Zhihu Inc.
Q4 2021 Earnings Call Transcript

Published: 14 Mar 2022

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the Zhihu Inc. Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, excuse me, ladies and gentlemen, thank you for standing by. And welcome to the Zhihu Inc. Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jingjing Du Head of Investor Relations. Please go ahead, ma'am.

[Unidentified Company Representative:]

Thank you, operator. Hello, everyone. Welcome to our fourth quarter and full year 2021 financial results conference call. Joining us today are Mr. Zhou Yuan, Chairman and CEO of Zhihu; and Mr. Sun Wei, our CFO and Mr. Neo Zhang, Head of Communities Business Division and Strategic Development. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference will be available on our website at ir.zhihu.com. I will now turn the call over to Mr. Sun Wei, our CFO.

[Sun Wei:]

Thank you, Jingjing. I am pleased to deliver today's opening remarks on behalf of Mr. Julian, Founder and CEO of Zhihu. Thank you for joining Zhihu's 2021 fourth quarter and full year earnings conference call. 2021 was a remarkable year for Zhihu. In March, we successfully completed our IPO amidst a challenging market environment and went on to complete the year with sustained, robust financial growth. Throughout the year, as part of our continued efforts to enhance content quality, we focused on promoting and distributing fulfilling content, or content that we believe broadens horizons, provides solutions, and resonates with minds. Our videolization strategy proved to be effective and brought the diversity of Zhihu’s content library to new level. This enabled content creators to contribute with even greater levels of creativity and strengthened our capabilities to meet the growing content consumption needs of our users. We continue to benefit from our commitment to deliver fulfilling content and enhance our operating efficiencies, realizing another year of strong user base growth and a more appealing content ecosystem for business owners. In Q4, our user base reached a new high in the fourth quarter, with average MAU exceeding 100 million, and a year-over-year increase of 36.4%. Our content-centric monetization approach maintained its robust growth momentum, as revenue in Q4 increasing by 96.1% year-over-year to RMB1.02 billion and the revenue for the full year increasing by 118.9% to RMB2.96 billion. And the contributions of non-advertising business increased to 62.9% in Q4. At the same time, our average monthly team members for Q4 further increased by 102% year-over-year to 6.1 million and accounted for 5.9% of total MAU. We believe these achievements are the result of not only the successful implementation of our content-centric growth strategy, but also the joint efforts of all the parties in the Zhihu community. Throughout the year, we relentlessly strive to enhance the quality of the Zhihu content through better understanding of our content creators and deeper comprehension of the Zhihu content. And we focused on promoting and distributing fulfilling content or content that we believe broadens horizons, provides solutions, and resonates with minds. This high standard has not only been the benchmark for our diverse content library, but also the cornerstone of the long term development of the Zhihu community. As of the end of Q4, the accumulative pieces of content on our platform had reached 490 million, representing a year-over-year increase of 39%, of which the number of questions and answers increased to 420 million, representing a year-over-year increase of 33.8%. As of the end of Q4, the average daily production of fulfilling content has increased fourfold compared to when we first launched the algorithm for most fulfilling content. In 2021, we also adopt a scenario oriented content operating efficiency, sorry, operating strategy to further diversify our content offerings, with this in mind, we deepened and refined our operations based on the differentiated consumption demands of various communities across the important calendar events throughout the year. These included seeking answers from science, China's Youzan and the college entrance examination in the first half of the year, and followed by the Tokyo Olympics, the autumn employment season, the Nobel Prize, the 2021, Zhihu Top 100 lists, and the year end reviewing in the second half of the year. As a result in Q4, the consumption percentage of fulfilling content in our cornerstone fields and other categories, including education increased by 3%, compared to the same period last year. This demonstrates that Zhihu's fulfilling content is resonating with students and young people in a way that meets their evolving demands for self development, and the lifestyle content. According to our recent user survey, over 90% of the monthly active users on Zhihu platform have a strong appreciation for fulfilling content. The enhanced recommendation and content consumption, coupled with the stimulated creating activities, sustainably throughout the rapid growth of our content-centric ecosystem. We seek to become a popular destination for timely content, inviting in-depth discussion of training events, which further encourages a high level of content creation, and user engagement. It is also an important category that is well suited to address the demands of users aged about 30 and help fastly drive organic user growth. As of the end of December, the number of users for timely content consumption remained about 40% of total MAU – of total DAU. Browsing, trending event on Zhihu has gradually become second nature for our users. In the fourth quarter, multi-dimensional and insightful discussions