Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, November 9, 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 third quarter 2016 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 quarter and also include a Q&A session after the management's prepared remarks. The third quarter 2016 financial results and the 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. I'm very pleased to report a solid financial results where we exceeded the streets profit estimates. This growth was primarily driven by strong results around our mobile advertising demand. The robust 69% year-over-year increase in mobile advertising revenues continue to highlight the sustainability of our overall advertising revenue growth. This exemplifies solid progress in the implementation of our mobile strategy and we are encouraged by these strong results that we continue to see in this area. Meanwhile, the macro environment remains challenging in the industry and it's no exception for us. We expect the trends to continue in the near future but are confident that our strong mobile execution and performance would help us cover these macro headwinds. We continue to focus on strengthening our core capabilities by providing our users with customized uniquely, specialized and high quality [indiscernible]. We remain diligent and agile as the media industry evolves in China. As such we're excited to have the best Chinese Media Executive, Mr. Chen Tong as the Co-President of Ifeng and the President of Yidian. Cheng Tong is the pioneer of China's internet media ecosystem. Having involved with the industry and spearheaded the development and success of Chinese portals, at levels of productions. He is a proven winner with significant media and content development expertise and a deep understanding of the changes and direction that are taking place in our industry. More importantly, he clearly sees and understand the tremendous growth opportunities that present for the phones and tablets. Going forward, he will be responsible for Ifeng's constant operations management and product operations and public relations. What's happening with Yang [ph] who helped to Ifeng into the next level of internet media expansion. We are extremely excited about Cheng Tong's appointment…

Thank you, Shuang. And thank you all for joining our conference call today. As Shuang mentioned earlier, we are very glad to have another strong quarter with bottom-line which has beaten the street consensus; driven by the mobile growth. Ifeng total revenues for the third quarter came in at RMB360.1 million, driven by the mobile advertising sales growth. Non-GAAP net income attributable to Phoenix New Media for the third quarter was RMB25 million, or RMB0.34 non-GAAP net income per diluted ADS. Now let me take you through our financial highlights for the third quarter of 2016 results. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP are non-cash or non-operating items which are share-based compensation and loss from equity investments including impairments. Starting with revenues, net advertising revenues for the third quarter came in at RMB310.4 million, which represents a year-over-year increase of 3.5%. The increase was primarily due to the 69.4% year-over-year growth in mobile advertising revenue and was partially offset by 22.8% year-over-year decrease in PC advertising revenues. Paid service revenues for the third quarter was RMB49.6 million, which represents a year-over-year decrease of 45.1%, which was better than expected. MVAS revenues decreased by 63.7%, to RMB25.8 million, mainly resulted from the decline in users demand for services provided through Telco operators in China which was consistent with the company's expectation given the shrinking demand for such services in general. Games and other revenues increased by 23.5%, to RMB23.8 million, primarily due to the increased revenues generated from online digital reading services through the company's own platform. Secondly, gross profit and margin, non-GAAP gross profit for the third quarter of 2016 was RMB172 million, compared to RMB184.7 million in the same period last year. Non-GAAP gross margin for the third…

[Operator Instructions] Our first question today comes from the line of Wendy Huang from Macquarie. Wendy, please go ahead.

Thank you. My first question is about Yidian and also competition in the personalized area. So what kind of the financial and traffic target that you have set of Yidian for next year? Are you still on-track to consolidate Yidian in 2017? Recently we have also observed the increasing competition for new players, for some by due started to promote their new spirit. And today's headlines they raised more money and high variation. So can you comment on the competitive landscape. My second question is about some of the broadcasting initiatives in the prepared remarks. So what kind of random audio. How would you like to generate value from those broadcasting initiatives you just mentioned. Is it many through the advertising revenue that you used to derive from your traditional product or you also expected to get some kind of the tipping or bridge heighten transient rationalize what has happened. Thank you.

