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Weibo Corporation (WB) Q3 2022 Earnings Call Transcript

WB Earnings Call - Final Transcript

Weibo Corporation  (NASDAQ: WB) Q3 2022 earnings call dated Nov. 17, 2022

Corporate Participants:

Sandra Zhang — Investor Relations

Gaofei Wang — Chief Executive Officer

Fei Cao — Chief Financial Officer

Analysts:

Alicia Yap — Citigroup Global Markets Asia — Analyst

Thomas Chong — Jefferies — Analyst

Timothy Zhao — Goldman Sachs — Analyst

Presentation:

Operator

Good day and thank you for standing by and welcome to Weibo Reports Third Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to the company. Thank you, Please go ahead.

Sandra Zhang — Investor Relations

Thank you, operator. Welcome to Weibo’s third quarter 2022 earnings conference call. Joining us today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer. Fei Cao. The conference call is also being broadcasted on the Internet and is available through Weibo’s IR website.

Before management remarks, I would like to read you the Safe Harbor statements in connection with today’s conference call. During today’s conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. We will assume no obligation to update our forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo’s Annual Report on Form 20-F and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law.

Additionally, I would like to 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 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 and are nonrecurring in nature or not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management’s prepared remarks, we will open up 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 third quarter 2022 earnings conference call.

[Foreign Speech] On today’s call, I will share with you highlights of Weibo’s user, product and monetization in third quarter of 2022.

[Foreign Speech] On the user front, Weibo’s MAU’s reached 584 million and average DAU’s reached 253 million in September 2022, adding approximately 11 million and 5 million users year-over-year, respectively. In September, 95% of Weibo’s MAU’s came from mobile.

[Foreign Speech] Our monetization with macro economy and consumption weighing on the overall advertising market, our clients remained cautious towards their advertising budget spend. In the third quarter, our total revenues reached $453.6 million, a decrease of 25% year-over-year, and an increase of 1% quarter-over quarter. Excluding the foreign exchange impact, our total revenues decreased 20% year-over-year, and increased 5% quarter-over quarter. Ad revenues reached $393.4 million this quarter and 95% of our ad revenues came from mobile. This year, we have focused on improving our operating efficiency. In the third quarter, our non-GAAP operating income reached $162.1 million, representing a non-GAAP operating margin of 36%, up from 32% last quarter.

[Foreign Speech] Next, let me share with you our progress made in product and monetization in the third quarter. Our target on product operation still focus on strengthening the platform competitiveness with improving operating efficiency, making large user scale and enhancing user engagement.

[Foreign Speech] In this quarter, with the summer holiday season and how trends effect, our overall traffic reached its peak level in August this year. Based on our experience, the opening of the fall semester in September usually negatively impacts our traffic, especially when campus promotion suspended this year due to COVID-19-related control measures. In response, on the product and operational front, we have stepped up our efforts in the areas of channel investment, community product optimization and cultivation of entertainment and e-sports verticals, which resulted in healthy trend of our overall traffic in September.

[Foreign Speech] On the channel front, the ROI of our channel investment for the third quarter was further improved. We continue to strengthen our cooperation with handset manufacturers in Weibo’s hot [Phonetic] trends and social products, while focusing on investing in higher ROI channels. This quarter, we achieved full coverage for Weibo’s hot trend contents in the core positions on handset devices of domestic leading manufacturers. Meanwhile, we further upgraded our service for domestic smartphone users and enhanced their consumption through improving the quality of hot trend contents considering the handsets’ attributes and users’ consumption scenarios. In September, the number of our hot trend users from domestic handset increased 30% quarter-over quarter. Next, we will continue to deepen our cooperation with handset manufacturers to focus on long-term mutual benefits, expand cooperation to more of Weibo’s core products and content and increase Weibo’s user scale through handsets channel.

[Foreign Speech] On social attributes, this quarter, we continued to enhance social features of our products and increased the scale and engagement of our core users. On relationship-based feed, while maintaining user traffic, user interaction continued to grow in September representing improved user stickiness. In July and August, which is a peak season of traffic due to the summer holiday, Weibo’s content generation largely increased, particularly for verticals such as celebrities, TV series, variety shows and games, etc. We leaned our traffic distribution towards these verticals with strong stickiness of young users in the relationship-based feed, which helped enrich the vertical content’s ecosystem and enhancing user interaction and consumption in relationship-based feed. In the meantime, we’ll continue to improve the distribution structure of our relationship-based feed, further increase the distribution of content generated by KOLs and community-based content to emphasize the social features of our relationship-based feed. In particular, we made significant upgrades in algorithm to enhance distribution of community content, further integrating the community-based content and the user-generated content. As a result, in the relationship-based feed, 70% of users were able to consume quality community-based content of their interest directly in the feed. In September, traffic generated from community-based content distributed in the relationship-based feed and the number of users who made interactions through community content had increased more than 50% quarter-over quarter, which further facilitated users’ relationship building and interaction efficiency in the relationship-based feed.

