Phoenix New Media Limited (FENG) Q1 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Phoenix New Media First Quarter 2017 Earnings Call. [Operator Instructions] This conference is being recorded today. I would now like to hand the conference over to Matthew Zhao. Thank you.

Thank you, operator, and thank you, and welcome to Phoenix New Media's First Quarter 2017 Earnings Conference Call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu; our Co-President, Mr. Ya Li; and our Chief Financial Officer, Ms. Betty Ho. For today's agenda, management will provide us with the review on the quarter and also include a Q&A session after the management's prepared remarks. The first quarter 2017 financial 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 entered the year of 2017 with a challenging first quarter due to continuing headwinds and changes in the Chinese advertising industry. However, we are pleased that we continue to experience trends on our mobile platforms, both ifeng news and Yidian apps, as our mobile strategy continue to gain traction. Leveraging our strong media DNA and cutting-edge technology, we remain focused on providing our users with high-quality professional media content that are tailored to our audience's interest and on their preferred medium. Firstly, we remain focused on extending our user footprints of both Yidian and ifeng news applications and are pleased to see that third parties are continuing to recognize the power and influence of our platforms. Yidian's number of daily active users, including both app and newsfeed in browser, reached 48 million in April 2017, making Yidian 1 of the top 3 news and information apps in China according to QuestMobile. Looking forward, we're confident that Yidian will maintain its strong growth momentum and continue to deliver robust results, supported by key strategic shareholders, OPPO and Xiaomi. Moving on to the ifeng side. In the first quarter of 2017, ifeng news application daily active users increased by more than 10% quarter-over-quarter, even during the Chinese New Year period, where media outlets normally experience traffic drops. According to February 2017 news apps ranking of analysis [ Top GN ], ifeng was rated as 1 of the top 4 news apps in China, surpassing the ranking of the majority of our traditional competitors. Further, in the first quarter of 2017, our paid news app was ranked #1 in the news category in the overall ranking of paid apps in Apple store for 3 consecutive months. These successes and endorsements clearly demonstrate that our product is the top choice for current affairs information for high-end users and validates our achievements in balancing algorithm-driven news feeds and high-quality professional journalism based on our users' reading interests. On the operational level, we continue to work with Huawei to strengthen our partnership and further drive robust business results, making our shipments exceeded expectations, which, in turn, helped with our pre-installed relations. Importantly, following May 9, Huawei released the latest flagship model, P10 and P10 Plus. And they, once again, choose to partner with us and exclusively pre-install the ifeng news app on the new models, which are expected to ship more than 10 million units. This further demonstrate Huawei's confidence in the quality of our content and our leading position in the Chinese media industry. We are pleased that the consolidation of ifeng and Yidian's we-media platforms significantly enhance our efficiency and accelerated our content expansion. The power of our consolidated we-media platform was further demonstrated by the successful we-media ceremony we've hosted in February 2017, which was extremely well received and boosted our standing in the industry. At the event, Yidian and ifeng released the 2017 We-media's strategy, announcing our strategic content-sharing collaboration with Visual China Group, [Foreign Language]. The collaborations strongly strengthened our competitive advantages to attract leading we-media accounts and further broaden our content library. On the content side, we continued to report major current affairs around the world in the first quarter of 2017. For example, our reporting of the 2017 National People's Congress Conference, once again, received recognitions from our users and advertisers. Another example is our reporting of the first meeting between President Xi Jinping and President Donald Trump also achieved solid results. The food topic generated 16.8 million page views on our PC app and received more than 6 million clicks on mobile app. Moving on to the solid progress we've made in live broadcasting. In the past quarter, approximately 100 media organizations were in deep cooperation with ifeng live broadcasting brands [Foreign Language]. We live broadcasted more than 1,600 sessions, many of which were highly popular with our users and provided potential monetization opportunities. With our recognized brand influence and professionalism in the media industry, we're uniquely positioned to deliver live streaming content that is professional, interactive and interesting. In March 2017, Starbucks reached out to ifeng to produce live broadcasting and Internet reporting content of their global CEO's speech at Tsinghua University in early April. They specifically choose ifeng due to our strong brand influence and global perspective. The 1-hour session was extremely successful, and ifeng was the only media platform to broadcast the original sound of the speech instead of its Chinese interpretation, which another endorsement of our platform's ability to attract high-end users. During the event, approximately 0.5 million users watched the speech live and actively participated on the ifeng platform. Further, in the following 24 hours, the on-demand video received 5 million clicks. Overall, this event was a successful example of content marketing, and we continue to explore similar opportunities in the future. Additionally, we continue to explore new initiatives and technologies to further enhance our products and drive our efficiency. In the past quarter, we launched an AI-driven we-media account that is self-operated and can produce simple articles on its own. It combines the latest research and technology in the field of AI, a natural language process, and currently possess ability to generate [indiscernible] [ analysis ] syntax and refined text. We are pleased with the results we're seeing with this new initiative and will continue to explore and invest in technologies that will help lower cost and increase efficiency going forward. Finally, in the first quarter of 2017, we experienced some headwinds and advertising dive as a result of integration of the old and new teams. The advertising team is actively working to ensure a smooth transition. We're confident that we'll be back on track in the coming quarters and keep our mobile advertising revenue growth in line with the industry growth rate in 2017. Looking ahead, leveraging our cutting-edge technology and branding power, we remain committed to continuing to improve our mobile platform and provide our users with differentiated media content that meets their unique needs and interests. We continue to work to expand our market share and are confident that we are well positioned to achieve our goals as the demand for professional current affairs reporting increase in China. We're confident that we have the right team and strategy in place to further drive value for all of our shareholders. With this, I'd like to turn it over to our CFO, Betty Ho.

