker 1

As for examples, we actually did a collaboration with Alibaba's SPARC program, a. K. A. Xinguo Ji Hua, and the results exceeded our expectation. There are a few interesting data points I can introduce.

Speaker 1

About 70% of the users who entered Taobao through Bilibili were new customers, and this ratio reached Even to 90% for certain industry, that shows that we have the effective ability To consistently convert user to advertisers, in addition, Bilibili user maintained A very high conversion value 15 days after the related video was posted and during June 18 period, The ad revenue from Alibaba actually increased by 300% year over year. While many other content platforms choose to build their own e commerce Bilibili, on the other hand, we choose to take an open approach, partnering with e commerce players and brand owners To grow the sales volume together on Bilibili. First of all, cultivating users' Consumption behavior and mine share on Bilibili is our top priority. We believe that the young generation has strong, willing to Consume and building the mindshare is very important as we unleash their consumption power on our platform. In the first half of this year, near 30,000,000 users clicked on the shopping link On Bilibili's video commentary section, which lead to a transaction related behavior, As we are unleashing our user consumption demand, the number of videos that carries product links increased by 8 times in the first half of this year and the number of live broadcasting e commerce shows increased by 7 times in the first half of this year.

Speaker 1

Secondly, we will continue to help our content creator to achieve sustainable operation Through our video e commerce initiatives, more content creator already started to try out Bilibili Video E Commerce. This includes, but not limited to, many well known content creators such as Wang Shibo, Xiaoma, Mi Dang, and etcetera. We are very delighted to find the model is very valid and successful. And this also broke the rumor that Bilibili's user has no consumption power. And actually, as a matter of fact, from the data that's shown that We have a lot of female user with consumption potential and power.

Speaker 1

Actually, 45 We do notice that they are they do have strong willingness to consume on Bilibili and they have strong purchasing Thirdly is that we intend to try more categories From our on top of our traditional strong verticals, in addition to the IP derivative, AKA as our membership shopping, which is focused on the ACG preferential products and content, We intend to explore more categories such as food, beauty, 3C and digital products, Home and appliances and etcetera. And here's an example. In mid April, Xiaomi launched a live broadcasting e commerce Show promoting its new cell phone. Based on the data that I have in hand, Bilibili Bank's number 1 in terms of GMV among all content platforms. It not only reflected that the strong word-of-mouth influence that we had among our young user group, but also the strong consumption power our users had.

Speaker 1

I think the Bilibili app model has evolved From establishing brand perception and mind share to a true integrated ad solution, a full advertising chain of brand building, seating and sales conversion. In the first half of this year, we have upgraded our industry app solution for game and e commerce and transactional strategy, And it's already starting to show positive results. In the second half, I personally plan to conduct additional upgrade For our leading ad inventory ad industries such as FMCG, 3C and digital products, We believe as we deliver healthy and sustainable user growth, we are confident that we can Thank you. That concludes the question this question answer. Operator, next question please.

Operator

The next question from Kenneth Fong from Credit Suisse. Please go ahead. Your line is open. Thank you, management, for taking my question. We noticed that we lowered the full year revenue guidance.

Operator

Can you share with us the key considerations behind? Are we still on track for narrowing losses for this year? Thank you.

Speaker 1

The reason why of the guidance update It's largely due to two reasons. Number 1 is number of our games launch plan was delayed. And secondly is certain non core business such as our Comic and The IP Derivative and others business is in the period of adjustment of strategy And its revenue is lower than expected. The we believe the reason for guidance update, the court is Just it's for a temporary phase change and it's not a change of foundations. The core business actually remains intact.

Speaker 1

For example, the delay of games is just That we are recognizing the revenue a little bit later. For example, pre D Derby has already scheduled to be launched in August 30th. And this we will be releasing this game on that day. This is confirmed and certain. And our outlook For and our confidence in the quality of the game and the revenue is unchanged.

