Weibo - Earnings Call - Q4 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to Weibo reports fourth quarter and fiscal year twenty twenty financial results conference call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded. I would now like to hand the conference over to your first speaker, Sandra Zhang, Weibo IR.

Thank you. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Weibo's fourth quarter and fiscal year twenty twenty earnings conference call. Joining me today are our Chief Executive Officer, Gao Phi Wang and our Chief Financial Officer, Fei Cao. The conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management remarks, I'd like to read you the Safe Harbor statement in connection with today's 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 statement. Weibo assumes no obligation to update the forward looking statement 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. We will assume no 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 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 future prospects. Our non GAAP financials exclude certain expenses, gains and losses and other items that are not expected to result in future cash payments or are nonrecurring 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. Knowing management prepared remarks, we'll 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 fourth quarter and fiscal year twenty twenty earnings conference call.

On today's call, I'll share with you highlights in Weibo's user product and monetization, review the progress made in 2020, and elaborate our strategies for 2021. Let me start with our fourth quarter financial results. In the fourth quarter, our total revenue increased 10% to 513,400,000.0, mainly attributable to less impact from COVID-nineteen pandemic to the advertising business as well as our efforts to optimize the competitive strategy for brand and performance ad business. Advertising and marketing revenue reached 453,500,000.0, an increase of 12% year over year with 91% of our ad revenue coming from mobile. In the fourth quarter, non GAAP operating income reached 204,100,000.0, an increase of 12 21% year over year, representing a non GAAP operating margin of 40%.

For full year 2020, Weibo's total revenues reached 1,690,000,000.00, a decrease of 4% year over year. Advertising and marketing revenues were 1,490,000,000.00, a decrease of 3% year over year. Non GAAP operating income reached 579,600,000.0, representing a non GAAP operating margin of 34%. On the user front, Weibo semi, you reached 521,000,000, and average DAU reached 225,000,000 in December 2020. 94% of Weibo's MAU came from mobile.

As we review 2020, we faced two major challenges. First, on the user front, although the pandemic in the first half of the year brought brought us large scale of user to consume pandemic related news and hot trends, it had an active impact on the content generation of entertainment vertical and certain other areas such as tourism and sports, which resulted in less user engagement in this sector. With progress made on the pandemic control, we adjusted our strategy accordingly in the second half of this year, putting more emphasis on our core competence in hot trends, social functions, and video. So far, we have seen an uptick of our overall traffic in the first quarter compared to last December. Second, our monetization.

The pandemic has hit some sector of our business hard early last year. However, with a well controlled pandemic situation and the recovery of the admin, Weibo's social marketing value proposition earned wider recognition among brand customers, leveraging our unique marketing offerings such as hot trends, celebrity and KOL marketing, as well as brand plus performance solution. As a result, our brand ad revenues delivered solid refund in the second half of the year and achieved double digit growth year over year in in Q4 with number of branding customers standing with us setting a new record. For performance ad business, despite certain pressure from advertisers and the market competition, the decrease of our performance ad revenue in q four further narrowed compared with prior quarters, mainly thanks to the fully upgraded ad billing system, SuperFST, and continued robust growth in gaming and education sectors under the brand plus performance model. Next, let me share some color on our progress in product monetization in q four as well as lay out key initiatives for 2021.

Speaker 0

On the product front, starting from q four last year,

Speaker 1

we further enhanced Weibo's differentiated competitiveness in hosting and social attributes. Coupled with efficient channel strategies, we stabilized our user scale and further drove user engagement. Concurrently, we also beef up our investment in the video sectors to strengthen users' mindset of using Weibo for video consumption so as to enhance our competitiveness in user acquisition. On the channel front, in q four, we optimized channel strategy for new and recalled users combined with hot trend and topic products. When hot events occur, we'll encourage media accounts and KOLs to discuss around topics through product and operating mechanism, providing real time topic related content to users.

With the opt optimized strategies, we further enhance the platform's confidence in this recall and retention through hot trends, bringing our strength in in content offering into full play. Taking the New Year's Eve as example, the number of New Year's Eve related posts to pass a 120,000,000, up 77% compared with last year, and recalled more than 16,000,000 users back to our platform. On the social front, for these users recall through hard events or channel investment, we focus on improving their consumption desk and user frequency in a relationship based feed. To elaborate, we focus on improving user experience in relationship based feed to data mining on quality social content based on several dimensions, such as intimacy of social relations, frequency of visits, and amount of discussion by followers, etcetera. With such quality content offer, we could further deepen their consumption as well as enhance user user retention.

