In the first quarter of 2024, Weibo (NASDAQ: NASDAQ:WB) reported an increase in monthly and daily active users, with MAUs reaching 588 million and DAUs at 255 million. The company's total revenue hit $395.5 million, with advertising and marketing revenues accounting for $339 million, despite a 5% decrease on a constant currency basis.
Weibo emphasized its strategic focus on acquiring high-quality users, enhancing its content ecosystem, and improving operational efficiency. The company also reported a substantial 50% increase in ad placements during the Spring Festival, with corresponding gross ad revenues doubling. However, revenue from the cosmetics and beauty industry fell short of expectations, leading Weibo to plan stronger cooperation with e-commerce platforms and domestic brands.
Key Takeaways
- Weibo's MAUs and DAUs increased to 588 million and 255 million, respectively.
- Total revenues for Q1 2024 stood at $395.5 million, with ad revenues at $339 million.
- Non-GAAP operating income was reported at $125.8 million, indicating a non-GAAP operating margin of 32%.
- The company saw a 50% increase in ad placements during the Spring Festival, with a doubling in gross ad revenues from festival-related IPs.
- Weibo plans to enhance partnerships with Tmall and focus on content marketing to drive growth in various sectors.
- The company is optimistic about the second half of the year, expecting positive trends in advertising due to the Olympics and other events.
Company Outlook
- Weibo expects an optimistic Q3 and Q4, with a focus on live stream advertisements and branding of new brands.
- Strategies to boost revenue include focusing on IP and customer-related hot topics, increasing sales in key areas, and investing in precise algorithms.
Bearish Highlights
- The cosmetic and beauty sector saw a decline year-over-year due to shifts in consumer preferences.
- Challenges in the handset and automotive industries were acknowledged, with a reduction in revenue from these sectors.
Bullish Highlights
- Significant growth in industries such as e-commerce, online games, and healthcare.
- Positive trends expected in the second half of the year, driven by the Olympics and other activities.
Misses
- Advertising and marketing revenues decreased by 5% on a constant currency basis.
- The cosmetic and beauty industry's performance did not meet expectations.
Q&A Highlights
- Weibo plans to focus on users who generate more opinions and content and have higher ARPU.
- The company aims to stabilize DAU and increase the percentage of high ARPU users.
- Emphasis on increasing user activity and interactivity to improve core competence.
Weibo concluded its earnings call with a commitment to increasing user activity, interactivity, and content contribution. The company is strategizing to improve its ad inventory and user engagement on terminal devices, targeting at least 50% usage on popular smartphones. With a stable MAU throughout the year and organic growth spikes during key news and social trends, Weibo is poised to focus on UGC-related content and interactivity to bolster its platform and drive future revenue growth.
InvestingPro Insights
Weibo's strategic initiatives and financial performance have been a mixed bag, as reflected in the recent data from InvestingPro. While the company has faced challenges, particularly in the cosmetics and beauty sector, it has also shown resilience through its increased monthly and daily active users.
InvestingPro Data indicates that Weibo's market capitalization stands at $2.14 billion, with a low price-to-earnings (P/E) ratio of 7.45, which further adjusts to an even more attractive 6.51 when considering the last twelve months as of Q4 2023. This suggests that the stock may be undervalued, especially when considering the company's impressive gross profit margin of 78.73% during the same period.
Two InvestingPro Tips that are particularly relevant to Weibo's current status include:
1. The company holds more cash than debt on its balance sheet, indicating a strong liquidity position that could help it navigate through market uncertainties and invest in growth opportunities.
2. Despite recent downward revisions in earnings by analysts for the upcoming period, Weibo's valuation implies a strong free cash flow yield, which could be appealing to investors looking for companies with the potential for healthy cash returns.
For those interested in a deeper analysis of Weibo, InvestingPro offers additional insights. There are currently 9 more InvestingPro Tips available, which can provide a comprehensive understanding of the company's financial health and future prospects. To explore these tips and make more informed investment decisions, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/WB.