Thank you, Shuang, and thank you all for joining our conference call today. As Shuang mentioned earlier, we have a challenging first quarter this year. ifeng's total revenues for the first quarter came in at RMB 294.5 million, which is in line with our previous guidance, primarily attributable to the 21.5% decrease in PC advertising revenues. Non-GAAP net loss attribute to Phoenix New Media for the first quarter was RMB 22.7 million or RMB 0.32 non-GAAP net loss per diluted ADS. Now let me take you through our financial highlights for the first quarter of 2017 results. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP, our shared base compensation, gain and loss from equity investments, including impairments. Starting with revenues. Net advertising revenues for the first quarter came in at RMB 241.1 million as compared to RMB 271.4 million in the first quarter of 2016. The decrease was primarily due to the 21.5% year-over-year decrease in PC advertising revenues. Paid service revenues for the first quarter was RMB 53.4 million, which represents a year-over-year increase of 3.6%, which beats our previous guidance high end. Prior to 2016, our paid service revenues mainly comprised of the revenues generated from MVAS and games and others. Digital reading was previously classified under games and others. In order to align with our overall strategies, digital reading was reclassified from games and others. And digital reading, together with MVAS, was determined as digital entertainment. As a result, revenues from digital entertainment increased by 17.1% to RMB 42.3 million, primarily attributable to the 101.6% year-over-year increase in digital reading revenues, which was partially offset by the decrease in mobile value-added service revenue. Revenues from games and others decreased by 28.2% to RMB 11.1 million, which was primarily due to the decrease in revenue generated from web-based games on our own platform. Secondly, gross profit and margin. Non-GAAP gross profit for the first quarter of 2017 was RMB 133.6 million as compared to RMB 165.6 million in the same period last year. Non-GAAP gross margin for the first quarter was at 45.4% as compared with 51.3% in the same period last year. The decrease in gross margins was primarily attributable to the increase in content and operational cost. In terms of cost of revenues, non-GAAP content and operational cost as a percentage of total revenue increased to 35.6% from 39.3% in the same period last year. It was mainly driven by the increase in content cost and advertisement-related content production cost. Revenue-sharing fees as a percentage of total revenues increased slightly to 5.9% from 5.8%. Bandwidth cost as a percentage of total revenues decreased to 4.9% from 5.4% in the same period last year. Sales tax and surcharges remained almost the same at 8.3% compared to 8.2% in the same period last year. Thirdly, non-GAAP operating expenses for the first quarter increased by 4.9% to RMB 165.4 million from RMB 157.7 million in the same period last year. Non-GAAP operating loss for the first quarter was RMB 31.8 million as compared to non-GAAP operating income of RMB 7.9 million in the same period last year. Non-GAAP operating margin for the first quarter was negative 10.8% as compared to 2.4% in the same period last year. The decrease in operating margin was mainly due to the increase in advertisement-related content production cost and mobile traffic acquisition expenses. Under the fierce competition on mobile front, we need to further expand our mobile user base; thus, we have to increase our investment on traffic acquisition expenses for the rest of the year. The total amount of traffic acquisition expenses, or TAC, will be at least double as compared to the same period last year, which will result to a negative impact on our profit and loss account. Fourthly, GAAP net loss attributable to ifeng for the first quarter was RMB 32.2 million as compared to net income attributable to ifeng of RMB 11.6 million in the same period last year. Non-GAAP net loss attributable to ifeng for the first quarter was RMB 23.2 million as compared to non-GAAP net income attributable to ifeng of RMB 14.7 million in the same period last year. Non-GAAP net loss per diluted ADS for the first quarter was RMB 0.32 as compared to non-GAAP net income per diluted ADS RMB 0.20 in the same period last year. In terms of balance sheet items. As of March 31, 2017, the company's cash and cash equivalents, term deposits and short-term investments and restricted cash were RMB 1.37 billion or approximately USD 199.4 million. Restricted cash represents deposits placed as security for banking facility granted to the company, which are restricted as to their withdrawal or usage. Lastly, I'd like to provide our business outlook for the second quarter of 2017. We are forecasting total revenues to be between RMB 362 million to RMB 382 million, representing an increase of 3.4% to 9.1% year-over-year. For net advertising revenue, we are forecasting between RMB 311 million and RMB 326 million, representing an increase of 4.7% to 9.7% year-over-year. For paid service revenues, we are forecasting between RMB 51 million and RMB 56 million, representing a decrease of 4% to an increase of 5.4%. This concludes the reading portion of our call. We are now ready for questions. Please go ahead, operator.

