Good day and thank you for standing by. Welcome to the Phoenix New Media First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Qing Liu. Thank you. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media’s first quarter 2021 earnings conference call. I’m joined here by our Chief Executive Officer, Mr. Shuang Liu; and Chief Financial Officer, Mr. Edward Lu. On today’s call, management will first provide a review of the quarterly results and then conduct a Q&A session. The first quarter 2021 financial results and webcast of this conference call are available on our website at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which apply 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 RMB. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Thank you, Qing. Hello, everyone. Thank you for joining us on our call today. In the first quarter of 2021, the industry-wide competition continued to exert pressure on our business process. We focus on fortifying our core advantages by creating and delivering original, exclusive and high quality content and securing our brand advertising baseline while striving to create new growth curves. Additionally, we remain committed to exploring our new business initiatives to augment our revenue source mix. In the first quarter, we continue to demonstrate our leading role in news coverage, especially as a go-to place for breaking news. During the government Two Sessions event in 2021, ifeng engaged in full coverage of event through our PC and mobile channels, as well as a conference of all major social platforms. Our original news coverage, especially our featured live broadcast, and exclusive content from Phoenix TV generated a record breaking two billion views across the internet. Our professionalism and credibility in journalism, allow us to stand out among other commercial media and gain more interaction opportunities with government officials. Additionally, we published our original interview series with dozens of commissions, scholars and experts on issues discussed at the Two Sessions, which were widely republished by other domestic and foreign media, such as CCTV Singapore. We’re at the top bar in Forbes China, and rank our viewers top lists of hot searches. Our coverage extended beyond news articles and short videos. Phoenix TV’s Two Sessions coverage, which included eight important event sessions, was forecasted through our live platform to reach millions of users across the globe. Our results from the Two Sessions speak for themselves. The number of brand advertising clients for the event reached new highs compared to prior years. And our brand advertising revenues from the event increased by 50%…

Thank you, Shuang and thank you all for joining on our conference call today. Our total revenues in the first quarter of 2021 were RMB226.1 million, in line with our previous guidance. This represents a decrease of 2.3% from RMB231.4 in the same period of last year. I will now provide some additional color on revenue during the first quarter of 2021. Net advertising revenues in the first quarter of 2021 were RMB201.3 million, representing a decrease of 3.5% from RMB208.7 million in the same period of last year, mainly due to the reductions in advertising budgets from advertisers in certain policy sensitive industries in the period. Paid services revenues in the first quarter of 2021 increased by 9.3% to RMB24.8 million from RMB22.7 million in the same period of last year. Revenues from paid contents in the first quarter of 2021 decreased by 11.8% to RMB10.5 million from RMB11.9 million in the same period of last year, mainly due to the broader market conditions reflecting the trend towards free online reading. Revenues from e-commerce and others in the first quarter of 2021 increased by 32.4% to RMB14.3 million from RMB10.8 million in the same period of 2020, mainly caused by the increase in revenues from e-commerce and online real estate related services. Loss from operations in the first quarter of 2021 was RMB41.9 million, improving from RMB70.9 million in the same period of last year. Operating margin in the first quarter of 2021 was negative 18.6%, improving from negative 30.7% in the same period of last year. Non-GAAP loss from operations in the first quarter of 2021 was RMB40.7 million, improving from RMB68.3 million in the same period of last year. Non-GAAP operating margin in the first quarter of 2021, was negative 18%, improving from negative 29.5% in the…

Thank you. [Operator Instructions] Your first question comes from Binbin Ding of JPMorgan. Please ask the question.

Good morning, management. [Audio Dip] I have three questions. First one is what is the cause between your organic traffic versus external traffic? And [indiscernible] these two traffic cost growth in the future. Second is, what are the major sources of your third-party traffic? And how do you generate those traffic? Third one is, can management also talk about the monetization plan of your third-party traffic in the future. Thank you very much.

Binbin, this is Shuang. Yes, I like to talk about our strategy. Starting from last year, we have more focus on organic growth in our traffic. I think, especially we are more cautious about the user acquisition strategy. We are more focused on the content-driven or brand-driven user growth approach. So that’s why you can see our marketing experience is under control. And at this stage, I cannot quantify the portion of the organic traffic and other traffic. But I like to tell you going forward, most of major portion of traffic will come from organic growth, which means it’s going to driven by our content, by our brand, by our premium content. And we have talking about our social media outlets traffic. I like to share that we have accumulated over 100 million users on third-party platforms. This demonstrated our brand influence, content value and higher monetization potential. We have also already achieved solid progress on WeChat and viewers counting ecosystem. Everyday tens of millions of users consume our exclusive content, while engaging in dynamic social interactions on these two platforms. And also we are making good progress in expanding our user base on short video platforms like Douyin, Kuaishou and Bilibili. We plan to promote hosts from Phoenix TV, as well as other partners, opinion leaders who create content that fits our trademark style. We believe these personalized contents in the form of short videos will appeal to and better service the younger user demographic. Our massive social media base, user base brings greater monetization potential. And frankly, speaking, we have not yet fully utilize these resources. In the first quarter, we launch our filming program to better monetize this enormous use of social media. We’re also in the process of utilizing our professional marketing and planning capabilities…

Thank you. Your next question comes from Frank Chen of Macquarie. Please ask a question.