Speaker 1

And as you may have already seen that in the Q2, the core business, literally live broadcasting and advertising, has achieved very solid growth. We do expect that in the second half of this year and look forward to 2024, The advertising and live broadcasting business will sustain a very healthy and solid growth. In the beginning of this year, we have set our financial target To increase gross profit and narrow our net losses. So as our requirement financial requirement or KPIs to each Department business lines is to ensure the absolute dollar growth for its Gross profit. Strategically, we have lowered the Revenue contribution of low margin business or loss making business.

Speaker 1

Even though some of the revenue growth rate has impacted. However, the absolute dollar of our gross profit has sustained a very healthy and robust growth. In the second quarter, Our gross profit grew by 66% year on year and our gross margin has experienced 4 consecutive quarter quarterly growth and our adjusted net loss has narrowed by 51% year on year.

Speaker 5

Yes.

Speaker 1

I'm confident to achieve our loss cutting target for 2023 And achieve our breakeven target by 2024.

Speaker 2

Yes, this is Sam. I just want to add that on the loss Reduction side, even though the revenue growth rate and Encore the chance already mentioned that Well, it will be lower than expected, but we are still confident to achieve the loss cutting target. We said in the beginning of this year, which is to cut our adjusted operation loss RMB3 billion, so through the gross profit increase and expense control. And notably in the Q2, Our operating cash flow was close to breakeven. We think there are good chance that we can achieve operating cash flow positive in the Q4 this year.

Speaker 2

Additionally, we are confident to continue to improve our gross profit margin in the second half of this year and achieve our breakeven target by 2024. Lastly, the updated full year guidance reflect our current projection of various potential outcome. We will try our best to ensure smooth product launch as well as achieve our goal of increasing gross profit and operating losses. Thank you for your question.

Speaker 1

Our next question please, operator. We

Operator

are now taking the next question. Please standby. The next question from Hee Win Zhang from China Renaissance. Please go ahead. Your line is open.

Speaker 2

So thanks for taking my question. My question is on our game business. Can you discuss on the pipeline and especially for the liquidity, how should we think about your expectation? And also can you talk about our self development game strategy and the direction? Thank you.

Speaker 1

In the second half of this year, we have 7 titles in our pipeline Ready to be launched domestically and internationally. Among those 7, 5 of them have already gained approval and Ready to be launched in the domestic market. 2 will be launched internationally. As for the highly anticipated game, Prix Derby, we have already Scheduled the launch date to be August 30. And right now within just 2 weeks of pre registration, Over 2,000,000 users have already pre registered for this game.

Speaker 1

This is a new record or in our operating history for the pre registration amount. Just because that it's Such a highly anticipated games with large fan base, we actually spent a lot of effort doing the localization work, Making sure that our gamers will be having the very original Puy de Derby experience. That's actually one of the reason why it has been delayed by several months. We believe that Bilibili's game launch team is the best ACG game launch team in China, And they are very experienced, and they will make sure a very smooth and successful launch of Freebie Derby. And we're confident Freebie Derby will be a very successful title and also Has good user feedback and reputation.

Speaker 1

As for our self development pipeline, we have actually have 2 ACG card game will be launched in the second half of this year. This includes 1 game called Rod Sludo, which is was already launched today. And there will be another game called Illusheer. This will be scheduled to launch in October. As for our self development game strategy, as you may you are aware, there's been a very Heavy competition among the game industry this year.

Speaker 1

As for our own self development game, the strategy will remain on Change, which is focus. Focus are on the content on the genres that Bilibili has most advantage of. Me personally will be spending a lot of time to ensure a success rate as we have Only started doing self development games, and we will be very down to earth and grounded To take a step by step approach to ensure every game that we launch will be high quality and will be successful. This is the target that I personally will spend a lot of time to ensure and also require our team to achieve. Secondly, it's about the long term operation of the game.

Speaker 1

I believe in the future, all the game will be a long term Operation cycle, otherwise, it won't make any profit. So this is the requirement I have for our self development game. If the title from day 1 is not a long term operation title, we won't be we won't allow it to be Set up. As far as the license game, if it's not a small life cycle game, we won't Finance, we will license it. As for the game that's already online, the long life cycle management And operation will be also be one of the most important KPIs I have for the team.

