Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Fourth Quarter and Fiscal Year 2015 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Tuesday, the 8th of March, 2016. I would now like to hand the conference over to your first speaker today, the IR Director of Phoenix New Media, Mr. Matthew Zhao. Thank you. Please go ahead, sir.

Thank you, operator, and thank you and welcome to Phoenix New Media fourth quarter and fiscal year 2015 earnings conference call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu; our President, Mr. Ya Li; and the Chief Financial Officer, Ms. Betty Ho. For today’s agenda, management will provide us with a review on the quarter and also include a Q&A session after the management’s prepared remarks. The fourth quarter results and webcast of this conference call are available at the Investor Relations section of www.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi. With that, I would like to turn the call over to Mr. Liu Shuang, our CEO.

Thank you, Matthew. Good morning and good evening everyone. We ended 2015 on a solid note, with our quarterly results beating internal and external expectations across the board even in volatile market environment. Recognizing the challenges that lay ahead, we have spared no effort in transforming our business in order to meet the evolving demand of this modern era and have shown solid success in staying in front of the change. As a clear example, during the fourth quarter, we grew our mobile app revenue by over 118% year-over-year. However, it was a challenging year for the entire internet media industry in China. PC app revenues continued to decline and many companies began to downsize their internet accounting operations. With the weak macro outlook and the further transition of production for PC-based apps on the horizon, we anticipate further softness in 2016. Though 2015 was a tough year for PC advertising, we still see plenty of room for future growth as we align our mobile app monetization initiatives with the development of our two core and complementary mobile applications, Yidian and Ifeng News. These apps are central to our strategy for building a business that exists at the crossroads of technology, lifestyle and journalism. In 2015, we made great efforts to further improve Yidian's targeting technology as integrated into our overall business. What we did was build a platform that is completely new and innovative in the market. Our interest-based news and information app, which push content to users based not only on their selected interest but also on their exhibited preferences. By harnessing the power of big data, we opened up limitless possibilities to further customize the user experience, introduce high-value targeted apps, and implement our targeting technology in other parts of our business where it may be useful.…

Thank you, Shuang, and thank you all for joining our conference call today. As Shuang mentioned earlier, we are excited to have exceeded our guidance for the quarter and close out a challenging year. Ifeng's total revenue for the fourth quarter came in at RMB430.8 million, driven by the mobile advertising sales, with a year-over-year growth of 118.2%. Adjusted net income attributable to Phoenix New Media for the fourth quarter was RMB44.9 million or RMB0.62 non-GAAP net income per diluted ADS. Now let me take you through our financial highlights for the fourth quarter of 2015 results. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP are non-operating items, which are share-based compensation, loss from equity investments, gain on dispositions of subsidiaries and acquisition of equity investments, gain on disposal of an equity investment and acquisition of available-for-sale securities, and impairment of equity investments. Starting with revenues, net advertising revenues for the fourth quarter came in at RMB346.2 million, which represents a year-over-year growth of 2.3%. It was mainly due to the 118.2% year-over-year growth in mobile advertising revenue, which was partially offset by the decrease in PC advertising revenues. Paid services revenue for the fourth quarter was RMB84.6 million, which represents a year-over-year decrease of 15%, which was in line with our expectations. Mobile value-added services revenues decreased by 15% to RMB59.6 million. Games and others revenues decreased by 15.1% to RMB25 million, primarily due to a decrease in revenues generated from web-based games on the Company’s games platform. Secondly, gross profit and margin. Adjusted gross profit for the fourth quarter of 2015 was RMB216.5 million, compared to RMB235.9 million in the same period last year. Adjusted gross margin for the fourth quarter was 50.2%, compared to 53.9% in the same…

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Wendy Huang from Macquarie. Please go ahead.

Hi. This is Joe [ph] asking question on behalf of Wendy. Hi, management. Thank you for taking my call. So I'm just wondering, so, regarding your guidance, so you guided a pretty significant slowdown in the first quarter, and I noticed that your competitors on the other portal sites [ph] have -- is saying that 2016 will be stabilizing for PC advertising and expect like a flat year-over-year growth. I'm just wondering if you could comment on the advertising outlook and why your guidance is particularly weak in this regard. Thank you.

