Weibo - Earnings Call - Q1 2022

Transcript

Speaker 0

Good day, and thank you for standing by. Welcome to WaveWare First Quarter twenty twenty Q Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Be speakers' a And now I'd like to hand the conference and over to Ms.

Sandra Chang from Weibo IR team. Thank you. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Weibo's first quarter twenty twenty two earnings conference call. During today are Chief Executive Officer, Gao Fei Wang and our Chief Financial Officer, Itau. The conference call is also being broadcasted on Internet and is also available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call.

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

All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information except as required under applicable law. Additionally, I would like to read you 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 and losses and other items that has not expected to result in future cash payment or are non recurring in nature or are not indicative of our core operating results and outlook.

Please refer to our press release for more information about our non GAAP measures. Following management's prepared remarks, we will open the lines for a brief q and a session. With this, I would like to turn the call over to our CEO, Gao Zhi Wang. Thank you. Hello, everyone, and welcome to Weibo's first quarter twenty twenty twenty two earnings conference call.

On today's call, I'll share with you highlights in Weibo's user, product, and monetization in the 2022. On the user front, Weibo's MAUs reached 582,000,000, and average AU reached 252,000,000 in 03/20/2022, adding approximately 51,000,022 US year over year, respectively. In March, 95% of Weibo's MAUs came from mobile. On monetization, the macro environment, industry policy, and recent domestic COVID nineteen research has posed a short and medium impact on the production and operation of many companies to different degree, causing most advertisers to defer or reduce their marketing budgets since March. Nevertheless, thanks to the solid growth of our user scale and traffic as well as our efforts in key industries such as gaming and apparel, we have further gained recognition among advertisers for our differentiated market solution that integrated well with our user product and content operation.

In the first quarter, our total revenue reached $184,600,000 up 6% year over year. And our ad revenues reached $427,100,000 up 10% year over year and 94% of our ad revenue came from mobile. This quarter, our non GAAP operating income reached a 141,700,000.0. Next, let me share with you our progress made in product monetization in the first quarter. On product front, we continue to focus on operating efficiency, driving steady user base expansion and engagement improvement so as to update our monetization efficiency.

On channel front, considering our user scale and the competitive landscape, we will emphasize on balancing user acquisition cost and monetization and improve ROI for user acquisition. On competition, we will continue to step up investment in operations of hot trends and social content, deepen strategic cooperation with partners from media, entertainment, gaming and sports verticals to encourage discussion around our trends and IT and maintain our competitiveness in core user function. In the first quarter, with the Spring Festival holiday and Winter Olympic, our user base and traffic grew robustly, demonstrating Weibo's advantages in hot trends and social attributes. During the spring festival, content related to the Spring Festival Gala of 25 television stations was distributed on Weibo via topics, videos, live streaming, and etcetera. For Spring Festival Gala related topics, the viewership surpassed the 20,000,000,000, and the discussion was more than seven 70,000,000, up 46% from last year.

And moreover, we launched the live topics and off related topic features that allows user to discuss live while watching the spring festival gala. While the gala was on air, celebrities, KOLs, and users were able to join in the live discussion altogether, igniting the willingness of discussion around the event. As a result, the discussion of the data related topics created by users increased by a 145% from last year. Furthermore, our content operation of the Beijing Winter Olympics has attracted massive users to consume content on Weibo. From the Winter Olympics event to sports campaigns and the IPs of the, we work with the Winter Sports Administrative Center to encourage athletes to open accounts and stay engaged on Weibo and build a content distribution metrics with the state media and Weibo among other media to enhance the dissemination and discussion of content around the games.

Not only be the traffic driven by the Beijing Winter Olympics, the past out of the Tokyo Olympic Games, but the athletes and their followers were also more engaged on Weibo. Based on historical data, as people return to school and work and work after the spring festival, the user scale and traffic on Weibo will fall back to a certain extent. However, in March, we grew our user and traffic nicely, mainly attributable to more social events occurred and increased time spent online due to the disruption from COVID nineteen coupled with our optimized channel strategy and improved operating efficiency of content and social content. On channel front, we further optimize our channel investment strategy with focus on efficiency as the content operation of Spring Festival and the Winter Olympic Games help grow our user and

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increase user engagement. We cut the budget investment in low ROI channels and try to shift more budget to channels with potential of raising user visits frequency.