Full transcript - Weibo Corp (WB) Q1 2024:
Operator: Good day, and thank you for standing by. Welcome to the Weibo Reports First Quarter 2024 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Sandra Zhang, IR Head. Please go ahead.
Sandra Zhang: Thank you, operator. Welcome to Weibo first quarter 2024 earnings conference call. Joining me today are 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 the management remarks, I would like to read you the safe harbor statement 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. Weibo assumes no obligation to update the forward-looking statement 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 future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payment or are non-recurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following the 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: [Foreign Language]
Sandra Zhang: Thank you. Hello, everyone. Welcome to Weibo's first quarter 2024 earnings conference call.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On today's call, I'll share with you highlights on Weibo's product and monetization in the first quarter of 2024.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On the user front, in the first quarter, Weibo's MAU reached 588 million and average daily use reached 255 million. In light of an already sizable user community and increasingly mature user mindset, we have proactively adjusted our user strategy in 2024 with more channel budget allocated to the acquisition and engagement of high-quality users. We are dedicated to further enhancing Weibo's product competitiveness, leveraging optimized channel strategy, social features and differentiation in hot-trends.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On the monetization front, in the last 2 years, we have been focusing on increasing commercial value for Weibo's hot-trends through combining entertainment and IP-related hot-trends content with advertising and marketing demand. This quarter, we enhanced the hot-trends effect of the spring festival, leveraging Weibo's advantage in hot-trends marketing. Despite the overall sluggish end market in the first quarter of 2024, our total revenues reached $395.5 million and our total ad revenues reached $339 million. On a constant currency basis, both our total revenues and ad revenues will be flat year-over-year. For the first quarter of 2024, our non-GAAP operating income reached $125.8 million, representing a non-GAAP operating margin of 32%, a modest pickup year-over-year.
Gaofei Wang: [Foreign Language]
Sandra Zhang: Next, I'll introduce our progress in product operation and monetization in the first quarter. In 2024, we still focus on growing user scale and engagement, strengthening the competitiveness of content ecosystem and improving operating efficiency as our key strategic objectives. We keep optimizing channel collaboration, improving the competitiveness of social and hot-trend products and strengthening key content verticals to further enhance the overall competitiveness and healthy development of Weibo's content ecosystem. We believe execution of this strategy will lay a solid foundation for our top line recovery from user, content and monetization side, enabling us to capture market opportunities once macro economy gets better and brand ad demand improves.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On the channel front, we maintained close collaboration with handset manufacturers, focusing on the acquisition of high-value users and promotion of user engagement. We also invested to further refine accuracy of algorithm and targeting capability of our business model in order to create enriched content offerings for our channel users and increase user engagement, which lays foundation for monetization.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On social attributes, in the first quarter, we continue to execute strategies to focus on the development of content verticals to further recover the vertical content ecosystem. On the one hand, we focus on adjusting the algorithm of relationship-based feed and interest-based feed to distribute personalized vertical content for users reinforce recommendation on real-time feedback and promote social conversion. As a result, the per capita content consumption and interaction efficiency of these 2 feed continue to increase sequentially. On the other hand, in 2024, we stepped up investment in UGC content and improved generation of high-quality UGC content on Weibo. We encourage users to create more high-quality content around hot-trends and verticals on Weibo to improve user engagement and enrich and diversify content in vertical areas. For example, in the Weibo mobile photography content, we introduced long-term stream tracks, co-created content with media and handset manufacturers and open off-line of photography exhibition to encourage ordinary users to share photography of scenery, culture and life et cetera, on Weibo. As a result, over 6 million users