Additionally, we focus on enhancing diversity of content distribution in the information feeds in order to drive user sickness, interaction, consumption. For instance, in the fourth quarter, we extended real time consumption of video content through the simultaneous distribution in our core feeds. As a result, we set the time stamp per user on a post video recommendation feed increased over 30%, and the effective video views post post each recommendation increased over 10% compared with

Speaker 2

q

Speaker 0

three.

Speaker 1

On the video front, in 2020, we reinforced our product offerings and operation mechanism and attracted a great number of quality video content creators to Weibo. In the 2020, we launched the video account program to incentivize Weibo's top content creator to shift toward video content generation so as to encourage more video production and consumption. We saw a significant uplift in the number of video accounts. Currently, the number of registered video accounts has surpassed million, among which over 15,000 video accounts already have more than 1,000,000 followers per each. By verticals, there is a good proportion of video produced by top content creators in the media and variety show verticals.

But we are if you need to increase that to many other sections on the platform. This year, we will continue to improve the overall experience for video accounts, scale up video content generation among top content creators, as well as strengthen the effective distribution of video content in feed and video community so as to boost the video content consumption and improve the platform's overall video content ecosystem. Let me briefly lay out our strategies for 2021 on the product and operation front. We seek to extend user base and engagement from the flow in three aspects. First, on the channel investment, leveraging our comparative advantage in user acquisition costs will ensure channel investments through traditional channels and focus more on channel investment to improve user engagement while strengthening the synergy between channel investment and subsequent content consumption and thereby increasing user engagement and retention.

Second, on core con competence, we will continue to solidify Weibo's competitive note as a leading social media platform. From product perspective, we'll improve core features of hot trend and social interactions and improve user stickiness and interaction among users core user groups. On the content system side, we will step up our efforts to empower top content creators to monetize within our ecosystem, which will in turn stimulate their content generation and interaction with fans, driving Weibo's user engagement. Finally, on video content, through video account, we will accelerate the transformation of videos key Weibo's key content creator group toward video creation and promote the supply and consumption of Weibo's video content. And meanwhile, we are focused on content operation on key verticals such as TV series, variety show, and gaming verticals to cultivate users consumption behavior through our differentiated video content offerings and further extensive users loyalty to the platform through videos.

On the monetization front, our KA ad revenues in q four is 18% year over year. The rapid recovery of k KA business in the second half of the year were mainly driven by the following factors. First of all, from the perspective of the marketing environment, most industry sector have returned to normal operation in the second half of the year and gradually resumed ad placement, except for a few sectors such as entertainment and tourism that has not fully recovered from a pandemic. And meanwhile, the pandemic has further driven ad hoc shift from offline to online with our top brand customer and also the also those emerging brands embracing Internet platform as their major, campaign arena. Secondly, k eight clients have shifted more of their budget from TV and long form long form video platforms to social and short video platforms, allowing you the user engagement shift.

With this trend, social platform had more strength in k a, k a marketing. Finally, in k a advertising, Weibo highlights its marketing strength based on KOL content IP and the brand plus performance offering, leveraging its robust accounting ecosystem. For one thing, we facilitate better content money marketing for top k eight clients. For another, we lower ad placement barriers for brand customer, especially mid tier customers through brand plus performance ad offerings, and thus deliver better ad efficiency. For example, through, throughout 2020, we had nearly a thousand content marketing project, leveraging hundreds of celebrities, thousands of KOLs, and more than 30,000 KOCs to participate in brand content based campaigns, achieving way better results than pure branding campaigns.

Moving on to SMEs. In 2020, we continue to see intense competition in the performance end market. That said, our SME and revenue is 65% year over year in the fourth quarter, improving from last quarter in terms of any trends. Let me briefly recap our progress made in our in our performance sector in this in the year of 2020. On the ad product front, first, we focused on enhancing the overall efficiency of our real time bidding system, namely SuperFST and further optimizing its algorithm.

Second, we launched several advertising tools such as and ad solution which enables marketing content, content posted by celebrity and KOLs to reach a more accurate target group instantly. Leveraging the influence of celebrities and heroes, we can maximize the campaign effect while reducing customer cost at the same time. On on a sales operation operation front, first, we optimized the SME sales model for key industries to directly serve more clients so that we could respond, respond to, and fulfill clients' needs more efficiently. Secondly, we further led agency to improve their service capabilities and transform into service providers. Third, we offer industry specific ad solutions to improve ad performance for different industries, leveraging our operational capability around topic and events.