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And meanwhile, we improved our capabilities of serving products to clients and increased the long term retention of the monetizable traffic and users to continue to optimize channel ROI. Hence, in the first quarter, we optimized our product from several aspects, driving to precisely targeting users with the recommended content. We also focus on optimizing the push recall strategy. And improving the product experience to increase the frequency of user consumption. In March, the per capita consumption of channel user increased by 40% from from the fourth quarter last year.

On social attributes, we continue to strengthen the social features of our user product by focusing on promoting scale and engagement of Weibo's core users. On relationship based feed, the number of feed refreshment continues to improve from December from December, benefiting from benefiting from the optimization in content distribution of the relationship based feed. We effectively retain and engage users brought to our platform by hot trend. Additionally, we continue to invest in social content enrichment, personalized the content distribution, and front end product spirits to improve the experience of user consumption and the social thickness of the relationship. On community product, we focus on improving the product mechanism to better serve user consumption and to enable users to discover content, build relation, and interact with with each other with communities.

At the same time, we strengthen the integration of products and operations to further expand community to more verticals, enrich vertical content so as to better fulfill user fee for social relations based on interest and location within the communities. In March, the number of users who use who use community products continued to increase up by double digits from last December. The number of posters and post in a community search and the users in gaming, sport, animation at the campus continue to be engaged. We have seen that community can effectively increase user engagement and promote user intention in the long run, which boost our confidence in Weibo's new positioning and growth potential in the market of social attributes. On videos, we continue to focus on the scale and engagement of video accounts, especially on verticals that can drive more traffic and engagement and also high quality content creators.

In 2022, we will provide more support from products and operations to this video content creators to encourage video generation and interaction with fans and ensure the quantity and the quality of video content, which in turn drives user engagement. As of the March, the number of video accounts exceeded 30,000,000. In the first quarter, we provided video content creator with more editing tools and features to promote social interaction around video content to increase video generation and engagement. At

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the

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same time, we encourage user consumption in core information, information based feed to continuously optimize the recommendation mechanism for high quality video content creators and their content. For example, for the relationship based feed, we optimize the recommendation of video accounts based on user social relations, which significantly improve the distribution of video account, and efficiency of user consumption. We also launched the hot video list in the discovery page, which not only stimulated video consumption, but also further strengthen the positioning of discovery page in the consumption of hot trends and the popular content. Government and state media and organized more than two two thousand and two hundred topics on the COVID situation in Shanghai, which generated nearly 200,000,000 views and over 22,000,000 discussion in total. We have also established an efficient rule rumor refuting mechanism in cooperation with department to promptly address rumors and misinformation while optimize our product mechanism to amplify information rich to more users.

On the other hand, we continue to enhance Weibo's efficiency and capability in a public rescue system. We quickly upgraded our rescue channel based on the existing super topic product to better converge request for help. Up to now, we have reported more than 5,000 valid requests for government departments, resulting in more than 2,006 countries that rescue cases. In addition, this year, we also attempt to coordinate with NGOs, business, media, volunteers, big leads, etcetera, to build a a society wide rescue system against COVID, providing assistance and support for people seeking medical treatment supplies, psychological consulting so as to further amplify our value in the society wide emergency relief and assistance. Our monetization in 2022, we continue to focus on enhancing our potential and efficiency of traffic monetization and thus beefing up our overall monetization skill.

Entertained by the resilience of Weibo's brand plus performance ad offerings in key verticals, We are dedicated to expanding the marketing combo of brand plus performance ad with content operation to more industries and clients, aiming to strengthen our industry base and marketing capability as well as our marketing competitiveness market competitiveness. From an industry perspective, our ad revenue increased by 10% year over year in the first quarter, mainly benefiting from the spring festival and the Winter Olympics as well as our improved capability to fulfill customers' brand fast performance marketing needs in key industries. For example, during the winter of Olympics, we help some Olympic sponsors to build hype in the in the market in the market, featuring a combo of our ad offerings such as topic, hot trends, launch screen ad, etcetera, to uplift their brand recognition, leveraging hot trends of Olympic sports events and athlete endorsement. Our unique solution of hot trend marketing has earned wide wider recognition among most of the advertisers, especially the Chinese food, footwear and apparel brands during the two Olympic Games seasons. As a result, we are pleased to see higher ad demand for the apparel vertical with ad revenue from this vertical growing very nicely year over year.