Good morning, I have two quick questions. The first one is can you share more additional [Technical Difficulty] business if you are willing to share more operating metrics? The second question is a follow-up question on your social media initiative. Can you tell us more about the unit economic health that how is your unit user acquisition costs on the monetization potential of unit follow? For example, you have million, over 100 million followers on social media. How should we think of the monetization potential of that amount of followers? And what will be the business model for that? Well, you get revenue sharing from those social media platform or now you have some native ads, and you can protein inside your content? Thank you.

Hi, good morning, Frank. This is Edward speaking. Regarding the first question of our e-commerce business, actually our progress on the e-commerce business is quite encouraging. On a sequential basis in the first quarter GMV grew by like 24% and gross profit grew by 23%. At this point of time, the majority of our e-commerce revenues still generating from our iPhone platform by creating original e-commerce content, such as articles and short video and utilizing our content recommendation algorithms. We provide ecommerce services to our iPhone apps, existing users who trust our brand list allows us to explore and improve the monetization potential of our user traffic. Also, this capabilities have allowed us to quickly build our e-commerce service system, let it tailor to our target consumers and has a very low, actually we have a very low consumer acquisition cost. Of course, to achieve a more significant e-commerce business growth in the long-term, we need to go beyond our existing user traffic. Our e-commerce team has already started to explore different ways of using our premium content to generate user traffic from third party platforms, such as WeChat. In the first quarter, we successfully organized a series of e-commerce live training sessions on short video platforms such as our Kuaishou and Douyin. And throughout these sessions, we collaborated with well established online influencers for the premium collection of high quality product at a very competitive prices. This result is quite accurate, the result is quite encouraging and we will continue to throw different ways to up higher potential e-commerce users on short video platforms. We will continue to, we’re definitely continued to refine the fundamentals of our e-commerce business. This business has a lot of headroom for improvements, especially in terms of product selection strategy, and acquiring third party…

Yes. Let me add a few more words. Your second question, actually, I have answered being the same sort of questions. At the beginning, you might want to double check with that. But I want to emphasize that the manifestation of our over 100 million users on social network platforms is due at early stage. As I said, the monetization option includes native apps, and the revenue sharing with third party platforms. But right now, it’s too early stage. So it’s premature to share the data and the portion of the native apps and revenue sharing options. But we’ll definitely keep you updated on.

Thank you, Shuang and Edwards, very clear. Thank you.

Thank you.

[Operator Instructions] Your next question comes from Carmen Zhang from First Shanghai Securities. Please ask a question.

Hi, management. Thanks for taking my question. Can you tell us more about your advertising business in the first quarter, and the main challenges that are currently pressuring your advertising revenue?

Hi, good morning, Carmen. This is Edward speaking. Actually, for our advertising business, as the macro economy continue to recover in the first quarter, our brand advertising business achieved a healthy growth rate sequentially. However, from a broader perspective, our advertising business as a whole still faces challenges in future revenue growth. We expect our brand advertising business to continue its year-over-year growth trend in the second quarter, this expectation is based on the fact that most of our brand advertisers should continue to experience a rebound. In addition, as the pandemic continues to be brought under control in China, many offline events such as our food gala can be conducted as normal, this will have a positive impact on our brand advertising growth. Nonetheless, in certain industries, notably real estate, we’re aware of the impact from tackling national macroeconomic policies, which will lead to uncertainties in advertising spending. Therefore, we expect the brand advertising to experience more pressure. The increasing execution costs for brand advertising project is also a challenge. And we will need to come up with a more refined project management process to better control costs. We’re also adjusting our sales team to balance our sales capabilities across different regions, besides we are enhancing our content offering, especially in terms of original content. This is allowing us to expand our influence in areas such as new consumption, all our education, healthcare and the new energy vehicles. We believe that our influence in these areas will eventually translate into new growth drivers for our brand advertising business. For our programmatic advertising business, the overall budget in the market continues to be absorbed by the leading show from video platforms, those are actually to survive this kind of competitive environment, we must put more effort to upgrade our ad product features accordingly. Actually, we have already enhanced as a underlying technology of our ad platforms for Sony, we enable the API docking to more efficient data sharing and ad placement, the coordination between our platform and advertisers. For Sony viewer, we have strengthened our data support system for our platforms’ advertising plans in the finance vertical. This helped to improve our conversion rates for clients throughout the infotainment industry. For Fanyue, [ph] we extended our business development efforts and converted the multiple leading smartphone manufacturers into Fanyue’s aligned partners, which drove additional used traffic to Fanyue in this quarter. This challenges I have mentioned above were improve the efficiency and effectiveness of our programmatic ad delivery and make our programmatic systems more competitive in the market. Thank you.

[Operator Instructions] I would now like to have the conference back to the management team for closing remarks. Please continue.

Thank you, operator. We have come to the end of our Q&A session on 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.