covering major international affairs, social news, and topics related to people's livelihoods were generated quickly on Zhihu, creating timely content for users. These questions generated tens of thousands of answers and more than 100 million pageviews, along with millions of user interactions. During this winter Olympics, Zhihu users have defended our titles of the master of skills and tactics in Chinese , which gained from the Tokyo Olympics. And we continue to provide professional, timely and broad based fulfilling content across various permits. Questions like, what are the highlights of the 2022 Beijing Winter Olympics opening ceremony, and which shows impressive ed you most motivated the answers directly from the opening ceremony operation team, including Director John Emo himself and received close to 40 million pageviews and 100,000 uploads within a few hours from users. In 2022, we will continue to iterate our timely content recommendation algorithm and the related products to better meet the diverse consumption needs of our users. During 2021, we further integrated video content into our vibrant ecosystem, through expanding the library of visualized answers, providing tools to facilitate text to review or join the equation. In the fourth quarter, the average number of monthly uploaded videos on Zhihu and the number of video creators increased by 211% and 32%, effectively compared to the same period last year. Meanwhile, the number of DAUs who consume the videos continue to increase and exceeded 45% in Q4. In Q4, we held Zhihu's first highly voted joint creation competition. Within less than four weeks, more than 4000 content creators participated in the competition. From using the authorized 2 million pieces of high quality graphics and text counters in our library, more than 2000 original video - video submissions were produced and received. These works covered dozens of diverse topics, including science, history, career, psychology, and extremely imaginative ideas and received over 200 million views. We firmly believe that the healthy content ecosystem it is a one that revolves around creators and fully support creator engagement across multiple formats. Moving forward, we will continue to upgrade our products and business strategy and optimize our organization structure as needed, to further increase – to further encourage creation activities. Along with our initiatives to further broaden the coverage of fulfilling content of Zhihu platform, we have upheld community culture to proactive upgrading of the community governance system. In q4, we strengthened our ability to identify non-compliant content and account involving cyber bully , rumor mongering, incitement and violence against children. With dealt with more than 4.6 million pieces of non-compliant content and suspended more than 15,000 accounts. Moving forward, we will continue to uphold our social responsibility, ensuring that the community culture of sincerity, expertise and respect is maintained for long term growth. Our user base continued a steady growth rate, driven by our healthy and more diverse content-centric ecosystem. In Q4, the average monthly MAUs on the Zhihu platform reached 103.3 million, representing a year-over-year increase of 36.4%. Our average monthly paying members reached 6.1 million, representing a year-over-year increase of a 102% and our average monthly viewers increase by 7.4% year-over-year. We have amassed a fast-growing, diverse and highly engaged user base. Currently, the vast majority of users are under the age of 30. While users from second and lower tier cities accounted for 52% of our user base, the female users accounted for 47% of it. It is worth mentioning that the organic growth of user base of new users continue to maintain a significant proportion in Q4. Also, our efforts in refining operational efficiency further accelerated the consumption in the relativity - in the related verticals, including baby care, and the lifestyles and also boosted the growth of our core users aged in the 30 years old and above. It is encouraging to see that a DAU to MAU ratio in the fourth quarter remained steady, along with the rapid user growth and the average monthly engagement increased on a year-over-year basis. Creators are one of the most important participants in our communities. They not only flourish the communities with high quality content by sharing their knowledge, experience and insights, but also gain inspiration, respect and recognition from the community by interacting with other users. Thus, in 2021, we support the creators by improving their experience within the community, launching a series of tools and functions and upgrading incentive plans for them. For example, we made several upgrades to the follow function, including an independent tab in order to support creators to better attract and interact with followers. As a result, we see a significant rise of average new followers per creators. The 16 PPC generation and the joint creation function enabled creators to utilize a more convening video creation experience. In addition, our refined operations tailored for different levels of creators effectively encouraged their engagement and multi-genre creation. Thanks to these initiatives, we saw steady increase in both the average daily activities of the highest level of content creators and their high quality productions in Q4. We also saw a rising exploration and encourage interaction among creators within the community. In 2021, we took great efforts to strengthen our ability to attract new content creators. In the rediscovery society campaign held in Q4 more than 100 annual Zhihu content creators in Chinese were