[summary]WeiboCEO Wang Gaofei said, “Judging from current trends, without the impact of the pandemic, we expect brand advertising to increase further month-on-month in the fourth quarter, and with the Double 11 node, advertisers' demand for posting on the Weibo platform is also further strengthened.”
TencentTechnology News on September 28, Weibo posted the company's unaudited financial report for the second quarter ending June 30, 2020 before the market on Monday. According to financial reports, Weibo's net revenue for the second quarter was 387.4 million US dollars, down 10% from the previous year; net profit attributable to Weibo was 198.4 million US dollars, up 92.6% from the same period last year. Weibo shares rose 2.46% to $33.34 in the pre-market on Monday.
After the financial report was released,SinaExecutives including Chairman, CEO, and Weibo Chairman Cao Guowei, Sina Chief Financial Officer Zhang Yi, Weibo CEO Wang Gaofei, Weibo CEO, and Cao Fei, Weibo's Acting Chief Financial Officer and Senior Vice President, attended the earnings conference call that followed to interpret the highlights of the financial report and answer questions from analysts.
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The following are the main contents of the analyst Q&A session in this conference call:
Barclays Analyst: Regarding advertising revenue, how does management view the rebound of SME users in advertising? Will this trend be further enhanced in the second half of this year? The management mentioned that the company has optimized and upgraded OCPX (a bidding mechanism for platform advertising) in advertising, so what kind of trends will advertising revenue show after that? What is the current state of the overall online advertising market and the pattern of competitors?
Wang Gaofei:First, let me talk about the overall performance of SME users in the second quarter and the outlook for the second half of this year, because now we are at the end of the third quarter. The market environment is improving, including the marketing capabilities of Weibo. As our operating investment increases, our marketing capabilities are also being strengthened, so we can also see the recovery of KA (major customers). Some key industries, such as FMCG, e-commerce, and automobiles, have actually achieved good year-over-year growth. However, among these, industries such as film, television, entertainment, and tourism are currently still affected by the epidemic. There is still a fairly obvious gap compared to the same period last year, which has dragged down the overall performance growth of KA.
Entering the third quarter, we have seen that with the stabilization of the epidemic and the impact of the macroeconomic environment, especially the overall consumption situation, the further improvement in the overall consumption situation, we have seen that the willingness of brand customers to invest is still further strengthened. The key industries I just mentioned, such as FMCG, automobiles, and mobile phones, have generally maintained relatively healthy growth over the previous year, but the month-on-month advertising demand, such as film, television, and entertainment, has actually recovered with the opening of entire offline movie theaters, but compared with the same period last year, the overall market, box office, and market have actually declined, so our advertising revenue in these fields has also declined year over year.
Judging from current trends, without the impact of the epidemic, we expect brand advertising to increase further month-on-month in the fourth quarter, and with the Double 11 node, advertisers' demand for advertising on microblogging platforms will also be further strengthened.
In terms of customer performance, this is currently the focus of everyone's attention. In the second quarter, we can see that although there was a month-on-month increase, most of the offline industry has not yet recovered, so there was still a year-on-year decline. Of course, the performance of some industries in this area is quite outstanding. For example, games and education, including e-commerce, and in particular, gaming and education. Overall, advertising in these two industries has increased by more than 100 percent over the same period last year. For customers such as e-commerce, due to the strength of e-commerce live streaming and the promotion nodes of the 618 shopping festival, the rebound in e-commerce industry month-on-month growth is also quite obvious.
Entering the third quarter of the second half of the year, we will see that the investment of small to medium customers continues to improve month-on-month. For example, the gaming and education industries I just mentioned are still quite prominent in customer investment, and the month-on-month growth rate is also very rapid.
Also, the advertising budget for the offline industry is still being gradually adjusted and restored. We used this period to upgrade our advertising system, comprehensively improve and optimize the service provider system, and also clean up some relatively low-quality users and advertising materials to improve our user experience and advertising conversion rate. This part of the clean-up may have a negative impact on performance advertising in the short term, but in the longer term, this measure will still have a positive impact on the performance advertising ecology.
Entering the fourth quarter, we will see that e-commerce has ushered in a relatively large marketing opportunity, not only for e-commerce platforms, but also for e-commerce C-side customers. We strengthen andAliPlatform data cooperation also provides e-commerce customers with a differentiated marketing value, so it is expected that e-commerce recovery in the fourth quarter will be good.