Thank you for the question, this is Ya. About the first question, about the user growth and revenue growth for Yidian's as we enter into the fourth quarter of this year, we accelerated our user growth, first all started to ship new handsets, with pre-installed Yidian's apps. Secondly, both for OPPO and Xiaomi handsets, we are starting to provide embedded news stream in their browsers, these two handsets, actually two of the top five manufactures in China. And also OPPO became the number one in the third quarter. Both of them have large existing browser user base, and also for the next 13 months towards the end of next year, we are expecting at least 100 million to 150 million new shipments, and we've preinstalled Yidian's apps, as well as embedded new service in their browsers. So we are very excited about this user growth, just from the strategic channel partners, we believe we should be able to double our user base from the level of over 40 million we announced in September. And also because our unique product positioning for Yidian, and that also really actually leads to manufactures initially choose to partner with us. We are trying to provide a balanced premium content, reaching average and professional journalism. So that we can provide news, not just based on the so-called interests, but also the quality content to make the content not only interesting or newsworthy, but also useful and tasteful. So this unique product positioning, based on our exclusive interest engine technology should also help us grow universe, from like IOS users, Apple users. We are also starting our brand advertising to help users understand new uniqueness of our proposition. In addition, I think profitably content premium content is also providing the Yidian users the kind of overall…

Thank you. I also have a question regarding the Q4 revenue guidance. Your Q4 revenue guidance seems can be [indiscernible] estimates. So can you maybe give more color on the rational [ph] provides the guidance you are giving. And also the business momentum by different segments. Thank you.

Okay. I think for the past quarter, we achieved year-over-year growth for our advertising revenue, despites of the soft economy and also continuous trend of migrating from PC to mobile advertising. Going into the fourth quarter, we continue to see the certainty -- increased uncertainty of the Chinese macro economy, that's why we want to keep cautious in providing guidance. However, we are making several or continue our several initiatives hopefully to achieve at least on the whole year base actually to be at least flat as last year. We are seeing rapid growth in our programmatic by the revenues. We are also continue to push our native marketing strategy initiative to generate more revenues for our brand advertising, and also I think we are leveraging the synergies between Ifeng and Yidian, trying to become larger media platform, to provide some integrated solutions for the major advertising needs of the leading advertisers. I think about the sector change the trends, we see the first auto industry continues to be the number one factor for us, and we see it stable and flat and the other -- the second factor is the E-commerce sector, we see E-commerce continue to be the number one factor actually on our PC platform, as our PC traffic is decreasing it's traffic at the lowest rate compared to our peers. And also, we have seen the overall E-commerce advertising expenditure to be stable, but for this quarter we have because due to the 11\11 factor, we see the e-commerce to grow compared to the previous quarter. And for the finance sector, which is the third contributor by sector, we are increasing a lot of new advertisers from insurance companies, from bank, traditional banks, from asset management and other small to medium size advertisers, based on our program by platform -- the fully platform, which helps us to increase not just for the finance sector but also overall, to increase the utilization rates of our ad inventories and to bringing more advertisers to feel both PC and mobile inventories. And also there are things that come the competition among the handset manufacturers, and telecom operators were also seeing the increase advertising budgeted from the communication service providers, and on Internet service side; we're also leveraging our programming by platform, to bringing more small and medium sized to advertisers. And another sector we are seeing opportunity for next year, is Chinese white wine the Baijiu industry, they stabilized over the last 24 months, and as we also getting information from some leading indicators like the Citi [ph] advertising revenue growth from the white wine industry. We are also expecting -- started growth in this sector, as it feeds our user profile better. We do have a lot of I think audience compared to other platforms who drink Chinese White Wines. So that's the sector by sector outlook for 2017.

Our next question today comes on line of Natalie Wu from CICC. Natalie, please go ahead.