We simply key implementation of these above mentioned strategies. We saw a robust growth in gaming and education sector this year, maintaining a triple digit growth year over year in the fourth quarter. In the second half of the year, we gradually expanded such industry specific solution to Internet service and some offline auto owned industries to capture to capture a higher wallet from key industries. In 2021, we will continue to enhance our monetization skill and efficiency from the following aspects. First, our ad products based on Weibo's unique attributes as a social media platform with younger users.

We will continue to strengthen the competitiveness of our social ad products and further capture brand plus performance budget and the KOL marketing ad dollars to reach more emerging clients as well as obtain incremental budgets from middle tier and top clients. Hopefully, both client member and ARPA could serve as drivers of our growth. Second, on sales operation, we will further develop our industry specific solutions and support our industry based sales team to improve operational efficiency from aspects of sales policy, operational synergy, product optimization, and service capability, etcetera. As such, we could improve our wallet shares through more diversified drivers from industry perspective. Finally, on ad technology, building on the upgraded super FST, we will continue to optimize the ad targeting and the conversion rate of OCPX so as to increase the placement efficiency and ROI for clients.

Coupled with the full funnel ad optimization, Weibo is well positioned to improve our eCPM in 2021. And meanwhile, we'll strengthen our video ad technology and monetization efficiency to gradually unleash the potential of video traffic monetization. To sum up, in 2021, with more money monetizable traffic generated from the growth in user base and engagement, we will step up our efforts in ad products, sales operation and ad technology to increase Weibo's monetization skill, efficiency and the market competitiveness. With that, let me turn the call over to for a financial review for the fourth quarter and the twenty fiscal year twenty twenty.

Speaker 3

Thank you, and hello, everyone. Welcome to Weibo's fourth quarter and the fiscal year twenty twenty earnings conference call. Let's start with user metrics. In December 2020, Weibo's MAUs reached 521,000,000, representing a net addition of 5,000,000 users on a year over year basis. Free cash average BUs reached 225,000,000, representing a net addition of 3,000,000 users on a year over year basis.

Mobile MAUs represented approximately 94% of total MAUs. As a reminder, my prepared remarks was focused on non GAAP results and old comparisons on a year over year basis unless otherwise noted. Now let me walk you through our financial highlights for the fourth quarter and fiscal year twenty twenty. Weibo's first quarter twenty twenty net revenue was 713,400,000.0, an increase of 10%. Operating income was 204,100,000.0, an increase of 21%, representing an operating margin of 40%.

Net income attributable to Weibo reached the 212,700,000.0, an increase of 21%, representing a net margin of 41%. Diluted EPS was 92¢ compared to 77¢ in 2019. For full year 2020, total revenue reached 1,650,000,000.00, a decrease of 4%. Operating income was 579,600,000.0, a decrease of 12% representing operating margin of 34%. Net income attributable to Weibo reached 547,500,000.0, representing a net margin of 32%.

Diluted EPS was 2.38 compared to 2.78 in 2019. Let me give you a color on our first quarter and full 2020 revenue growth. Advertising and marketing revenues for first quarter twenty twenty were 453,500,000.0, an increase of 12%. Mobile ad revenue reached 413,800,000.0, representing 91% of our total ad revenue, up from 88% last year.

Speaker 0

Full year 2020 advertising and

Speaker 3

the marketing revenue reached 1,490,000.00, a decrease of 3%, with mobile ad revenue contributing 90% of total ad revenue, up from 87% in 2019. Despite unprecedented challenges from COVID nineteen and resulted full year single digit revenue decrease. We are pleased to see solid recovery in the 2020 and depend by the overall added demand pickup in the domestic market. Rest of new economy bringing incremental marketing demand as well as our relentless efforts to capture new ad budget and additional ad worthy share of existing fans. Let's start with k eight.

In fourth quarter, our k ad revenue was 226,800,000.0, an increase of 18% or 26% excluding the impact from faster transaction. Our paid business booked accelerated year over year growth with the number of brand advertisers spending with us reaching a new record. Industry wise, the recovery momentum for our key business continues to be broad based with key sectors such as FMCG and automobile closed the year on a higher note. On sleep debt, entertainment, travel, and real estate sector remain pressured. As the sporadic COVID nineteen cases in China, in part, postponed the recovery pace of new sectors in late twenty twenty.