Hi. Thanks for the question. This is Ya. I need to talk about the advertising environment and the overall outlook first and Betty will follow up on the guidance. From what we are seeing now, some key sectors for us remain very uncertain. In the fourth quarter, the auto sector contribution remained stable compared to the third quarter, but it still is down from 32% contribution a year ago to just 26%, 27% contribution. I think in 2016, auto sector as the largest contributor for all the quarters still seeing uncertain environment. Despite of the government incentive policy, but the overall macroeconomic conditions remain uncertain. And also the shift from PC to mobile advertising is causing some transitional friction as to the uncertainty. In addition, we are seeing fourth quarter FMCG, like food, beverage and wine dropped out of our top five contributing sectors, because of the overall softness in their advertising budgets. We also see the same pressure for other like video websites in the fourth quarter for FMCG. Another sector which was also among the top five was the medical services. Due to the government regulation, we are seeing very little, if any, medical services in 2016. So I think based on these specific sectors which are among our top five sectors traditionally, we have to be more conservative. We know that in the fourth quarter, we did beat our guidance by more than double digit for advertising, but due to these sectors and also the Chinese New Year caused lower visibility for the fourth quarter, as it always is, that's why we remain rather conservative. I think Betty can add more.

Thank you, Ya. As for the guidance for the first quarter, specific to our advertiser space which are mostly brand advertisers, we do see a quite soft first quarter, which is in line with our previous quarter. First quarter is always our weakest quarter. But looking ahead throughout the whole year of 2016, given the weak macroeconomics, we are quite confident that our mobile advertising will be continuously grow at a very robust rate, which will be in line with the industry, if not better. As for the PC, I think we are still looking at a decline in rates, but the declining rate will be offset by the strong growth of our mobile advertising. Our mobile advertising revenue in 2015 has reached about 28% of our total revenue, and we will see that it will be further increased throughout 2015. So overall our net advertising revenue will be growing actually better than the growth of 2015.

Okay. Thank you. That's very helpful.

Your next question comes from the line of Binbin Ding from JPMorgan. Please go ahead.

Hey, morning, management. Thanks for taking my question, and congrats on a strong quarter. I just really have some follow-ups on your advertising business. So, first, could you quickly share the mobile traffic and revenue contribution within your online ad revenue, and I think Betty mentioned that in 2015 is 28% of total ad revenue. So, how about the revenue split and traffic split for the fourth quarter of 2015.

The mobile and PC revenue contribution percentage for fourth quarter is this, Binbin. It's 35% contribution from mobile advertising, overall it's 28% for 2015, compared to 14% for the 2014. And for 2016 we think the mobile revenue growth rate will remain higher than the industry average. In 2015, in the fourth quarter we grew by 118%; overall I think we grew by also over 100% in 2015. In 2016 the industry expectation is also high double digit, but we expect even higher growth. The contribution of our mobile revenue in 2016 will also helped by the mobile video monetization. In 2015 there was very little mobile video monetization. And also in 2016 we plan to invest more in our mobile traffic growth and product innovation. In addition, the mobile native marketing, which we have successfully applied to our PC advertising, will also help to generate more brand advertising for the mobile properties. And also we are enhancing our technology for programmatic ad selling so that we can sell more on-field ad inventories for our mobile properties. Add that together, we think that in 2016 we will see even greater contribution from mobile advertising. And lastly, if we, you know, our Yidian Zixun strong mobile ad revenue expectations, especially in the second half of this year, will also add to the overall growth of the mobile ad. I don't know if that answers your questions.

Yes, it does. And also could you remind me the traffic contribution from mobile in the fourth quarter and in 2015.

Traffic?

Yes.

Growth or --

I mean basically the split, the distribution.

Traffic growth overall is -- I think it's 22% for our app and it's -- for the year over year, for the year 2015 over year 2014, it was 8%. However, it's also because our -- the lower growth on our WAP, W-A-P, WAP traffic, but higher growth on our app traffic. For the fourth quarter the overall traffic was 33 million. On the WAP side we revamped our -- the front page of our WAP site and also added more ad inventory and also changed some channel strategy. However, for the app side we had 22% growth. And in 2016, as I mentioned, we plan to increase investments in both channel and promotions for our user growth, as well as the technology and product innovation for our mobile assets. Yes.

Got it. That's helpful. And also can you give us some update on the monetization of Yidian Zuxin. And as you mentioned, the user, the DAU has already exceeded 10 million, and can you elaborate the Yidian's strategy to further acquire traffic and advertisers? And how should we expect the traffic -- sorry, the revenue contribution from Yidian to ramp up? Thank you.

