Ladies and gentlemen, thank you for standing by and welcome to Phoenix New Media Fourth Quarter and Fiscal Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today call includes question-and-answer session [Operator Instructions]. I must advise you that this conference is being recorded today, Tuesday, March 14, 2017. I would now like to hand the conference over to your first speaker today, Mr. Matthew Zhao. Thank you, sir, please go ahead.

Thank you, operator. And thank you and welcome to Phoenix New Media fourth quarter and fiscal year 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 fourth quarter and fiscal year 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 that for the fourth quarter 2016, we delivered better than expected top and bottom line results. Our solid financial performance is a testament to the strengthening of our mobile platforms. We remained agile as a Chinese media landscape continues to involve and a focus on proving our users with superior media company with cutting edge technology. Let’s start with updates of ifeng News app. In the fourth quarter of 2016, our ifeng News app and officially launched the algorithm for the newsfeed for the first time. Users are now able to get more targeted and relevant recommendations that are tailored to their specific needs in their newsfeed. Ifeng’s strong media DNA allows us to take the ideal balance between algorithm driven news and professional journalism and push high quality and personalized content to our users based on their reading records and profiles. As a result, we witnessed strong traffic re-bond after the launch of this function upgrade in Chinese New Year when media outlets normally experienced traffic drops in similar situations. This clearly demonstrates the power of our product and the sequence of our users. This positive user reception was further reinforce within server third-parties recognize its solid adoption and growth. At December 2016, ifeng was ranked as number one paid news app in China in the iOS App Store and won the award for the most popular information app by an authoritative third-party in China. Additionally, we are confidently working to improve the operation of our products and are delighted to see our strengthening streamlining efforts bear fruit. Because of our new talent, our senior teams and the restructuring of our news app team our operations has improved significantly. Our news team’s impact has been…

Thank you, Shuang. And thank you all for joining our conference call today. As Shuang mentioned earlier, we are very glad to have exceeded our guidance for the quarter and closing out a challenging year with solid financial results. Ifeng’s total revenues for the fourth quarter came in at RMB411.9 million driven by the mobile advertising sales growth. Non-GAAP net income attributable to Phoenix New Media for the fourth quarter was RMB41.4 million or RMB0.57 non-GAAP net income per diluted ADS. Now let me take you through our financial highlights for the fourth quarter of 2016 results. The amount mentioned here are all in RMB unless otherwise noted. The differences between GAAP and non-GAAP on non-cash, on non-operating items which are share based compensation, loss from equity investments, including impairments, gain on disposal of an equity investments and acquisition of available for sell investments. Starting with revenues, net advertising revenues for the fourth quarter came in at RMB353.2 million, represents a year-over-year increase of 2.0% and with our previous guidance high end by 11.8%. The increase was primarily due to the 22.5% year-over-year growth in mobile advertising revenues, and was partially offset by the 9.2% year-over-year decrease in PC advertising revenues. Paid service revenues for the fourth quarter were RMB58.7 million, which represents a year-over-year decrease of 30.6%, which our previous guidance high end by 12.9%. MVAS revenues decreased by 47.9% to RMB31.1million, mainly resulted from the decline in users' demand for services provided through Telco operators in China, which was consistent with the company's expectations given the shrinking demand for such services in general. Games and others revenue increased by 10.6% to RMB27.7 million, primarily due to the increased revenues generated from online digital reading. Secondly, growth profit and margin. Non-GAAP growth profit for the fourth quarter of 2016…

Thank you ladies and gentlemen. We will now being with the question-and-answer session. [Operator Instructions] Our first question comes from the line of Wendy Huang from Macquarie. Please go ahead.

Thank you, management. This is Joe asking question on behalf of Wendy. I have two questions if I may. The first one is regarding Yidian competitive landscape, could management comment more on your competitive advantage against some of your key competitors, and also what’s our thought on potential M&A for Yidian? And second question is on the ad market outlook. Your 4Q ad revenue came better than expected, but 1Q guidance it's quite weak, so how should we think about full year 2017 ad market outlook. And where do you see advertisers shifting budget away to and away from? Thank you.