Next, let me share our progress in the gaming vertical as well. Our revenues from the gaming vertical sustained strong growth momentum with over 50% year over year growth in the first quarter. We primarily attribute attribute the growth momentum to a differentiated ad playbook we developed for the gaming industry in the past two years. To elaborate, we have strengthened the synergies between sales, product and operation to amplify the distribution and discussion of new games, as well as facilitate the accumulation and activity of social assets. Coupled with our ongoing optimization in performance ad offering, we managed to capture incremental brand ad budget for new game release from client, which additionally only value conversion results.

Considering the approval policy of the game license, we launched event based ad offering and service for top gaming clients in the first quarter to better align with client's event pipeline and fulfill their marketing needs in connection with major major version upgrade updates and new new character promotion. A good example is Yuan Shen. We work closely with the game advertiser and aggregated all marketing events on Weibo, including version updates, brand ambassador official announcement, and branding and branding events, etcetera. On a public test now, the official account of have accumulated over 4,000,000 followers. The number of views and discussion around the major topic exceeded, 12,006,000,000 respectively with over 4,000,000 long, long term active fans of ancient super topic.

That's the first quarter has made decent terms. In the first two months, we had pretty good start, both in terms of user traffic and financial performance. However, we have seen an inflection since March. Amidst geopolitical issues and COVID nineteen resurgence, multinational customers and off offline customers start to cut back marketing marketing spend. Some of our channel marketing campaigns were also negatively impacted.

As a result, our ad revenue was also negative impact in March. Entering the second quarter with more regions setting setting up lockdown and the prevention prevention measures, various aspect of economic activities has been significantly disrupted, including production logistics and and other offline activities, which directly weigh on the growth of the overall advertising market. For the second quarter, despite many market headwinds, we are dedicated to join together with our customers to navigate through the difficult times and reinforcing our own competitive edge in the hope of capturing market opportunities post the normalization. For one thing, we offer targeted favorable policies and resources to support several customers customers and industries hit hard by COVID nineteen, inviting customers to explore exploit our brand plus performance ad offering So as to boost their confidence in the social media marketing, while raising the utilization rate of Weibo's core ad inventories at the same time. For another, we proactively take the window to further refine our product offering and reinforce our core competitiveness.

Our major initiatives include optimize optimizing our brand price performance ad offering to improve efficiency, beefing up our content marketing service and expanding customer scenario, just to name a few. We are making solid progress against all these initiatives as critical move to further strengthen our competitiveness in the ad market. With that, let me turn the call over to Fei Cao for a financial review. Thank you, Gaofei, and hello, everyone. Welcome to Weibo's first quarter twenty twenty two earnings conference call.

Let's start with user metrics. In March 2022, Weibo's MAUs and average DAUs reached $582,000,000 and $252,000,000 respectively, representing a net addition of 51,000,022 users respectively on a year over year basis. We are delighted to achieve solid user growth momentum with disciplined marketing spend. Turning to financials. As a reminder, my prepared remarks would focus on non GAAP results.

All monetary amounts are in US dollar terms and all the comparisons are on a year over year basis unless otherwise noted. Now let me walk you through our financial highlights for the 2022. Weibo's first quarter twenty twenty two net revenues were 484,600,000.0, an increase of 6%. Operating income was 141,700,000.0, representing operating margin of 29%. Net income attributable to Weibo reached 132,900,000.0, representing a net margin of 27%.

Diluted EPS was $0.56 compared to $0.57 last year. Now let me give you more color on revenues. Weibo's advertising and marketing revenue for the fourth quarter twenty twenty two reached 427,100,000.0, an increase of 10%. Mobile ad revenues were 401,900,000.0, contributing approximately 94% of total ad revenue. We had a solid start to 2022.

Weibo delivered relatively resilient ad growth in the first quarter even though the overall advertising market was tapping off amid macro uncertainties, resurgence of COVID-nineteen and lockdown disruptions for first quarter twenty twenty two. Our leading verticals in terms of ad revenue contributions were FMCG, three c products and gaming. In terms of growth, the fastest growing verticals were gaming and luxury among major ones. Despite regulatory and the macro challenges winning on demand set, the relatively resilient performance of FMCG and third C product sectors demonstrated that Weibo's brand plus performance ad offerings resonated greatly with customers in these sectors and enabled them to build tab around the major events such as the Winter Olympic Games. For gaming sector, our cultivation in the content vertical as well as improvement of ad performance for the sector folded well for us to tap into higher ad wallet share of gaming sector.

