Weibo Q2 2025 Earnings Report

Weibo EPS Results

• Actual EPS: $0.54
• Consensus EPS: $0.27
• Beat/Miss: Beat by +$0.27
• One Year Ago EPS: $0.48

Weibo Revenue Results

• Actual Revenue: $444.80 million
• Expected Revenue: $438.84 million
• Beat/Miss: Beat by +$5.96 million
• YoY Revenue Growth: +1.60%

Weibo Announcement Details

• Quarter: Q2 2025
• Date: 8/14/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 14, 2025
• Conference Call Time: 7:00AM ET

Weibo (NASDAQ:WB), through its subsidiaries, operates as a social media platform for people to create, discover, and distribute content in the People's Republic of China. It operates in two segments, Advertising and Marketing Services; and Value-Added Services. The company offers discovery products to help users discover content on its platform; self-expression products that enable its users to express themselves on its platform; and social products to promote social interaction between users on its platform. It also provides advertising and marketing solutions, such as social display advertisements; and promoted marketing offerings, such as Fans Headline and Weibo Express promoted feeds, as well as promoted trends and search products that appear alongside user's trends discovery and search behaviors. In addition, the company offers products, such as trends, search, video/live streaming, and editing tools; content customization, copyright contents pooling, and user interaction development; and search list recommendation, trends list recommendation, and Weibo app opening advertisements. Further, it provides back-end management, traffic support, and product services for better displaying and promotion of its account and content; open application platform for other app developers that allows users to log into third-party applications with their Weibo account for sharing third-party content on its platform; and Weibo Wallet, a product that enables platform partners to conduct interest generation activities on Weibo, such as handing out red envelops and coupons. The company was formerly known as T.CN Corporation and changed its name to Weibo Corporation in 2012. The company was founded in 2009 and is headquartered in Beijing, the People's Republic of China.

Weibo Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In June 2025, MAUs reached 588 million and average DAUs hit 261 million, marking a net addition of 5 million users year over year and an improved DAU/MAU ratio.
• Positive Sentiment: Second quarter total revenues were $444.8 million (up 2% YoY), with non-GAAP operating income of $161.8 million (36% margin) and net income rising 13% to $133.2 million.
• Positive Sentiment: The revamped homepage information feed, now powered by large language models, increased recommended content consumption to 43% (a 17% uplift), aiming to deepen user engagement.
• Neutral Sentiment: Weibo’s Intelligent Search MAUs surpassed 50 million in June, with daily search queries up over 150% quarter-on-quarter, laying groundwork for future monetization.
• Negative Sentiment: Management warned that third-quarter ad growth may face headwinds from tough year-ago comparisons (summer Olympics) and conservative budgets in certain sectors.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to Weibo Reports Second Quarter twenty twenty five Financial Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sandra of Investor Relations. Please go ahead.

[Operator]

We have a technicality on the line. Please remain on the line. Your conference will resume shortly. Thank you. Please remain on the line.

[Operator]

Your conference will resume shortly. Thank you. We are now back. Our conference can resume. I would now like to hand the conference over to your first speaker today, Sandra of Investor Relations. Please go ahead.

[Sandra Zhang, Investor Relations at Weibo]

Thank you, operator. Welcome to Weibo's second quarter of twenty twenty five earnings conference call. Joining me today are our Chief Executive Officer, Gao Fei 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 the Safe Harbor statement in connection with today's conference call.

[Sandra Zhang, Investor Relations at Weibo]

During today's conference call, we may make forward looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward looking statements. Weibo assumes no obligation to update the forward looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20 F and other filings with the SEC.

[Sandra Zhang, Investor Relations at Weibo]

All the information provided in this press release is occurring as the date hereof. Weibo assumes no obligation to update such information, except as required under the applicable law. Additionally, I'd like to remind you that our discussion today includes certain non GAAP measures, which exclude 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, gains or losses and other items that are not expected to result in future cash payments or are non recurring in nature or are not indicative of our core operating results and outlook.

[Sandra Zhang, Investor Relations at Weibo]

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 this, I would like to turn the call over to our CEO, Gaofei Wang. Thank you. Hello, everyone.