Hi Joe, hi this is Ya. Thanks for the question. First of all the Yidian’s competitive landscape and our competitive advantage, we look at this mobile news feed sector, we realize with both UC and Baidu joining the competitive landscape and also the demonstrated monetization capacity by some of the peer companies. And this becomes most contended, one of the most contented area in mobile internet, because of its relatively better business model, because of limited cost structure and also high revenue potential and especially the high frequency daily usage and the big data user graph which provides potential for any more innovative revenue streams in the future. So that's the first point that I want to make that this is a very attractive factor and very compatible. Secondly, when we look at the news feed players, I think most players provide similar contents, which easy to copy from each other. And also user acquisition cost continue to increase as user switch their mobile handsets every 12 to 18 months, I think the user acquisition becomes you know most important capacity among different players. And that's why I think we have a unique advantage here in the way that we acquired; we secured these strategic alliances with two of the top four - the handset manufacturers. Especially with OPPO came out as the number one handset manufactures in 2016 and also going very strong, while Xiaomi continues for the most internet active users’ handset. So with these two strategic alliances, we preinstalled all their new handsets and in addition, we also provide exclusive news feed on their browsers. The browsers are the basic application cannot be removed by the users. These two handsets combined have over 240 million daily users. And our news feed embedded in the browser service actually…

Thank you. Our next question comes from the line of Alex Yao from JP Morgan. Please ask your question.

Hi. Good morning, guys. Thank you very much for taking the question. Two quick ones, why is regarding the user acquisition strategy, so you guys talk about the partnership with the manufacturers for user growth. And I’m just wondering beyond that what are the other user acquisition strategy you guys have in mind and how to think about the financial impact for the user acquisition in 2017? A related question is that can you give us the top three channels in terms of efficiency in user acquisition? The second question is in the self-media which you guys talked a lot in the prepared remarks. I think yeah when we took maintenance to make the content move forward with this self-media is very important and in the market, sufficient this from this product the intensive I think every major media platform have here the self-media strategy, Baidu has a Baixar Hao, Sogou has Sogou Hao, Tencent has actually multiple similar initiatives. How are you guys going to position yourself in the self-media mark in, how do you plan to incubate your content supply? Thank you.

Okay. Thanks, Alex. Yeah your first question, I think let me answers it for just both I think EDM and also ifeng perspective. First on ifeng, I’d like to add that we also have some exclusive relationship with Huawei especially on their high end handset like Mate 9 and also expect a new handset, high handset the be announced in the recent exhibit. And so the preinstall with handset is important because as I mentioned that user switching handsets is important point of time to capture new users. And of course secondly, really the content and the brand perception is very important. So for ifeng I think we have seen our user acquisition to rebound especially after these years spring festival when we launched a new version of our ifeng News app with some new recommendation technology to help our service attracted a broader range of users. That overall, I think for ifeng is quality of original content it’s recognized brand image, especially in the era when social media, self-media becomes so prevalent. I think a lot of users are also very I think interested in this assortative content in the world when there is so much change, so much uncertainty, so many breaking news. And we have demonstrated our ability to always attract and retain new users whenever a breaking news or event takes place. I think that’s for ifeng does the content and to the brand is also important way for user acquisition. And certainly we for ifeng we also continue to innovate product like the live broadcasting of events is, one example I think that’s where we differentiate from the these chat room live broadcasting events and that’s also very I think valued by our advertisers. So it becomes a complete cycle for us to provide this…

Alex, let me add that, the Yidian and ifeng use support team actually give us a better competitive advantage. While Yidian enter into deep cooperation with Xiaomi and OPPO, hyper news as just started the preinstall with Huawei, like I mentioned in my opening remarks, Mate 9 and Mate 9 Pro, so basically three of the top five handset manufacturers has have indoors our brand and products. So that’s give us a very big competitive advantage. In addition to that we're also talking to other online shops, but we have very rigorous task internally, so we're going to monitor the operating metrics months-by-months to make sure the ROI of these pre installments or online cooperation will generate better results. As you mentioned that user acquisition is a highly competitive market. For the time being I think our top priority is given to extending market share rather than maintain profitability. I think that is - this strategy in fact interests of our overall shareholder interests. Just like Ya mentioned for competitive reasons, we cannot elaborate exact top three area in terms of user acquisition, but definitely a price dormant and online shop and deep link is three of the top priorities should be taking account by all these players in the market.

And the second question with regarding self-media. Yeah, it is intensive markets, all the players allows huge subsidies for the self-media organizations and the riders. Last year in 2016, Yidian was allowed to this plan called Yidian meaning that we are actually providing all the advertising revenues generated on self-media landing page to fact to the self-media themselves. We do not keep any of the revenue, and that's still the case, I think for 2017. And also - also there is I think when we combined the ifeng self-media with Yidian self-media platform, we have overall 150 million daily users across the PC and the mobile platforms of these two products that’s our huge platform, no self-media can ignore even just because of the overall influence and the rich. So I think the scale provides competitiveness and also we are product technology which can help us to really provide especially some vertical, some more targeted contents to the interested consumers. That capacity also helps us attract the high quality and more diversified riders from all the entire self-media organization.