[Operator Instructions] Our first question comes from the line of Natalie Wu from CICC.

I have 2 questions here. The first one is, can management update us the latest Yidian DAU, MAU as well as average daily time spent and ad load? Also, when will Yidian be consolidated into our financial [ scene ]? And second one is, is there any chance that you would consider collaboration with an existing competitor in terms of [indiscernible], who has the other type of base but lack of products?

Thanks for the question. The first question regarding the -- some key metrics, yes, based on the third-party QuestMobile's recent data release, we have MAU ranking number third in the industry. And the DAU, as Shuang mentioned in his prepared script, is 48 million. And the time spent is about just a little over 50 minutes. And I'd to point out that excluding short video, excluding video, time spent, I believe we are among the top time spent for non-video contents compared to the other newsfeed service providers. For the ad loads, relatively, I think we have a smaller or lighter ad load compared to our peer companies. We continue to believe that we should be able to consolidate the financials by the end of this year into ifeng. And for the second question, can you repeat it again?

It's just that given that Yidian has the product and the algorithm as well, some of your existing competitor who has the abundant advertiser base but in lack of the like format of the products, so is there any chance that you guys would consider to collaborate together?

Yes. Okay, yes, that's good question, actually. Yidian established itself based on a strategic alliance or an ecosystem as it did with, of course, Phoenix New Media and also with Xiaomi and OPPO. And we have been approached by other companies, including handset manufacturers and other non-news mobile apps, to leverage our content and our algorithm to provide or to expand our technology and content out to other mobile apps and also to rely on our monetization to provide additional revenue for these strategic partners. We have also talked with some other companies which -- with even better technology or monetization capacity to also consider cooperations for some specific traffic or specific areas on our own product platforms. So that's something we are very open. And in fact, for the first quarter, we are expanding partnerships with all sorts of partnerships -- with all sorts of companies, including, for example, those for video services like from [indiscernible]; and also for social media, like Weibo; and also for vertical companies, like commodity trading platforms; and also for diverse content forms, like the audio or paid audio contents. And so we will continue this eco-strategy and to build even stronger and even more diverse strategic alliances. It's all based on our capacity to capture a broad and more accurate and more comprehensive user interests because we encourage users express their general interest beyond entertainment and breaking news. Thanks.

Great. Just one more thing. All these partnerships you have mentioned, are these necessarily related to operational level partnership, or will it be related with any kind of the capital level partnership?

We believe that we have strong competitive strengths existing with our existing shareholder base and our existing core competence. But we know that this is a heated -- this is a very competitive market, and so we are actually open to any sorts of strategic or even including capital partnerships with other companies. But we realized, no matter what, we have to first build our strengths and competitiveness on our own products, on our own brands, on our monetization capacity.

Your next question comes from the line of Alex Yao from JPMorgan.

I have 2. Why is -- can you talk about your view on short video, which is gaining increasingly more traction on the consumers, and also, there have been a number of leading pure-play short video operators? Can you talk about the exposure to short video on both ifeng and Yidian and the strategy to grow this part of the user services? And secondly, Betty, I think you mentioned that the TAC will increase meaningfully this year because of the investment into content. Can you talk about the competitive landscape in content for the news applications? And how will you continue to drive content supply for both ifeng and Yidian?