As we said, e commerce, entertainment, and education categories booked the descending trend due to sluggish consumption data and the regulatory impact. From ad product perspective, promoted fees continues to be the largest part followed by social display ad and search and topic ad offering. Last said, as they entered mid March and second quarter, delivering national wide Omicron outbreaks and subsequent restrictions and lockdown measures have significantly disrupted the advertising market on demand side. Industries which high offline exposures, such as offline merchants and also industry cut ad budget due to suspension of offline activities and disruption of production. The restriction and lockdown in major areas in China, especially Shanghai, has also negatively impacted consumption sectors such as FMCG and e commerce, which suspended ad campaigns originally scheduled for the quarter and cut ad budget accordingly.

Additionally, we also faced the major sales and ad campaign execution challenges due to lockdown in Shanghai. As COVID nineteen resurgence rapidly involves national wide and restriction and lockdown disrupt economic activities, including production, consumption, logistics, and offline activities. Based on our current observation and our best estimate, we expect the potential impact on advertising business in the second quarter is material and even more severe than the COVID-nineteen impact on our business in 2020. Given the major areas impacted, duration of restriction and lockdown as well as the current macroeconomic condition, we are closely monitoring the evolving situation and we will make relentless efforts to mitigate such headwinds, leveraging our diverse industry mix and broader scale network coverage nationwide while doing our utmost to protect our employees, partners, and community. Despite near term challenges ahead, we are encouraged to see our user and engagement metrics remain a solid momentum, laying foundation for us to further tap into a wider demographic and increase monetization scale as business recovers.

We remain confident in our long term monetization opportunities that our unique value proposition and a diversified content ecosystem will unlock. Ad revenues from Alibaba for the fourth quarter decreased 22% to RMB25.9 million, primarily attributable to its own conservative marketing strategies amid weight consumption and lockdown, as mentioned earlier. Value added service VAS revenues were $57,500,000 in the fourth quarter, a decrease of 17%. The decrease of VAS revenues was mainly due to less revenue from less revenue contribution from membership service and a decrease of live streaming revenues. Turning to cost and expenses.

Total cost and expenses for the first quarter was $342,900,000 an increase of 7%. The increase was primarily due to first, higher personnel related costs second, step up in constant costs mainly associated with Winter Olympic Games third, recognition of culture business construction fee with LAMP of the exemption policy this year. The increase was primarily offset by a decrease of sales and marketing expenses with disciplined channel investments and reduced offline events. Operating income in the first quarter was $141,700,000 an increase of 3%, representing operating margins of 29%, exceeding our expectation as we continue to effectively balance growth and margin performance amid uncertainties. Turning to income tax, under GAAP measure, income tax expense for the first quarter was $11,700,000 compared to $14,900,000 last year.

Net income attributable to Weibo in the first quarter was $132,900,000 representing a net margin of 27% compared to 28% last year. Turning to our balance sheet and cash flow items. As of 03/31/2022, Weibo's cash, cash equivalents and short term investments totaled $3,300,000,000 compared to $3,100,000,000 as of 12/31/2021. In the 2022, cash provided by operating activities was $248,600,000 Capital expenditures totaled 8,500,000.0 and depreciation and amortization expenses amounted to $15,000,000 With that, let me now turn the call over to the operator for Q and A session. Thank you.

Speaker 0

Thank you. You. As a reminder, if you wish to ask a question, please press star one on your telephone and lights for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we can pound the question and answer roster.

Your first question comes from the line of Alicia Yap from Citi.

Speaker 1

Please ask your question.

Speaker 2

Hi. Thank you. Thanks for taking my question. My question is related to the COVID impact in the second quarter. So if management can give a little bit more detail or the color in terms of the directions that we see in April and May, what kind of the magnitude of the decline that we are seeing for the online app budget?

And what is our expectation for June and also, you know, into the second half of this year? Which industry vertical actually seeing, biggest fill back in terms of their spending, the past two few months? And then which industries, vertical that you think will actually see a a bigger rebound, once this reopening is actually happening? Thank you.