Thank you. Our next question comes from the line of Thomas Chong from BOCI. Please ask your question.

Hi, thanks management for taking my questions. I have a couple of questions. The first question is management and beyond part of the advertising outlook, can we talk about the trend for each of the advertising key categories? And my second question is about the price hike for this year if there’s any? And thirdly is about price gap between PC and mobile? Thank you.

Okay, thanks Thomas. Yeah, first question is about ad outlook for each of the category certainly is a price hike and the third is…

Gap.

Price gap, okay. Yeah, let me address it. First on, our top five categories mostly remain the same with the auto industry followed by e-commerce and by financial service, by communication service and by food, beverage and wine. Among these five you know we think that although for our sales I am talking our sales, I think for the auto industry is continue to going to be the number one category for us, and we don't see much change because I think the advertisers are looking for both performance driven and also brand enhancement. And for e-commerce, we believe that continue going to grow as the overall economic activity shifts online the trend continues. For financial service, we didn't mention awkward and we have recruited more smaller advertisers from asset management, from insurance companies, from traditional bags, This is smaller, I mean their budget probably a smaller, but the financial service we are having more clients, but overall contribution probably this year will be the same not growing much, because of the I think limited growth from the internet financial service providers or the P2P providers. And for the communications sector, the mobile operators especially the handset manufacturers continues to spend money to acquire consumer, so we think that area will still be strong. For food, beverage and wine and we are targeting, we are hoping that specially the white wine Chinese bai jiu industry to continue to rebound, and so we're also optimistic about it. In addition, we see the internet service companies like the O2Os, the sharing economies that’s still going to provide new opportunities for us. About price hike, for PC rate 2017 is about the same as last quarter. And for the mobile web, we increased our rate by 32%. And the for news app, we increased our price by 25% in the first quarter compared to the fourth quarter of last year. The price gap I think right now the mobile some of the premium position of the mobile - our mobile platform already exceeded the premium position for PC and our - I think the trend will continue. And also another area of affecting price is our expansion of programmable buy the DSP performance apps as it contributes to 20% of our revenue in 2016. We believe that’s performance is a better management for advertising ROI. So as we continue to provide important marketing - brand marketing, including relative marketing services, the performance driven DSP as we also increased steadily. But since we are still going to sell our premium positioning using brand advertising, so the DSP growth will be I think just I’d rather I think we’ll not be too steep this year.

Thanks.

Thank you. The next question comes from the line of [indiscernible] from Nomura. Please ask your question.

Hi good morning management. Thanks for taking my call. I think management talk about your collaboration with North America in the beginning of the quarter. So I just wonder how do you pay those handset manufacturers for such channel services, it’s a revenue share model or you pay a fixed money for smartphone, for smartphone to those handset makers and or is that just and how long is your contract with that smartphone makers? And also for Yidian position, I just want to what are the line advertising verticals and for the advertisers, are they mostly SME or multi-national advertisers? And also just wonder what’s management’s view on the competition for our budget this year, for Yidian this given the fact that we have some new entrants by and using news feed entering this market? Thank you.

Okay, thank you. First about our relation with handset manufactures, it's all different, I think for Huawei with the standard market practice, but we value our premium content for their premium flagship handset, the things that fit their target audience. And also we think that's also fits to our target audience, so it's mostly you know it's the pre-installment are using payment, using cash. And for the Yidian, I think we have a long and strong relationship as Xiaomi and OPPO combined they are significant shareholders of us. And also you know the relationship also is strengthened by additional revenue sharing schemes. And as I mentioned that we’re already each of these two handsets, Yidian is already the number one new service provider. We combined browser news feed in the browser and work with the independent news app. So I think this strategic relationship is rather unique and as Xiaomi already is entering into the third year of such exclusive corporation with us. So we believe this ratio will grow even stronger and will be very long. And the second was about SME and multi-national, I didn't hear clearly what - can you repeat that question?

The second question right?

Yeah.

I just wonder - yeah what are your major advertising verticals for Yidian to change, yeah so the big advertisers like multi-national advertisers or SME advertisers and also as wonder what’s you competition landscape for advertising in budget for Yidian?