Thanks, Alex. Yes, first, on our views on short video, yes, this -- video is generating a macro trend to increase user engagement. And also with the increase bandwidth provided by the operators, I think our video will be -- especially among the younger Internet users, will be a very popular form for all sort of content. And so that's the first, I think, our perception about video. And among the video category, of course, for the long video part from iQIYI, to Tencent, to Youku, I think there is already, I think, established leaders. However, they are trying to differentiate themselves using self-created content or in vertical contents like sports. However, for the short video, which actually better utilize people's fragmented time and on a smaller swing like a mobile handset, right now, I think the landscape in China is still at early stage with relatively small or very low differentiation. Most people spend their time, I think, consuming short video contents of entertainment nature, and those entertainment short videos actually have very little copyright, I think have -- I would say, have very little original content created by these platforms. For example, the top categories includes the -- I think, the some -- short forms from -- short-form videos from the movies and TV offers or from variety shows or some traffic accidents or especially from social video news, like tabloid news, like -- so these kind of short video contents are difficult to differentiate. And also, most of these contents' copyright are very, I think, difficult to become protected. That's why you see more or -- more or same the -- more or less the similar content, it's not the same content among the short video feed providers. And however, there are players like [indiscernible] and [indiscernible], which are different from the news apps. They actually created their short video contents based on, I think, heavier or deeper user engagement, user creations. And they also created some kind of community or, if not, social background. And so I think it's starting to see the evolution of short video content, stuff like the long-form video. I think contents are the king for user experience, for user acquisitions. And so back to Yidian, to ifeng, ifeng traditionally is great or is actually the best to provide news, short news videos. And it includes not only Phoenix TV's news content but also news TV content from all the other TV stations and other, I think, Internet news content providers. And for Yidian, I think when joined with ifeng to create this we-media platform, and so we have -- we become the -- we're not the largest we-media platform, with over 150 million unique users per day, including PC and mobile. And this is -- this patent is so large and so influential, so it attracts all, I think, we-media or sales media creators, including those concentrating or focusing providing video contents. And in addition to that, I think we realized that we can adage or we can repackage this video content from our live broadcasting events and should provide some unique -- uniquely different video contents. So our strategy for video is to definitely recognizing the macro trends, the importance and the value for promoting user engagement and also to try to first catch up with the [ people ] kind of entertainment short videos but, on top of that, provide something we are uniquely good at. And in addition, I think, to increase monetization this year. I think ifeng is -- I think we are gaining our video app contribution after last year's, actually, decrease. And for Yidian, and I think we are collaborating, as I mentioned earlier, with other third-party video content providers and platforms even, so that we have variety and very comprehensive selections -- content selections for our users. And we can better utilize our user interest graph to push to them the kind of video content that fits their interests. These include beyond entertainment but also into the categories of health, of technology, of finance, of history. Yes, that's our growth strategy. And for the investment in content for news apps, I think for -- I will start at -- as Shuang will probably add more, I think for ifeng news app, we -- as Shuang mentioned, we've seen a double-digit growth quarter-over-quarter for our ifeng news app for DAUs. This is based on a combination of our channel promotion and also our enhancement in content offerings and algorithm enhancement. I think content has always been the unique strength based on our media G&A -- DNA and -- we believe, and in the area where there is so much social media and we-media content. I think when there is so much uncertainty and breaking news every day in the society and the world we are living in, ifeng provides a unique value, non-replaceable -- cannot be replaced by other entertainment-driven news apps. That's why I think we are invest -- we'll continue to invest on our content quality and so that, that we can establish content as a way also for user acquisition, also for user stickiness and for -- also for our monetization based on that like a native marketing kind of way, yes.

