Weibo Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 24, 2023

There are 7 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Weibo Report Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be the question and answer session. You will not hear an automatic message advising your hand is raised.

Operator

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. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Weibo's 2nd quarter 2023 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang and our Chief Financial Officer, Fei Cao. 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 a 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 from those contained in any forward looking statement. Weibo assumes no obligation to update the forward looking statement in this conference call and elsewhere.

Speaker 1

Further information regarding these and other risks This concludes in Weibo's Annual Report on Form 20 F and other filings with the SEC. All the information provided in the Press release is occurring as of date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I'd like to remind you that our discussion today 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 exclude certain expenses, Gainesville losses and other items that are not expected to result in future cash payments or are non recurring in nature We are not indicative of our core operating results and outlook.

Speaker 1

Please refer to our press release for more information about our non GAAP measures. Following mentioned prepared remarks, we will open the lines for a brief Q and A session. With this, I would like to turn the call over to our CEO, Gaofei Wang. Thank you. Hello, everyone, and welcome to Weibo's Q2 2023 earnings conference call.

Speaker 1

On today's call, I'll share with you highlights in Weibo's user product and monetization in the Q2 of 2023. On the user front, Weibo's MAUs reached 599,000,000 An average DAUs reached 258,000,000 in June 2023, adding approximately 17,000,000 and 5,000,000 users On monetization, Leveraging for the pickup of offline consumption and events in the Q2, we are pleased to see our ad revenues returning to the growth trajectory With a broad based recovery on the advertising side, in the second quarter, our total revenues reached US440.2 million dollars A decrease of 2% or an increase of 5% year over year on a constant currency basis, our ad revenues reached US385.7 million dollars flattish year over year or an increase of 7% year over year on a constant currency basis. 94% of our ad revenues came from mobile. Our non GAAP operating income reached US153.8 million dollars representing a non GAAP operating margin of 35%, Thanks to the solid execution of our efficiency initiative over the first half of this year. While The post pandemic challenges generated from a shift in user interest and differentiated progress in ad demand recovery Across various sectors in the first half this year, we adjusted our operational strategy in the Q1.

Speaker 1

We shift our operating focus From pandemic related hot topics over the past 3 years to the traffic recovery of vertical content as well as cultivation of users' mine site. In the Q2, we focused on improving operating efficiency of hot trends as well as entertainment and consumption related verticals in the 2nd quarter, which further enhanced the user engagement this quarter. Next, let me share with you our progress made in product and monetization in the second quarter. On the channel front, our focus this year is to improve user acquisition capabilities through channels and boost our user scale and engagement Despite the fact that the recovery of the handset shipment in the first half of this year is below our expectations, we Continued to improve the efficiency of Weibo's health trends and social product over the core positions on the headset devices in the 2nd quarter, Collaborate with manufacturers to improve targeted reach to high quality users, optimize push mechanism and content consumption experience And improved retention of users acquired through channels. In the Q2, the number of average DAUs from handsets, which we collaborated with increased 40% from the Q1.

Speaker 1

On social attributes, let me share with you the key progress we made in our products. In the Q1 last year, we adjusted the structure of social products and reinforced the content distribution based on the social behaviors of user social network In the relationship based feed, on the one hand, we enhanced distribution of super topic content in relationship based feed to improve social stickiness of users and help the user build up high quality and real social relationships for an extended social network. On the other hand, we refined distribution mechanism to boost the traffic for content and accounts from key verticals In the relationship based feed, given users increased demand for content consumption on interest based content verticals, All these efforts we made were made to improve Weibo's competitiveness in the interest based content verticals post pandemic. In the Q2, the scale of our content consumption per user in the relationship based feed grew double digit in June from last December. Users consumption in interest based content verticals further grew as well.

Speaker 1

We will continue to implement these efforts In the second half of this year, by leveraging the seasonality during the summer holiday in the Q3, we will Set up a better distribution mechanism to boost traffic for vertical content and KOLs and speed up the traffic recovery for the interest based Content ecosystem, we increased our investment in vertical content this year. For Weibo's advantages verticals such as entertainment, online gaming and anime, the traffic and user Segment exhibited a significant year over year growth in the Q2, which benefited from the recovery of market environment And our continuous effort in improving operating efficiency. As a result, Weibo's overall traffic and engagement grew rapidly. To elaborate, for entertainment vertical, we leverage offline activities such as entertainment dollars, concerts And film promotion events in the Q2 to speed up vertical traffic recovery. We expand cooperation with selected agents And IP Producers and generally more confident discussion around celebrities and entertainment related hot topics.