Full year 2020 k ad revenue reached 741,500,000.0, an increase of 2% or 9% excluding factor impact, This is an industry percent of Weibo's total ad revenue. Our case business demonstrated resilience against the past market environment, speaking to Weibo's unique value proposition to brand customers. Weibo has gradually become the cornerstone of many advertisers' marketing fans as they offer for for no marketing solutions to serve their branding plus performance needs. In 2020, we also notably captured incremental ad volume through our differentiated KOL marketing tools as well as unique products, such as search and a copy of products, as it resonated well with customers' demands. Looking forward, with continuous recovery of ad demand and opportunities brought forth by new economy, We continue to see headroom in expanding our customer base as well as potentials to continue to implement our ad work.

We believe we are well positioned to solidify and further uplift our competitive needs in the brand advertising market. Turning to SME. In the fourth quarter, Weibo's SME ad revenue was 167,200,000.0, a decrease of 5%. We continue to narrow the year over year decline rate, leveraging the net momentum of online sectors, particularly gaming, education, and e commerce. That said, certain offline customers continue to face headwinds, particularly amid sporadic outbreak of COVID nineteen cases in multiple areas in China.

Full year SME ad revenues was 592,700,000.0, a decrease of 16%, representing approximately 40% of Weibo's total ad revenues, mainly due to significant impact on COVID nineteen, especially for offline sectors as well as competition having. Although the performance ad market in 2020 was challenging in many ways, we may strive in expanding OCPX coverage, driving video ad penetration, as well as developing integrated industry specific ad solutions, which all aim to enhance our ad performance. We are delighted to see this initiative already bear fruit in early stage with the gaming and education sectors booking triple digit growth this year. The early momentum for these two sectors demonstrated the Weibo's potential in delivering relatively competitive ROI in the market, Leveraging our unique status in integrating Weibo's resources, in content, QL, and traffic. Ad revenues from Alibaba in fourth quarter were 59,500,000.0, an increase of 57%, reflecting our cooperation with Alibaba to track value for both platform brands and merchants during the peak ecommerce promotional season.

Full year ad revenues from Alibaba were 152,000,000, an increase of 55%. Apart from the fact that 2019 was relatively low base, The momentum of Alibaba ad revenue also reflected our efforts in serving integrated marketing demand for both platform brand and market. That said, ad spend from Alibaba highly correlated to its own business operation, especially its marketing strategies, which may change from time to time. As communicated earlier, we cannot assure that such robust growth will be sustainable in future. Value added service, VAS revenues, were 59,900,000.0 in the fourth quarter, a decrease of 4%.

The decrease was primarily resulted from the decrease of live streaming business and was partially offset by the revenue contribution from the interactive entertainment company acquired and consolidated to the company in November 2020. Full year 2020 VAS revenues were 203,800,000.0, a decrease of 14%, mainly resulting from a decrease in lab streaming revenue. Turning to costs and expenses. Total costs and expenses for fourth quarter was 309,300,000.0, an increase of 3%. The increase was primarily due to higher personnel related costs and step up in marketing spend and was partially offset by a decrease in general and administrative expense.

Full year cost and expenses totaled 1,110,000,000.00 compared to 1,100,000,000.00 for 2019. Operating income in the first quarter was 204,100,000.0, an increase of 21%, representing an operating margin of 40% compared to 36% last year, reflecting our solid recovery post health COVID nineteen and our capability of delivering decent margin profile amid market competition. Operating income for full year 2020 was 579,600,000.0, representing operating margin of 34% compared to 37% in 2019. Turning to income tax and the GAAP measure. Income tax benefit for the first quarter was 25,300,000.0 compared to an expense of 31,100,000.0 last year.

Income tax benefit was primarily due to the recognition of preferential tax treatment for certain of the company's PRC subsidiaries as well as reverse of recognition of the further tax liabilities in prior periods related to certain investments. Full year income tax expenses was 51,300,000.0 compared to 109,600,000.0 in 2019. The decrease was primarily resulting from changes in the further tax liability related to fair value change on investments. Net income attributable to Weibo in the first quarter was 212,700,000.0 compared to 176,500,000.0 last year. Net margin was 41% compared to 38% same period last year.

Net income for full year 2020 was 547,500,000.0, representing a net margin of 32 compared to 36% in 2019. Turning to our balance sheet and capital items. As of 12/31/2020, we booked cash, cash equivalents, and short term investments totaling 1,500,000,000.0 compared to 2,400,000,000.0 as of 12/31/2019. The increase was primarily due to net proceeds from 750,000,000 senior notes issued in July 2020 for general corporate purpose and cash provided by operating activities and was partially offset by the investment activities we made during 2020. In the first quarter, cash provided by operating activities was 321,200,000.0.