Alex, let me also add that, speaking of content, has many fold. First, the most important thing is the original content. That's where ifeng stands out among all the competitors. In terms of coverage of major current affairs, the breaking news and the exclusive interview with celebrities and heavyweight political players, our strength is unrivaled in this field. So that help us to gain major attraction among high-end users. And secondly, the content produced by major media powerhouse right after Lao Chen Tong joined us, I think our strategic alliance with all these major media players are significantly enhanced. We quickly entered into a cooperation with [indiscernible], with some major players. That significantly enriched our content library. And third is the self-media players. We just hosted our we-media ceremony. It was very well received. We can -- we witnessed the [ app ] has demonstrated by all these participants. They really respect our platforms, are highly confident the influence we can empower them in terms of gaining more traction in their platform. One thing I want to emphasize that -- one thing I want to emphasize is the synergy between Yidian and ifeng. If you think about Yidian and ifeng, it's not -- may not be necessarily the #1 player in this market. But if you put them together, they have pulled traffic is a formidable force in China's news apps area. So that help us to gain more cooperation with all these media players. ifeng definitely grants that all these partners, the branding power and the influence and other which other players are jealous of. And Yidian can grant all these partners the huge traffic, especially the ecosystem traffic, including the traffic based on Xiaomi and OPPO's brands. So these double-team team-up gives us strength in gaining more cooperation opportunities with self-media players and major TV powerhouse, a major media powerhouse. And fourthly, I want to emphasize that digital content is not only about the content itself, it's also about the content delivery capabilities. Our advanced algorithm approach in content delivery, especially our [Foreign Language] interest-based content recommendation engine, the capability to deliver content to the right people at the right time, at right area, that significantly enhance content delivery efficiently. That, in return, also give the better ROI to our content partner. That's also one of the important area we are going to work on to further improve. Yes, Alex, did that -- did I answer your question?

Yes, very helpful.

Your next question comes from the line of Joe Yu from Macquarie.

I have a question regarding your self-media, the we-media strategy. We have obviously signed many good partnerships, but many of our competitors are also pushing their request for their self-media platforms. So just -- could you just comment on the competitive landscape of this market? And also, any metrics such as revenue-sharing target for this year will be very helpful. And secondly, just quickly, a housekeeping one, what's the mobile revenue contribution for this quarter and the year-over-year growth?

