Categories Earnings Call Transcripts, Technology

Weibo Corporation (WB) Q1 2021 Earnings Call Transcript

WB Earnings Call - Final Transcript

Weibo Corporation (NASDAQ: WB) Q1 2021 earnings call dated May. 10, 2021

Corporate Participants:

Sandra Zhang — Head of Investor Relations

Gaofei Wang — Chief Executive Officer

Fei Cao — Chief Financial Officer

Analysts:

Alicia Yap — Citigroup — Analyst

Alex Xie — Credit Suisse — Analyst

Thomas Chong — Jefferies — Analyst

Alex Ko — Morgan Stanley — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to Weibo’s First Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I’d now like to hand the conference over to Ms. Sandra Zhang, Weibo Head of IR. Thank you. Please go ahead, ma’am.

Sandra Zhang — Head of Investor Relations

Thank you, operator. Welcome to Weibo’s First Quarter 2021 Earnings Conference Call. During today our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the Internet and its 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 conference call. During today’s conference 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. Weibo assumes 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 20-F and other filings with the SEC. All the information provided in this press release is current as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law.

Additionally, I’d like to read you — I’d like to remind you that our discussion today includes certain non-GAAP measures, which excludes 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 excludes certain expenses, gains, or losses and other items that are not expected to result in future cash payments or are non-recurring in nature or not indicative of our core operating results and our outlook. Please refer to our press release for more information about our non-GAAP measures.

Following management 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 — Chief Executive Officer

[Foreign Speech] Thank you. Hello, everyone, and welcome to Weibo’s first quarter 2021 earnings conference call.

[Foreign Speech] On today’s call, I’ll share with you highlights in Weibo’s user product and monetization in the first quarter of 2021.

[Foreign Speech] On the user front, Weibo’s MAU reached 530 million and average DAUs reached 230 million in March 2021. And 94% of Weibo’s MAUs came from mobile.

[Foreign Speech] On the monetization front, in the first quarter of 2021, our revenue increased 42% year-over-year to $458.9 million, mainly thanks to the further recovery of market demand and the optimization of competitive strategy for key indicators. Our advertising and marketing revenue increased 42% year-over-year to $390 million with 92% of our ad revenue coming from mobile. Our non-GAAP operating income in the first quarter reached $137.5 million.

[Foreign Speech] Next, let me elaborate on the focus made in the area of product monetization in the first quarter.

[Foreign Speech] On the product front, since the start of 2021, we further enhanced Weibo’s differentiated competitiveness in key features, such as hot trends and social function. Coupled with effective channel strategies, we have further improved our user engagement concurrently to beef up our investment in video product to strengthen users’ mindset of using Weibo for video consumption, so as to enhance our product competitiveness.

[Foreign Speech] On the channel front, we step-up our channel investment with the focus on improving user engagement by leveraging Weibo’s competitive advantage in user acquisition costs, while strengthening the synergy between channel investment and subsequent content consumption, and thereby, improving user engagement and retention. In the first quarter, we expanded the channels and improved the content recommendation efficiency and the consumption experience of acquired user by focusing on algorithm optimization. Moving forward, we will continue to improve user acquisition efficiency while focusing on increasing user retention, content consumption and monetization efficiency, so as to improve our hyper [Phonetic] user acquisition.

[Foreign Speech] On the product front, I would like to elaborate on key initiative on Weibo’s information feed and video. On information feed, our objective in 2021 is to enhance Weibo’s key social features and competitiveness, and thus, drive user stickiness and interaction among Weibo’s core user group. In the first quarter, for relationship-based feeds, we focus on the data mining, on quality social content to improve the social attribute and the content diversity, and thus, effectively promoting user consumption and retention. Meanwhile, we step-up our investment in social interest products.

To elaborate, in the first quarter, we improved the integration of the Super Topic into the core feeds, optimizing the interest test for the users to discover and consume Super Topic. For gaming and campus verticals, we also strengthened the interactive features of Super Topic to improve the community’s life, which led to a notable increase of user engagement traffic in Super Topic on a year-over-year basis. Super Topic traffic in the first quarter increased by nearly 40% year-over-year, which generated more social content for relationship-based feed and increased the users’ social stickiness on Weibo.