[Sandra Zhang, Investor Relations at Weibo]

Welcome to Weibo's second quarter of twenty twenty five earnings conference call. On today's call, I'll share with highlights on Weibo's product and monetization in the 2025. On the user front, in June 2025, Weibo's MAUs reached five eighty eight million and average DAUs reached two sixty one million. In the second quarter, Weibo's total revenues reached 4 and 44,800,000.0 US dollars, up 2% year over year. Our total ad revenues reached US383.4 million dollars up 2% year over year.

[Sandra Zhang, Investor Relations at Weibo]

Our non GAAP operating income reached US161.8 million dollars representing a non GAAP operating margin of 36%. In 2025, the company's overall strategy focuses on the value of users, sustaining the leading position in trending topics and entertainment sector, and solidifying the competitive edge of the social product. On top of that, we prioritized on enhancing the recommendation and search functions by integrating large language models to drive user scale and engagement. Next, let me share with you our progress made in the 2025 from three dimensions: user growth, the competitiveness of the company ecosystem and monetization. On user growth and engagement, we focused on integration of social product and upgrade of our recommendation system this year, aiming to drive user engagement and user growth.

[Sandra Zhang, Investor Relations at Weibo]

Over Weibo's fifteen years development, the homepage information feed have continuously evolved to achieve two core objectives, to enhance the efficiency of content consumption and social interaction by users. And accordingly, the content recommendation mechanism of information feeds has evolved from a timeline based distribution to a recommendation based distribution. To be specific, the information feeds were originally distributed in reverse chronological order based on the posting time. As content creation became more convenient for users, the explosive amount of content produced largely exceeded the amount of content consumed. And therefore, to improve content consumption efficiency, we upgraded the algorithm of information feeds from purely time timeline based to focusing on distributing unread posts from individual accounts being followed by users in 2016.

[Sandra Zhang, Investor Relations at Weibo]

Later in 2038, we introduced a new feed product structure composing of a relationship based feed and an interest based feed, aiming to broaden users' content discovery and increase their content consumption scale. In recent years, users' content consumption behaviors have been altered by the recommended content. To adapt to this trend, we initiated a strategic revamp of our homepage information feed in the first half first half of this year, which makes the interest based feed as a primary interface when user access Weibo. We also made significant adjustment on the distribution mechanism of the interest based feed. On the one hand, we integrated the recommendation mechanism for both relationship based feed and interest based feed.

[Sandra Zhang, Investor Relations at Weibo]

On the other hand, we enhanced the user feedback mechanism based on user interaction and consumption behaviors in the interest based feed, aiming to meet their in-depth consumption demands. Overall speaking, while preserving users' fundamental need for social content consumption, the upgraded interest based feed delivers improved efficiency of discovering interest based content and deepens user engagement. Additionally, by leveraging large language models, we have enhanced the quality of the augmented content, improving users' overall consumption experience. We hope the upgrade of the homepage information feed will further unlock Weibo's value in delivering quality content. We aim to enhance users consumption depth and engagement through algorithm capability, which will strengthen the competitiveness of our vertical company ecosystem.

[Sandra Zhang, Investor Relations at Weibo]

In early July, we completed the upgrade of product and technical framework, which has rolled out nearly all users. Currently, with the average content views of homepage information feed per user remaining stable, the proportion of the recommended content consumed by users has increased to 43%, representing a 17% improvement over the previous level. This established a solid foundation for efficiency improvement and the development of the platform's content ecosystem. With the upgrade of the homepage information feed product, our platforms' content distribution strategy will expand from relationship based distribution to interest based distribution, aiming to enhance content competitiveness. For social products, leveraging the platform's long accumulated social assets and the interest based communities, we reinforced the platform's social attributes and boost the user's willingness to share and interact.

[Sandra Zhang, Investor Relations at Weibo]

In the second quarter, we further strengthened user's social interaction experience in the core product scenarios, achieving notable progress. For example, to address the pre prevalent issue of low quality content in comments recession, particularly comments under posts by celebrities and top KOLs, we enhanced the identification and monitoring of low quality content. This effectively improved discussion quality and increased users' willingness to visit and engage in a commentary session. For the celebrity related super topics, we prioritize users' genuine communication, content sharing, and consumption needs, and focus on improving the diversity of content and real time attributes of the community. These efforts help improve social connection in celebrity related super topics, driving notable year over year growth of users who posted, engaged and consumed content in the second quarter.