[Foreign Speech] In the third quarter, we’ll continue to beef up our investments in community products to strengthen the perception of community products by all users. On one hand with the independent tab of super topics at the bottom of main page [Indecipherable], we are able to improve new users’ willingness to revisit a tab through prioritizing traffic distribution for quality community content, coupled with our effective user recall strategy. In September, the DAU’s of super topic tabs increased by more than 50% compared to that of June, half of which were new users for community products. Not only has the scale of users grown, users’ consumption stickiness increased significantly with per-capita consumption of community-related contents increased by 40% from June. On the other hand, we further enhanced functions and mechanism of the community product such as new functions of posting and interaction that were launched in the third quarter. The increased user stickiness in the communities significantly drove the production and interaction of quality content in entertainment and online gaming verticals. In September, the number of users who posted and interacted in the community continued to grow double-digits compared to June, while the number of posts and interactions increased twice the increase of users. We believe that the constant building up of our community products has strengthened the social stickiness of Weibo users, boding well for the long-term healthy development of the platform.

[Foreign Speech] On the focus front, our strategy this year is to focus on developing social accounts in key verticals to constantly solidify our advantages in key content verticals as well as high-quality accounts and thus drive the improvement of operating efficiency. In terms of the online gaming vertical, we’ll further cultivate our ecosystem around e-sport events and deepen cooperation between Weibo and top e-sport clubs. In third quarter, the daily number of posts by e-sport players had increased by 50% quarter-over quarter with both traffic and interactions doubled. Coupled with tournaments-related hot trends, the overall traffic from the e-sports vertical grew over 50% sequentially. We have also attracted a wider group of young users and generated higher user engagements, while helping e-sport clubs build up inquiries [Phonetic] and market value on our platform.

As for the entertainment industry, the summer holiday was the peak season for TV series and variety shows. We focused on partnership with video platforms and show producers to improve distribution of hot trends and user interactions, driving the volume of blockbusters to grow across the platform. In third quarter, the traffic and the interaction of TV and variety shows continued to trend up compared to that of the last summer holiday. In particular, traffic for TV shows has reached record-high which more than doubled compared to the same period last year with multiple phenomenal projects emerging. TV shows, Love Like the Galaxy and Love Between Fairy and Devil have generated over 40 billion topic views and 28 million discussions, reinforcing Weibo’s position as the best animated platform for show launching and promoting. Going forward, we will continue to actively support our partners and drive healthy development of entertainment ecosystem.

[Foreign Speech] Moving on to monetization. In the third quarter, we saw general recovery trend of ad spend on a sequential basis with various impetus across different industries. For example, in auto industry, thanks to positive support for new energy vehicles industry and enhanced market recognition for Weibo’s integrated new car launching marketing solution for automakers over the past two quarters. Weibo’s [Indecipherable] product launch and marketing solutions attracted over 90% of the overall new model launches. On top of regular brand exposure, leveraging the combo of media, vertical KOLs and hot trends, Weibo has successfully expanded its market share in new car launches leading to sustained double-digit year-over-year growth in ad revenue from auto industry in the third quarter. As for the luxury sector, ad revenues also booked significant year-over-year growth due to the intensive launch of new lines and shows in the third quarter. In terms of online gaming industry, our differentiated marketing model that we have established over the past two years has resonated greatly among game developers. Even though the new games approval this year has shrunk, we have effectively helped these game developers improve user ARPU and lifecycle, leveraging cooperation around contents with our top tier game clients and event-based marketing products and services. As a result, Weibo has gained certain ad budget and further solidified our market position among advertisers in the online gaming sector.

Other industries such as the FMCG industry continue to be impacted by headwinds of COVID-19 control measures and weak consumption measures, with brands taking a wait-and-see attitude in their branding budget allocation. E-commerce platforms and 3C products also experienced varying degrees of decline in the third quarter due to market conditions and the industry’s slow season.