participated in the contest in 5 months and contribute approximately 3 million photos. This year, we will recognize more similar activities and encourage users to participate in the content generation, leveraging Weibo's influence and enrich Weibo's company ecosystem. Additionally, we further upgraded the posting and interaction functions for the Super Topic products. In order to boost the user engagement within the community, that is to say users can gain traffic incentives on high-quality content they posted while also enjoy the social interaction around the interest-based content within the Super Topic community. In the first quarter, the number of post users who posted an interaction in the Super Topic community all grew double-digit compared with Q4 last year. The Super Topic has become an important channel to copy the interest-based to high-quality content creators.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On content ecosystem, in the first quarter, while maintaining our competitiveness in hot-trends, entertainment and other advantaged IP-related verticals, we focus on increasing investment in verticals such as digital, automobile -- automotive, game, fashion and beauty and healthcare to enhance the competitiveness of Weibo's ecosystem and further improve monetization efficiency.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On hot-trends and IP content, in the first quarter, with about entertainment content released during the Spring Festival, we integrated content operation of hot-trends entertainment and various vertical areas to engage broader users to consume and interact around the content related to the Spring Festival, leveraging our advantages in these areas. As a result, the overall traffic of the platform increased significantly during the period. Total views of content related to Spring Festival Gala this year reached 100 billion, and related discussions surpassed 300 million, up 50% year-over-year. The increase of traffic in hot-trends in the Spring Festival also created significant commercial value. On the one hand, such cross-vertical operations amplified the hot-trends and the IP effect on the platform and improve the platform's operating efficiency and establish Weibo's influence in key industries. On the other hand, as hot-trends become increasingly standardized and the process of hot-trends marketing becomes smoother we will also bring a sustainable revenue growth going forward. We are confident that Weibo will maintain its leading position in the industry in the future hot-trends operation and marketing.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On industry-related content verticals, this year, we will continue to execute against some of the key strategies we adopted in the fourth quarter last year. First, we strive to strengthen the construction of vertical company ecosystem. To elaborate, we will beef up our support of vertical content, engaging cross-vertical accounts and media outlet in the generation and distribution of popular vertical content. Second, we will divert more traffic to vertical accounts to promote the growth of high-quality accounts in vertical areas and empower them to gain higher commercial returns with their own content on Weibo platform. In addition to the healthcare industry mentioned in last quarter's conference call, we also achieved notable growth in automobile, digital products and online games in this quarter. We are encouraged to see significant increase in the number of golden and orange verified accounts and their traffic interaction as well as ad revenues generated on an annual basis. In particular, for the online game vertical, the number of golden and orange verified account increased by nearly 50% year-over-year with traffic and interaction increasing over 20% and the revenues from marketing activities yearly triple. As a result, we have gradually integrated the content and monetization ecosystem in a closer and healthy manner for the online game vertical. In terms of the cosmetic and beauty vertical, we achieved notable growth in the number of hot-trends and the golden verified accounts in the past 2 quarters, leveraging our traffic support and hot-trends operations. However, due to the fierce competition from other platform and accounts, Weibo's content ecosystem in the cosmetic and beauty vertical has now returned to an effective growth trajectory. We need to keep up our investment, find a stable and effective road map to optimize the content ecosystem in order to reinforce our competitiveness in this vertical.
Gaofei Wang: [Foreign Language]
Sandra Zhang: Moving on to monetization. In 2024, we will continue to beef up our efforts to reinforce our monetization competitively. Leveraging Weibo strength in hot-trends and IPs as well as driving vertical content ecosystem, we will sharpen our competitive edge of our content marketing and performance ad products in the hope of enhancing our capabilities to navigate through business risk in key industries.