selected from various fields, including science, lifestyle, social sciences, humanities, fashion and psychology. Moving to 2022, we will continue to provide effective and professional support to the creators based on their own needs and specialties. At the same time, we will further encourage the production from new creators and continues to improve their retention rates. By fostering both existing and new creators, we are confident and excited to inject even more vitality into our community ecosystem, and provide multi-scenario content-centric solutions to our brand partners. In spite of many uncertainties in the macro economy during 2021, we have focused on building a high quality content-centric ecosystem, as the foundation for our healthy and long term business development. Our total revenue for 2021 reached RMB 2.9 6 billion, representing a year-over-year increase of 118.9%, while our underlying revenue structure was further improved, and optimized. As a percentage of revenue, non-advertising revenue further grew to 60.8% in 2021 from 37.6% in 2020. Of which content-commerce solutions revenue for the year increased to 32.9% from 10% in 2020. Our paid membership business remained stable and accounted for 22.6% of our total revenue in 2021. And other revenue, which primarily is contributed by e-commerce, and vocational training related business increased by 196.3% year-over-year to RMB155.9 million. In 2021, we have further improved our commercial content ecosystem through the following steps. The first step was to solidify the infrastructure of the commercial content. By launching our chief platform and connecting content creators with business partners, we help creators to improve their own monetization capabilities, while satisfying the marketing demands of business customers, all the way from brand building to actual transaction conversion. Other tools like Post and were launched to further improve the efficiency of commercial content creation, so as to further encourage content production. As of the end of December 2021, the total number of content creators integrators who generated financial income through our content-commerce solutions exceeded 15,000. Secondly, we helped build the content tool for brands and merchants. Through a series of brand content marketing campaigns, such as Auto Lab, Curiosity Lab, and Zhihu's Top 100 list, we assisted our business partner in guiding their customers, along the journey from brand names awareness to decision-making, and finally getting user trust and sustaining business growth. In 2021, our advertising revenues achieved a yearly growth rate of 37.7%. Furthermore, we continue to explore various potential vertical content ecosystems to elevate Zhihu's overall commercialization capabilities. Vocational training is one of them. It's related content on Zhihu platform is perfectly matched to the demand from core users, aged from 18 to 36 years old. We call it second aging year of life, indicating of huge potential commercialization opportunities. Moving forward, we will continue to improve our technical capabilities to develop more user favored paid educational courses and the related content by leveraging the advantage of our Zhihu brand. On top of rapid revenue growth, we also continue to improve our operational efficiency. By adopting a smart and rational planning strategy and a continuous technology improvement plan, we can achieve both quality and effective customer acquisition and further develop our commercial ecosystem by leveraging our abundant user base and a solid technical infrastructure. Our acquisition per - our acquisition costs per additional MAU for full year 2021 was approximately RMB60, which remains relatively low compared to the whole industry. In 2022, we will continue to recruit excellent R&D talent, as we work to improve our recommendation algorithm, strengthen the construction of our data system, and solidify the technical foundation that drives the ongoing development of our community. Meanwhile, we will further enhance Zhihu's branding awareness by creating powerful IPs, such as an adventurous evening with answers in Chinese and any of Zhihu content greater ceremony, to achieve our goals across brand building and high quality user growth. As of December 2021, cash and cash equivalents, term deposits, and short term investments were RMB7.4 billion, which gives us strong financial resilience to power our future development. Stepping to 2022, through prioritizing the healthy development of our community, and the caring to our fulfilling content standards, we will be able to further improve the experience for users and creators, and inject our whole community with both trustworthiness and a sense of belonging. For example, following the improvement of products and the functions across trending topics, top searches, live streaming and video, users were able to enjoy a better consumption experience for timely content. Here is another case for content related to the Winter Olympics, and the ongoing Russian/Ukrainian war, where high quality discussions were aggregated across various format, including graphic and text, live streaming, and video, allowing users to consume content according to their own preferences. We committed to further upgrading our recommendation algorithm to ensure that fulfilling content can be introduced to users more accurately. On our creator community site, where we will enhance our initiatives to refine operational efficiency to help creators achieve their goals both in user recommendation and financial income. We believe a healthy and vibrant community will lead to more efficient and organic user base growth. In addition to the above, we will continue to explore more commercialization opportunities within vast verticals in our content library, and among our users diverse and various demands. Our emerging vocational training business is a good example, which can help us to both further diversify our business ecosystem and it contributed to drive our long term growth. 