Capital expenditures totaled 8,400,000.0, and depreciation and amortization expenses amounted to 2,700,000.0. On a full year basis, cash provided by operating activities was 741,600,000.0. Capital expenditures totaled 34,800,000.0, and depreciation and amortization amounted to 32,100,000.0. We delivered approximately 706,800,000.0 free cash flow in 2020, an increase of 30% year over year, representing our capability of delivering high profitability and generating strong operating cash flow. Lastly, let's talk about our financial outlook.

We anticipate our 2021 revenue to increase by 25% to 30% year over year on a constant currency basis. This forecast also reflects Weibo's current and preliminary view and is subject to change. With that, let me now turn the call over to the operator for the q and a session.

Speaker 0

Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key.

Your first question comes from the line of Tianhu of Teenage Capital. Please ask your question.

Speaker 3

Has already elaborated our 2021 strategy. Can you elaborate a little bit in detail about your outlook in the user growth and as well as your channel strategy? Thank you.

Speaker 2

So relating to this question, before answering the question about 2021, let's talk about the issues that we had in 2020. So for example, due to the COVID-nineteen, that we really had a historical high or reaching a peak of those number of users in Q1. But actually, normally in the past, after consuming some of our products like the hot topic products or hot trend products, those consumers or those users are going to leave with us and retain with us to further consume the entertainment and also the other vertical related products. But actually, because of the COVID nineteen, in the 2020, we had a very good management and also the restrictions on the entertainment related product consumption. So the retention rate of those kind of customers or users dropped.

So those are the major reasons causing us to have a decreased number of users in q two and q three majorly. So in q four, we have been doing some kind of a work, for example, increasing the investment to the user acquisition cost. And also, we really, you know, increased some kind of a prioritization in order to attract and also retain those kind of users. And, also, you can see that we have been doing some kind of things right now because, you know, rather than paying attention to MAU, now we pay more attention to the total consumption as well as the frequency of the consumption specific. So we can interpret that into the following kind of the parameters.

For example, DAU and also some kind of frequency of the consumption and also the total scale of the consumption. So that is actually now going to really, you know, help us to improve our competitiveness as well as our kind of inventory of the monetization. And also, you know, in terms of our strategy in the future in 2021, we treat really would like to focus on the following items. So first of all, we had our traditional advantage in terms of acquiring those users through our hot trends. So in the past in 2020, actually we had some of the issues occurred in terms of increasing the retention ratio and also helping the users to actually stay with us more and consume more frequently.

So actually in twenty twenty one Q1 and also later this year, we're gonna further emphasize on these two particular points. So that is to say, first of all, emphasizing on the consumptions related to the relationship based feed. And, also, we are going to encourage those video accounts to actually publish more videos and also help and trigger the consumption around the videos by the users. So actually through these kind of ways, especially through videos, we're going to really help to increase the retention ratio of our users. So, actually, you know, we are very confident in overcoming the difficulty and also get ourselves improved in later this year.

And also, lastly, I want to say that in terms of the 2021 trend. So first of all, talking about the year on year comparison, because we had a very high historical figure in 2020. So it's not that meaningful for us to compare. But actually, are very confident to realize a month to month growth in twenty twenty one Q1. And also another thing is that in terms of our channel strategy, we're going to really focus on increasing the retention ratio of our users and also really help to build a very good and also healthy growth on the number of users.

So we are very much confident in driving the traffic and also driving the activity and also the retention ratio of the users in 2021. Appreciate it.

Speaker 3

It's very helpful. Thank you, doctor Zong. That's all my questions.

Speaker 0

Your next question comes from the line of Miranda Zhuang of Bank of America. Please ask your question.

Speaker 1

Thank you. Thank you for taking my question. So my question is, can you please share the ad spend outlook for the 2021? And what kind of your ad products and services will particularly gain traction and gain the incremental budget allocations among your k and SME clients across different industry sectors? Thank you.

Speaker 2

And so let me answer this particular question. So first of all, in twenty twenty q four, we have been seeing a very good recovery of our k customer, especially we returned to the triple digit growth. And also we although had a year on year decrease on SME in Q4, but still that particular decrease rate has been reduced. And also further in 2021, we're going to really see a kind of a very good growth on the brand customers, especially the FMCG and also automotives as well as the luxury as well. And also in 2021, we're gonna see also a very good growth for entertainment as well.