Okay, yeah, I think for Yidian, we provide both our performance add and also the brand advertising. For brand advertising and auto industry is again is also the overwhelming number one factor, for performance driven we do have a lot of SME customers. And in terms of competition for ad budgets, it all comes down to the ROIs for the advertisers, if we can have better ROI based on the advertisers purpose and so we have to improve our advertising effectiveness based on as where you mentioned illustrated we have a better user interest graph. We’ve understand the user better. We know that the user specifically subscribed or searched or shared or favorites what kind of contents beyond especially those contents beyond the breaking news or leisure, tabloid news. This unique product positioning allows us to better capture the interests also generates better going beyond the clicks to rate. Because click to rate can be somewhat manipulated by enhanced advertise - is the ad creation - however you have to deliver better result in terms of conversion the user interest has to match the advertisers target of consumers, that's something I think our product positioning allowing able us in the long run, as we also innovate our performance and platform we launched the Ling Xi ad platform last June, and also we are expanding our performance at sales team this year, so we are looking at faster expansion of SME clients this year. And in terms of big international multi-national advertisers we have being I think rather successful even just during the first year of full year operation - operation we achieved the highest award in last year's Annual Chinese Ad Festival in Haikou, and we received more than 80 I think different awards on that festival. So I think the competition for ad budget will be based on our unique product, and also by our intense sales team.

Got it. Thanks for the color. May I ask a very quick follow-up is that correct, the SME advertisers contribute the majority of the ads revenue for Yidian at least for now and also for the SME advertisers to just wonder what are their major industries out there like a service providers or from some other verticals?

Okay, I think in fact for 2016, I think our SME is about the same with a larger corporations contribution to Yidian versus advertising. And so for the SMEs factories when just all different from real estate, financial service, e-commerce, internet service you know many of them are local advertisers and we expand it our localized services or ad sales operations into 45 different provincial and municipal areas across China.

Got it. These are all my questions. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Natalie Wu from CICC. Please ask your question.

Hi good morning. This is Greg, I just ask the question on behalf of Natalie. Thank you for taking my question. I ask a question sort of proceeds for housekeeping, can management give us some real color on the mobile contribution and in the advertisement revenue? And the second question is about the positioning between ifeng new app and especially when you guys mentioned you've launched the news feed on ifeng news app in the last quarter. And what's the different position between that and Yidian. And in terms of the user behavior on both platforms, what kind of trend user time spent gets observed because for competitors we've observed a lot of them aren’t using a video strategy and using short videos et cetera to increase the time spent platform to increase to - new entry and what Yidian strategy on that front? Thank you.

. :

Yeah, let me answer the second question. Yeah, this is Ya. As I had mentioned in opening remarks and you know our previous quarters. Ifeng News and Yidian are totally different products. Yidian target more grassroots users and more other than driven and more product driven catered to the users a long tail of interest and not necessarily very time sensitive information, entertainment, general entertainment media. Ifeng News target at White Collar elite and has very strong media DNA. And it focus on fear and more timely sensitive information, if - as you nicely mentioned that we just ifeng News just adopted AI backed algorithm to cater to users personalized information needs. But even the - but I have to say the algorithm adopted by ifeng News it different from Yidian. First get a stronger media DNA and it's more emphasized on the journalism, the editing, and also because the different user demographic. So the big data collected by these two platforms are fundamentally different, so different user behavior, different demonstrated user interests, and also different entertainment consumption habit. So then - because of the - because algorithm is based on deep learning, so the learning that the massive data collected by these two platforms is different, so the algorithm patent it's also different. I also want to emphasize that both these new two products have adopted short video is definitely a key load application these two apps to enhance sickness. Ifeng News just like I mentioned in my opening remarks, we have achieved four minutes extension of user sickness. Especially given the fact that we just - it’s a low piece, it’s Chinese New Year festival, so these achievement is quite significant that definitely demonstrates the success our new product upgrade.

Yes, and also on the user behavior I think it because also the product positioning difference in product positioning that's why we do see that Yidian has a longer time spent per day per user, as we provided more comprehensive contents. And after people reading or finishing the most important and interesting news content, we can dig further into the area which the find useful to them. And I think that's why we see the Yidian time spent actually ramps I think among the top especially when we exclude, if we exclude the video time spend, and we believe that Yidian app has been the highest time spent on non-video content compared to all the players in the market. While for ifeng it has a very healthy over 30 minute time spent per user, per day and as we provide the most newsworthy contents to this. And going forward, we do plan to enhance the application or the service of video, short video content, and also news view content and not only in these apps and also in the newsfeed in the OPPO and Xiaomi browsers, so that I think we provide a complete package of newsworthy interesting useful and tasteful.

And let me also add that, even for our high end user like me, it's pretty natural for me to use both the two apps for different reasons. Ifeng News provide me with most efficient access current news, most of agents, most reliable, most professional coverage of the global events. While Yidian will soon give me plenty of choices to queue my time, if you have longer time, I can get access to personalize entertainment related or life style related information. So even for elite users these two apps can address you different needs. So I don't think there is any cannibalization between these two apps.

Okay, thank you.

Thank you. There are no further. I’d now like to hand the conference back to the management team 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 gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.