Weibo Corporation
Q1 2020 Earnings Call Transcript

Published: 19 May 2020

[Operator:]

Thank you for standing by, and welcome to the Weibo's First Quarter 2020 Financial Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to Sandy Zhang, Weibo Investor Relations. Please go ahead.

[Sandra Zhang:]

Thank you, Operator. Welcome to Weibo's First Quarter 2020 Earnings Conference Call. Joining me today are Chairman of the Board, Charles Chao; our CEO, Gaofei Wang; and our Senior Group CFO, Bonnie Zhang; and our VP of Finance and Interim CFO, Fei Cao. The conference call is also being broadcast on Internet and is available through Weibo's IR website.Before the mentioned remarks, I would like to read you the Safe Harbor statement in connection with today's conference call. During today's call, we will 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.We will assume no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding these 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'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 nonrecurring in nature or will not be 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'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang.

[Gaofei Wang:]

Thank you. Hello, everyone and welcome to Weibo's First Quarter 2020 Earnings Conference call. On today's call, I will share with you highlights on Weibo's users, products, and monetization, as well as progress we've made on our key initiatives in 2020.Let me start with our first quarter financial results. In the first quarter, our total revenue reached $323.4 a decrease of 19% year-over-year or 15% on a constant currency basis. Advertising and Marketing revenues reached $275.4 million, a decrease of 19% year-over-year or 16% on a constant currency basis, 89% [ph] of our ad revenues came from Mobile.On the user front, Weibo's MAU grew 18% year-over-year to $550 million in March 2020, representing a net addition of approximately 85 million users year-over-year. Average daily users grew 19% year-over-year to 241 million, representing a net addition of approximately 38 million users year-over-year. This is the highest reported year-over-year user growth to date in terms of net addition of MAUs and DAUs. 94% robust MAU came from Mobile.This quarter, amid the coronavirus outbreak in China, Weibo demonstrated its indispensible value as a social media platform leveraging unique strength in serving public conversations between government, media and general public. We are delighted to see strong growth in both use and traffic to our platform with [indiscernible] growing 50% year-over-year. On monetization front, advertisers in broad range [ph] cutback or suspended their ad budgets in response to the business disruptions resulting from the pandemic in short or mid-term.That said, this is all now behind us, as we have the pandemic has driven the transformation of the larger industry and their marking approach presenting long-term opportunity to both our customers and us coupled with ramp up in traffic Weibo is well positioned to further grow its social ad wallet in the long run.In discussing our operating activities for the first quarter, I will elaborate on progress made in areas of product monetization. The strong growth in users and traffic in March was mainly driven by similar [ph] stress and public conversations related to the COVID-19 pandemic. To be specific first it is a difficult season for Weibo to grow users adding group user engagement around Chinese Spring Festival. Second, we have responded to the pandemic.Weibo had to [indiscernible] operating resources and the product development to enable wider dissemination of official information from government and media, bringing professional opinion and discussion to the public, and more importantly, help general public to seek quick response from government agencies. This initiative allowed us to acquire users at a relatively lower cost and further solidify our company's ads in the market. Now I will elaborate.So [Indiscernible] in order to give people timely update of the pandemic, Weibo has facilitated official information dissemination from over 70,000 media outlets and government agencies in the form of video and live streaming and responded quickly to launch the COVID-19 feed within recommended feed and discovery zone.In the first quarter, the pandemic view total by media and the government reached nearly 6 million with total views over 400 billion. On a daily basis over 200 million users can stream pandemic related content among which 70 million users consumed COVID-19 feed. And the daily views of pandemic related content exceeded 12 billion and meanwhile we allowed 50 renews [ph] verifying nearly 1500 new Weibo accounts of medical experts, medical care staff, patients and their family members and helped in accumulating approximately 150 million followers through content distribution on Weibo.Second, on vertical content. In the early stage of the pandemic, Weibo has proactively encouraged platforms content creators to participate in the distribution and discussion