Speaker 1

In the first half of this year, both the traffic and user engagement for the entertainment vertical grew over 20% year over year. The online gaming, esports and anime verticals also deliver similar growth rate during this period. In particular, for the Esports vertical, we focus on Esports events over the past few years and strengthen completion with major Esports clubs. In the first half this year, the average daily traffic and the number of engaged users of this vertical grew significantly on a year over year basis With over 50% growth for traffic, 40% growth for the number of engaged users and over 100% growth for the user engagement. For the anime vertical, we've grabbed much market opportunity in the Q2 and rapidly They encouraged many global anime artists to verify their accounts on Weibo, which in turn quickly attracted fans and promoted consumption From ACG users on Weibo, the number of engaged users for the anime artists community exhibited a year over year growth of 15% in the 2nd quarter, which helped to increase the usage of Weibo among users interested in anime.

Speaker 1

As offline Esports events and anime activities resume, we will continue to increase our investment in the ACG vertical on Weibo, Help our partners within the ecosystem to enhance their influence and the commercial value, cultivate users' mindset Over the past 3 years, some professional verticals such as Automobile, Digital Product and Healthcare verticals have been strengthened. These verticals are more easily monetized despite having less traffic scale than entertainment and ACG verticals. We have also created a more comprehensive and healthier accounting ecosystem in the past 3 years. Our customers are willing to Further explore, create value and achieve winning situation with us in terms of content and marketing. With the recovery of industries and consumption, The traffic of revenues generated from these verticals booked year over year growth in the Q2.

Speaker 1

However, for the FMCG verticals, which used to be heavily by our users such as cosmetics and food verticals. The company's ecosystem has been facing challenges over the past 3 years Due to disruption from the pandemic and external competition, we anticipate the resumption of these verticals will take time As we are exploring differentiated operational strategy to reconstruct our company ecosystem, aiming to offer better support for the end market for these sectors. For our top content creators, in the Q1, we have completed the transaction to increase shareholding of eMaidShield Digital Technology. We revamped the VTech platform system together And completed various upgrades of our functions. In the Q2, the platform selected more Top KOLs with higher impact and social value and offer support to them in terms of traffic, operation and monetization aiming to build a healthier ecosystem for them.

Speaker 1

As a result, the traffic and the number of engaged users of top KOLs Booked double digit growth in June versus March and the corresponding ad revenues from vTASK grew over 50% year over year in the second quarter. By improving the operating efficiency of top content creators, we have created a more favorable monetization environment for them, Further driving the continuous and healthier development of Weibo's content ecosystem. Next, let me share some color on the monetization front. In the Q2, we are encouraged to see that most industries have demonstrated solid recovery trend and returning to the growth trajectory, Entertained by a notable pickup in ad demand side, leveraging resumption of offline activities As well as pent up travel and consumption demand during May Day holiday and the June 18th e commerce event, We continue to reinforce our advantages in hot trend IP and new product launch, enabling brands to build market hype and earn recognition from users more efficiently. In the process, coupled with our targeted marketing reach, Brands have established ongoing communication with consumers, thereby further cultivated consumers' mindset.

Speaker 1

This marketing combo has resonated greatly with numerous industries and clients after being introduced to the market. From an industry perspective, clients from the automobile and digital product sectors have already been highly recognized Weibo's Strength in heartrend's marketing. Therefore, partnership between Weibo and these clients have entered a more advanced stage With both sides not only collaborating extensively in advertising, but also investing more resources in talent integration And the content co creation, leveraging synergies on the content marketing front, Weibo has become a must have platform For customers' new product launches with the virtual cycle formed around our organic and monetization content ecosystem. In addition, we will also strengthen its capability to capture AdWallet entering routine sales phase post the product launch, Leveraging enriched marketing scenarios by building a more influential IP and co creating hot trends with clients. Driven by such synergies, the Automobile and Digital Product sectors continue to deliver a decent revenue growth rate in the second quarter.