Hi, good morning. Thanks for taking my question. Firstly, a housekeeping question; so what's the mobile contribution for your advertising revenue in last quarter? And also in terms of top five sectors, actually you just mentioned that e-commerce rank should be the firstly in terms of your advertising revenue and finance as the third. So what's the second contributor to your advertising revenue? And can you remind us of the contribution from the top five sectors to your advertising revenue? And also the second question is regarding your Yidian business, so Yidian DAU reached over $14 million in September, this is very impressive number. So just wondering how much of the $40 million is coming from app and how much from web? Are they with similar level of monetization potential in the future? And also can management update us the average daily using times in terms of Yidian? And also -- actually, I noticed that there is some litigation going between you Yidian's competitor, so wondering can management also have some comments on that please? Thank you.

Thanks, Natalie, this is Shuang. It's nice you have researched very important questions about the Ifeng's integration against competitors. Actually a few months ago, a user reported to us that when they try to upgrade Ifeng products on other competitor's app, installation alerts problem pops up. This is typical type of traffic hijacking behavior. Traffic hijacking has been a very, very big serious issue for internet companies and it continue to cause measurable damage for users. And also the competitors intentionally meets users who are searching to download Ifeng to install other apps instead to purchasing keywords from search engines. So this kind of actions actually are violating fear in business ethics and also severely impacted users daily consumption of Ifeng's product. So we decided to safeguard our right through legal actions. Actually by doing so we hope to help the industry to create a better fierce competition environment. I hope this answers your questions.

Hi Natalie, thanks for the questions. First, about the mobile contribution for the third quarter, it's 47% as compared to 29% a year ago or 40% a quarter ago. We did grow mobile advertising and we have 69% for this quarter. Secondly, you read the sector contributions. Let me first clarify that the e-commerce is the number one considered for our PC advertisers. However, on the mobile it's overwhelmingly big auto industry. So overall when we combine PC with mobile, the top five sectors and their contribution, so auto sector is 10%, e-commerce 13%, financial services 10%, our communications services is 9% and Internet services include like Internet transportation, like some of the other -- I think O2O and sharing economy all those internet services is 7%. These are the top five sector contributions. And on the Yidian's user, the 40 million DAUs, yes, currently I think the post the Yidian apps, the embedded news services in the browsers contributed to this number. However, do we exclude those browser users which do not use our embedded news service or we can't book user space down whether we have advertising capacity for that user on that day. In other words, if the user doesn't see our ads, doesn't -- of course excluding the factor of ads, we only count the users who is able to see our ad towards the DAU. Currently we do not provide the breakup between these two categories but we do believe in both, the app user and the embedded new service user will accelerate its growth. As I mentioned, OPPO started to shift their handsets with pre-installed Yidian app in late October. And about the time spend on our apps and browsers, the average time spend on our apps is about 15 minutes and are very…

Our next question today comes from the line of Bin Bin Ding [ph] from JP Morgan. Bin Bin, please go ahead.

Good morning, thanks for taking my question management. I'm very pleased to see that [indiscernible] product to management team. So my question is, what kind of changes or synergies can we expect that Chen Tong will bring to Phoenix as well as Yidian Zixun? And as Chen Tong as President of Phoenix and Yidian, so what we would Chen Tong's time and occasion pertaining to these two platforms? And my second question is about user engagement; so in addition to the average time spend for users, so can you give some more color in terms of user engagement, for example, as measured by the DAU and divided by the MAU ratio? Is there any major difference between the user behaviors and the users you acquired from pre-estimation [ph] as compared to the organic dollars? Thank you.

Hi, this is Shuang. Let me answer your first questions. Chen Tong will serve as the President of Yidian Zixun and continue to represent Xiaomi as the Director, and he will be fully responsible for Yidian's product operations, public relations, he will also serve as the Co-President of Ifeng, responsible for Ifeng's operation management. As I said in my opening remarks, Chen Tong is the pioneer of China's portal blog and a mini blog business. She basically defined the market and bring these three product line to the highest level in China's industry arena. So with his joining Ifeng and Yidian, he will bring his very supersensitive journalism and very strong execution capabilities as an extensive industry contacts and also very deep insights into our constant consumption behavior of all the engine users. His major -- I think he will spend more than half of his time and energy on focusing on Yidian Zixun, and also further accelerate the corporation between Yidian Zixun and Ifeng because there are lots of synergy in the areas of Way Media channel development and the constant cooperation and also major coverage of the current events and all the things. So he can help to realize the huge synergy in these areas between Ifeng and the Yidian side.