around the pandemic related content. As the pandemic evolved, Weibo has diversified content outflow from some of our users to initiating online events with stay at home themes across its verticals, such as entertainment, food and humor, aiming to alleviate public anxiety over the pandemic and encourage youth to return to normal life. As a result the number of daily quotes by top content creators in the first quarter grew over 50% year-over-year and shopping for hot non-pandemic related verticals resumed to the pre-pandemic level.Let's talk about Video and Live Streaming business. For video, we are ramping up our mechanism around those PGC and UGC video content this year. In March, our daily video views and the number of users who consume videos at Weibo grew over 30% year-over-year driven by the over traffic flows and growing products improvement.On the UGC video front, we have further optimized user consumption experience, enhanced distribution efficiency and reinforced traffic support for UGC video content and thus enhanced our monetization efficiency around the video content. The daily video views of UGC videos grew 50% quarter-over-quarter leading to over 50% sequential growth in our revenues from UGC videos.On PGC video front, we further optimized social interaction experience through ramp up on the layout of PGC video main page. These had robust growth in the user content and interaction on the main page compared to the previous one. Meanwhile, we have restructured the video community through adequate [ph] video consumption [indiscernible] one which recommended [indiscernible] video, one which is popular one and inserted one with vertical UGC videos.Since the rollout of the new version in early April, we are glad to see profits change [ph] in terms of user retention and the video consumption, which in turn encouraged professional video content creators to upload content on Weibo. And moreover, benefiting from user search demand for video consumption during the pandemic, along with our further optimized content offering mechanism, our video community has gained recognition from users and content creators. In March, PGC content creators who uploaded content on Weibo reached nearly a million with the daily video growth growing over 20% quarter-over-quarter.Moving on to live streaming, driven by the pandemic, robust live streaming product saw wider adoption in an increasing number of vertical scenarios, as enterprise, celebrities and [indiscernible] our platform quickly embraced live streaming too as a desirable communication channel. With this understanding we beefed up our investment around live streaming from both product and operational fronts.[Indiscernible] by the showroom and the e-commerce live streaming facilities, we already had last year. In addition, through facilitating over 30,000 corporate and media live events around the pandemic we encouraged our partners and clients to go live on Weibo such as in the Kids [ph] online concert and product launch events. We also leveraged short video clips and KOLs to distribute and raise awareness at our diverse events leading to better promotion results for our content partners and the customers.For instance Weibo, together with Tencent Music hosted the first virtual live concert for the famous singer, Rene Liu. This live concert itself drew over 10 million total views with nearly 300 celebrities and KOLs creating publicity for the event. We also edited highlights of the concert into short video clips as a way to achieve wider distribution for the event. We are pleased to deliver over 100 million views on the video clips and over 700 million views on related topics.This distinct advantage we have around our live streaming video event promotion in which Weibo's counter offerings. In the first quarter the total number of the live video exceeded a million, double from the same period last year and going forward we will continue to optimize our products and improve content distribution efficiency through more traffic support and further enhance marketing efficiency for our clients through more diversified offerings.Lastly, let me talk to the progress we made on Oasis. The pandemic [indiscernible] impact [indiscernible] and limited content generation by certain degree. However, as people's lives in domestic areas gradually returned to normal, we saw the active user and content generation at Oasis in April resume to the pre-pandemic level and continued its growth trajectory, even without large field channel marketing activities. We will further optimize user products, primarily video content generation and distribution on top of the total community and further drive user growth and engagement with proper channel enhancement.Weibo's advertising revenues decreased by 19% on a year-over-year basis or 16% on a constant currency basis due to the adverse impact from the coronavirus pandemic.Our KA revenue decreased due to [indiscernible] were 18% excluding negative impact from currency translation and barter transaction, as several industries which were directly hit by the