Okay, thanks. Yes, first about the self-media, again, I think we do see this is -- I think, is this phenomenon, I think, it's -- I have to say it's accelerating its importance in terms of contents consumed as compared to the professional contents produced by the traditional media organizations. I think some of our peers have released that maybe over 80% of their content consumption are from the self-media. For us, I think we are slightly lower and -- on Yidian and even lower on ifeng. But still, for both of them, I think it's over 50% already. However, we also observed this one thing that, with the contributions more from the self-media, a lot of them, I think a lot of organizations, like individual or small groups of people, I think the accurateness, the authoritativeness or the quality of the content actually are negatively affected by the pursuit for clicks or click-through rate. And so that's something I think is one observation. Secondly, I think most content consumption are on the -- relatively, the hot contents or I sometimes call it personalized hot topics, like the tabloid news, like the -- it's some breaking news but more like astonishing news happenings. And very little content actually can be consumed. And the real long tail parts, I think that's the reality for today, I think overwhelming majority of the content are still consumed for the head or the middle part, the body part of the long tail curve. So with this, as this is the reality, I think ifeng and Yidian actually are trying to enhance our competitiveness from different approach. And for ifeng, of course, is our influence, our quality, our professional journalism, I think, is -- can't -- it's very unique. I think on most of the we-media, they can commentate on certain things, but they cannot provide original, I think, stories on sophisticated events or sophisticated reportings. And they are easy to be commentators or like bloggers used to do. But for the original reporting, I think this professional journalism is still the key. And as the industry as a whole is leaning towards this blogger we-media style of content production, I think ifeng's uniqueness will become our strength. And on the Yidian side, it's the interest engine, as Shuang mentioned, that our ability to identify people's interest beyond the breaking news and the entertainment content into the area in their life, their work, their education, their spiritual pursuit, for those interests which are useful, truly useful and also tasteful as opposed to going very low taste, I think this enable us to attract the writers, the creators of content, which typically are for the long tail vertical part of the content category because we are able to identify their target readers and to disseminate, distribute this kind of contents to the right target audience, and also for the complete business model. And we are also able to monetize this kind of traffic using better-targeted advertising because I think a time spent on generating a useful interest is more valuable than like every day 40 minutes on like interesting but useless entertainment or tabloid news video. So I think that's the first about the self-media landscape and how we're trying to provide value beyond the commonalities of today. And on the sharing -- revenue sharing, to encourage this people, I think on Yidian, we continued our 2016 strategy, which is to distribute 100% of the revenue generated on the landing page of any we-media content to the creators. And as I mentioned, because we are able to distribute this content especially better than our peers in the long tail part, so we are able to attract diverse and high-quality creators in the long run. And yes, what is the second one, it's mobile...

Contribution.

Mobile revenue contribution, okay. For ifeng, it's -- for the recent quarter, it's 50% from mobile, 50% from PC. It's a slight increase from the fourth quarter. And we believe this trend will continue. And the over -- the growth rate for mobile revenue was relatively low for the first quarter because I think there are a couple of factors, including when we -- that we decided to increase our mobile ad inventory actually after the first quarter, that's the key reason, but others, including the timing of the Chinese New Year and also the macroeconomic condition and also a relatively strong base for 2016, the first quarter of 2016. Thank you.

[Operator Instructions] Our next question comes from the line of Thomas Chong from BOCI.

This is [ Jane ] on behalf of Thomas. So my first question is regarding your Yidian's partnership with [ Nandu ] in content. So obviously, you're very experienced in combining traditional and new media given your shareholder background. Can you share more on your thought on your next line in this? What content providers are your next targets and any related costs for this kind of initiative? And what are the top content sources for Yidian regarding content consumption? My second quick question is, what's your plan for full year headcount number?

The full year headcount number for Yidian or for -- I think, first, we do not [indiscernible], yes, but we do not disclose that for Yidian, right?

For the overall company.

For the overall company? Okay. Yes, for Yidian, we did not -- we do not disclose that number. I think for ifeng, I think Betty probably will address that. And for the first question, I didn't get the first part. Can you just repeat it again, the first part of your first question?

So regarding Yidian's partnership with [ Nandu ] in content.

[ Nandu ]? Oh, okay.