[Foreign Speech] Talking about outlook of overall advertising business for the fourth quarter and the first half of next year, there is still relatively high uncertainty under the market circumstance. However, we are pleased to see positive signals with certain industries. For example, e-commerce platforms and FMCG clients have released ad purchase during the Double 11 Shopping Festival to various degree. Although the Double 11 Shopping Festival was shorter this year, ad budget from e-commerce platforms returned to a growth trajectory compared with the same period last year. In third quarter, we focused on confirming our algorithm to accurately pursue the marketing needs of e-commerce platforms on the ad product front, and expect to gradually capture certain advertising budget in the fourth quarter. Meanwhile, the fourth quarter is also a key season for new product launches in the handset sector with all major handset manufacturers launching key models in their pipeline. As such, we are actively working with our clients to develop content marketing plans to further beef up Weibo’s market share in new phone launches. Moreover, the 2022 World Cup in the fourth quarter will be a key advertising window for many of our clients, especially in the food and beverage sectors. We are cooperating with clients and discussing their marketing plans in detail to tap into World Cup-related hot trends in the hope of enhancing ad performance and our wallets.

[Foreign Speech] Now, let me briefly recap on Weibo’s progress in our initiative to optimize costs and improve operating efficiency. As mentioned in our last earnings call, we have taken a series of effective measures to optimize our cost and expense structure and enhance efficiency during the year to better control our ROI on cost in [Phonetic]. These measures continues to bear fruit, leveraging our solid execution. In third quarter, we delivered a non-GAAP operating margin of 36%, up nearly 4 percentage points versus 32% in the second quarter, benefiting from solid execution of disciplined spending strategy to further improve operating efficiency. This has demonstrated our improvements in operating efficiency, giving us the opportunity to link our resources towards more potential areas. Taking channel investment as an example, through strategic channel cooperation, we acquired more high ARPU users and has thus shortened the ROI retrieving period of China investments. Currently, the cost retrieving cycles of most of our channels shortened to nearly half of that in the same period last year.

On the product operation front, we deepened the strategic cooperation with our content partners, focused on social products and strengthened our advantages in hot trends in key verticals such as e-sports and sports. We built strategic partnership with video sites, mainstream media and e-sports club this year to acquire more content and users. Despite potential cost incurred in the short run, we could significantly enhance our competitiveness in content operations and improved the operating efficiency of the platform’s traffic. On the ad product front, for one thing, we will tap into market trends and beef up our investments in content marketing to strengthen our differentiation. For another, we’ll focus on delivering breakthroughs in accurate algorithm adaption to capture e-commerce ad budget. Looking into the fourth quarter, we will continue to execute against our strategy of reducing costs and improving efficiency with more focused on adjusting our cost structure and optimizing resource allocation to ensure efficient operation of our company amidst high uncertainty of macro environment and solidify our long-term competitiveness.

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

Fei Cao — Chief Financial Officer

Thank you, Gaofei and hello everyone. Welcome to Weibo’s third quarter 2022 earnings conference call. Let’s start with user metrics. In September 2022, Weibo’s MAU’s and average DAU’s reached 584 million and 253 million, respectively representing a net addition of 11 million and 5 million users, respectively on a year-over-year basis. We are pleased to see healthy engagement trend and video consumption despite the back-to-school seasonality and ongoing disciplined channel marketing strategy, demonstrating Weibo’s core value proposition to users.

Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in U.S. dollar terms and all comparisons are on year-over-year basis unless otherwise noted.

Now, let me walk you through our financial highlights for the third quarter of 2022. Weibo’s third quarter 2022 net revenue was $453.6 million, a decrease of 25% or 20% on constant currency basis. Operating income was $162.1 million, representing operating margin of 36%. Net income attributable to Weibo reached $119 million representing a net margin of 26%. Diluted EPS was $0.50 compared to $0.90 last year.

Now let me give you more color on revenue. Weibo’s advertising and marketing revenues for the third quarter of 2022 reached $393.4 million, a decrease of 27% or 21% on a constant currency basis, reflecting a tepid marketing — advertising market as we expected. Mobile ad revenues were $372 million, contributing approximately 95% of total ad revenues. With COVID resurgence and manpower headwinds mainly on overall demand set, our advertising business continued on a descending trajectory year-over-year while booking a moderate sequential growth during the quarter. Our leading verticals in terms of ad revenue contributions in the third quarter were FMCG, 3C products and online games. In terms of growth, the luxury and automobile sector exhibited solid recovery trend, booking double-digit growth both on an annual and sequential basis. Participating [Phonetic] from tailwinds of electronic vehicle industry, policies [Indecipherable] for the automobile industry and an eventful product launch season for luxury brands, we beefed up sales efforts to capture higher wallet share in these sector with our full spectrum of social ad solutions.