In fact, the market competition for performance advertising is still quite intense this year. In terms of our performance advertising business strategy, in addition to simply competitive traffic and click results, this year we are also actively mobilizing the QL advantages (quick search) and content-level advantages of the Weibo platform in the two industries of gaming and education to provide customers with comprehensive solutions. Currently, judging from the first two quarters, these characteristics of microblogging in the market have been brought to full play, which can also improve the efficiency of our advertisers' marketing.
In addition to our advantages in terms of QL and content, we are also optimizing advertising product technology, mainly by improving the coverage of OCPX delivery. Up to now, OCPX's consumption of performance ads has exceeded 60%, and the goal is to increase it to more than 80% by the end of the year. In addition, we are also committed to improving the conversion capabilities of native advertising in information flows. For example, we have added more direct conversion features to our advertising products, including videos, graphics, etc., and now the effectiveness of videos has improved significantly compared to graphics. This is also the main driving force for us to increase our engagement with Weibo game customers over the past six months, including the three quarters.
Bank of America Analyst: What is Weibo's current video content positioning and growth strategy? What is the development process of Weibo video bloggers? The commercialization of video content and the status of advertising? What is the gross margin situation? For top video bloggers, company sharing and subsidy measures? And in order to get more traffic, has Weibo adopted a corresponding competitive strategy?
Wang Gaofei:Our original intention in launching the Weibo video account function is mainly aimed at the large number of video authors currently emerging in the entire Internet industry. Through the optimization of Weibo product functions, we have allowed more video authors to enter Weibo, and also made the Weibo content ecosystem more complete.
First of all, from the production side, the launch of these video account product features will help us expand the overall production scale on Weibo. In the past two years, with the rise of various video content platforms and the lowering of the threshold for video creation due to video tools, a number of high-quality video creators have also emerged on the domestic Internet. Weibo has launched video accounts, and these features make it more convenient for these authors to post their works on Weibo, accumulate fans, and participate in fan interactions. The multimedia format of the Weibo platform and our strong communication power have always been a resource that this kind of high-quality video writer is willing to seize. The launch of the video account will also make our video strategy more systematic and attract more high-quality video bloggers.
Since its launch, the number of authors who have launched video accounts has exceeded 500,000, of which more than 5,000 individual bloggers have already surpassed 1 million followers. We can see that this effect is still quite obvious.
Furthermore, as these video creators gradually began to enter Weibo, on the one hand, we can attract a wider user base through the video works they post, including diverse video content. For example, video writers in the game field have increased their total number of fans by more than 40% over the past year, which has also increased our influence on the game market as a whole. Moreover, after these authors joined Weibo, they not only posted video works, but also interacted with fans through graphics, which increased the user stickiness of our entire platform.
The improvement in monetization efficiency of Weibo video ads in the first half of the year was still quite obvious. Weibo has achieved good growth in the number of users who consume video content, video stream traffic, distribution efficiency, and edge effects. The other is the development and optimization of video ads in the first half of the year, such as the launch of the “Watch While Watching” product line, video style optimization, and the increase in conversion rates, which helped us improve our ability to monetize video ads. Take the game industry as an example. Basically, all materials posted on Weibo now are mainly videos. Other advantageous fields, such as e-commerce and education, are also gradually increasing their video material posting.
In terms of monetization, we will definitely incentivize and subsidize producers of high-quality video content based on current market competition. We will not only share advertisements for the consumption of their video content, but also give them some subsidies. Overall, however, the development of the video content ecosystem will bring about an increase in the number of users of the entire platform, including an increase in the size and length of the interested user base, and will also increase the efficiency of users to consume our main information flow, including relationship flows and recommendation flows. This part actually brings us more incremental and monetized traffic that does not need to be divided.
Therefore, from an overall perspective, this will give us an advantage, especially in competitive markets, and it will become more and more obvious. The focus of our work in the second half of the year will still increase investment in this part, including the acquisition of video authors, as well as the sharing and subsidies for video content.
Looking at the entire ecosystem, we will continue to drive the activity and content productivity of our top users. For example, in the first half of the year, we supported the traffic of high-quality content such as technology, finance, popular science, and military content. The increase in exposure for content in these vertical fields was also very good. Overall, in terms of commercialization, we have also provided content producers with more monetization methods other than advertising, including e-commerce and micro-membership. Our purpose is also to hope that through revenue on Weibo, they can increase their willingness to create on Weibo, and also increase Weibo user acquisition, reduce our cost of acquiring users, and improve the efficiency of users' consumption on Weibo.
Over the past few years, Weibo's number of top users, average daily posting volume, and fan interaction volume have maintained a year-on-year increase of more than double. (Qin Xin)