Speaker 1

For instance, as major handset manufacturers were heavily promoting their photography features, In the Q2, Weibo launched the Weibo Mobile Photography Year event aiming to create high quality photography IP and uncover compelling stories from users. By far, Vivo and Honor have already signed up for the event. Apple and Huawei have also expressed their intent to collaborate. Through this event, Weibo and handset manufacturers are working together To influence users' perception of mobile photography and shape consumer mindsets, thereby promoting the long term growth of the handset industry. As for the luxury sector, benefiting from increased marketing budget of And the rebound of the entertainment sector, we leveraged the celebrity and heartrend effects of offline entertainment and fashion events For sectors such as entertainment, apparel, healthcare as well as tourism, as pandemic receded, The pent up consumer demand for offline consumption was unleashed in the Q2.

Speaker 1

Clients in these sectors aim to drive offline sales through beefing up Online brand promotion. In view of such marketing our marketing goals, we will effectively cultivate and strengthen users' mindsets Through the company ecosystem operation and health trends in these sectors leading to ongoing improvement in client recognition, Weibo has thus deepened opportunities and capabilities to capture higher ad wallet in these sectors. For instance, in terms of the healthcare sector, We deepen the engagement of professional media and doctors on Weibo and thus enhanced our capability In operating call topics related to healthcare, as a result, the traffic of healthcare vertical grew nearly 30% in the first half of this year, leading to over 30% year over year revenue growth for the sector in the Q2. Medical service platforms such as Maytran, Madison Delivery, APP and JD Health focus on placing ads under the healthcare hot topics, We should facilitate them to communicate with their targeted users on health related concerns, resulting in elevated brand awareness and better recognition from our clients. We are encouraged to see ad revenue from medical On the flip side, the cosmetic, personal care and online gaming sector continue to show slower than expected recovery pace, Tracking the overall growth of our ad revenue during the Q2.

Speaker 1

To elaborate, some of the top multinational in the cosmetic and personal care sector faced the headwinds from their old business operation and intensified competition in marketing and thus slow down their pace of new product launch. Due to such headwinds, it might take additional time for revenue from this sector To return to positive growth, as for the online gaming industry, we are encouraged to see higher number of new games released After the resumption of game license approval in the Q2, with more mid tier games and new games Setting up their marketing cooperation with Weibo. However, due to the strategic adjustment from key gaming online gaming clients And marketing budget reduction amid cost cutting trends. The overall revenues from online gaming industries continue our descending trend in the The quarter investments with normalizing gaming license issuance as well as a greater trend toward premium game price Focusing on content marketing, we will continue to beef up our competitive edge around Weibo's game ecosystem and facilitate the long term growth of our clients, leveraging the strength Hopefully, we would expect to see a more meaningful recovery of ad wallet of online gaming sector in the

Speaker 2

Q3.

Speaker 1

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

Speaker 3

We experienced 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. S. Dollars, Our financial performance was affected by adverse currency movements. Now let me go through our financial highlights for the 2nd quarter A decrease of 2% or an increase of 5% on a constant currency basis.

Speaker 3

Operating income This is a net margin of 29%. Diluted EPS was $0.53 compared to $0.46 last year. Let me give you more color on the Q2's 2023 revenue performance. Weibo's advertising Weibo has targeted customers with strong demand of building market cap and brand premium Customers from new electronic vehicle sector and handset manufacturers with high end product launch. We, with brands, the performance social ad offering resonated greatly with these customers The ad product.

Speaker 3

Promoting the feed, promoting the feed ad was the largest, followed by social media clicks and topics and search. Before turning to guest segment, let me share some preliminary color on the channel entering the second half of twenty twenty three. On Absa, advertising market has been bottoming off month by month during the 2nd quarter With many sectors already returning to growth trajectory, we view our tailwinds from policy similar Leveraging our differentiated social ad label, that's that. Given that over half of

Speaker 1

Value

Speaker 3

adding service revenue was $54,600,000 in the second quarter, Turning to cost expenses. Total cost expenses for the 2nd quarter was 286,400,000

Speaker 4

A decrease of 6%.

Speaker 3

Operating income in the 2nd quarter increased 6% to 153,800,000 Turning to income tax. Under GAAP measures, income tax expense for the 2nd quarter was $25,500,000 Turning to our balance sheet and cash flow items. As of June 30, 2023, Weibo's cash, cash equivalents and short term investments totaled $2,830,000,000 in the 2nd quarter. We are pleased to announce that we have completed the distribution of special dividend of 85% per ordinary share, OEDI, To our shareholders, with aggregate amount of $200,000,000 Looking ahead, we will continue to embrace long term growth opportunities, Well, thanks to our financial discipline, we've commitment to returning value to our shareholders.