The online games sector also demonstrated relative resilience as our brand plus performance ad offerings resonated greatly with game developers. On the flip side, discretionary consumption categories and e-commerce sector remained sluggish amid weak consumption sentiments, lukewarm sales data and broad based initiatives to optimize costs and expenses among our customers. From ad product perspective, promotion fees continued to be the largest part followed by social display ad and search and topic ad offerings. In light of industry-wide pricing pressure and ad execution challenges, we proactively took the window to optimize our ad technology and product in the hope of capturing more performance through the ad budget, which is more defensive in the current market condition.

Meanwhile, we are steadfastly focused on highlighting our market differentiation as well as further diving into the visualization chant [Phonetic] of the ad market. Entering the fourth quarter, we are seeing signs of advertising market bottoming out in a more moderate and gradual pace. Leveraging the upcoming e-commerce festival, we will beef up our product and sales execution to capture the potential pent-up market opportunities, while navigating through many headwinds in the near-term. We remain confident in our long-term monetization opportunities that our unique value proposition and a diversified content ecosystem will unlock.

Ad revenues from Alibaba for third quarter were $13 million, a decrease of 28% or 22% on a constant currency basis which is generally in line with our overall advertising business performance. Value added service, VAS revenues, were $60.1 million in third quarter, a decrease of 14% or 8% on a constant currency basis. The decrease of VAS revenue was mainly due to less revenue contribution from membership services.

Turning to costs and expenses. Total costs and expenses for the third quarter were $291.5 million, a decrease of 19% as we implemented our efficiency initiatives to stabilize earnings. The decrease was across each cost and expense items, such as ongoing stringent cost control measures on varied operational front, especially disciplined channel investments and reduced offline opportunities.

Operating income in the third quarter was $162.1 million, representing operating margin of 36%, improved from 32% in the second quarter. Our margin performance has exceeded our expectations as our cost optimization initiatives continued to bear fruit despite COVID headwinds and the manpower challenges.

Turning to income tax. Under GAAP measure, income tax expense for the third quarter was $19.8 million compared to $31.4 million last year. Net income attributable to Weibo in the third quarter was $119 million representing a net margin of 36% compared to 34% last year.

Turning to our balance sheet and cash flow items. As of September 30, 2022, Weibo’s cash, cash equivalents and short-term investments totaled $3 billion compared to $3.1 billion as of December 31, 2021. In the third quarter of 2022, cash provided by operating activities was $74 million, capital expenditures totaled $4.6 million and depreciation and amortization expenses amounted to $13.2 million.

Before turning to the Q&A session, I would like to provide updates on share repurchase program. Under our $500 million share repurchase program authorized in March of this year, we have repurchased a total of approximately 3.1 million ADS for a total cost of $57.7 million as of September 30, 2022 as means to return value to shareholders amid a turmoil market.

With that, let me now turn the call over to the operator for Q&A session. Thank you.

Questions and Answers:

Operator

Thank you, management. [Operator Instructions] First question comes from the line of Alicia Yap from Citi. Please proceed.

Alicia Yap — Citigroup Global Markets Asia — Analyst

Hello, thank you. [Foreign Speech] So thanks for taking my questions. I have a question related to the advertising outlook and sentiment in the fourth quarter as well as into the 2023. Given the stricter COVID policy and also the weakness in the macro, how should we think about the growth rate as comparison to the third quarter in terms of the declining magnitude? Will the 4Q year-over-year decline be bigger — steeper than what we saw for the third quarter? And then as we go into 2023, can management also kind of like split in terms of preliminary build for the first half versus the second half growth? How should we think about whether the first half should be more conservative and then second half we should see some resumptions of the growth? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] All right, thank you for this question. So with regards to the Q4 and also the 2023 performance, so we can see, first of all, I’d like to talk to you about the structure of our advertisement. So two [Technical Issues] of the industries are actually related to consumption, for example, FMCG or 3C products as well as the e-commerce. So you can see that the recovery speed is highly related to the macro.