And also next part is about the SME. So this year, for example, we're seeing a very good trend for gaming or, Internet service as well as online education, etcetera, etcetera. But actually, we're not quite sure whether or not we're going to see another doubling effect or doubling results of the gaming industry this year. And also talking about the other traffic diverting related SMEs, Without a very strong demand on branding, actually in 2020, we were talking about those O2O or e commerce businesses. We had a little bit not that ideal performance in 2020, but still in 2021, we are going to see a further intense competition in the area that I mentioned.

And, also, next part is about, the product. So based on the social, nature of the Weibo, so we are going to really focus continuously on the kind of the strategy of the brand plus performance and also the content and also IP based marketing strategies. So based on this particular content marketing as well as the strategy of brand plus performance, we have a very good advantage in gaining the budget from the top notch customers. And also, we do see that the kind of short video is actually a very big competitor to the OTT area. So we can see that in this particular thing, we do see that those customers from OTV actually had a very high requirement over the kind of a content and also the IP as well as the famous KOLs in this area.

So based on the unique advantage of Weibo in terms of the IP and KOLs and celebrities, we are very much positive to actually have the advantage of those LTV converted or transferred budget and gaining that. And also next part is that we had also a very good development in terms of our information flow, like the super FFT has been upgraded further. So we're gonna see a kind of a triple digit growth on OCPX as well as well. And also the gaming as well as the education as to verticals are increasing dramatically and also because of our upgraded algorithm in this particular area. And also talking about those particular customers, they do have the requirements not only to gain traffic, but also they would like to do some kind of a brand promotion work.

So because of that, we are seeing that in 2021, we're very much positive to actually have that particular development, especially talking about the c customer and ecommerce and also Internet services, etcetera.

Speaker 1

Okay. Thank you.

Speaker 0

We'll take the final question from Alice Yap of Citigroup. Please ask your question, Alice Alicia.

Speaker 4

Oh, hi. Good evening. Thank you for taking my questions. Also, congratulations on the results and the guidance. My question is related to the app inventory and also the competitive landscape.

So how does management, you know, elaborate the situation you are seeing in 2021 versus last year in terms of the ad pricing pressure and the app the supply for these app inventory as compared to last year and even, you know, as compared to 2019? And also, any comments on the margins trend for 2021? Let me translate very quickly.

Speaker 2

So first of all, talking about the ad inventory. So before, in the first question and answer to that first question, I already mentioned that actually this year, in terms of our strategies for the users, we are going to actually see that more of our investment and also the product related strategies are going to focus more on the DAU and also the consumption frequency of the users and the per capita consumption traffic of the users from the previous laser focus on MAU. So that's to say this particular DAU increase and also more frequency of the consumption of users will definitely drive the development and growth of the ad inventory. However, currently speaking, based on the Q1 result, it's very difficult for me to give you a kind of forecast about this particular ad inventory in 2021, especially for Q1. And of course, we do have seen very good growth on the other video platforms.

But still, we are very much focused on increasing the DAU and also the frequency of consumption of users, and these strategies will definitely bring a growth on the ad inventory.

Speaker 3

In terms of your margin question, I

Speaker 1

will try to take this question. This is a

Speaker 3

brand new growth as our primary goal, and at the same time, we want to enhance our competitiveness of our platform. So we may increase our investment in marketing channels compared to last year 2020. So on this basis, we expect our operating margin can still reach rather than the high level that is to say maybe no less than 30%, but there still will be a certain decline. Maybe we expect the decline will within single digit, maybe 5% compared to the level of last year. So in summary, in this year, the company's overall strategy is mainly focused on improving our revenue growth and continue to improve the competitive need of the platform at the user product level.

So at cost and expenses level, the main areas of investment will be increased. It will include the marketing channel investment. In last year, 2020, due to the epidemic and other impact, market channel investment was conservative. That is down from the year 2019. So considering the competitive user market and the leveraging Weibo's relatively advantage in user acquisition cost, we will ensure our coverage of basic channels such as free installation and focus on increasing the investment in user engagement.

And another area is personnel related cost. To maintain in order to maintain our competitiveness in the market, in some key department, such as our advertising business department and our r and d department, there are certain personnel increase, headcount increase, and also the salary raise. So last year, due to the impact of that pandemic, the company also enjoyed some government benefit. This will impact our margin this year. So in summary, they expect our margin will be dropped from year to year.

Mhmm.

Speaker 1

Okay. Thank you for the color.

Speaker 3

Thank you. Yes. Thank you. Thank you.

Speaker 1

This concludes our conference call today. Thank you for joining. We'll see you next quarter. Bye bye.

Speaker 0

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.