domestic coronavirus outbreak, cutbacks or suspended their overall ad budget in the first quarter. That's the case with the movie industry where the withdrawal of new movie release left nothing to be promoted. And meanwhile, with the epidemic evolving into a global pandemic, there were other industries such as in the case of cosmetics and luxury brands, who deferred their expense following the delay in new product launch caused by the global supply chain destruction.On the flip side, the pandemic has further driven the ad budget shift from offline to online. Industries that were traditionally opted for offline product release have begun piloting to the online model, bringing forth new opportunities as well as in the top line growth for us in the long run.Taking Auto [ph] as an example, we piloted quickly and rolled out an online product launch solution to address Auto's [ph] need to release its new model, Find XP. We successfully built [indiscernible] through the HD live stream event. Leveraging improved the watching and interaction experience, rich traffic exposure compounding influence of over 3000 KOLs. The ad solution resonated greatly with our customers delivering over 1.8 billion total views on related topics.The success will continue with Opos [ph] showcase the potential of the online past launch during the pandemic and does entice other customers from the handsets and auto sector to have a choice.We believe that [indiscernible] will continue to migrate their advertising from offline to online. And furthermore, we expect notable trends of integrating marketing featuring elements of live streaming, short video, e-commerce and KOLs. In light of this trend, we have focused on our ad product upgrades in order to further enhance our social ad wallet share.Let me answer SME, SME ad revenue decreased 23% year-over-year, or 19% on a constant currency basis. On the one hand, the pandemic has put pressure on the move to outline motions who flash marketing spend in response to the pandemic due to disruption in work and logistics from the quarantine.On the other hand, the pandemic has structurally benefited a few industries, which delivered much better results than we had expected. For example, ad revenues from the online education and gaming sector grew by triple-digits on year-over-year basis in the first quarter. We took the opportunity to tap into a broader customer base, notably in the education, cloud and gaming sectors with the pandemic accelerating internet penetration in our daily life.Our differentiated value proposition lesson [ph] well among those customers with an integrated branding plus user acquisition objectives. For instance, traditionally, customers from the online education vertical came to us mainly for commercial purpose and then our feedback. During the pandemic, market leaders such as Yuanfudao and TAL also reached with brand awareness on top of this acquisition.With this understanding, our sales team adapt quickly by rolling out an integrated branding plus performance ad solution and leverage the synergy with the vertical content operational team to deliver on both the branding and plus acquisition expense, but this entry with ad solution earned great recognition from SME customers.On top of that, we also made strides in improving our service capability to top customers while continued enhancing our feed ad offerings. As such, we see potential headroom in growing our SME ad revenues, built upon such integrating blending plus performance needs.Finally, let me share some color or progress around ad products. On the programmatic buying front, mainly [indiscernible], we focus on delivering higher ROI for customers for introducing deep learning to improve the automatic bidding process. As a result, ad spend through OCP ads grew over 50% on a sequential basis. For gaming and education industry, if we put more efforts on optimizing algorithms OCP ad spend accounted for over 60% of the total assets. On the video side, over the years, we have gradually enhanced our monetization efficiency around video underpinned by the healthy growth in the user, who consumes video content as well as the overall video view.We are encouraged to see substantially higher revenue contribution from ads in video format this quarter. That's a chunk part of the incremental ad inventory released to video consumption. We may unpack or undermine highs. To address this opportunity, we have been continuously innovating our video ad offerings.For instance, in the second quarter, we are upgrading our watch plus [ph] series of video ad products by introducing more direct response features to the video playing page, such as watch plus download, watch plus purchase, watch plus flowing and watch plus H5 serving, et cetera. Such direct response features will give you a shortcut to the conversion end, leading to optimize ad performance around short video and filters. Consequently, we believe these initiatives can further help marketing efficiency on our SME customer on Weibo.With that, let me hand it over to Fei Cao for financial review.