On interest-based feed, in the first quarter, we focused on the technology — technical upgrade of the recommendation system, as well as algorithm, which combines the behavior characteristics of users from different channels and in different scenarios to experience the feed content recommendation. As a result, users content consumption experience has been improved than we saw a steady increase in the user scale and traffic from the previous quarter.

[Foreign Speech] On the video front, in 2021, we will accelerate the content videolization [Phonetic] for Weibo’s content creators through video account mechanism and thus, improve the production and consumption of Weibo’s video content, while strengthening users mindset of using Weibo for video consumption. In the first quarter, we upgraded Weibo’s video account product, improving the consumption experience in all video feeds and lowered the entry barrier for content creator to participate in the program. As of now, we saw a notable increase of content creators — content — registered video account, which exceeded 5 million, among which the video accounts with over 1 million followers, each exceeded 25,000.

By verticals, entertainment and lifestyle-related verticals remain at our core. As of March, for those video accounts with over 10,000 followers, approximately 60% of the account and video views generated are from entertainment and lifestyle-related verticals. Also, we are pleased to see the rapid videolization strength among certain knowledge-related verticals, including popular science, law, and education, serving a good document to the existing graphic and text content ecosystem of Weibo.

On live streaming, in the first quarter, we launched the feature of Joint Mic [Phonetic] live streaming, which enables the interaction between multiple content creators and users through live streaming. Hundreds of KOLs have joined the test run, with enhanced interactive features versus traditional live streaming, Joint Mic performed well in both user retention and time spent. In the second quarter, we plan to launch the Joint Mic live streaming with top media outlets, cooperating with KOLs to strengthen Weibo’s brand recognition in the live streaming market.

[Foreign Speech] Before moving on to monetization, I’d like to touch upon on the adjustment we have made on segment disclosure. We used to classify our ad business by customer type since our IPO, mainly KA and SME segments. The disclosure measure could help categorize customer with distinction in ad spend and marketing demand. For instance, the marketing demand for KA customer is usually brand focused, while for SME customer, it is usually performance-driven. Nevertheless, with development of the advertising industry and Weibo’s business as well, the distinction between KA and SME segment has become increasingly blurred.

On the one hand, customer across those segments has an increasing demand for brand plus performance ad products. On the other hand, there is no clear distinction of the amount of ad spend by KA and SME. Therefore, we are also deemphasizing such distinction in our internal management by integrating the two sales teams, while increasingly focusing on development of vertical industries, fulfilling each customer’s comprehensive content needs, as well as the competitiveness of all our products in the market, and thus, to be consistent with internal management, we will no longer provide segment disclosure by KA and SME since the first quarter of 2021.

[Foreign Speech] Let me share with you more color on our strategy of monetization and progress made so far. In 2021, we will further strengthen the competitiveness of our social ad products, solidifying industry-specific marketing confidence and acknowledge the potential and efficiency of traffic monetization so as to improve Weibo’s monetization scale and market competitiveness.

[Foreign Speech] From an industry perspective, in the first quarter, our ad revenue increased by 42% year-over-year on a low base due to the pandemic last year. It also represents 14% growth, compared to the first quarter of 2019 before the pandemic, which speaks to the recovery of the overall market environment recovery, as well as our efforts to strengthen Weibo’s capabilities to directly serve customers across key industries, marketing-oriented services and differentiated marketing strategies. In particular, we’re delighted to see a robust year-over-year growth in key industries, backed by our further enhanced competitive advantage.

To elaborate, in FMCG sectors such as food and beverage and beauty and personal care, we put celebrity and KOL marketing and brand plus performance solution into full play, delivering a notable year-over-year growth in revenue. In those automobile and handset sectors, we are seeing changes in market landscape, with more emerging brands and shorter intervals between new product release in the first half of the year. In response, we fully utilized our advantage in promoting new product for customers to hot trends, resulting in our outperformance of revenue growth of these sectors versus the overall ad business on a year-over-year basis.

In luxury category, most top brands customers have shifted their marketing focus towards the domestic market. Therefore, we strengthen their marketing mindset to promote new products through live streaming and with the celebrity and KOL endorsement, and thus, increasing the revenue in the first quarter by triple-digit year-over-year.

In the education sector, we did see a pull-back on marketing demand due to a tightened regulation, while keeping an eye on the subsequent impacts. We are also strengthening the combination of Weibo’s unique ecosystem and strategies to encourage customers to try out our content marketing solutions.