2022 may prove not to be an easy year. However, we believe that we are all well prepared and better positioned for the journey, as we continue to unlock the value of our unique content centric ecosystem and benefit from growing scale. We will continue to enhance our operating efficiency, the financial health, as well as fulfill our responsibilities to the society. This about concludes the remarks from Mr. Julian, I will now talk you through our Q4 financial performance in a little more detail. As discussed, we achieved another solid quarter of performance in Q4 2021 despite the unpredictable headwinds. In the fourth quarter, we recorded our total revenue of RMB1.02 billion, representing a 96.1% year-over-year increase. This increase benefited from a very unique content centric business model. Our fulfilling content library was further extended and diversified in Q4. This contributed to the continuous prosperity of our communities and also to the sustained growth of our user base. Our average MAUs reached 103.3 million in the quarter, representing a year-over-year increase of 36.4%. Worthy of note In q4 2021, our non-advertising business, which mainly includes our content-commerce solutions, and paid membership enjoyed accelerated growth, contributing 62.9% to the total revenue in Q4 compared to the 38.6% in the same period last year. This demonstrates not only the remarkable success of our content centric monetization model, but also the scalability of our content-commerce solutions, as well as the robust growth in demand for our other services such as paid membership and vocational training. In Q4, the revenue contribution of our content-commerce solutions increased to RMB367.3 million, representing a year-over-year increase of 380.2%. Our client base of CCS became more diversified, compared to the same period in 2020. We are also excited to see that more and more content creators are empowered by our diversified commercial platform and the tool such as Chief platform. As of the end of Q4, the number of content creators who have joined our Chief platform nearly increased 50% compared to the number in Q3. Our paid membership contributed RMB208.8 million to total revenue in the quarter, representing an increase of 100% compared to the same period last year. At the end of Q4, our average monthly paid members reached 6.1 million with a paid ratio of 5.9%. The robust growth rate of this business line was solidly underpinned by the increasing vitality within our creator community. Meanwhile, our advertising business achieved solid growth in Q4, despite of the weaker market. In this quarter, advertising revenue recorded RMB377.8 million, representing a 18.4% year-over-year increase, of which the display based advertising grabbed a greater percentage. Revenue from E-commerce, Internet Services, FMCG, Consumer Electronics and Vocational training were the top five contributors. Bolstered by our diversified content library and highly engaged community, our advertisers find it is natural and effective guide their targeted customers during the whole decision making process and to build brand trust in the long term. Other revenue, mainly, comprising of our vocational training and e-commerce achieved year-over-year growth of 230.5% on 5% in Q4, increasing to RMB65.4 million. It is worth mentioning that our vocational training business had a very strong quarter and achieved multiple times year-over-year growth. Stepping to 2022, by leveraging Zhihu's deep understanding of users needs and our brand name recognition, combined with further increased operational efficiency, we believe these new business lines will be able to continue to achieve strong growth momentum. As a UGC based content platform, we enjoyed the benefits of having a healthy gross margin of 47.1% in the fourth quarter, and 52.5% for the full year. Meanwhile, we have been investing in building a healthy company ecosystem in order to broaden and enhance content offerings for all of our users. However, we'll be very conscious of maintaining high efficiency on our cost structure. Our total operating expenses of RMB855.1 million decline as a percentage of total revenue on both a year-over-year basis and a quarter-over-quarter basis. Our operating expenses in the quarter were primarily compared of - composed of sales and marketing expenses, and the investment in human resources. Driven by the abundant content coverage and the diverse content format for the Zhihu platform, the organic growth of new users continued in Q4 and effectively promoted the health - healthy and long term development of the Zhihu community as a whole. As a result of all the above, our non-GAAP adjusted net loss, which primarily excludes share-based compensation expenses, was RMB240.8 million in the fourth quarter of 2021. While focusing on improving our cash flow management as of December 2021, the company had cash and cash equivalents, term deposits, and short term investments of RMB7.4 billion, compared with RMB3.1 billion on December 2020. So I will conclude with our overall financial outlook. Looking to the first quarter of 2022, the company expects total revenue to be in the range of RMB720 million to RMB740 million. Please do note, however, that the above outlook reflects Zhihu's current and preliminary estimates, and may be subject to change. Okay, this concludes our prepared remarks.