[Fei Cao:]

Thank you, Gaofei and hello everyone. Welcome to Weibo’s first quarter 2020 earnings conference call. Let's start with user metrics. In March 2020, Weibo’s MAU reached $550 million, representing a net addition of approximately 85 million users on year-over-year basis. Weibo’s average DAUs reached 241 million representing a net addition of approximately 38 million users on year-over-year basis. This is the highest reported year-over-year user growth to date in terms of net additions of MAU and the DAU, demonstrating Weibo’s indispensable value as a leading programming platform in China, and further solidifying our strategic mode in the China internet space. Most MAUs represented approximately 94% of total MAUs.Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results and all comparisons are on a year-over-year basis, unless otherwise noted. Now let me walk you through our financial highlights for the first quarter of 2020. The unprecedented COVID-19 had a broad impact on our business operations, revenues and expenses in the first quarter of 2020.Weibo’s first quarter 2020 net revenues were $323.4 million, a decrease of 19% or 15% on a constant currency basis. Operating income were $74.1 million, representing operating margin of 23%. Net income attributable to Weibo were $67.4 million, and diluted EPS was $0.30.Now, let me give you more color on revenues. Weibo's advertising and marketing revenues for the first quarter of 2020 reached $275.4 million, a decrease of 19% or 16% on a constant currency basis. Mobile ad revenues were $246.4 million accountability approximately 89% of total ad revenues up from 85% last year.Moving on to KA. In the first quarter, Weibo’s KA ad revenue reached $127.6 million, a decrease of 24% from 21% on a constant currency basis. Excluding the product transaction revenue impact KA ad revenues would have decreased 18% on a constant currency basis. The performance of KA ad business in the first quarter is generally in line with our expectations as pandemic has an overall adverse impact on our business since late January,On the postage side [ph] with gradual stabilization of the spread of virus domestically since much, we saw general recovery trends from the trough in February. From industry perspective, consumer staples such as food and beverage fared well and increasing degrees [ph] during the challenging period.Moreover, the pandemic has also altered people's way of life with more time spent online which accelerated trend of advantage shift from offline to online, leveraged on this with a solid performance of ad spend from handset and automotive sectors, our platform especially in March as there are growing demands from these advertisers to promote products and service online.Social media platform is [indiscernible] positioned in barter shift as it builds direct connections between brands and potential customers, and to a large extent, take a vital role in brand marketing funnel through engaging platform influencers in the marketing process.On the flip side, the global situation of the pandemic in global areas still pose uncertainties to the macro-economies and the impact on advertising budgets of those with higher exposure to global business operations and supply chains, that have led to industry.Ad revenues from Alibaba for the first quarter were $27.6 million, an increase of 66% or 73%, on a constant currency basis. The slow momentum of Alibaba advertising business lacks the resilience of the e-commerce giant against the challenging environment, as well as our strong cooperation in driving value for brands and merchants to achieve fair brand recognition and fast sales conversions through integrated branding campaigns on both platforms.Turning to SMEs. In the first quarter, Weibo’s SME ad revenue reached $120.2 million a decrease of 23% or 19% on constant currency basis. In the first quarter [indiscernible] divergence [indiscernible] industries amid the pandemic. The hardest hit sectors are offline categories which lost marketing trends in the first quarter [indiscernible] slowed in the COVID-19 outbreak.E-commerce sector had experienced drop in February and under the recovery trends is much of what the assumption and logistics compacting input helping mitigate, the decline has been significant impact in marketing side by gaining online education factors led to the advantage of the rising internet usage during the pandemic quarantine.We also made progress in delivering integrated service and driving the adoption of [indiscernible] the big and more SME slice especially as we mentioned online sectors which led to a relatively stable life as pricing trends on sequential basis despite the cost trends in ad demand.Value-Added service net revenues were $48 million in the first quarter, a decrease of 17% or 14% on a constant currency basis, primarily due to the decrease of [indiscernible] and worse partially offset by increase in membership revenue.Turning to costs and expenses, total costs and expenses for the first quarter decreased 5% to $249.4 million. Operating income in the first quarter were $74.1 million representing operating margins of 23% compared to 34% last year. After disciplined funding response to pandemic we largely offset this impact on revenue side impacted quarter.Turning to income tax and the GAAP measure. Income tax expense for the first quarter was $15.9 million compared to $21.1 million last year. The decrease which possibly resulted from the reduced earnings and was partially offset an increase of the effective tax rate, primarily due to the expiration of the preferential tax treatment on one of the company's [indiscernible] series in 2020.Net income attributable to Weibo in the first quarter was $67.4 million representing a net margin of 21% compared to 32% last year.Turning to our balance sheet and cash flow items as of March 31, 2020. Weibo’s cash, cash equivalents and short-term investments totaled $235 billion, compared to $2.4 billion as of December 31, 2019. In the first quarter of 2020, tax provided by operating activities was $63.6 million. Capital expenditures totaled $700 million and depreciation and amortization expenses amounted to $6.8 million.Now let me turn to financial outlook. In light of the uncertainties from the pandemic and the drastically changing market conditions, we anticipate our second quarter 2020 net income, net revenues to decrease by 7% to 12% year-over-year on a constant currency basis. This forecast 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&A session.