[Foreign Speech] On the ad products, in the first quarter, we prioritized on continued optimization of products that leverage Weibo’s advantages in brand plus performance content marketing, such as promoting feed product with KOL celebrity marketing concepts and promoted trends and topic products. Not only could these products help increase brand awareness for customers, it could also fulfill customer’s performance-driven needs, which largely increase the recognition of this product solution amongst performance customers. In this quarter, the number of customers who had ad spend on either celebrity or KOL marketing or promoting trends and topic products grew notably year-over-year with revenues contributed from the past delivered [Phonetic] strong momentum as well.

And meanwhile, for online service and gaming verticals, while continuing to optimize the algorithm, we upgraded the entire advertising experience and optimized the ad performance for app download customers. For example, we optimized the app download ad and installation link and improved download and installation rate. As a result, the app download increased significantly after the solution was launched.

On video ad, in the first quarter, the ramp up of traffic from video accounts last for a small video ad inventories and also attracts more customers through to advertiser through video, and thus, video ad as a percentage of total ad revenues continue to ramp up this quarter. Going forward, we will fine-tune the scheduling and distribution of the monetizable traffic and allocate quality and compatible traffic to customers with a stronger performance demand and greater market potential so as to maximize the efficiency of traffic monetization.

[Foreign Speech] Lastly, I would also like to touch on Apple’s recent implementation of the App Tracking Transparency policy since the launch of iOS 14.5, under which new apps are no longer able to access IDFA, namely identifiers for advertising by default without user information. It is expected that such change may compromise the position of attribution in targeted app download marketing. Since IDFA is a key tracker for the ad attribution, especially with the cross-app activity tracking. In response, we have adopted Apple’s SKAdNetwork attribution as an alternative. Nevertheless, in the short-term, we expect to face headwinds on the ad algorithm and strategy front due to change in the attribution algorithm. In the long run, SKAdNetwork-based attribution could gradually catch-up and deliver similar performance as the original model, leveraging model training and advertisers increasing support.

[Foreign Speech] With that, let me turn the call over to Fei Cao for a financial review.

Fei Cao — Chief Financial Officer

Thank you, Gaofei, and hello, everyone. Welcome to Weibo’s first quarter 2021 earnings conference call. Let’s start with user metrics. In March 2021, the Weibo’s MAUs reached 530 million, a decrease of 4% year-over-year, primarily due to a tough comp last year, with our user traffic reaching peak level during the pandemic period. On sequential basis, our MAUs represented a net addition of 9 million users. Mobile MAUs represented approximately 94% of total MAUs. Weibo’s average DAUs reached 230 million, a decrease of 5% year-over-year due to the same reason for MAU. On a sequential basis, our average DAUs represented a net addition of 5 million users.

Turning to financials. As a reminder, my prepared remarks would focus on non-GAAP results and all the comparisons are on a year-on-year basis, unless otherwise noted. Now, let me walk you through our financial highlights for the first quarter of 2021. Weibo’s first quarter 2021 net revenues were $458.9 million, an increase of 42%, exceeding the high-end of our guidance. Operating income was $137.5 million, an increase of 85%, representing operating margin of 30%. Net income attributable to Weibo reached $130.7 million, an increase of 94%, representing a net margin of 28%. Diluted EPS was $0.57, compared to $0.30 in the first quarter 2020.

Now, let me give you more color on revenue. Weibo’s advertising and marketing revenues for the first quarter 2021 reached $390 million, an increase of 42%. Mobile ad revenues were $361.8 million, contributing approximately 93% of total ad revenues, up from 89% last year.

As Gaofei indicated in his prepared remarks, consistent with market trends and the internal management, we will no longer provide segment disclosure of ad business by KA versus SME starting from this quarter. Let me share some color on our growth from an industry and ad product perspective instead. For the first quarter 2021, our leading verticals in terms of ad revenue contributions were FMCG, testing [Phonetic] products and e-commerce. Weibo has gradually become the cornerstone of many advertisers in this traditionally highly expanding industries to fulfill their integrated brand plus performance needs. We are also delighted to see great opportunities with new economy, particularly in the consumption sectors, such as those emerging domestic brands as these customers increasingly recognize on Weibo’s unique value proposition in connecting with massive young generation of users, implementing celebrities on the KOL marketing and delivering value effects in their content.