[Sandra Zhang, Investor Relations at Weibo]

To enhance the competitiveness of the content ecosystem, our interest based feed will become the primary feed for content distribution. In the second quarter, on the vertical content ecosystem, we completed the transition of content operation from an influencer based model to a vertical content based model, which attracted content creators from cross verticals to generate content on specific vertical area. Currently, over 50% of the interest based content from key verticals are generated from cross vertical KOLs, which benefit from our years of deep cultivation in vertical areas and the advantages of our vertical content operation. In the second quarter, vertical content consumption accounted for 60% of the interest based feed consumption. And meanwhile, the new interest based feed optimized content quality by allocating more traffic to high quality authentic content.

[Sandra Zhang, Investor Relations at Weibo]

This has increased the traffic share for KOLs and celebrity accounts, while also providing more growth opportunities for mid tier and long tail KOLs. In the second half of this year, with the goal of enhancing user engagement through the interest based feed, we will increase the supply of quality content to users through product offerings and recommend more precise and engaging content to users through recommendation. This will improve the efficiency for users to access effective content and their satisfaction of content consumption, and thereby further drive up content consumption and more frequent usage, while solidifying Weibo's advantages in entertainment verticals and trending topics will support the long term development of vertical content ecosystem to achieve a win win situation where users enjoy quality content, creators develop, and the platform thrive. Next, let me share with you some updates of Weibo's Intelligent Search product. In the second quarter, we beefed up our efforts to transform the AI powered search experience to optimization in model strategies, enrichment of database, and integration of multimodal content.

[Sandra Zhang, Investor Relations at Weibo]

Additionally, we incentivized the content creators to produce more high quality content and perspectives, which further refined the quality of search results. As a result, Weibo's Intelligent Search saw robust growth during this quarter, with MAUs surpassing 50,000,000 in June. Notably, Weibo's Intelligent Search has significantly enhanced the user experience for trending topics, as well as better for field user queries in on demand search scenarios. Daily active users of intelligent search also increased notably quarter over quarter, driving solid growth in average daily search queries. In the longer run, powered by the large language model summarization capabilities, We believe that the high quality content and diverse viewpoints accumulated on Weibo over a decade will be presented in a more thorough way.

[Sandra Zhang, Investor Relations at Weibo]

This will not only improve results relevancy and the content consumption efficiency, but also enable Weibo's intelligent search to go beyond trending trending and real time topics to better address long tail search needs. We are encouraged to see an AI driven roadmap to strengthen our competitive edge in the search market. Moving on to monetization. In 2025, our ad product and sales strategy focused on expanding and solidifying customers' mindset of choosing Weibo as the go to platform for content marketing across industries, as well as enhancing ad product conversion capabilities. From demand side, better buy, consumption stimulus policy, e commerce platforms and related sectors increased their ad spend during the quarter.

[Sandra Zhang, Investor Relations at Weibo]

We focused on two aspects in our sales execution this quarter. First, we continue to leverage unique strength in trending topics, celebrity resources, and hot KOL content to broaden our industry reach, while focusing on new product launch marketing to further reinforce Weibo's position as the go to platform for clients. Second, we maintained our investment in performance based ad products, which enhance our capability to capture incremental ad budget and continue to deliver positive revenue outcomes. By industry, e commerce platform posted solid year over year revenue growth in the second quarter, benefiting from close partnerships with major platforms during the June. As a pivotal arena for boosting domestic consumption, e commerce and related categories such as local service are expected to further ramp up marketing efforts with Weibo this year.

[Sandra Zhang, Investor Relations at Weibo]

As for the automobile vertical, Weibo continue to be the key discussion hub for new energy vehicles, sustaining its ecosystem advantage advantages. Major OEMs have increased their budget allocation to Weibo with marketing coverage for new new new EV model launches exceeding 60% in the first half of this year. In the FMCG category, including food and beverage, footwear and apparel, and personal care and beauty sectors, we are seeing shifting in clients' marketing strategies. After years of heavy investment in e commerce performance and key KOC seeding, more and more advertisers now face diminishing returns, which prompt a reconsideration of building. For instance, certain advertisers who had previously shipped most of their budget to performance based marketing or influencer seating are now reallocating budget towards select towards select endorsement, content IP creation, and sponsorship.