[Operator:]

Thank you. [Operator Instructions] The first question today comes from Alicia Yap from Citigroup. Please go ahead.

[Alicia Yap:]

Hi. Thank you. Good evening management. Thanks for taking my questions. Congrats on the solid results. Can management elaborate on the recovery status and also the budget readiness for the KA account versus the SME? And any specific trend you're seeing from multinational KA accounts showing more cautious in spending and if you could give some colors on major industry, but because how are some of the impacted factors seeing the recovering trend and their willingness to spend? Thank you.

[Gaofei Wang:]

First let me share some color on Weibo’s first quarter performance and recovery that we have seen so far. For KA business we actually saw healthy year-over-year growth trends. In January prior to the coronavirus outbreak, prior to active coronavirus outbreak since last late January [indiscernible] involving Chinese revenue cutback, [indiscernible] impact to the pandemic entering into April since getting normalized with domestic epidemic being effectively contained and business resumption underway. Accordingly, we are seeing a sequential recovery of ad spend from those advertisers with either flattish or modest growth trend on an annual basis. However, now the national brands probably would take a more cautious [indiscernible] aspects given the impact it is having from pandemic in the home market, which might have a ripple effect on China ad budget.So FMCG industry, consumer staples such as food and beverage turned out resilient and exhibit a general stabilized trend in the first quarter. While the [indiscernible] such as cosmetics and personal care subsector largely impacting the first quarter as severe customers reduced or postponed their ad spend in the action to the delay in the new product launch. For the second quarter, ad budgets from the top customers in FMCG verticals are picking up sequentially.Also the [indiscernible] of the sectors revenues from [indiscernible] actually increased year-over-year in the first quarter despite disruption in the introduction of offline promotion in the first quarter. During the pandemic we have introduced online product launch solution to further tap into the partnership from offline to online sectors. And looking ahead, I think mobile handset introduction really compensated in the domestic area and this accelerated trends of the budget partnership from offline to online.So we will further emphasize on optimize the cost to the sector and capture the ad dollars from the handset factory. And we actually saw a nice growth of the handset sector [indiscernible]. And for the auto sector [indiscernible] to the global supply chain. The global pandemic disrupted auto production and may cause uncertainties to the ad budget for the sector in the second quarter.For the e-commerce sector, I think [indiscernible] the logistics and reduction, and we believe the e-commerce will see further uptake as the Q2 is industry's traditional peak season.Lastly on the food brands and [indiscernible] sector, these two sectors were significantly impacted by the pandemic in the first quarter. And we also anticipated, then we put an attitude to what [indiscernible] coming back to - jewelry industry as operational pressure and demands and softening caused by the pandemic in these sector growth. And for the entertainment, which we also anticipate similar kind of slowing due to impacts of the pandemic and also the regulation impact.For the SME business, the pandemic has actually totally benefit for our sector. Among which the gaming and education vertical delivered a very strong growth, doubles numbers since last year and that should see more adaptation. Leveraging the synergy between our product and operational team we piloted quickly to fulfill our customer's integrated branding, plus the use acquisition, helping us to capture additional ad dollars from the online sector.As we enter into April and May, which were presumption underway. Users on time spent had gradually normalized and we did see some products or expense with gaming and education category on a sequential basis. Well, on any basis growth trends still are encouraging. And on the flip side, the offline industry such as the wedding service and the medical service is [indiscernible] during the pandemic period, which offset Weibo's growth of the online sector and we might also take a while to publish some of these offline sectors.Moving on to Alibaba we are delighted to see nice growth from Alibaba in the first quarter. So one thing the e-commerce sector demonstrated resilience and solid recovery during the period. We took the opportunity to capture additional ad budgets from the Alibaba ecosystem such as from [indiscernible] the cloud service, building and [indiscernible]. We have built in our strategic collaboration with Alibaba in average of funding plus performance ad and e-commerce live streaming. These initiatives amplify with Alibaba's advantage in social e-commerce and [indiscernible] provided that to the conversation for [indiscernible] within Alibaba's ecosystem. With public development, with ad offerings a better explanation by Alibaba leading to growth in the Alibaba aspects.From a full-year perspective, we have enhanced our company [indiscernible] system such as live streaming [indiscernible] offering. And we expect a solid ad growth from ad in Alibaba sector in the second half upon normalization after the outbreak. However, in the SME sector, despite nice growth in our inventory and a strong performance in the gaming and education sector to our product optimization, we still see some pressure on the side especially for the offline sectors, and we also are seeing the pressure on the supply side with oversupply of inventory especially from the [indiscernible] platform. So with that over SME performance for the full year is still some industries are having and also in tight market competition.