[Operator:]

We will now begin the question-and-answer session. The first question comes from Yingyan Zhao with CICC. Please go ahead.

[Unidentified Analyst:]

Thanks management. And I have two questions. And the first one is about how does the management think of the strategic direction of the company in 2022? And the second question is regarding the content ecosystem, especially for the content creator side and for the commercialization. So what are the potential enforcement's in the 2022? Thanks.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

Thank you very much. This is the answer from CEO, Mr. Julian. First of all in the year of 2021, we have made some concrete achievements at the current stage. In terms of content exquisite - sense of acquisition, as a sense of fulfilment, as well as medium upgrades and based on this foundation, we will put our strategic focus for the year of 2022 to ecology first.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

What do I mean by ecology first? Well, first of all, it means that there are things that we have to accomplish on top of the user number increase and also revenue number increase. What is more important and higher up on the top of our hierarchy are the experiences of content creators, the word of mouth of consumers, as well as the satisfaction level of the community hemisphere. All of these factors that I mentioned will be attest to whether or not we have done our good job. And of course, the numeric or KPIs are also very important and we'll try to also hit those targets and also reduce the loss for the year.

[Yuan Zhou:]

[Unidentified Company Representative:]

Second, in terms of the product and operations that we have, we'll try to unleash the full volatility of the community that we built. In this perspective, as I said before, a good ecosystem focuses on a couple of things. First is multi-medium of - a multi-forms of the medium, and multi-forms of monetization, and the third is end-to-end. And I'll elaborate a little bit more in detail.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

By multiple format of mediums, I meant that by using different mediums we'll be able to cater for different needs of our users in different scenarios. It's just like having a dinner, you have motor, you have you know, first appetizer and then the main course and then followed with some dessert at the end.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

By multiple ways of monetization, I mean today the popular - the creator population, they're a diversified group of population and we - as a platform, we have to be adaptive to cater for their needs and experiences, rather than having the creators coming to us and adapting to our platform.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

And last but not least, by end-to-end. I mean, we have multiple types of creators at different levels. And we would want to make sure that our platform is running efficiently and quickly so as to create a closed loop for those creators to be able to finish their content concentrations and make money. So according to this, three key factors that I just mentioned. We do have a lot of rooms for further upgrades.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

If you know Zhihu well, you may noticed already that we have made quite a lot of changes to our product last year. And through this process, we have also got quite a lot of learnings. And this year, our plan is to further reduce the level of difficultness for the content creators and also to increase the consumer experiences to have further iterations of our product. And also at the same time, we'll try to continue to allocate more resources to those who continuously creating contents that are bringing higher sense of fulfilment.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

The third point I want to make is that everybody knows that only by having healthy content, healthy commercial products, which could we are able to have, you know, continuous revenue and create genuinely valuable - useful values. And as you can see that we have a very nice CCS impressive performance on CCS and around CCS this year there are many, many more, you know, changes to production to come in a year of 2022.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

The last point I want to make is that we had already fought out our business in vocational training this year, due to the belief that we think it's a good to come supplementary to our ecosystem. And we just discovered that the demand for taking exams and having vocational training is really huge and the size is quite impressive. And therefore we will have some more progress to be made in vocational training by working with our education partners this year.

[Yuan Zhou:]

[Unidentified Company Representative:]

So as I said before, ecology first is our fourth strategy. And we believe that by implementing this strategy well, we'll have improved the numbers for years to come. And I'll direct the second question to our - Neo Zhang.

[Neo Zhang:]

[Unidentified Company Representative:]

So this is Neo Zhang, the Chief Strategy Officer responsible for the community. So for the content creators and sense of fulfilling, we will focus on the content creators, especially the original content creators by creating - by giving them better creation tools through our product and our technology and to support them to have multi-medium formats of expression, so that to help them work better.

[Neo Zhang:]

Okay.

[Unidentified Company Representative:]

Second is about the traffic and benefits innovation schemes, especially for those who are with us for the longer time in cornerstone areas, we would have some new schemes in terms of benefits in order to supplement with the cheese system and the influx system that we already have, so as to benefits those creators with a better traffic and better monetization.

[Neo Zhang:]

Okay.