[Sandra Zhang, Investor Relations at Weibo]

While the transition is gradual and measured, we believe this trend is likely to continue. In the 2025, advertisers from the FMCG category became increasingly interested in Weibo's product launch, celebrity and IP marketing offerings. As a result, both the number of campaigns and revenue generated from product launch and celebrity official announcement campaigns drove the double digit year over year growth. We are encouraged to see customer stickiness to our product launch marketing further enhanced with the value of celebrity assets gradually revived. And meanwhile, we focus on tailoring our ad product to fulfill the more granular marketing needs of different segments within the FMCG sector.

[Sandra Zhang, Investor Relations at Weibo]

We seek to amplify the synergy between commercial content and organic post and trending topics generated by celebrities or KOLs, leveraging our ad product like content boosting and aggregation. With these efforts, we aim to facilitate more effective distribution of commercial content so as to cultivate consumer mindset and drive conversion. From ad product perspective, ad revenue from our community feed offerings and the real time bidding system the same solid year over year growth in the second quarter with decent enhancement of ad performance for those performance driven e commerce advertisers. In the third quarter, we plan to further expand advertiser coverage and see opportunity to extend this growth trend through the second half of this year. And meanwhile, we are stepping up our exploration and integration of AI on the monetization front, with focus on streamlining ad creation and accelerating review process, as well as improving ad targeting and click through rates.

[Sandra Zhang, Investor Relations at Weibo]

This initiative successfully drove higher eCPMs for real time business feed ads in the second quarter versus the same period last year. Entering the third quarter, we do see a tough comparison due to the high base from last year's order sales, which would negatively impact on the year over year growth. That said, we'll beef up sales efforts to capture visible opportunities from sectors such as e commerce, automobile and health care sectors, etcetera, with focus on driving the penetration of our brand plus content marketing among these sectors. Furthermore, we strive to secure incremental budget, leveraging the progress we made in real time video feed ad products. In the longer run, we remain committed to amplifying the synergy between content and monetization operations, With the revamp of information feed on homepage, we have a clear roadmap to further strengthen our vertical content ecosystem and boost the interest based content consumption, enabling commercial content to effectively reach desirable audience.

[Sandra Zhang, Investor Relations at Weibo]

At that time, our value proposition of content and new product marketing will become even more pronounced and therefore reinforce Weibo's competitive edge in the ad market. With that, let me turn the call over to Peter for a financial review. Thank you, Bobby, and hello, everyone. Welcome to Weibo's second quarter twenty twenty five earnings conference call. Let's start with user metrics.

[Sandra Zhang, Investor Relations at Weibo]

In June 2025, Weibo's MAUs and average DAUs reached five eighty eight million and two sixty one million, respectively, represent a net addition of 5,000,005 users on a year over year basis. The DAU versus MAU ratio further enhanced our as our strategic focus on high quality users are paying off. Leveraging the transformative power of AI, representing our recommendation engine as well as speed and search experience to make Weibo more relevant and engaging. Turning to financials. As a reminder, my prepared remarks will focus on November results.

[Sandra Zhang, Investor Relations at Weibo]

All monetary amounts are in US dollar terms, and all comparisons are on a year over year basis, unless otherwise noted. Now let me walk you through our financial highlights for the second quarter twenty twenty five. Weibo's second quarter twenty twenty five net revenues were $444,800,000 an increase of 2%. Operating income was 161,800,000.0 US dollars, representing operating margin of 36%. Net income attributable to Weibo reached 133,200,000.0 US dollars, an increase of 13, and diluted EPS was 54 Let me give you more color on the second quarter twenty twenty five revenue performance.

[Sandra Zhang, Investor Relations at Weibo]

Weibo's advertising and marketing revenues for the second quarter twenty twenty five were $383,400,000 2%, while value added service revenues were $61,400,000 2%. Weibo's advertising business continued to deliver a slight uptick, which resulted from mixed performance of major ad verticals by industry. Our top three verticals were FMCG, e commerce, and three c products. In terms of growth, e commerce, Internet services, and automobile were the key contributors. Benefiting from cheating policies and intensifying competition among platforms, e commerce advertisers increased their ad spending on Weibo to boost the brand visibility during the June 18 shopping festival.