Actually, from -- this is Shuang. From competitive point of view, we do not disclose the exact details of our offer [indiscernible] of this content provider, especially the detailed terms. I think this is [indiscernible] headcount for both ifeng and -- what's that?

[ General headcount ]

Yes, thinking of the overall headcount for both ifeng and Yidian, we definitely -- Yidian is a technology-driven company. [indiscernible] acquisition strategies like in our full competence in algorithm. So depending on our headcount [indiscernible] actually, we are very mindful of the [Foreign Language], the efficiencies of our manpower. So we actually take a very cautious approach in terms of expanding our headcount. This is the same thing for ifeng. So -- but at this stage, we cannot disclose the exact headcount for our overall headcount. But we want to say that we are very confident right now of our professional -- media professionalism and also algorithm-driven content delivery approach. Our main [ objective ] will be focusing on improve our technology and upgrade our product, not necessarily expanding our journalism teams.

Just to quickly add the first part, the [ Nandu ] partnership is mostly with ifeng than it is Yidian. And also, I did mention that for both platforms, I think,we-media has become the largest contributor for our content consumption.

Maybe [indiscernible] your question -- your first question is not related to [ Nandu ] itself but about the overall content acquisition strategy. Is that your underlying intent?

Yes.

Okay, okay. Yes. Actually, as I mentioned in our previous speech, we are speaking of the content operations, there are 3 types. One is original content because we have Phoenix TV backing us. So unfortunately, really, our players in terms of current affair coverage and all these includes interviews with celebrities, especially heavyweight political players. And secondly, after Lao Chen's joining our company, we have been quickly extending our strategic alliance with -- of this major TV powerhouse and the print media powerhouse. The cooperation is based on win-win basis. So we are also very mindful of the ROI in terms of all this content, what kind of traffic the content we acquire can generate and what kind of advertising revenues we can gain from all this traffic. So internally, we have a very rigorous approach to evaluate the efficiency of all these content cooperation. And Ya has mentioned our we-media, our self-media cooperation approach. And I want to emphasize that the trend of our self-media strategy, like in synergy between Yidian and ifeng, ifeng has very strong brands and can help the content players, especially in high-end users, to quickly reach their target audience. And Yidian has very broad user base can definitely [indiscernible] and also advanced, cutting-edge algorithm-driven content delivery can help all the content players to have more target delivery of content to enable them to better monetize their content. But in terms of the operating metrics of the media -- self-media players, maybe we can get back to you offline. We'll collect more data to help you to understand the [indiscernible] cooperation terms. Yes, I think that's what I'll share with you.

Your last question comes from the line of [ Virginia Yu ] from Citi.

I have question. This is [ Virginia ] asking on behalf of [ Alicia ]. So we have 2 questions we want to understand. Firstly, can management provide us the user overlap in terms of DAU between Yidian and other existing news applications out there? And secondly, we see actually Baidu actually came in quite aggressively since last year. And can management comment on the competition like landscape or even just the general competitive landscape outlook in the coming year?

Yes. First is regarding DAU...

Yidian and ifeng's DAU.

And overlapping? Or just the each growth rate of the each of the...

The user overlapping in terms of DAU between Yidian and other news application.

Okay. I see, okay. Yes, okay. I'd say that the overlapping is very, very small because I think these 2 products has 2 different positioning. ifeng provides professional, authoritative, influential contents, high-quality contents. I think most of these are for our high-end users and especially who are not satisfied with receiving the content from we-media or social media. And also, ifeng collaborates with Huawei, as Shuang mentioned, where the unique app pre-installed on Huawei's Mate 9 and P10 product series. And also, ifeng has traditionally some loyal -- very loyal audience from the TV and also from our PC users migrated to our ifeng news app. Whereas for Yidian, I think it's technology algorithm-driven, and our interest engine enable us to provide a comprehensive, more diverse content, including breaking news, entertainment content and also useful and tasteful contents. And also, a lot of -- most of the users come from our channel partners, including Xiaomi and OPPO. And also, I think the Yidian's user actually are from a more young -- a younger, I think, a more diverse group compared to the ifeng's high end. And so the product positioning is different, and the channel strategy is different, and the brand recognition, brand image is differentiated -- is different. However, this actually complement each other because even for the Yidian users, they still need these authoritative breaking news sometimes provided by ifeng. And also for ifeng, they also rely on the synergies of, for example, the contents created by the we-media creators, the authors on the -- on our joint we-media platform. So very little overlapping but high synergy. And the second question regarding, I think, Baidu, yes, this is indeed -- I think it's the most important, I think, observation.