In terms of growth, the fastest-growing verticals were automobile, luxury and e-commerce. Apart from low base impact, these verticals have been experiencing rapid secular growth momentum, leveraging tailwinds in consumption, in user shift [Phonetic], as well as our differentiated social marketing solutions.

From an ad product perspective, promoting feeds continued to be the largest of all [Phonetic], followed by social display ads and other ad products [Phonetic], such as promoted trends and topics. That encourage the customers by a couple of this network ad offerings to drive users all the way down the funnel to achieve our guided ROI. Notably, ad revenues generated from our differentiated promoted trends and the topic products delivered strong growth, mainly driven by increase of ad inventories and the positive pricing trends, as well as a relatively low base last year during the pandemic.

Revenue contribution from video ad also continue to trend up, mainly benefiting from continued growth of ad demand for video ad products, underpinned by good momentum with our video account program. Ad revenues from Alibaba for the first quarter were $33.3 million, an increase of 21%, despite a relatively high base from Alibaba last year. Ad revenues from Alibaba continued to deliver double-digit growth, speaking to the value of our partnership in serving integrated marketing demand for both platforms’ brands and merchants. That said, ad spend from Alibaba highly correlated to its own business operations to, especially its marketing strategies, which may change from time to time. As communicated earlier, we cannot ensure that such robust growth will be sustainable in the future.

Value-added service net revenues were $68.9 million in the first quarter, an increase of 44%, primarily attributable to the revenues derived from the interactive entertainment company acquired in November last year.

Turning to costs and expenses. Total costs and expenses for the first quarter were $321.4 million, an increase of 29%. The increase was primarily due to step-up in marketing spend and higher personnel-related cost.

Operating income in the first quarter was $137.5 million, an increase of 55%, representing operating margin of 30%, a decent margin profile amid intense market competition and also in line with our expectations as we proactively step-up our spending in channel investments and video capabilities.

Turning to income tax, under GAAP measure. Income tax expense for the first quarter was $14.9 million, compared to $15.9 million last year.

Net income attributable to Weibo in the first quarter was $130.7 million, representing a net margin of 28%, compared to 21% last year.

Turning to our balance sheet and cash flow items as of March 31 2021, Weibo’s cash, cash equivalents and short-term investments totaled $3.4 billion, compared to $3.5 billion as of December 31, 2020. In the first quarter of 2021, cash provided by operating activities was $244.3 million, capital expenditures totaled $6 million, and depreciation and amortization expenses amounted to $12.4 million.

Lastly, let’s talk about our financial outlook. We anticipate our second quarter of 2020 revenue to grow 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&A session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Alicia Yap — Citigroup — Analyst

Hey. Thank you. [Foreign Speech] Congratulations on the very strong results. So wanted to follow up a little bit on these strong outperformance in the first quarter. Was that mainly driven by the secular ad especially with a low base last year or are we actually seeing we are gaining market share in terms of the app that your allocation from the advertisers? Any color that management could provide in terms of the trend going into the second quarter, for example, like April or the first week of May, some of these strong verticals that you are seeing in first quarter, are we also seeing the trends continue into April and May? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] All right. Okay. So, first of all, thank you very much for the question. Let’s just be very brief. So, first of all, we have been seeing that in Q1, we had a big growth and part of the reason was due to the kind of year-over-year base, like low base number of the last quarter on — Q1 of last year, but that was only partially the reason. However, we can see that before talking about the growth rate of the Q2, business still as robust as in Q1, so only partially reason.

And also, let me talk about the external and also internal reasons of having that high growth of the Q1 performance of the advertisement. So, first of all, externally we are seeing that the recovery of many verticals are very robust. For example, the consumer-related industries like the e-commerce and also FMCG and automobile and luxurious, etc., and also some of the other very competitive markets, for example, the gaming and also the education industry, which was somehow impacted by certain policies, but still we have seek to strive to realize our target set in the beginning of the year if I’m talking about the year-on-year growth. So, this is something about a very good vertical performance.

And also internally, we’re talking about the reasons, for example, last year, we have been doing some kind of a restructuring of our sales system. So in the past, for example, we had a branding team and sales team that was very much focus and strong at doing service and providing service to those KA customers. However, they are relatively weaker in providing services to SMEs and also on the country, those SME sales teams were very much dedicated in providing services and also get budgets from the gaming and education industry, they are pretty much strong in helping to download or helping to sell the courses, but not that much in terms of organizing activity or doing some kind of a branding work for those SME customers.