Sure, okay. Yes, in 2015, especially in the fourth quarter, we did announce that our overall mobile traffic for Yidian exceeded 20 million, combining app and the WAP traffic. And it ranked number three according to the third-party TalkingData weekly coverage ranking, after Tencent and Toutiao. And our traffic did increase 400% in last year. In 2016 we will invest more in our traffic growth for Yidian Zixun. And we think we will remain solid in the first tier of the mobile apps. Also the -- we position ourselves much more beyond just a news app. We look at the overall market size as more than 500 million, including this mobile news consumption from the social platforms, from all the browsers, and also from the WAP side combined, not just the mobile apps of the portals plus Toutiao. So our search engine plus, as we mentioned, engine based -- interest engine will provide useful informations, with greater reach and more value, beyond just the hot news. And also the technology addresses some weakness of the pure, personal recommendation technology, allowing users to more conveniently express their interests and follow their interests. For example, the -- today, I think, the world is also eyeing -- is looking at the AlphaGo's competition against this Korean gold player. And we have, on our site, the AlphaGo is just one of the over 26 million [ph] channels can be easily defined by any user base on his or her personal interests. And this usage also allows our advertising divisions to have a better user profile and to better match the user, the consumer with the advertisers' target user group. So on the monetization side, because of the traffic growth and the base, and also because of the unique technology and the big data user profile, we can have greater effectiveness and ROI for advertising solutions. By the end of 2015, we have built advertising platform called Shingyu Ningshi Yidian [ph] -- Ningshi [ph] advertising platform. And also we have built advertising sales team of 100 people. We have seen some meaningful monetization already by the end of 2015. So in 2016, we do see those performance-based ads sales and also brand ad sales for Yidian to increase tremendously because of all the scale and unique technology of Yidian. We do have outlook for the Yidian advertising revenue. We think, comfortably, we think that we should easily deliver over $100 million gross revenue for the year. However, we will have better visibility I think towards the end of second quarter as we will open up our advertising platform, and we will also generate more brand advertising to validate our own advertising plan and also marketing solutions.

Okay, that's very helpful. I'll get back to the queue. Thank you.

Thank you, Binbin.

The next question comes from the line of Natalie Wu from CICC. Please go ahead.

Hi. Good morning Shuang zong, Li Ya zong, Matthew and Betty. Thanks for taking my questions. Actually your fourth quarter started very strong. And the advertising revenue, actually it's over 10% more than your -- the guidance you gave in mid-November. So, just wondering, is there are any special situation that happened in the month of December that led to the surprise? And how should we see the PC and mobile advertising revenue growth in 2016? I will have a very quick follow-up question.

Okay, thank you. I think we just actually did better than we -- than our guidance. We did give a conservative guidance due to a couple of factors. First was the economic outlook uncertainty. Secondly is we were still at the transitional period of our internal advertising sales team restructuring. And thirdly, I think, it's also the -- I would say the -- some of the sectors, especially when we had our field visits, and also when we communicate with our peers in portal and video companies, and we heard more negative feedback, then later actually we delivered the results. So I would say there was -- it was just better execution and also more conservative attitude we had when we gave the guidance. Yes. And for 2016 -- yes. The PC advertising revenue still contributed 65%, in the fourth quarter, of our advertising revenue. And it's still very important, I think, for our overall revenue growth. I think lastly, we only had 3% in advertising growth due to a double-digit decrease in our PC revenues, which is, I think, slightly less, I think, than our peers. In 2016 we continue to see better performance of our PC in the way that the PC will continue to decrease year over year but at a lower rate than our peers. I think there are a couple of factors allowing us to have this expectation. First, our PC traffic remains relatively strong compared to our PCs because of our media gene, because of our original content production and because of our overall influence, especially among the PC users, the higher-end users rather than the lower-end who cannot afford or who do -- not afford, who do not have habits to use PC. So the stable traffic allows -- or a better --…

Yes. So your PC revenue actually declined around 15% in 2015, if my calculation is right. So, just wondering, are you -- you said PC ad revenue will stay at the same healthy pace? So do you mean that the PC revenue decline in 2016 will be much narrower than the 15% decline in 2015?

Yes, we think -- our internal expectation is it will decrease at a lower rate, not only compared to 2015 and also compared to the industry average.

Great, thank you. My next question is about the top five industry among your advertisers in the fourth quarter of 2015. What kind of change you have noticed or expected to happen in terms of advertisers spending, maybe in different industries, also amid the PC transformation to mobile.