Gaofei Wang: [Foreign Language]
Sandra Zhang: Amid a relative soft end market in the first quarter, our ad revenue were flattish year-over-year on a constant currency basis. During the Spring Festival, we accustomed the platform resources to customers' marketing campaigns by integrating the hot-trends of Weibo and market hype for clients. We seek to accommodate customers' promotion budget as much as possible. As a result, our gross ad revenues related to the Spring Festival ad placements increased by 50% year-over-year, of which gross ad revenues connected to the Spring Festival IPs doubled year-over-year with our diversified marketing offerings and products, customers from more industries can participate in the Spring Festival marketing campaigns. Therefore, our gross ad revenue from e-commerce, online games, footwear and apparel, healthcare, digital products and food and beverages sectors, et cetera, all more than doubled year-over-year. For example, during the Spring Festival, the beverage brand [indiscernible] launched the Send Good Wishes campaigns on Weibo through the hot topics around the brand ambassador, [indiscernible] such as Spring Festival greetings, auspicious words and the popularity of works. Over 300 celebrities posted good wish under the topic of good luck in the Year of the Dragon to create auspicious atmosphere and enhance the brand mindset of the auspicious culture. As a result, the customer successfully built market hype with its brand exposure on Weibo increasing 290 percentage, which drove the growth of e-commerce sales of the brand during the Spring Festival season growing 20% year-over-year.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On industry, we are pleased to see the handset online game industry sustained double-digit growth year-over-year. The handset sectors continue to grow off a high base as we capture higher volume share among customers and budget, thanks to the customers' recognition of hot-trends marketing offerings. As for the online games with the tailwinds from game license approval and the client's growing demand in content marketing. Ad revenue from the game sector also grew significantly.
Gaofei Wang: [Foreign Language]
Sandra Zhang: On the flip side, despite a sequential recovery, the cosmetic and beauty sector continued to decline year-over-year as we previously expected. This was mainly because the consumers concept and trends are gradually shifting toward more cost-effective products. As a result, the sales of the international beauty brands were still under pressure, which negatively affected the pace of new product launch and thus, their scalable budget. That said, we are pleased to see continuous improvement of domestic beauty brands in product quality and brand marketing, leading to increased brand ad placement on Weibo since the second half of last year. In the first quarter, ad revenues from domestic beauty brands grew over 50% year-over-year. However, the growth still cannot fully offset the impact of the decline in the international brands on our overall revenue yet. In order to boost client willingness of new product marketing and improve its performance, we will strengthen cooperation with e-commerce platforms and domestic brands and actively explore the synergistic promotion of new product in the FMCG industry on social and e-commerce platforms and provide clients with better marketing support. We hope these efforts will translate into more stable growth in the FMCG industry in the coming quarters. In the second quarter, we will test the in-depth cooperation with Tmall focusing on the beauty, footwear and apparel industries, leveraging Weibo's strength in hot-trends marketing, we aim to create full funnel value to customers for their new product launch from social influence to e-commerce conversion and thus enhance customers' perception of Weibo's value in hot-trends marketing.
Gaofei Wang: [Foreign Language]
Sandra Zhang: Overall speaking, although revenues from certain industries such as cosmetic and beauty industry fell short of expectation and dragged the overall revenue growth, we delivered decent operating profit, which further increased from last year, thanks to solid execution of our efficiency initiatives, leveraging improved operating efficiency, stable profitability and healthy cash flow. We further elevated our financial flexibility, giving us ample room to invest in the vertical company ecosystem to drive user growth and engagement as well as strengthen our monetization competitiveness.
Gaofei Wang: [Foreign Language]
Sandra Zhang: With that, let me turn the call over to Fei Cao for a financial review.