Operator

Thank you, dear participants. Now we're going to take our first question and the question comes from the line of Timothy Zhao from Goldman Sachs. Your line is open. Please ask your question.

Speaker 5

My question is regarding the tariff outlook into the second half of this year. Could management share any color On ad spending trend in July August to date and how should we think about the ad revenue growth in the Q3 Q4 this year? We've seen the verticals that Weibo has. Is there any specific verticals that we are going to see very strong recovery into the second half? Thank you.

Speaker 5

Thank you

Speaker 2

for your questions. First of all, in Q2 yes, thank you very much for your question. So first of all, in terms of Q2, we had actually maintained a positive growth Year on year basis. So we had a 13% growth quarter by quarter and 7% growth year on year. So this was much better than before.

Speaker 2

And also, first, there are several reasons. First of all is that the Mayday holiday came and also you can see that, we had more revenues from the verticals like And also the 6 18th as the one of the biggest e commerce events Taking place after the COVID, we have seen more placement and also the budget from the e commerce sector as well. So these are all giving us the boost. Okay. And also turning to the July and also August, we have already finished our performance in July.

Speaker 2

So the growth rate has been a little bit down compared with that of the June, Because that was still associated with the macro economy and also the consumption related performance, because 2 thirds of our verticals are pretty much related to consumption. And also in August, we're going to have a better recovery pace than that of July. So overall speaking, we have the confidence over the recovery pace of The whole second half of the year, but still we have to keep an eye on the macroeconomic development of China. Okay. And also further, Maixin for the overall second half of For this year, in terms of the verticals.

Speaker 2

So first of all, I would like to talk to you about the supply, which is all about the traffic. So in July and also August, we have seen a very, very good I mean, in terms of the entertainment and culture as well. And of course, talking about the overall kind of a traffic recovery, This is already better than the period during the COVID and still we're having a very good recovery on but still we have to focus on the vertical traffic and hot topics And whole trends as well as the whole vertical of culture and entertainment. So still we have our strategies that are going to be later focused on So the verticals, for instance, we would like to increase the budget spending by the verticals like automobiles and headsets as well as the gaming as well. And also still we have experienced some of the headwinds from the verticals like the food and the travel as well.

Speaker 2

Due to the COVID situation And also the severe competition in the past, we have seen a decline of the percentage Of the traffic contribution from these verticals. However, still in the second half of the year, we have to further give more traffic support To the verticals like the food and travel in order for them to develop. And also, so as for the travel, for instance, we have been regaining the activity of Travel with Weibo, which has been stopped for about 3 years during the past COVID period. So this year, still when we are regaining this particular or travel with Weibo as an event, we've been seeing the total number of participants exceeding 9,000,000 And also the total number of final hot topics exceeding billions or tens of billions. So these are all going to help us to have a very good recovery.

Speaker 2

Okay. And also, I'd like to share with you some of the colors of those different verticals as our customers. So we have many different verticals, so I would just like to give you some of the representative ones. So first, 2 are the assets as well as the automotives. So in the Q2, we've been having a year on year growth of 20% for the headsets industry and also 40% for that of the vertical for the automotive verticals.

Speaker 2

So that was pretty much related still to the sales trend of these 2 verticals. But still there are some of the updates And still, the sales of these two verticals are fluctuated, but still we do see some of the new highlights and some of the events happening for these two verticals. For instance, there is a switch between the from the ICE vehicles to the electric vehicles and now the electric vehicles are accounting for about 50% Of our sources of the advertisement revenue. And also in the first half of the year, we have been seeing a kind of a launch Or promotion of a lot of new products of the headset industries. But still in the second half of the year, We have to be aware that there might be more new products or new headphones or smartphones that are going to be launched by those brands, Especially from Huawei or Apple, it's the same trend.

Speaker 2

So we are going to experience a pretty much good trend and good growth For the handset industry in the second half of the year. And also still we have to be aware that for the automotive industry, In the first half of the year, we had difficulties seeing the budget, especially from the ICE vehicles because of their poor sales. They've been having a slowdown trend of the placement of new products of ICE vehicles because of the sales. So you can see that we have to have a strategy to focus on development of the automotive and also the headset industries Okay. And also, we have other kind of verticals As our customers, they are growing pretty much beautifully.