Speaker 3

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

Okay. And, also, talking about the different ad, for example, the performance ads, we can see that, especially the information flow ad, this kept quite stable in terms of the volume. However, the pricing wise, this has been a little bit reduced. And second of all, talking about those brand advertisements. So you can see that because majority of the agents are located in East China.

So I think that in terms of the budget, and this has been impacted due to the COVID. And, also, you know, talking about, the situation here, you know, since the late March, week have been seen a, driving downtrend in terms of the booking. And also talking about the April, because of the impact to the logistics as well as the execution of a lot of the projects in East China, we have been seeing a driven down trend of the brand advertisement. And also talking about May, we used to believe that it will recover very soon. And actually it was recovered very well and to the level of the March.

However, still, also in after June originally, we saw that, it will be fully recovered. However, because of another, you know, COVID, broke out in Beijing area, we've been seeing some kind of fluctuation of our performance there. And also because Shanghai just, resumed work and also all the kind of lifestyles, since June 1. So and there is a lot of uncertainty here in terms of Shanghai and also the performance in the second half. So we are not going to be as optimistic as we used to be in May.

And, also, you know, talking about the, effectiveness or the performance ad, the impact to that particular category will be the minimized. And also, however, talking about the brand customers, because they have a whole process, which is going to be followed if they want to, you know, resume the kind of a budget and also resume the advertisements in terms of the budget allocation and then the marketing plans as well as the execution, etcetera. So we expect that the brand customers are going to recover slower than the performance. Alright. And and also talking about industrial verticals, first of all, we believe that the gaming industry has been least impacted.

And also in Q2, there is a kind of upward trend going upward. And also in May, of course, we had a little bit impact because of the unavailability of the gaming license, but still, you know, that particular impact could be controlled. Okay. Okay.

Speaker 1

Got it.

Speaker 3

And, also, because 50% of our businesses are focusing on FMCG luxury products as well as the automotive industry, So you can see that, these three verticals they've been impacted heavily in, April because of COVID. However, when there was a little bit recovery of the control and also containment of the COVID in May, we've seen a very quick and also robust rebound of these three verticals. So that is to say that in the future, if the COVID could be better contained, we're going to see for example, more marketing campaigns organized by the customers in those categories or those verticals. We're going to see a very good recovery and rebound of their budget to us. And of course that's in Beijing, we've got cancellation of the auto show and this does or did impact the budget allocation.

However, this brought up with us more opportunities to the future because most of the OEMs are now moving their publish and also the launch event of their new models from offline to online. And this is exactly the same that we experienced in 2020 in terms of the mobile and also the smartphone industry. Right? So a lot of, you know, people move up their campaign from offline to online. So this is going to give us more confidence, for us to see a very good increase of the budget, especially for the automotive industry.

Got Okay. And then, next, I would like to say that, you know, talking about the, other verticals, especially those, offline activity oriented industries. So for example, the, aesthetic medicine and also OTO customers, they have been they will also receive the impact after q three even. And even if now we've got a reopening of Shanghai still there will be a little bit impact. And also talking about the mobile or smartphone industry, we also have experienced a driven down of the sales of this particular industry vertical.

Of course, in Q2, there wasn't a big impact to the smartphone industry. However, we really believe that in the future, this is going to be impacted negatively. And of course, in some if we're talking about the smartphone, this is not only the customer that we have, but also this, should be regarded as the channel, posted to the marketing and also ad. So in in terms of the expenses saving and fee saving, this actually, you know, has brought with us a positive impact. So if we are talking about the offsetting of these two parts, we are not seeing a big impact to our profit margin.

And, also, lastly, I would like to say that, you know, in q one of this year, we had about, more than half of the month of, the impact, and also in Q2, the impact, would have been lasting for about, one and a half month to two months. And also I think that, this particular impact is larger than our expectation because Shanghai just reopened itself in June 1 and also in Beijing, there are still certain areas that are having people working from home still. So and also because talking about the brand customers, they're having a longer process to follow to restart and also reboot their business. And also this require collaboration closely between publishers and also agents. So we really think that we are going to have a slower recovery of our business than our expectation in June and also the second half.

Okay.

Speaker 1

Thank you. Thank

Speaker 0

you. Our next question comes from Thomas Chong from Jefferies. Please go ahead.

Speaker 4

Management for taking my questions. I have

Speaker 0

a question

Speaker 4

regarding our cost control and the trend in operating expenses in 2022? And on that front, how should we think about our our margin outlook in the remainder of the year? Thank you.