[Sandra Zhang, Investor Relations at Weibo]

The automobile sector sustained healthy growth, as Weibo plays increasingly important role in building market hubs for EV launches underpinned by the joint discussion web of the auto vertical. The FMCG sector continued to see a year over year decline. However, we are seeing early signs of gradual recovery. Despite near term pressure, we are encouraged to see a gradual comeback with those mega festival brands FMCG brands reallocate their budget to Weibo's celebrities and brand name ad offerings to engage our young and high value users. Other underperforming industries that dragged the overall top line recovery included online games, luxury, and entertainment.

[Sandra Zhang, Investor Relations at Weibo]

In particular, the online games sector remained soft due to tough comps and the lack of blockbuster release this quarter. By ad product category, promoted speed ads remained the largest contributor, followed by social display ads and topics and search placements. We have been integrating AI to facilitate smarter ad targeting and placement, which shows a double digit growth of our feed ad offerings. Specifically, our real time video feed products saw strong improvements in both performance and conversion metrics. Ad revenues from Alibaba sustained a healthy growth of 10%, reaching 35,700,000.0 US dollars in the second quarter.

[Sandra Zhang, Investor Relations at Weibo]

We gained a larger share of Alibaba's ad wallet in ad wallet in q two, driven by increased marketing demand during the June 18 festival and heightened competition in the local survey segment. Looking ahead to the second half of the year, we expect to face a tough year over year comparison in the first quarter due to the summer Olympics in the prior year. Also, advertisers from construction related industries remain conservative in their ad budget allocation in light of fluid geopolitical outlook and macro uncertainty. That said, we will step up our sales execution to capture engagement opportunities, particularly in on demand e commerce services and new EV launches. In the longer term, we aim to further integrate AI capability to generate meaningful improvements in ad inventory, scalability, and eCPM updates.

[Sandra Zhang, Investor Relations at Weibo]

Total costs and expenses for the second quarter were $283,000,000 increase of 1%, with increase in cost of revenue and product development expenses offset by decrease in general and administrative expenses. Operating income in the second quarter was US151.8 million dollars an increase of 3%, representing operating margin of 36% less versus the same period last year. Turning to income tax. Under GAAP, income tax expenses for the second quarter were $31,700,000 to $33,300,000 last year. Net income attributable to Weibo in the second quarter was $143,200,000 an increase of 13%, representing a nice margin of 32 compared to 29% last year, primarily attributable to higher net interest and other income.

[Sandra Zhang, Investor Relations at Weibo]

Turning to our balance sheet and cash flow items. As of 06/30/2025, we were cash, cash and equipment, and short term investments totaled $2,110,000,000 compared to 2,350,000,000.00 US dollars as of 12/31/2024. The decrease of Weibo's cash, cash equivalents, and short term investments was mainly resulting from the purchase of long term wealth management products and the payment of the annual dividend to our shareholders in the 2025, and partially offset by operating cash flow. In the second quarter, cash provided by operating activities was $24,800,000 Capital expenditures totaled $17,600,000 and depreciation and amortization expenses amounted to 14,800,000.0 With that, let me now turn the call over to the operator for the Q and A session.

[Operator]

Thank you. As a reminder, to ask a question, please press star one and one on your telephone keypad, and wait for your name to be announced. Our first question comes from the line of Felix Liu from UBS.

[Felix Liu, Executive Director at UBS Group]

Thank you management for taking my question and congratulations on the strong second quarter results. Management earlier mentioned about your progress on Weibo Smart Search. Can management elaborate a bit more on your product strategy and the future plan for commercialization? And furthermore, on AI, could management share more progress on how AI is helping the overall monetization and commercialization for the Weibo platform? Thank you.

[Moderator]

Okay.

[Moderator]

Okay. So actually, in the last quarter, we've already shared that in q one, we promoted the intelligent search product. In q one, we actually connected to the DeepSegaR1 model, and we promoted the product launched the product. And in q two, actually, was a first full season for the intelligent search to be present in Weibo. And then in June, we also connected to the Ali q one.