Fei Cao: Thank you, Gaofei, and hello, everyone. Welcome to Weibo's First Quarter 2024 Earnings Conference Call. Let's start with user metrics. In March 2024, Weibo's MAUs reached 588 million and average DAUs reached 255 million. Given our massive user base and increasingly mature under mindset, we have proactively adjusted our user strategy in 2024, which puts more emphasis on the acquisition and engagement of high-quality users leveraging effective channel investments, optimize the social features and our differentiation in hot-trends. 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 the comparisons on a year-over-year basis, unless otherwise noted. We continue to experience happiness to our financials due to the volatility of foreign exchange rates in the last 12 months. Since our business primarily operates in China, while we report our financials in U.S. dollars. Our financial performance was affected by adverse currency movements. Now let me walk you through our financial highlights for the first quarter 2024. Weibo's first quarter 2024 net revenue was $395.5 million, a decrease of 4% or flattish on a constant currency basis. Operating income was $125.8 million, representing an operating margin of 32%. Net income attributable to Weibo reached $106.6 million, representing a net margin of 27%. Diluted EPS was $0.41. Let me give more color on the first quarter 2024 revenue performance. Weibo's advertising and marketing revenues for the first quarter of 2024 was $339 million, a decrease of 5% or flattish on constant currency basis, reflecting low seasonality and the past macro environment. Mobile ad revenue was $322.5 million, contributing approximately 95% of total ad revenue. In terms of growth, the online game and the 3P product sector demonstrated strong momentum, both booking double-digit growth. For the online game sector, we benefited from normalization with game license approval and captured ad budget of newly launched blockbuster titles. We are also encouraged to see the solid as well as increase of handset sector continued into 2024, leveraging our years of cultivation around content ecosystem in the [indiscernible] vertical. But FMCG categories, it continued on descending trajectory year-over-year, though delivering sequential growth. Within the FMCG category, the food and beverage and the apparel sectors already returned to positive growth, while the cosmetic and the personal care sector still faces the challenges from a lack of new product catalogue and in turn competition among ad platforms. The ad product, promoting feed ad was the largest, followed by social display and topic and search. Ad revenue from Alibaba (NYSE:BABA) for the first quarter was $22.6 million, an increase of 23% or 29% on a constant currency basis. We are pleased to see the solid ad growth from Alibaba continue into 2024. [indiscernible] moderately pickup in ad budget amidst the intensive by the competition landscape. Before turning to VAS segment, let me share some preliminary color on the trends entering the second quarter of 2024. On the offset, advertisers actively embrace the campaign before the opening of [indiscernible] Olympic. Consumption sentiment also seems to be bottoming out with the holiday effect and execution of economic similar packages. We hope for further recovery of our ad business in the second half of the year, driven by [indiscernible] event as well as a relatively user comparable base. Turning to VAS. VAS revenue was $56.5 million in the first quarter, a decrease of 3% or an increase of 1% on a constant currency basis. Turning to cost and expenses. Total cost and expenses for the first quarter were $269.7 million, a decrease of 5%, mainly due to lower personnel-related expenses and the marketing expense. Operating income in the first quarter was $125.8 million, representing an operating margin of 32% compared to 31% in the same period last year. Turning to income tax and the GAAP measure. Income tax expense for the first quarter was $25 million compared to $21.9 million last year. Net income attributable to Weibo in the first quarter was $106.6 million, a decrease of 4% of flattish in renminbi terms. Net margin was 27% flattish versus the same period last year. Turning to our balance sheet and cash flow items as of March 31, 2024. Weibo's cash, cash equivalents and short-term investments totaled $3.25 billion. In the first quarter, cash provided by operating activities was $139.6 million. Capital expenditures totaled $21.7 million and depreciation and amortization expenses amounted to $14.8 million. Before turning to the Q&A session, we are pleased to announce that we have completed the distribution of special dividend of $0.82 per ordinary share or ADS to our shareholders with aggregate amount of approximately $200 million. Looking forward, we remain highly committed to consistently return value to our shareholders and explore various ways to enhance shareholder returns, including but not limited to, distributing dividends. Besides, I would also like to provide an update on our ESG initiative. In April, we released our third ESG report which details the company's initiatives and progress in key ESG areas such as cyber security and privacy protection, human capital, content quality, social responsibility and operations, et cetera. The ESG practice displayed in the report showcases our long-term commitment to sustainable development, current impact on our users, content creators, employees, business partners and other stakeholders. Weibo is set up in the region of making the world a better place with the power of Weibo. Looking ahead, we will step to further refine our ESG governance system and enhance our ESG performance. We invite all participants and stakeholders around Weibo's ecosystem to jointly achieve the sustainable development goal of the company as well as the [indiscernible]. You may visit our IR website to obtain more information of our ESG disclosure. With that, let me now turn the call over to the operator for the Q&A session.