[Foreign Speech] So next of all, I would like to talk to you about the performance. So you can see that we’re narrowing the kind of a trend in Q4 and also going to realize a quarter-over-quarter improvement in the future. And also now I’d like to talk to you about these situations. So as you can see that talking about some of the offline scenarios and also some of the offline activities, so in October we had lot of activities and lots of events were organized by the national offline institutions so that we’ve got some suspension of the offline activities organized by our customers. So we had a big impact in October. However, you can see that talking about the e-commerce had actually great improvements because of the Double 11 Shopping Festival and also the Double 12 Shopping Festival as well. So that’s especially talking about the FMCGs. So they are going to allocate more budget actually in these two events’ timeframe. And also the overall trend will be upward.

Also last year we had a very special category which is the live stream e-commerce and due to certain reasons, they had actually a big decline in terms of this — particular, this year’s performance. And also the next one is that talking about the Q4 on the overall basis, the overall category of e-commerce will be experiencing a very stable trend. And also talking about the World Cup, we can see that all of the budget is going to be allocated with us in the World Cup. So that’s especially FMCG. So that is to say that we’re going to receive the same budget of the FMCG allocation of participants in the World Cup session which is quite equal to the session of the Winter Olympics.

[Foreign Speech] So now I would like to share with you some of the colors, like, for example if you’re talking about the new control — COVID control policy, especially the new 20 items issued by the government in controlling the COVID and also some of the stimulus policies towards the real estate industry, we are able to see a very good recovery of the consumption side, but that is to say that having said that, we are still hoping that it will take time to recover. And also even if we are having a fully opened market after the COVID control, still it will not generate the recovery immediately and I believe that is going to be the case and still takes time to recover. And also the next point I would like to talk to you about is, talking about the first half of the next year, still we are going to experience some of the stress in terms of the advertisement market. And also in 2022, in Q1, we did not have any impact actually from the COVID-19 and also however, if you’re talking about the marketing activities and also some of the allocation of the budget and in terms of the product promotion, for example, we’re going to see a very good situation in the Q2 of 2023 and even in the second half of 2023. So there will be an upward trend.

[Foreign Speech] And also lastly, I would like to say that if you’re talking about the next year, so you can see that more people and also more customers are going to allocate their budget, especially on the performance-based ads. And also even if we are seeing that the slowdown of the new product launch, but still we are seeing that more customers are actually choosing our platform as their kind of platform to launch their new product and also the new product launch percentage against the rest of the other budget is increasing. Especially, that is quite obvious in the industry of luxury products and also the automotives as well. So third point is that in the next several quarters and also the next year, we’re going to still focus on cost reduction as well as seeing efficiency improvement. So we’re going to have a very better-off situation in that. Thank you.

Operator

Next question comes from the line of Thomas Chong of Jefferies. Please proceed. Thomas, your line is now open, please proceed with your question.

Thomas Chong — Jefferies — Analyst

[Foreign Speech] Thanks management board, my question, we have been seeing the cost optimization strategies emphasis on ROI is progressing [Phonetic] quite well. In particular, we are seeing that reflect in our operating margin. May I get some more color about our strategies in 2023, our strategies in cost optimization and how should we think about Q4 margin trend as well as next year margin outlook as well as the measures that will be undertaken next year? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] Alright, so thanks for this question. Actually. I have been stated quite briefly in the script that is to say that in Q3 we’ve been keeping optimizing some of the expenses, for example, marketing and then related to R&D and also operation as well, we’ve been had lots of optimizations. And also in Q2 and Q3, due to the COVID management and control policy, a lot of our offline events actually did not have or did not successfully hold. So we are going to move and delay them into Q4 and also the ROI of these offline events will be around 1 to 2 also. So that is the reason why we are having a slight higher margin in Q3 than in Q2.

[Foreign Speech] So also if you’re talking about the next year and also Q4 as well, so there are a lot of uncertainties in terms of the control policy of COVID as well as economic policies as well especially in the first half of next year so that, of course, we’re going to further reduce the cost and also optimize the cost as well as improve the operational efficiency and also do a lot of work in terms of the optimization of our cost structure. For example, we’re going to further concentrate and also doing more optimization works related to the expenses of marketing and also labor and human resources as well. So that’s how we’re going to improve our core competence by doing that.