[Alicia Yap:]

Okay, thank you.A - Gaofei WangOkay, thank you.

[Operator:]

Thank you. The next question comes from Binbin Ding of JP Morgan. Please go ahead.

[Binbin Ding:]

Good evening management. Thanks for taking my questions. My first question is regarding the competition in the ad market. I think in last year, one of the major concerns among investors is the oversupply of ad inventory. And many of them just to mention that again, how does management view the supply-demand situation in this year especially post the COVID-19? Will there be any changes to the competitive landscape because of the pandemic?And I have a follow-up question on the potential opportunity from the COVID-19. So have you identified any new the behavior changes during the pandemic, and I think you mentioned a number of new initiatives, such as live concert online for that launch. Can you elaborate on the topic and how is Weibo positioned to capture these opportunities? Thank you.

[Gaofei Wang:]

Worldwide is the answer for, I already mentioned and an over advertized market with some softness on the demand side, especially for the SME sector and oversupply of inventory in the market. And we are very well positioned for capturing the opportunity brought by the partnership from offline to online as the leading social media platform. We have influence on media, celebrity and the KOL [indiscernible] and we also have a very strong growth in our overall user base and also the – you know we can also tap into new opportunities with the online product launch, which we're hoping to capitalize on that partnership. And we do see [indiscernible] to improve our product monetization maturation rate consistently in traffic feed and the growth of our platform.And the pressure we see from the platform is the feed is a few challenging offer and surely the platform and we will focus on three areas to improve our overall ad impact in the market to upside the [indiscernible].First, [indiscernible] shall we see the integrated vending class performance at a high change it is very influential in the market and it also adds – we keep focus on for our products and operations.I have made an overall ad budget CapEx led by the pandemic. We expect the key customer to - and that's more on the commercial front on top of spending needs. If a new product launch and various e-commerce related promotion by brands is becoming kind of must have scenario in their budget allocation. For new product launch, as I mentioned earlier our product, all in product release resonate as well with the handset customers and we are also penetrating through the FMCG vertical as well. And for e-commerce really the promotion by brands. We will have to reinforce our social ad offers and social e-commerce ecosystems, and basing our corporation with [indiscernible] helping leading users purchasing intent, intention KOL marketing, as well as sales conversion, which enables us to attract incremental [ph] from KA customers.On the other hand, our top SME customer also have incremental branding needs on top of their traditional performance driven objectives. In fact, base incremental branding budget was one of the main drivers for the growth of the gaming and education customers in the first quarter. And we also cooperated with our activity on KOL sources and also integrated branding customer solution to our customer leading to significant uptake in our competitive ads among these two industries, especially the online education sector with the consumption upgrades and we will offer more integrated spending towards performance ad solution to our top SME customers.Besides the branded class performance trends, KOL marketing is a very important channel as well and labels [ph] key differentiation in the market.Though we may have some disadvantage for the advertising campaign for the short video platform, but we have a very plenty of celebrities and KOL resources on our platform and it is a very important social asset in