Speaker 3

Okay. So first of all, talking about the cost control. So so first of all, are having a stricter control and also a stricter policy in terms of the ROI and also keeping it quite preservative in terms of the placement among different channels and also the purchasing of the feeds, for example. And also, you know, I'm talking about, Q1, however, still we had a stricter, rules on the appraisal of ROI, and also if the channel for example could not provide with us the returns as required within three months or six months, we are going to cancel collaboration with that channel. And also, as a result, we have been seeing a quite good performance in terms of margin in Q1.

And second of all, in Q1, we are talking about the cancellation of already the decreasing of the tax related to the culture establishment by 1.5%. And also second point is about the activity related expenses. And due to the COVID, we could not organize a lot of activities as planned. So this has saved some of the costs relating to the activities and also campaigns. However, those kind of activities are also profit making.

So this did impact our revenue at the same time. Okay.

Speaker 1

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

So amid the difficult market environment and the compound effect of numbers of other factors such as the expiration of the certain tax incentive, the culture business contract and fee will be reliable and we have to investment in some sports IP such as Beijing Winter Olympics and NBA. So we do expect a decline in operating margin compared to last year. But the management has reached a consensus that the highest priority this year is to optimize our cost structure with more disciplined channel investment and other spending strategy. Weibo as you know, Weibo has always maintained a conservative style. Our goal is improving operating efficiency with picture ROI assessment to control our overall spending and striving for higher operating leverage to mitigate the margin decline as more as possible and ultimately keep our healthy financial metrics.

Thank you so much. Thank you.

Speaker 4

Thank you.

Speaker 0

All right. Thank you. Next question comes from Tian Hou from T. H. Capital.

Please ask your question.

Speaker 1

It's about the user. So what is the eventual goal for the company to accomplish regarding the total number of the m MAUDAUs? And also, what's the company's plan in 2022 to acquire new users in China? And also how to use content operation to improve user retentions and user activity level on the platform? Thank you.

Speaker 3

So I think that this question has been answered, you know, previously while we were listing our company and also did the secondary roadshow in Hong Kong last year. So we were saying that if we were not operating any video related content and also strategies, and then the social media or the upper limit of the social media will be only 60% of that of the social network. But that was about 2013. Our time is different. Right?

So, we are now emphasizing a lot on the differentiation points between Weibo and also Twitter and also the other pure social media. And we have been doing more complicated works and also more works as well in terms of our business operation or business development, especially we're talking about a video. So, you know, the in terms of the video, the impact is actually going to be bigger than the social media. And, also, the business driving courses are going to be more as well than the social media only. So that's why that even if we've had a lot of headwinds as well as the market competition in the video content area, we're still trying to invest as many as possible.

And, if, so we believe that when we have a very key positioning and also important positioning in the video area, and then we are going to further uplift the upper limit of, the number of users and also the others. And now in terms of the total traffic and data, the video part accounted for about one third of the total traffic now we have. So this is extremely very important for us to uplift, further the upper limit.

Speaker 0

Okay.

Speaker 3

And also, lastly, I would like to say that, you know, talking about the business value of a company, this does not only related to the DAU and also NAU number, but I think it's more relevant to the activity of the users. So especially, you know, in q one, we've been saying that, you know, our total traffic has been reaching the kind of upper limit or the kind of a peak level, before any rec reconciliation and also some ratification conducted to the entertainment industry. Right? So that because, you know, activity was all about the stickiness of the users. And, also, we we really believe that, with a business model of Weibo and combining social media together with the media, hot trends, for example, This is going to be our key strategy, to be sustainable in the future.

And also in q one, because of the ratification conducted to the entertainment industry, we already said that the entertainment industry, will not be recovered until the second half, and this is still the case right now. And also, that's that's why we've been doing a lot of other works, for example, the launch of HotTrans and SuperTopics as well as the community, etcetera. So those businesses are now offsetting the declined activity that we experienced because of that change happened to the entertainment industry. And also, as a result, we are saying that, you know, MAUs and also DAUs are important, but, this is not the only thing that we are focusing. But we are focusing more on the provision of better quality services to users and also enhance the stickiness of users and enhance the activity of users and interactivity of the users as well.

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

Speaker 0

Alright. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I'll now hand the call back to miss Sandra Zhang for closing remarks.

Speaker 1

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

Speaker 0

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