But since second half of last year, we have been doing the restructuring of our sales system, that is the reason that after Q4 that we can see that we’re not performing like the other companies that are only focusing on either brand or KA customers or SMEs, but we actually now have combined this and also better say, we have a higher and also better strength in gaining the budget from our customers and also improve our competitiveness, because the customers could approach Weibo for a lot of effectiveness, for example, content marketing and branding and also effectiveness, etc., etc. So that is to say that we are providing a whole package of solution to the customers.

And also, that in terms of the quickest growing — one of the quickest growing verticals like automobile, which had over 60% of the performance or growth and that is to say, the kind of better than also SME ad is the quickest growing part. However, in this education sector, we’ve been seeing that the brand part is actually the biggest growing sector. So, that is to say in a word, we are having stronger ability to actually gain more budget from our customers. Right.

Alicia Yap — Citigroup — Analyst

Okay. Thank you so much.

Operator

Thank you. Our next question comes from Alex Xie from Credit Suisse. Please ask your question.

Alex Xie — Credit Suisse — Analyst

Thank you, management, for taking my questions and congratulations on very strong results. So I would like to ask about your strategy focus in the user products. So, what will be your key initiatives to increase the user engagement with in terms of your product design and operations? And would you like to share any specific targets for some of them? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] Okay. So, thank you for this question. First of all, since Q4 of last year and also in Q1, this quarterly report, we have already been mentioning some of the works and efforts focusing on the user engagement enhancement. And also, for example, the first is that, we are trying to get access to those low frequency users and especially improving their frequency from external sources.

And also, second from the internal sources. We are talking about, for example, after Q1 we focus more on those kind of activity and also more engagement on the core scenarios and especially, for example, those interest-driven or interest-based scenarios like the Super Topic. And also, we are going to increase the frequency of the content consumption in the — from the KOLs and also the gamers, as well as the campus, etc., products, and also like the Super Topic and that is the exact reason why we had over 40% of the growth on the Super Topic. And also and talking about the monetization, we are going to actually start doing the monetization since Q2 of this year.

And also third point is, we are emphasizing a lot on the growth of the video account. And also you can see that, not only this can help us to develop the DAU and MAU in terms of user side, but I’ll also more importantly, that we can enhance the consumption of content and also consumption scale of the videos. So that is exactly our focus on the enrollment or enlargement of the time spend on the videos within the system. So that is to say that we have been gaining a lot in terms of the traffic inventory in this area and that is specifically important for us to drive the SME ad industry and also product.

And also talking about the Q3 and Q2, I don’t think that there is any big change. So in a word, we are just going to focus on three areas. The first is that, more channel access to increase the frequency to be more specific. And second is that, focusing more on the social content products. And also third, video products. All right.

Alex Xie — Credit Suisse — Analyst

Okay.

Operator

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

Thomas Chong — Jefferies — Analyst

[Foreign Speech] Thanks, management, for taking my questions. I just have a couple of questions relating to the cost side. Given that we are going to invest more in content to drive user growth and engagement, can you share about our spending budget for this year together with the trend in R&D, and sales and marketing. Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] All right. So, first of all, let’s give you the answer in relation to the content part. So, since this year, we are talking about a kind of competitive landscape here and also we are going to focus more on the investment to the content. But, of course, this particular fashion of doing the investment is quite much different from the investment to the content or to the video, sorry. So that is to say like we are talking about the collaborations with the NBA last year and also CBA and also China Super League Football League of this year quite similar. So that is to say that we are going to focus more on the — those kind of social accounts like in the Weibo and also to do some kind of monetization or socialization work. But we’re not going to act like a video actor, which is to say that we are not going to buy a lot of content in that sense. All right.

[Foreign Speech] So that and second of all, let’s talk to you about the monetization or the business side or commercial side. So that is to say that, first of all, we are trying to provide to our customers the kind of commercial solution that is pretty much focus on the market — content marketing. So that is to say that, Weibo, altogether, the regular kind of solutions that we are providing to our customers, we’re also going to put and include inside package the kind of contents created by the KOLs and also those top-notch KOLs, so that will generate certain cost in this particular area. However, if you are talking about the kind of sales, gross margin of this particular area. We are not seeing any deduction on the gross margins here. So that is to say that, even though the absolute figure is going to kind of increase, but talking about the percentage against the total sales, this is not changing.