facilitating a brand recognition for self-conversion and plays a very crucial role in enhancing the conversion performance of the ad. And so we put a public social feature enabled peel-off mocking content to achieve a viral reach and also help them to accumulate social assets and help to differentiate our ad product in the market.In the second and third quarter, we upgrade our KOL marketing system performance at ad offerings, and to advance our facility and capability between customer and KOLs as a step towards - to differentiate us in the performance market. We'll also drive up adoption of the KOL marketing provided that customers from daily seem to find the optimal match for the container.For the ad technology, we are focused on driving the [indiscernible] improving ad technology through LTE [ph] apps adoption and the ultimate enhancing our conversion performance, which largely helps to [indiscernible] ad product in the first quarter. And on the other side for our which kind of product, which is the updated version of the social based products, it also helps us to improve the conversion kind of effects for the product and our platform with the [indiscernible] of this kind of watch class product.In terms of the pandemic high starts have also changed the use behavior, we see a very meaningful increase of the traffic and also the user content generation kind of activities. But what we found from the summer vacations is actually is that a person is seeing a much live content being promoted on the platform and also using increasing more time spent on the platform.On the content generation side, we see a lot more live broadcasting coverage on the vertical area, other than the typical segment in the past with strong out of the live broadcasting show on the media and e-commerce we see significant expansion of the vertical in segment in using live broadcasting tools.We look at the number of live broadcasting we hold on our platform. This number is over a billion which is more than double over the same period of last year, 80% of high, then the quarter-over-quarter basis. And these is the live broadcasting events we're focused on the e-commerce, the media and the enterprises level.Yes, from a short-term perspective, we see quite limited revenue growth can be directly derived from the live broadcasting growth. Even for the showroom live broadcasting, we anticipated, there will be a short-term reduction in revenue in the foreseeable future. However, we believe with the more adoption of live broadcasting e-commerce and such as live concert, there will be increased demand from brands to participate in events like this.So we look at the enterprise and the e-commerce live broadcasting with where we are converting demand into our standard products and to push to the care enterprise for them to using live broadcasting for self channel to facilitate their brand.In terms of media, celebrity and live concert broadcasting, so far they have been providing quality content and potential commercial inventory to us. We are a typical buyer of these commercial inventories. Even though at this moment, we have very limited exposure, the brand revenue for the second quarter, however we believe in the second half of this year more brands will likely to looking to these types of inventory to have an opportunity to present themselves.At this moment, most of live broadcasting was more focused on the content generation and from a user consumption perspective has brought quality content to the platform, where we're promoted to commercialize or monetize deep content to try using different trial products.

[Operator:]

This concludes our question-and-answer session. I’d now like to hand the call to Ms. Sandy Zhang for any closing remarks.

[Sandra Zhang:]

Yes, thank you, operator. This concludes our call. Thank you for joining us. We will see you next quarter.

[Operator:]

This does conclude our conference for today. Thank you for participating. You may now disconnect.