And also if you are very senior investors and following Weibo for a very long time, you should be knowing the story about five years before. So from 2017 to 2020, we had about the operational cost which was about 60% of our revenue and also in 2020 because of launches of new operational events and also businesses, this particular figure improved to about 65%. And also in 2022, first half because of the reduction of revenue, this particular figure is going up further. But we don’t think that this is actually quite in line with the positioning and also the core strength of Weibo as a social media platform. So in the future, we’re going to really focus on advantages and also the key characteristics as well as further improve our core competence and then having better-off situations by doing a lot of further more works on the optimization of our costs and also cost structure so as to improve our operational efficiency further.

[Foreign Speech] So lastly, I would like to say that in Q4, as I have already stated that, most of the offline events will happen — should have happened in Q2 and Q3 will be moved to Q4 so that we’re not going to see as high operational margin as the previous quarter. But I think that this should be quite similar to Q2. And also in 2023, of course, we’re going to have a very stable plan for the growth of our operational margin and also really emphasize more, of course, on the investments to improve our core competencies as well as launch most of our new businesses. And also in the long run, while the market is fluctuating and also uncertain, we have to keep a very good balance in terms of product development and also the investments as well and also generate quite robust cash through all of those means and also having a very good flexibility on our financial performance.

Operator

Thank you for the questions. In the interest of time, the last question comes from Timothy Zhao from Goldman Sachs. Please proceed.

Timothy Zhao — Goldman Sachs — Analyst

[Foreign Speech] Could management share your thoughts on the strategy to further diversify the revenue stream beyond advertising and what are the key initiatives the company is investing to and what is the management outlook for VAS revenue potential going forward? Thank you.

Gaofei Wang — Chief Executive Officer

[Foreign Speech] Thank you for the question. So I have to say that even if you can see that now in the advertisement module carrying Weibo, we do have actually a VAS but if you’re talking about the further work, the positioning and also the market influence also Weibo as a big social media platform and also because of the importance and also the product of advertisement itself as a kind of a necessity or necessary product for the customers to actually launch their new products, we can see that the efficiency of the monetization by using the advertisement is actually the highest. And also, of course, that still if you’re talking about a fluctuating market, still we do see a lot of pressure on the pricing of this particular advertisement and also that is the reason why we have to diversify the monetization methods. And even if, currently speaking, we have our VAS accounting for the total revenue, which is about only 13%, not very high. But actually I think that is significantly important for us to maintain the fundamental line for our monetization itself and especially based on the traffic.

[Foreign Speech] So second thing in terms of our e-commerce and also the mini shop of Weibo, so actually we are having a module of combining that platform with the product. And also as you all know that we always keep a very good relationship with JD and also Taobao and also the other alliances as well. So in terms of this one, we are always keeping a very good collaboration with those very good e-commerce with a very high ARPU and also this is very efficient for us to generate enough cash flow and especially for those scenarios of online plus offline as well. And also we can see that this is especially important for us to leverage the capability and also the advantage of Weibo as a platform and especially helping those offline organizations to actually have a very good select of the collections [Phonetic] and also helping to improve the quality of the users by guaranteeing a very good module of placing order within this particular stations and also having the guarantee of very good agreement fulfillment and also the performance. We’ve been having a very good growth on this particular segment.

[Foreign Speech] And also third of all, talking about the members. As you’re going to see that during the product development we have been actually having a very stable and also mature membership system. So on one hand this is actually very good to guarantee a benefit that is specifically unique to those loyal members of Weibo platform and also this is very good for us to actually bring lot of our monetization capabilities and opportunities for those content creators as well. So this is actually even going to further boost the activity and also enhance the ability of the monetization. And also previously, in the last year, we had lot of restrictions on the entertainment industry and also that was little bit impactful to our total business. But actually you can see that, while we are upgrading, the benefit that we are providing to the users and also the members in specific in Q3, we are seeing that the revenues and also the loyalty of the members actually improved in Q3.

And also if you are sharing some of the colors on the VPlus Membership system, so we are having a kind of a year-over-year growth on this area and especially in the area of healthcare, Internet and also the other segments. We are keeping a very good growth year-over-year. And also this is giving us more space, of course, in the future to further enhance this particular segment of the VPlus membership system. And also in our membership system is a very important revenue which we regard as a non-advertisement revenue to Weibo and this is really significant. So in the future, we’re going to further enhance more functions and also dedicating ourselves into, for example, first of all, as VIP and also second is the VPlus system which is targeting, in specific, those content creators. So this is a very good way for us to improve the monetization and also the revenue of the content creators and also this is going to be very beneficial to Weibo in the long run as well. Thank you.

Operator

[Operator Closing Remarks]

Disclaimer

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