[Foreign Speech] And also, first of all, let’s talk about the expenditures on the channel side. So, as we have already stated last year that things this year, we are definitely not going to have an expenditure or expense more focusing on the channels. So the reasons are, first of all, because of higher competition and more intense competition here, we’re going to spend more money in getting access to users, especially new users and also more engaged and active users. And also that is to say, however, having said that, our kind of user acquisition cost is relatively lower than our competitors.

And also, second of all, we are having a more stringent appraisal of the ROI of this particular area. So that is to say that, in half a year of time, we’re going to try to balance this particular kind of investment versus the user acquisition cost. So that is to say that the conclusion is that, since Q1, we have already seen a big increase of this particular expenditure on the channels. However, we are going to definitely focus more on the sustainable kind of growth of the channels and also we are going to have more stringent policies over the appraisal of this particular indicator and also ROI of this expenditure.

Operator

Great. Thank you. Our next question comes from Alex Ko from Morgan Stanley. Please ask your question.

Alex Ko — Morgan Stanley — Analyst

[Foreign Speech] Thank you, management, for taking my question. So, I also want to congratulate on the strong result. So like to get a sense of like the recent fan economy, like the regulatory headwind or like the crackdown, would that have like any impacts on like any operational or financial impact on our business fundamentals? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] And also, talking about this question, first of all, I have to say that this is not a very good question for Weibo to comment, but rather by Baidu IT should comment on this. But, however, let me just share you some of my opinion. So, I think that we are talking about the two levels of regulation. The first one is that, first of all, we’re not talking about this particular fan economy, but I think that this is more like a kind of illegal funding or cross-sourcing and also to help those fans to hit the ranking. But the thing is that, all those kind of launching or initiating kind of a platform or the funding platform or the promotional platforms, they are not Weibo. But actually people are discussing, however, all those topics on Weibo. So, we are keeping a very close eye on this topic and also a very close relationship and also the communication with the government.

And also, second of all, talking about the fan economy, I think that this is pretty common here in China, also in the other part of the world. And also, I think that in Weibo, we’re not trying to divert this particular to a very good direction and positive direction. So that is to say that this topic has been talked and discussed for months and also for the past half year. And also, for example, talking about the KOLs servicing Weibo, I think that their fan economy is more like engaged in the fans to really do some pro bono activities or charity activities or some of the positive energy-oriented activities. For example, that one of the indicators that we care and concern about is the charity value created by that KOL together with their fans and followers. So that is to say that I really thing that this is something very positive-driven.

And also, having said that, still for this particular problem or issue, as you have described, this may occur and emerge due to the period of time when the reality show actually was quite popular, but the platform wasn’t quite complete and there wasn’t a very complete agent system or the servicing system in place. So some of the platforms were taking advantage of that and trying to promote this so-called fan economy of that. But that wasn’t something quite virtuous and benign. So, I think that needs to be eradicated afterwards. All right.

[Foreign Speech] So, and also another thing is that, in the past one quarter, we have been seeing a very active communication of Weibo and also our regulatory bodies. So that is to say that for the platform and big platforms such as Weibo, we are having a very stringent requirement over the management of the fans and also the fans group, as well as the agency and also via KOLs themselves. So, we should manage that to say that verification of the identities of the followers and also the fans group of that particular agent company or the KOL is a must and also a necessary thing for us to do. So that is to say, we are not allowing any activities organized by the irrelevant fans group according to that regulation.

And also, I think that this is a beneficial thing for the development of this industry and also a very healthy development and management of this whole fans economy. But the thing is that, this might seen a kind of temporary impact on the pause and stop of some kind of a reality show programs and this may have seen a kind of a reduction over the short-term traffic on that. However, I think it’s pretty much important for Weibo to manage this as a whole and also we are going to gain long-term benefit by managing strictly on this particular notion. All right.

Operator

All right. Thank you. So we have reached the end of the question-and-answer session. With that, we conclude our conference for today. [Operator Closing Remarks]

Disclaimer

This transcript is produced by AlphaStreet, Inc. While we strive to produce the best transcripts, it may contain misspellings and other inaccuracies. This transcript is provided as is without express or implied warranties of any kind. As with all our articles, AlphaStreet, Inc. does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of AlphaStreet, Inc.

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