Baidu [indiscernible].

No, no, [indiscernible] And I think not only Baidu, but also, there are other companies actually who have recognized the attractiveness and the importance of news app. And because it's frequent -- frequency -- usage frequency and also the capacity to generate user interest graph and also the demonstrated monetization and the profitability potential by some peer companies, so we have seen more players coming into this space. And however, I think most users still feel that there are very little differentiation among the contents provided. I've seen mostly still our breaking news plus entertainment content. And with Chinese users switch their handsets every 12 months, I think in average, I think there is very little reason, I think, for users not to try the new apps pre-installed on our new phones. In other words, there is just -- unlike social apps, there is almost very little exit barrier. There is very slow brand loyalty among different users. So user acquisition, TAC becomes, I think, a challenging point for every player. And with this recognition, I think, ifeng and Yidian are trying to establish or trying to address this point: for ifeng, of course, it's uniqueness in providing the kind of professional journalism in a world of social media and we-media; for Yidian, we recognize the bottleneck is -- or the key points for user acquisition is, at the time of users switching their cell phone, that's where we establish strong and long relationships through shareholder arrangement and also revenue-sharing scheme with 2 of the top 4 handset manufacturers in China, Xiaomi and OPPO. And we have seen the rapid user growth from the recent relationship with OPPO. We quickly become the #1 news provider on OPPO handset. And this strategy enabled us to address, I think it's a key challenging point for the industry, the bottleneck of the industry. I think our peers, including the one you mentioned, I think they all have this challenge of how to grow new users. As user can observe very little differentiation, that's very little reason for them to switch -- to change their habits to this habit driven. Even though they have very low loyalty, but it's habit-driven. There is no reason to switch. But whenever they'll need to switch their handset, there is little barrier for them to try the new ones. So there will be continuous investment in TAC. So for ifeng and Yidian, we're trying to leverage our content and also leverage on our channel [indiscernible] partnership; and also for Yidian, our unique product positioning based on the interest engine to provide some useful or highly personalized long tail contents, to become some sort of exit barrier and some sort of a reason to persuade users to try us because we provide something more than breaking news and entertainment contents, which they can easily get from any other peer apps. I think that's our observation for this increased competition and our strategy to create a long-lasting competitive advantage.

And also, let me add to your question regarding the competitive landscape of all these apps. Actually, different users have different purpose when they click on these apps. For users who want to have quick access to the professional coverage of the current affair and world event, I think ifeng is definitely one of the top choice. And for users who have specific purpose, who want to know the answer of a query, who want to know the answer of a question, all these search engines or even [indiscernible] might be the ideal happening. But for users who want to be entertained, who want to kill their times, simply because you have search engine, simply because you have the leading position in covering world affair simply because you have a big user base does not necessarily guarantee you can better address their need to be entertained. So this, I have to say, information, fee-driven product is a very highly contested area. A lot of player want to get into this area. But simply because you have a big user base, you have a leading position in either search engine, in covering world affairs does not necessarily guarantee you can better address the individual user's need to be better entertained, to be better individually served. So that's where our confidence lies in. We -- in terms of the search -- interest-based content recommendation system, I think we have very unique philosophy. We have accumulated massive data in serving the users' individual needs. And we also believe it's a product different from search engine, different from a current affair, news-driven site. So that's where our strategy lies.

There are no further questions at this time. I would like to hand the call back to Matthew. Please continue.

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.