Speaker 2

For instance, in Q2, we had over 20% of the growth witnessed for the vertical like Cultural entertainment, luxurious products and healthcare as well as the tourism and travel. So in the second half, we're confident That without any accidents of happening, we're going to having confidence of seeing the continuous momentum. Okay. So the cosmetics and personal care, for instance, we've been seeing a very, hardly the case of the new product launch in the first half of the year. And also, most of those brands in these two verticals are involved or engaged in the price war.

Speaker 2

So, we have still some of The pressures in gaining the budgeting from these two verticals, we have been seeing a slight recovery of The beauty and personal care and cosmetics industry in the 18th June of events, but still this particular recovery trend Our recovery pace was still lower than our expectation. So in the second half of the year, still there are some of the headwinds that's coming in. So we still have to be precautious Over the recovery pace of these two industries. Okay. And also, as a whole, standing on this particular time point, I think that there are varied and heterogeneous recovery pace So, different verticals.

Speaker 2

So, apart from still focusing on the revenue and also the budgeting gain from those verticals, we have another 2 additional focuses of this year, for the rest of this year. First is that still we have to pay attention to the recovery of the overall traffic. And also second is that later On those traffic supported to each and different verticals, so that it's all about the traffic for the verticals. So you can see that still In the first half of the year, we have been seeing some of the nature of Weibo, for example, the it is a Great and popular place for people to discuss upon topics. So we do see actually more users and also the influential power of Weibo as a social platform Was also enhancing.

Speaker 2

However, still there's a broad to some of the pressure or some of the suppression On the lifestyle and also local service related revenues, for instance, like used to be, I know we had a lot of traffic related to topics like the food and travel and photography, etcetera, etcetera. But we've been experiencing some difficulties there. So our focus for the rest of the year is, first of all, Still overall, pay attention to the recovery of the whole traffic for all kinds of different sectors and So topics. And second is that we are going to give a laser focus support to the traffic give the traffic laser focus support to those verticals So that they are going to have a very good recovery, and also we can gain the momentum From the recovery of those all kinds of different verticals that we are working with. Okay.

Speaker 2

All right. Thank you very much.

Operator

Excuse me, Timothy, do you have any further questions?

Speaker 5

That's it. Thank you.

Operator

Thank you. Now we're going to take our next question. And then the question comes from the line of Miranda Chuang from Bank of America Securities, your line is open. Please ask your question.

Speaker 4

So thanks. I want to follow-up management's comment on this year's strategy, which is To increase the overall traffic and also to beef up support for the verticals traffic. So my question is, can you share your outlook For the user growth in the second half and also operational strategies to boost user traffic and then the vertical content areas?

Speaker 1

Thanks.

Speaker 5

Okay. Thank you for

Speaker 2

your question. So first, let's talk about the scale of user. So, first of all, everybody is aware that the shipment of the headset in the first half of year experienced a decline of about 10% year on year. And also as a result, the marketing expenses relevant to that was also decreasing. So our focus for this will be, 1st of all, increase the efficiency of the traffic And second of all, focus on those high ARPU value clients, especially the traffic supporting those iPhone users and Huawei smartphone users as well.

Speaker 2

And also in Q2, you can see more activities of the and also still we are going to focus on the recovery of the traffic, Especially from 2 areas, one is culture and entertainment, the other is the news and hot trends. So in Q2, especially talking about the activities of the culture and entertainment Industry, we've been seeing more activities organized, for instance, the movies and theaters and also variety shows as well as the concerts, etcetera. So we had a very clear trend of the recovery and increase of the traffic in July and also August as well. This was mainly due to, for instance, More activity in the entertainment industry in the summer holiday season and also in the first half of this year as a whole, We've been seeing over 20% of the growth for the interactive users number in the entertainment industry and also 50% growth This is the pre COVID period. So that we are going to have a very good trend getting from that particular industry.

Speaker 2

Okay. And also in the second half of the year, we're going to focus first On the overall recovery of the traffic efficiency and also second is that give more support to those different vertical content and verticals as well. So I've been already sharing with you some of the colors related to the headsets industry and also the vertical of automotive, which we had a great investment of traffic For the past 1 2 years. So in 2023, we have been seeing that the overall percentage or the traffic contribution to our total traffic From the headset and also the automotive industry has already been doubled versus the pre COVID period. So that because of this Very good trend and also a better kind of a revenue commercial revenue and also influential power increased.