[Moderator]

Because for the DeepSig r one model, in terms of the output speed, actually, it's a bit low. So actually, a lot of users couldn't wait for the results to be produced. So in general, we should say that actually in q two, the product is still being perfected, and it's still in the process. So, basically, at the '2, the product form was finally stable. Then, actually, in terms of June, just now we introduced that, actually, for the MAU, it's already over 50,000,000.

[Moderator]

So for the query, it also improved by 60%. And as for the DAU and for the user query, actually, the growth was even faster. So, actually, the growth rate was already over 100%. And in terms of the traffic, it grew by around 150% compared to the previous quarter. So in general, we can see from that data, actually, the user scale is growing, and the frequency of usage is obviously increasing.

[Moderator]

So, actually, we have pretty high expectation on the intelligent search product in the latter half of the year. And I think if you have been following Weibo, you would know that, actually, we have always have the advantage of news search. But in terms of the long tail searches, actually, Weibo isn't that advantageous in that aspect. But right now, with this product, we can see that in the current usage by the users, of course, the search on the news is still accounting for a big percentage, but more and more users are using it. And now they are using it for the experience search, product search, maybe some other long tail searches.

[Moderator]

And also now with the connection of the models and other content, it also helps us in terms of displaying some of the out of sight search results that can be displayed in the intelligent search on Weibo, and that is very vital for Weibo to really change the user behavior of the users and also to improve the percentage of the long tail searches. So actually, in the industry, people have this general awareness that AI search is clearly overtaking and replacing the traditional search, and that is a clear trend. And now in the social media platforms, we can see that for us, we're not we're not only making the search function better. Actually, in terms of the usage on Weibo, you can see that for users, when they use this product, it's not just about the search. It's also about social interactions.

[Moderator]

For example, in the comment sections, they can do fact checking. And also for some of the blogs, they can also use this kind of tool to fact check or maybe do some extensive reading for the relevant material. Actually, there are a lot of use cases and scenarios, and they are some of the key works key directions for our latter half of the year, and we do have some pilots going on. And in terms of commercialization, we should say that, actually, a lot of clients are interested in this product. But we are not overly anxious in terms of commercialization, and we tend to try to expand the user base right now.

[Moderator]

And in the future, for the commercialization, maybe it's about the bundled cooperation with the brands, or maybe it's just like in the traditional search where we in include ads in the search results. But, actually, in the latter half of the year, in q three, we may not consider that. Maybe in q four, we would do some tests. But overall speaking, we should say, for this product, it's really important for us to increase the user base for the search and also to help us increase the user stickiness and the traffic. And we have really high expectation in terms of the future commercialization of the product.

[Moderator]

So just now, you your second question was about AI ads. In terms of ads, I think most of the platforms are alike. That means they're mostly concentrating on the performance based ads. And for us, on one side, it's about the auto placement of the AI as AI assets. So in q two, we launched our AI ad creative platform called Lingchuang.

[Moderator]

And right now, for the assets that is consumed, actually, more than 10% is already from AI. And from the results, just now we already talked about it. For q two, in the information feed ads, the eCPM grow grew by single digit, less than 10%. And then when it comes to CTR, I think for different clients for different client types, things would be different. For the leads, like, lead type, the CPR would be higher, maybe around 20%.

[Moderator]

But for the apps, maybe more than 10%. But comprehensively, the ECPM maybe grew by less than 10%. So that's for information feed or maybe for the performance based ads. So in terms of the brand ads for a lot of the brand customers, they are placing quite high quality ad assets on Weibo. So actually, in q two, we have done some tests with some specific customers.

[Moderator]

For them, they have some high quality PVC ads, and then we use AI to conduct some coordination or for different user bases according to their interest. We conducted some reediting with their existing assets. Actually, in terms of the result, it's better than the results for the small and medium sized customers. And then they saw some of our testing results. Basically, for the click rate, it increased just like the performance based ads.

[Moderator]

But for the interaction, it basically doubled. So the overall result was pretty good. But for the brand clients, the biggest challenge is still in the restraints of the process of ad placement. So, basically, for our brand customers, when they place the information feed ads, they require all the assets to be approved on their side. So that kind of work process for AI ads, which is quite customized for different people, it's not really adaptive.