Operator: [Operator Instructions] We will now take our first question which is from Felix Liu from UBS.
Felix Liu: [Foreign Language] Congratulations on the first quarter B2 consensus expectations. My question is on your outlook for the advertisement business in second quarter and second half. How is advertiser sentiment trending? And how do you expect your advertisement business to perform? And could you maybe elaborate a little bit more on your ad strategy?
Gaofei Wang: [Foreign Language]
Unidentified Company Representative: First of all, let's talk about our expectation on Q2 and also the second half overall speaking. So in last year, from Q1 all the way to Q4, we have been seeing an increasing of the certainties of the advertisement industry. And in 2024, each quarter, but still, we are keeping a very cautious manner in this area in terms of our expectation of the recovery of the sentiment. So of course, in Q1, this was more optimistic than our expectations. Apart from the cosmetic and beauty products industry, we've been seeing a slow recovery and also a quite normal sentiment of the rest of the other advertisers from the other industries. And also in Q2, especially in March and also in April, of course, that we have seen some of the positive trend, except that seems that the consumption seems to be slowing down. However, still, we believe that the expectation in the second half in Q3 and Q4 is more optimistic than the Q1 and also Q2 of this year. And also with the limited budget on the advertising, most of these budgets went to the effective based advertisement, for instance, the live stream advertisement. And also, it is pretty much focusing on the branding as well as some of the promotion of the new brands. This is going to be focused on the, for instance, some of the hot topics like the IP of the entertainment programs or the holidays like the Chinese New Year, et cetera. So we've been seeing a pretty much obvious trend of the indication of the budget in these areas in the past quarters. And of course, another very important thing is that we have to refocus on the hot topic marketing and also some of the relevant areas like the hot topics of the festivals and also some of the IPs as well as the e-commerce focus, for instance, the 618 or Double 11 shopping festival. And also, we have to pretty much focus on the new product marketing and also the new brand market as well. So that is to say that against the overall trend, we still need to focus on the core competitiveness areas of Weibo as a whole. And also in terms of the overall industry, we have seen that in Q2 and also in the second half, we've been seeing some of the focuses of the driver of the overall demand from the shoe industry and footwear, for instance, and also the gaming, food and beverage and also the healthcare, et cetera. So in the second half of the year, we are going to pretty much focus on these hot IPs. And also, we're going to have a lot of activities that could pretty much drive up the budget of the advertising like the Olympic Games. So that is to say that the industry is like the footwear as well as the food and beverage are going to be contributive to the advertiser industry in the second half of the year. And also, we've been seeing a very good effectiveness turning up pretty much the focus on the factor-based advancements from the gaming industry, which used to be the case. But now we've been seeing more and more focus shifted to the content-based advertisement and also some of the hot topic-based advertisements. So that is to say that the overall structure and also the ecosystem of the advertisement from the gaming industry is getting better. And also, as a result, we are expecting a positive result and more optimistic recovery in the second half of the year. And also, apart from that, for the other kind of industries like the handsets and also automotive, according to our estimation, the base number was still quite high. So we've been seeing some of the challenges in terms of development of these industries. But still, we think that there's still some of the uncertainties that whether we're going to maintain the same growth rate as of 2023. However, still, we need to base on our differentiated strategies and also core competency in terms of the content market share. And also, we believe that we still have a very good high ability in terms of the anti-risk availability. And also, we're seeing for the handset industry some of the high-end handsets. We do see a more allocation of the budget of [indiscernible]. And also in second quarter of the year, we are able to pay attention to the increasing of this particular budget. But still, now we do need to be aware that there is still less new handsets are promoted. And also in the automotive industry, we've been seeing a very good recovery. But an overall trend is like that but still, there is a price win also some subsidies, subsidies policies. So the profit of the automotive industry is actually getting down. As a result, some of the budget of the development is getting shrinked. And also for the other industries, we do see some of the pressures, prices like the cosmetics and also the beauty care products. As I have mentioned, that we've been seeing a very good overall quarterly performance and recovery of the performance, but