Speaker 2

We are going to see more and more significance of the headset and also automotive vertical so that we can give more vertical support Traffic support to these 2 verticals. Okay. And also, next thing I would like to Talk about our 4 of the verticals of, beauty, the cosmetics and personal care and fashion industry as well as the vertical of travel. So I know before the COVID period or during the COVID period, people's or users actually demand over these different products of these verticals actually declined. And also we had experienced a severe competition during the COVID period.

Speaker 2

So when the COVID control policy was just alleviated I'm sorry, Was just alleviated. We can see that the Carnival performance and also the traffic contribution percentage of from these kind of industries are accounting for only half of This total traffic contribution percentage before the COVID period. So in the first half of the year, we had already we have already done something to actually support the operation From these to these different verticals and also now a very good trend is that the fashion vertical has already recovered Their traffic percentage contribution to our overall traffic to the Period before the COVID. And also in terms of the luxurious industry, the revenue from this luxurious industry actually was increasing And to a positive trend. And also for the cosmetics and also the travel, still we have been seeing a gap if we're comparing with the situation before the COVID.

Speaker 2

So as a result, you can see that the overall kind of revenue from the verticals of the cosmetics had a year on year decline. So these will be still the verticals that we are going to laser focus on our operations support in the second half of the year. And also because When we had a very good recovery from those less than expected growth verticals, it is going to give us More influence and also we are going to optimize the total structure in terms of the traffic contribution to our overall traffic So that we can regain to a positive momentum of growth. Thank you.

Speaker 1

Thank you.

Operator

Thank you. Now we will take our next question. And the next question comes from the line of Daisy Chen from Haitong International. Your line is open. Please ask your question.

Speaker 6

I'll translate myself. Thanks management for taking my question. My question is about the AIBC. Can management here more color about the development, application scenarios and the product planning in AITC? And what is the current stage of the development?

Speaker 6

Thank you.

Speaker 1

Okay.

Speaker 2

Okay. Thank you for this question. So I think that during the last quarter Earnings conference call, we had already answered part of this question. So AIGC for Weibo has 2 functions. First is that we are going to enhance The production speed and productivity of those individualized content by those key accounts on a platform or the big accounts on a platform And also help them to enhance the stickiness and customer relationships.

Speaker 2

And also, second is that it could help us to really supplement And also regain some of those medium to long tail accounts on Weibo. So you can see that for Weibo, in terms of the content creation, We have a characteristic, which is that the ecosystem for the top accounts or top ranking accounts is pretty much optimized and also, but still Pretty much weaker for those medium to long tail accounts. So AIGC is going to be very much supplementary In helping with those medium and long tail accounts in terms of the content generation. Okay. And also in Q2, we've been seeing a very good trend of some of those Big accounts like 100 of those important accounts are already trying the AIGC capability in helping them to actually cater The needs of their customers in writing some of the articles or creating some of the contents that will And have the similar style that their customers want.

Speaker 2

But still, this is not fully rolled out to the rest of the community. So I think that in the second half of this year, we're going to see more and more of those top accounts of using AIGC capability. And also second thing is that, We really believe that it is going to be very important for giving us a further supplementation Of the vertical traffic and also vertical content, especially in terms of the travel and also the food, etcetera. So because the top accounts, of course, are creating very good contents in these two areas, but still we are lack of the good Quality content for those medium level accounts and also medium level users. So, I think that the AIGC is going to be of great help and support In this particular area, so that the efficiency of operation of those medium level accounts could be pretty much enhanced.

Speaker 2

Okay. And another two areas. First of all, in Q2, we have been seeing a more and more high efficient interactions Created and generated because of AIGC. For those kind of quite professional and also specific topic oriented accounts Like for the romantic relations and finance and zodiacs, etcetera, etcetera. So because it does require A lot of very professional and also very much style oriented answers.

Speaker 2

So we are using GC to offer those Very professional answers. And also, the capability of AI chat can also help, these accounts of increasing their stickiness with their users and followers as well and also thus generating certain revenue and income for those accounts. And second part is that some of the medium level celebrities are actually using and utilizing the capability of AIGC in Generating images through images and also the function of AI chat as well. So, most of those medium level Celebrities are already using this capability to enhance their daily operation. So starting from September of this year, we are going to see more and more top level celebrities Trying and using this capability.

Speaker 2

Okay.

Operator

Dear speakers, there are no further questions. And I would like now to hand the conference over to Sandra Zhang for any closing remarks.

Speaker 1

Thanks, operator. This concludes our conference call today. We will see you next quarter. Thank you.

Operator

Thank you very much for participating. You may now all disconnect.

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