[Unidentified Company Representative:]

As to the standard of sense for fulfillment, we had already completed the preliminary algorithm for that. And we have deeper understanding as to the content and capacity of our content creators, so that we'll be able to have a higher efficiency and better control of costs, in terms of the supply of content, all the way up to the distribution of the content. And for those content creators different areas and at different levels, we'll be able to create sorts of better areas of our communication through our algorithm improved, so that we have both squares and also clubs.

[Neo Zhang:]

Okay.

[Unidentified Company Representative:]

By way of summary, just as our CEO Julian said, we'll continue to have ecology first and continue to help our content creators to support them for their content creations and to give them some very nice, you know, monetization mechanism.

[Operator:]

Are we ready for the next questioner?

[Unidentified Company Representative:]

Yeah, please.

[Operator:]

Thank you. The next question comes from Natalie Wu with Haitong International. Please go ahead.

[Natalie Wu:]

Thank you very much. Management, thanks for taking my question. My question is related there about online advertising, industry update to you on the advertising from your perspective. So just wondering what's the latest trend and outlook for the online advertising industry in China and for most specifically for traditional brand ad performance based ad and CTS et cetera? Also for the specific industry in terms of the user advertisers, just wondering any particular - particularly stronger or weaker on a year-over-year base to – your perspective of view, and how is your exposure for that? And also in terms of the full year of 2022, how should we think about your growth with advertising business, also the CCS? Thank you.

[Unidentified Company Representative:]

Hello. Hello?

[Operator:]

Yes, we can hear you Grace, please go ahead.

[Unidentified Company Representative:]

I think we have problem hearing the call, can we check.

[Operator:]

Just one moment please. Thank you. I'm still trying. Excuse me, we have re-joined the speaker location. Please go ahead. I believe the answer to Ms. Wu's Question.

[Unidentified Company Representative:]

Yeah, yeah. Hi, Natalie.

[Yuan Zhou:]

[Unidentified Company Representative:]

Thank you very much, Natalie, for your question. We actually have made two observations in terms of online advertisements recently. First is because of the uncertainty surrounding macro economy, the politics, as well as regulation. The general environment indeed has made some negative impacts on our clients marketing budgets. In the past couple of quarters, you see that the total size of their marketing budget probably dropped quite a lot. And the second is that we noticed that there is a major structural change to the marketing budget of our clients, more and more budget - more and more marketing budget switching from traditional media platform towards content platforms that has better and higher qualities of our contents, including content community, like us. Therefore, our clients they focus more and more on making long term investment in building their brands and also to make accumulations of high quality content assets. And during this switching or a shift of structural budget shifts, community - content community, high quality content community like Zhihu we are actually benefiting from this trend.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

So, against this backdrop, we see that CCS, plus advertisement as a model for us is giving us three nice growth for instance, year-on-year growth for the whole year '21 increased by 180% and fourth quarter year-on-year increase was 88%.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

Structure wise we see advertisement is still the number one source of revenue we had. In Q4 we had a faster growth rate than the industry average and for the whole year we reached around 40% in advertisement increase.

[Yuan Zhou:]

Okay.

[Unidentified Company Representative:]

In terms of the brand advertisement, we see that is growing even faster at about 50% for the whole year and as a percentage to total online advertisement revenue it is also growing and getting a bigger part. In terms of verticals, we see e-commerce, FMCG, we see electronics and automobiles are growing very significantly, which is very unique and characteristic to Zhihu, because we believe that these two areas they are closer to the consuming scenarios of the users and also closer to people's consuming decision point.

[Yuan Zhou:]

[Unidentified Company Representative:]

CCS is still the biggest driver for growth in Q4 increased by four times and for the whole year about six times. CCS is highly scalable and it is highly growth-oriented. I believe that this has been proven too.

[Yuan Zhou:]

[Unidentified Company Representative:]

In terms of the content creators, they - by using the cheese platform they entered into our ecosystem for CCS and will be able to scale up more significantly and meaningfully so that they can have a better you know income. By the end of the fourth quarter, the total number on cheese platform is 15,000 of creators.

[Yuan Zhou:]

[Unidentified Company Representative:]

We are benefiting with better and better word of mouth. In terms of the CCS we are seeing those - the number of brands and merchants who are working with us on the rise. Vertically we see e-commerce and personal care are the two biggest verticals, whereas Internet service and vocational training are showcasing very nice driving force.