still, there is a certain reduction over the past. So this is pretty much an understanding of that. So in Q2, we have to focus on different topics of that, like the Olympics and also the others to do more marketing on this. And also, I would like to share some of the colors on some of the more stressful industries, for instance, cosmetics. As I have already said that in details, we had around 5% reduction in terms of the overall revenue from this particular sector in Q1. And also, we do see -- now we have been shifting our attention to the collaborations with the domestic BD products brands. And also, we've been seeing a kind of a very small percentage against the total revenue contribution, which is only 20%. But still, there is a lot of a stressful situation for the decline of the revenue from the international famous brands of the beauty care products. So this is one of the problems, which is that the international brands are having actually driven down of their overall sales. And also second, we did not recover fully in terms of our whole ecosystem. And also, we are waiting to fully recover our core competence and competitive edges. So in 2023, the overall revenue from this industry was decreased. And also, you can see that on a year-on-year basis, in Q1, we still had a little bit reduction versus the same period last year. But still, because of the low base in the first half of the year, we are expecting a pretty much positive trend for this cosmetic and beauty product industry in the second half of this year. That's for this industry and sector. And also in terms of the overall strategy of boosting its revenue from advertisement industry, first of all, we need to really focus on the particular market trend and also focus on the core business models that we already had, for instance, emphasizing still on the advertisement based on the IP hot topics and also the customer related hot topics, and also increasing the sales and penetration of these areas. So for instance, like the Olympic Games and also increasing our sales and promotion during these competition days and also some of the very important e-commerce festivals. So at the current stage, we've been seeing a very good improvement of the overall penetration of our products in these occasions. But still comparing with some of the other brands like the IQiyi or Youku or Tencent videos still we're accounting for only several -- like only accounting for dozens of percentage against the total customer base. But still, we are having a very positive trend on this area. And also in terms of the other hot topics related to customers, for instance, some of the new product launches and also like the new handsets and also the new automotive and also some of the e-commerce festivals like 618 or Double 11 festival, we are now having a very good success rate of our product promotion, for instance, 50% to 70%. And also sometimes, if we really focus on these key areas, the overall success rate could be as high as 90%. So still, it takes a little bit of time for us to reach a final economy of scale. But still, what we need to do is that still focus on the overall trend and also know what's the best industry that we have to cover for different years. For instance, many years ago, we were doing a very good job in terms of the management in industries like entertainment and also movies and TV series and also the handsets. And 2 years ago, we were doing good jobs in the area of automotive and also gaming. And of course, that in recent several quarters, it was not that successful in promoting the advisement business among the cosmetic and beauty products industry, but still, we will keep our eyes on the development trend and the recovery trend of this industry and also really focus on those industries that are -- we believe that are most suitable industries and also sectors for different quarters accordingly. And also, now you can see that if we're comparing the brand-based marketing versus the effect-based advertisement still, we've been seeing the latter part, experiencing some of the pressures. And also, you can see that the pricing trend for the kind of brand-based marketing and advertisement is always better than the effectiveness based advertisement. But still, we have taken some of the measures in coping with that challenge. For instance, we are purchasing the traffic and also using some of the traffic to have a very good recovery of the effective-based development and also to have a stabilized performance within this year. And also in the near future, within this year, we are going to emphasize more on our investment and also the implementation of better and more precise algorithm to really boost the performance of this particular part.
Operator: Next question is from Daisy Chen from Haitong International.
Daisy Chen: My question is about the user base. This quarter, we noted that the number of active users have decreased. But a good point is that the revenue per user has improved in a time. We think that indicates the improvement of our user quality. As you just mentioned that you will adjust your user growth strategy this year, can you tell us more about the adjustment and what kind of user data will be the forecast this year? And maybe is there any -- is there a saving of the user base that you feel comfortable?