Okay. Yes, the top five sectors I think are the auto, e-commerce, financial service, communication equipment and services, and also Internet services. The difference from a year ago was the FMCG, or food, beverage and wine dropped out of the top five, as I mentioned, because of the economic condition. And also the managed services dropped out of top five because of regulatory change. And also another thing was also, among our top five is -- or number six is real estate. The last year we no longer consolidated real estate. So we can only compare 2015, I think 2014 actually, when you keep in mind that there was maybe a 5% factor caused by not consolidating the real estate advertising revenue. The Internet services, which ranked number five in the fourth quarter of 2015, refers to the new economy companies like the sharing economy, Uber-like companies. And also the communications equipment and services clients includes mobile operators, as well as -- or more importantly, the mobile device manufacturers. That also reflects the growing demand for mobile services. Financial services also ranked number three in fourth quarter, due to Ifeng's unique user profile and also the increase in online financial service demand for the targeted users. And auto sector, I mentioned earlier, it remained stable compared to a quarter earlier, but did drop from 32% to 26%, a year ago. And that also hurts us, because auto sector is the number one contributor to our advertising revenue. I don't know if I answered all of your questions. Thank you.

Great. Thank you.

[Operator Instructions] Your next question comes from the line of David Li [ph] from Huaiyan Securities [ph].

Hi, good morning. Can everyone hear me?

Yes. Yes, David.

Good morning Shuang zong, Li Ya zong and Betty and Matthew. And first I want to congratulate our mobile product received amazing growth rate. So I have two questions here. First, I want to know the [inaudible] price level compared to the other competitors' products such as Net [ph], Tencent and Sohu.

Okay. Thanks for the question. Are you referring to the mobile average or the PC?

Mobile.

Mobile, okay. I think mobile is a little bit difficult to compare. First, I think that -- we can only compare the [inaudible] publishing rate. However, each publishing rate probably has some different app condition. Unlike the PCs all at the top banner, mainly it's the in-stream ad, each different news app has a different location within the news stream and also has different number of locations. So it has difficulties to the apple to apple comparison. However, if we look at the launching or the loading page prices, [Chinese language spoken] then we believe that we have a very strong or high -- among the highest CTM rates. For the CTT rates, it doesn't really tell us too much information. But one factor contributed to our strong mobile revenue growth is of course, first, the [inaudible] mobile traffic; secondly, the increase and -- in our mobile ad inventory. In the third quarter we mentioned that we increased mobile ad inventory for both, for app and also the WAP properties. And I think the better cooperation between our advertising team and sales team and our content team helped to provide better advertising solutions for -- to adjust to advertisers' needs. Going forward I think we see the pricing for our mobile properties to -- mainly through adjustment of the ad inventory, rather than a simple change of the rate for our fixed ad inventory. So the ad inventory will be increased -- increase and adjust the increase itself rather than adjust the rate itself, is the strategy for our -- the beginning of 2016. And we do see the demand for mobile advertising and also the shift from PC to mobile advertising continue to be strong. And also all the peers, plus our own revenue growth in 2015, I think testifies the effectiveness and the strong demand for mobile advertising. That's why we continue to see a very high growth rate for our mobile traffic. And that's also the reason we're investing more in our user acquisition for mobile in 2016.

Okay. So how big is the potential of the mobile product monetization, so how about the goal or figures in the future, in three years or five years?

We think in two or three years our mobile revenue contribution will certainly exceed our PC advertising contribution. And also we -- I think Betty mentioned that our mobile revenue growth this year is targeted at a greater rate, growth rate than our peers.

Okay. So here's my second questions. So, as we know, Phoenix New Media has reduced staff during the second half of last year. So I want to know the progressive situation now and what will be the impact to the financial result in 2016?

Well, yes we have done a restructuring during -- around September last year. It has been stabilized and actually the cost saving will be reflected in 2016. And actually the staff we have around now is about 1,500 currently.

Yes. And if I may add more, I think that, in the end -- by the end of 2016, we actually are, I think, almost kept out original headcount plan, but maybe from this year it's shifting from PC-related headcounts to mobile and the product-based advertising-related staff. So it's a shift in our -- in structure and of our organizational headcount distribution in order to embrace this macro-trend from PC to mobile, and also to carry out our internal plans to make our content and audience younger and to make our products stronger, and also to provide more lifestyle and consumption content, rather than these too serious hot news. Of course we'll remain strong with that, but we'll add more to increase the younger and more entertaining audience. So I think that's the motive behind the restructuring and also, in fact, we did achieve that goal.

Okay, thank you.

There are no further questions at this time. I would now like to hand the call back to today's presenter. Please proceed.

Thank you operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us on this call. Have a good day.

Ladies and gentlemen, that does conclude our conference call today. Thank you for participating. You may all disconnect