[Yuan Zhou:]

[Unidentified Company Representative:]

So overall speaking for both advertisement and CCS, we have e-commerce, three C vocational and gaming of this categories put together accounting for 80% plus of the total advertisement revenue. And then the e-commerce, Internet service, automobile and three C's quarter-on-quarter they registered a growth rate ranging between 20% to 60%. So that's very impressive.

[Yuan Zhou:]

[Unidentified Company Representative:]

For the year 2020 Q1, we thought that the growth will be over 50% year-on-year and for the whole year we expect it to be 60% to 65%, which will be higher than the industry average.

[Yuan Zhou:]

[Natalie Wu:]

In terms of full year growth

[Yuan Zhou:]

[Natalie Wu:]

Got it…

[Unidentified Company Representative:]

For the whole year outlook we're talking about 60% to 65% growth, which will be higher than industry average. And in terms of contributor size, CCS will be probably the biggest contributor by taking up about one third of the total, following up with you know advertisement and paid membership also on the rise.

[Operator:]

Are you ready for the next question please?

[Unidentified Company Representative:]

Yeah.

[Operator:]

Thank you. The next question comes from Steve Qiu with Goldman Sachs. Please go ahead.

[Steve Qiu:]

Okay, I'll briefly translate myself. Thanks, management for taking my questions. So I've one question on behalf of future buy regarding vocational education. So understand that this business is still at the national stage, but could management share with us some high level thoughts and in terms of how actually manufacture or create high-quality educational content on a sustainable basis. So except for the content that already on our platform, how we actually cooperate with our industry partners, is there going to be done through M&A Or is going to be created by our partners and then we will be the publisher of this education content? And last but not least, could you please share with us some of the data points, such as the growth profile, the revenue mix, as well as the margin content?

[Yuan Zhou:]

[Unidentified Company Representative:]

Answer from CEO, Julian. Well, actually for the vocational training business, in our mind, we believe that this is a real demand generated genuinely within the community as we see it over the years. And we see that there is a mid to long term - long tail education system that is gradually taking shape in our community from the demands generated from our users. By way of example, in our master's examination part we see an active for DAU you have about 1 million or even higher than 1 million, so the demand is real and huge.

[Yuan Zhou:]

[Unidentified Company Representative:]

As I said before, the contract is something we see in our system. We think that the people who are very active if we want to pursue like a professional certificates and use it as a forum to talk to like minded people, and they also talk about their hobbies, their skills, and how they can achieve a certificate or improve their skills in our community. So we could provide greater support to those people based on our content.

[Yuan Zhou:]

[Unidentified Company Representative:]

We believe that community that we have built already is a very good platform in order to generate an ecosystem specifically for education and community can serve as an entrance - as an entrance for people to take up you know, the content with regard to education that they required.

[Sun Wei:]

[Unidentified Company Representative:]

From CFO Mr. Sun Wei, in terms of numbers, education or vocational training in 2021, the size increased by five times year-on-year and in terms of percentage is still rather small at the beginning. So we put that under the category of Other income. However, in the year of 2021, in Q1 we thought that increasing to more than 5% and for the longer term, we believe that they have a potential of taking up about 20% of our total revenue.

[Sun Wei:]

[Unidentified Company Representative:]

In terms of types of products or categories of a product that we have developed for training, in terms of exam we have master's entry examination, we have civil-service examination in China. We also cover different types of professional skills, such as CFA or CPA or FRM. We also have business English training or writing skills training.

[Sun Wei:]

[Unidentified Company Representative:]

In terms of infrastructure building, we had already completed the mid office required for Zhihu education. For instance, we have this CRM education system that will be able to cover the whole value point from content creation and distribution of content. So in the future either we can run it ourselves, operate it ourselves or we can acquire a partner and very quickly and efficiently incorporate the business into our own system as an infrastructure.

[Sun Wei:]

[Unidentified Company Representative:]

And also specifically to Stevens question before, all the courses that we have for the time being are 1P instead of 3P but maybe there will be 3Ps in the future.

[Sun Wei:]

[Operator:]

Thank you. Did that answer your question? Thank you. That concludes today's question-and-answer session. At this time, I will turn the conference back to by to Jingjing Du for any closing or additional remarks.

[Unidentified Company Representative:]

Thank you, operator. Thank you all again for joining us today. And if you have any further questions, please contact our IR team directly or TPG Investor Relations. Thank you.

[Operator:]

Thank you. The conference has ended. You may disconnect your line.