Gaofei Wang: [Foreign Language]
Unidentified Company Representative: So actually, in last year, Q4 and also the overall second half of the year, we were already discussing our strategy on this particular area. And now, of course, that we are focusing on DAU and also MAU but still, we truly believe that not only that, we have seen that the ARPU generated from the different asset types and also different brands is actually pretty much different. For instance, we’ve been seeing actually the ARPU for those smartphone brands like Huawei and also iPhone is 2x to 4x higher than the other brands. So as a result, we have to really focus on those really competitive ones. For instance, especially focusing on those users that is actually able to generate more opinions on the social top or hot-trends and also the – in terms of the UGC as well. So that is to say that if we need to spend the budget in acquiring those users, we are going to focus on those users with a higher ARPU and also the users that are able to generate more content and also are more interactive. So normally, of course, the overall spending is around 2x to 3x more expensive than those users with a lower performance, but still, we’ve been seeing a very good positive trend. So still, we have tested that notion last year, and we’re going to keep doing so. So for instance, in Q1 of this year, we purposely gave up on some of the cheap to get or low-cost to get users in terms of their interactivity and also the ARPU generation. So we expect to have a very good DAU increase because of this focus. And also second, we do expect some of the frequency of the use and by switching on the Weibo app, for instance, really will focus on those high-frequency users. For instance, we might have a turn on of the app 10 or more times during the day, and this is really going to contribute to overall ad inventory. And also in the future, we believe that with higher activity and interactivity and also the higher and more content contribution, this is going to increase the core competence of Weibo as a whole. And also, we are going to see that in terms of the overall MAUs, we have seen around 20% of the users that have these purchase and also the acquired users. And of course, that now against those particular acquired users, so the percentage of those users with a higher ARPU is quite limited. But still, our strategy is that we want to keep a very stable performance of the DAU figure or a slight increase of the DAU number. And also in the future, we will be focusing on the increasing of those high ARPU-generated users number against the overall DAU. And also, a very important thing is that we really want to focus on the user activity and also the particular content generation capability and also the higher ARPU in order to, on the overall basis, improve and boost the core competence of Weibo as a whole. And also now we’ve been seeing that against those terminal users and the app users of the brand iPhone and also Huawei, we’ve been seeing 40% of our users that are using the app and also the terminal. This is already higher than the other social media platforms. But still, internally, we wish that this particular figure could go up all the way to about 50% or even higher. So in terms of the user generation capability or capability of generating content and also the users’ interactivity, et cetera. These performance indicators are really important to us because that is going to help us to drive the overall core competence with a double-digit impact. And last not least, I would like to say that in terms of the whole channel feed, it is keeping flat throughout the whole year. And also, not only we want to keep a very stable growth of the overall MAU, but still, we really wanted to make sure that we had a very organic growth for it. But sometimes, in June and also in December, we had a lot of hot news happening and also some of the hot social trend happening. So we do not – we actually have seen the increase of the overall MAU, but not organically but pretty much organically due to the natural incident happening during these 2 months, but not because of our channel strategy. So in the future, of course, our core strategy is that we really want to keep a stable or a slight increase on the DAU number, but more importantly, we have to focus on the percentage of those high ARPU users against the DAU, which could have around 5% to 10% of the increase, which is going to be better. And also, for the whole Weibo platform, we’re going to focus on the content, UGC-related content and also the improvement of the overall interactivity and also the content generation. This will be the focus of our effectiveness while taking some of the appropriate channel-related strategies. This is the answer for the strategy of our channel.
Operator: And we have no further questions. In that case, I will hand the conference back to the speakers for closing remarks.
Sandra Zhang: Thanks, operator. This wraps up our conference call today. Thank you for joining us. We’ll see you next quarter.
Operator: Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.
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