Hi, this is Ya. Thanks for your question. First of all, the user engagement measurements for Yidian; I think there are several numbers we did disclose in the past, first is the number of channels subscribed by our users, the three million companies, three million channels subscribed by users. That actually is truly unique, I think the only comparable platform is YouTube. YouTube has over a million channels, I think some are defined and sometimes subscribed by users. This large-scale or super DIY capacity allow us to provide the so-called value reading chance as we have to our users beyond tabloid news and the breaking news. And we -- internally we do measure many more aspects of user behavior like the number of search, the number of subscription, percentage of those things, and also other engagement numbers like the number of social sharing onto raising and wait for other social platforms, the number of -- like markets favorites, the number of user discussion, user comments, etcetera. I think these and many more engagement numbers, we do that, we scarcely disclose them as we -- some internal measurement we watch to improve our user satisfaction, also to improve user stickiness, prevent user exit to -- to jump to other platforms. And so the MAU level to the DAU level -- I think that we are among the highly frequently used platforms; I think among the top three. But the actual number we never disclosed in the past. Lastly, you mentioned about the importance of the number of organic downloads, we've realized that our product positioning and value proposition for our users actually referenced I think the direction of the evolution of the mobile rating. And that's the reason in the beginning why Phoenix New Media where Ifeng threatens to be invested…

Thank you very much.

Our next question today comes from the line of Xin Wang from Citigroup. Xin, please go ahead.

Hi management, thank you for taking my questions. I have two questions; the first one is, how to see the user overlap between our news app and Yidian? And the second one is, what's the Yidian's traffic breakdown by OPPO and Xiaomi and other category? And what's the breakdown for the incremental part of the traffic? Thank you.

Thank you for the question. First, I think we have rather different user profile -- Ifeng news app, and the Yidian news app; I think -- yes, right now on Yidian we have more users which are also Xiaomi handset users and also OPPO handset users, and Ifeng, we have more IOS users. Actually create opportunities for us to cross promote our users as these two products have different positioning. I think Ifeng news app, we do emphasize more on professional journalism, and newsworthy events like today's U.S. presidential coverage. And Yidian, we provide more comprehensive but more even more personalized contents based on user intelligence and machine learning and Big Data and our unique product positioning. So this user profile difference actually creates some synergy for us in the future. And also Yidian's larger mobile user base will help to -- help Ifeng's original contents and media influence to spread over a larger user base. So that's another of synergy for them. And on the Yidian's traffic breakup, we do not provide that information at this time; however, as OPPO starts to ship handset with pre-installed Yidian apps, we believe that OPPO's user contribution will increase rapidly. And both on Xiaomi and OPPO, we see that users through embedded new service on the browsers to grow very quickly. As the browsers system level fundamental software provided by the handset manufacturers, they are not removable, and they are positioned at the bottom of the handsets and very easy for users to launch the service. And as I mentioned more importantly, the time spent on these browsers for our embedded news service actually -- given now it's at the beginning or already at the same level as the average time spent by many of the peer independent apps, news apps. So we are confident the overall traffic growth including my previous answering -- on my previous question, the organic user growth will overall contribute to a very healthy contributions to our -- to next year's users which would be at least double from the September level this year. Thank you.

Thank you.

There are no further questions on the line at this time. I would now like to hand the conference back to Matthew Zhao for closing remarks.

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 gentleman, that does conclude our conference call today. We thank you all for your participation. You may now disconnect.