Speaker 1

As for Bilibili, we have very good Track record of making sure long life cycle operation. As a matter of fact, Our Azure Lane just celebrated 6 years of anniversary. And SGL, just last week, we celebrated its 7th year anniversary. And all of the user data metrics remain very healthy for both of the games. As a matter of fact, During the 6th anniversary of FGO, its DAU even surpassed the 6 years anniversary DAU.

Speaker 1

So we will stick on this route and making sure that all of our game will sustain a long life operation cycle. Operator, next question please. Thank you.

Operator

We are now taking the next question. The next question from Lincoln Kong from Goldman Sachs. Please go ahead. Your line is open.

Speaker 5

So my question is about AIGC's application to Bilibili. So from past Investor Day, we already seen some Development of strategy showcase in terms of energy saving up the production efficiency, the Marketing promotion tools as well as the AI integrated search. Could management elaborate more around how we think Poly HSC could

Speaker 1

We believe this is a breakthrough technology of the AIGC, what can bring to the industry. The way we look at it, it equals to the mobile Internet that happened 10 years ago. And this will not only benefit Bilibili, it will actually benefit everyone. So as for Bilibili, our core business is video and ACG. And it is There, it has been very clear that AIGC can enable and increase efficiency in a large amount on both fronts, For example, on content production as well as content recommendation, also in term based on the LLM, We can increase a lot of the efficiency of managing our community by understanding what the Text means, the content means within our community.

Speaker 1

And, we believe this Technology, AIGC has multifaceted applications and scenarios to help us to improve all around user experience. As for the application scenario, actually, we have already conduct Some extent of research and development, and we believe there's a lot of scenarios that we can leverage. For example, the prepared remarks that spoken by Sam just now Before this Q and A session, actually, it was not actually conducted by Sam. It's powered by Our self developed AI tool, text to speech, TTS tool and Similar products like this, we have already starting to research and develop and apply it in our various scenarios. And there are other examples.

Speaker 1

For example, this year's Bilibili Macro Link, Our live virtual host, 22 and 33, their voice was also generated by the same Tool, TTS AI tool that's built itself developed. And another example would be knowledge Related video creation, as many knowledge content creators, They generally write the text and they record their voice. With the help of this AI tool, they can It can largely improve its production efficiency. As for the LLN, even though we haven't marketed Quite aggressively, but actually, we have already starting to apply LM in various Another example would be on the content auditing side. In the past, we have to spend a lot of human resource and power And managing the content with the help of large language model because it can understand the voice, the Tax, the meaning and all of the implied meanings behind the task, It can drastically increase the efficiency of how our content audit teams process the content.

Speaker 1

And another application scenario would be enhanced search, because Bilibili has a vast content library, And each video carries a lot of scattered information, and we can leverage our LOM to drastically enhance The search efficiency, we are actually better testing a new enhanced search that by just in typing question in our search box, Our large language model can summarize and answer questions. A very valid example would be With the recent version upgrade of Jinseng Impact, people can just simply ask which card is worth drawing and which Character is worth spending time to improve and the large language model can summarize the valid information And just provide it to the user versus in the past, they have to watch several videos to summarize that Content information now with just stroke of hand, they can get the correct and fast answer. Another function upgrade that we are testing is AI assistance. This Will accompany users, when they are watching a video, help them to summarize and extract useful information? For example, In MacBook review video, user can ask the AI assistant, what's the difference between M2 Pro chip and M2 chip, what's the price difference?

Speaker 1

What's the efficiency difference? And the AI assistant can extract the Exact information to help the user to get what they want. This all of this will help to increase Bilibili user experience. Internally, we really value the AIGC technology. We believe this is a once in a life Time mix opportunity.

Speaker 1

This will be similar to the invention of mobile Internet, which enable Bilibili's mobile user Grow by tenfold. And we believe with the AIGC technology matures, We can leverage this technology to largely enhance our user experience, our content creators' experience and productivity as well as increase our commercialization efficiency. That concludes the questions. Operator, we

Operator

And that concludes the question and answer session. Thank you once again for joining Bilibria's 2nd quarter 2022 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director or Piacente Financial and Communications. Contact information for AR in both China and USA can be found on today's press release. Have a great day.

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