[Moderator]

So that really limits our customers, especially the brand customers when they wanna use our AI ads at scale. So, generally speaking, for the brand ads, I think, if we can use AI ads on a large scale, the performance and the results would be even more obvious in terms of its improvement. But it may take some time for our customers to gradually accept it. So we expect that at the end of the year, maybe more than 10% of our brand customers can start to use the AI ad system.

[Operator]

Thank you. Just a moment for our next question, please. Next, we have Timothy Zhao from Goldman Sachs. Your line is now open.

[Timothy Zhau, Analyst at Goldman Sachs]

Thank you management for taking my question. My question is regarding the advertising revenue growth outlook. Can management share what is your expectations for the ad revenue growth into the third quarter and second half of this year? And specifically, which industries may show a stronger revenue growth? And from the format perspective, just wondering what is the difference in terms of growth rate between search ads, display ads, recommendation fees ads, etcetera.

[Timothy Zhau, Analyst at Goldman Sachs]

And then specifically, as Benjamin already mentioned, the applications of AI in information ads. Just wondering, given the very rapid usage of the AI search functions on Weibo, What is the implications for the search ad growth? Thank you.

[Moderator]

Okay.

[Moderator]

So in the latter half of the year, especially when we look at the industries with some national subsidies, those industries still have some uncertainties, especially the national subsidy related industries like the cell phone or the automotive industry. And then when it comes to q three, I think firstly, I think we already covered about that in q two, which was ecommerce and also automotive industry. We think those industries can still maintain very good growth. And in the last two years, with the change of the age of our users, especially for the white collars, people generally paid more attention to health care. So health care had pretty good growth in the last two years, but the base number was not as large as ecommerce and automotive industry.

[Moderator]

So those are the growing sectors. So, actually, in q three, will you still face lot of pressure in terms of FMCG? Because there was the Olympics last year. So for dairy products and other FMCG, had some spending cuts in especially in q three. And the other thing is for the cosmetics and luxury goods.

[Moderator]

Cosmetics have already quite stabilized, but we still face some pressure in Q3. And also, the same thing goes for luxury goods. And then for cell phone and gaming industry, there is huge uncertainty for cell phone. And this year, we do see that compared to the first half of the year, their their budget basically stabilized, but their overall sales went down a lot. So if there's no additional national subsidy policies coming out, we still expect some pressure in terms of the cell phone industry in the latter half of the year.

[Moderator]

And then in terms of the ad strategy, I think the biggest percentage still goes to the information feed ads and then the displayed ads and then the the the other ads. And then for the information feed ads, it's growing in itself. And in terms of the growth rate, I think for information feed ads, the growth rate is the highest. And, actually, for the displayed ads in q one and q two, there was a small dip because I think that's related to the overall budget of the customers. So for the information feed ads and the performance based ads and for the maybe content based ads and then for the purely displayed ads.

[Moderator]

For our from our perspective, I don't think the pure displayed ads is our future focus. So that means more and more customers were purely go to performance based ads, and also they may invest more in terms of star collaboration or maybe KOL investment. And maybe customers, they have their own accounts, the social media account that can produce some content based marketing type of ads. That is the mainstream in the future. And for the search ads, I just introduced that, of course, there are certain customers.

[Moderator]

They have some expectation on the monetization or commercialization. But for us or even in the industry, there's no clear business model for this type of ads. So right now, we still focus more on building a bigger customer base and introducing more traffic. And, of course, maybe we can introduce a bit of the display ads, but that's too small a piece. So I think we still will focus more on increasing the user base.

[Moderator]

And also, we need to focus on the user experience of the intelligent search, and also the feedback of the industry had been good. So we would increase a bit in terms of the budget, maybe in computing power and also the investment for the external corporation and marketing. And we hope that that will help us grow in terms of the user base because that's the highest expectation we have now for this product. In terms of the revenue and commercialization, we're in no hurry. Thank you.

[Operator]

Thank you. Thank you for the questions. I will now turn the conference back to Sandra.

[Sandra Zhang, Investor Relations at Weibo]

Thank you, operator. This wraps up our conference call today. Thank you all for joining us. We'll see you next quarter.

[Operator]

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

Participants

Executives

• Sandra Zhang, Investor Relations

Analysts

• Felix Liu, Executive Director at UBS Group
• Moderator
• Timothy Zhau, Analyst at Goldman Sachs