Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Second 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] I must advise you 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 Media's second quarter 2021 earnings conference call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu; Chief Financial Officer, Mr. Edward Lu. On today's call, management will first provide a review of the quarter results and then conduct a Q&A session. The second 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. During the second quarter of 2021, we continue to encounter downward pressure as competition intensified, regulation tightens, and advertisers remain cautious with their budgets. As our core competitive differentiation lies in our regional accounts and production capabilities, we have upheld our commitment to originalities and revamp our content strategy. We believe that our newly augmented cost metrics will lay a solid position to attract new users, increase their loyalty, and generate a sustainable revenue stream. I would like to start by discussing our key efforts in revamping our content strategy. As users suffer from information overload in the digitally-charged world, we're convinced that the most effective way to add value to our users is to produce original content with distinctive characters that are true to our brand. Hence we have repositioned our content metrics and adjusted accounts and production pipelines to produce a series of columns and programs each written and presented in a certain voice and style consistent with our branding differentiation. Through these efforts, we intend to not only enhance our brand image, but also creates a unique brand affinity among our users and advertisers, which should help us unlock more certain long-term value from our brand equity in turn. To elaborate in area of original content in order to cater to various user demand, we have focused our resources on producing three distinct venture genre [ph], opinion column, investigators reporting, and premium IP production. For example, during the second quarter, we launched our original opinion column titled Eye of the Storm [Foreign Language], which is distinctively positioned to examine contentious current events. We present the audience with our unique authentic and timely information of issues by conducting meticulous research and deploying wide array…

Thank you, Shuang and thank you all for joining our conference call today. Our total revenues in the second quarter of 2021 were RMB 256.7 million, representing a decrease of 17.8% from RMB 312.3 million in the same period of last year. I will now provide some additional color on revenues during the second quarter of 2021. Net advertising revenues in the second quarter of 2021 or RMB 233 million, representing a decrease of 18.6% from RMB 286.3 million in the same period of last year mainly due to the reductions in the advertising spending of advertisers from certain industries in the period. Paid services revenues in the second quarter of 2021 decreased by 8.8% to RMB 23.7 million from RMB 26 million in the same period of last year. Revenues from paid content in the second quarter of 2021 decreased by 32.4% to 9.6% RMB 9.6 million from RMB 14.2 million in the same period of last year, mainly due to the trend towards free online reading in the online reading market. Revenues from e-commerce and others in the second quarter of 2021 by 19.5% to RMB 14.1 million from RMB 11.8 million in the same period of 2020, mainly caused by the increase in revenues from E-commerce business. Loss from operations in the second quarter of 2021 was RMB 34.8 million, compared to income from operations of RMB 25.6 million in the same period of last year. Operating margin in the second quarter of 2021 was negative 13.5% compared to positive 8.2% in the same period of last year. As Shuang mentioned, we have made a strategic decision to increase our investment in bolstering our original content production capabilities. While such investment will impact our profit margin in the short term, as we're managing our expenses prudently, we…

Thank you. [Operator Instructions] Your first question comes from Xueru Zhang of 86Research. Please ask the question.

Good morning, management. Thank you for taking my question. I have one question, regarding advertising, can management share more color on the driver for advertisement growth in the second quarter. So if – just about looking that to understand about, how you see that growth trend and any major initiatives should we expect in second half to further support for the growth?

Hello. This is Edward speaking. Actually, this is a very good question. Actually, our brand advertising business is still facing challenges in revenue growth. During the quarter, advertisers in certain industries reduced their marketing spending. For example, clients in auto industry, our advertising business mostly important revenue source. But because of the ongoing shortage of auto chip supply, auto industry production capability was reduced and the lower sales target for the industry clients to cut their ad spending, advertisers in other industries such as real estate also trim their advertising activities, as a result of the tightening regulatory environment. Also, during the second quarter, COVID-19 resurged in Southern China, the execution of some of our important off-line operations and events in the region, had to be put on hold. This of course, also negatively, affected our ad revenues in the second quarter. But in the meantime, various short video and social media platforms obtained an increasing portion of market share in the online advertising industry. So we are at the same time facing intense competition as well. Having said that, we have carefully reviewed our business operations reevaluated our sales team and made timely operational adjustments to better prepare for the challenges ahead. We have assessed our industry and customer mix, as well as our original market dynamics to explore more sales opportunities and create the new incentive schemes around business development to acquire more new customers and the enter new industries. Actually, advertisers' demand for strategic branding and marketing are always evolving. They now require more comprehensive marketing solutions, instead of single ad product. Aside from our signature events and the regular premium content offering, actually we are leveraging our user traffic and influence on social media and short video platforms including those generated by our -- I'm seeing influencers to enrich our product and service offerings. Also as Shuang mentioned, earlier, like, adjustment to our original content strategy is very important as well. This will further enhance our brand. Let's combined with our strategic planning in various industry verticals such as, tourism, health and wellness, and automobile will help us improve user loyalty, increase brand influence and ultimately drive the growth of our advertising business in these sectors. Last but not least, utilizing our international business and their perspective, we are actively launching official accounts on social platforms overseas such as Facebook and YouTube to further amplify our global brand presence and the influence. At the same time we have utilized our MCN platform to sign money overseas QOLs with international background. I believe these efforts will create enormous value for large-scale corporations in China, helping them to expand their international exposure and conduct more overseas branding activities. Thank you, and I hope I have answered your question.

Yes. That’s very helpful. Thank you.

Your next question comes from Carmen Zhang of First Shanghai Securities. Please ask the question.

Hi, management. Thanks for taking my questions. First, can you please share some additional information regarding our operations for third-party social media and [Indiscernible] platform and how do you plan to monetize [Indiscernible] from there?

Hi. Thank you, Carmen. This is Shuang. We’re definitely becoming more focused on third-party platforms. This platform is becoming more and more important, because it first can function as a channel for our premium content distribution. Also becoming a very important source of traffic and therefore monetization opportunities. In terms of brand advertising, our third-party platform traffic has provided existing advertisers with more opportunities to heighten their brand exposure, as well as reach more potential consumers on third-party platforms. It will support our brand advertising revenue in return. Aside from brand influence, we also believe that in-depth commercial value of these traffic has yet to be fully unleashed. They have helped us to access our large client base with growing demand for content marketing, notably those in the FMCG industry. Also since an increasing number of consumers start shopping our social media platforms, such as [Indiscernible] and WeChat, the large follower account -- counts, which we have accumulated on these platforms will also drive our E-commerce business growth. As such, we have laid out a detailed action plan for our operation on the third-party platforms. We have a specific aim to further explore their commercial value. First, we need to concentrate on resources on developing top-tier accounts on third-party platforms and focus on quality over quantity. We have also categorized our accounts on third-party platforms into different groups for varying purpose. For example, our iPhone accounts on Weibo given its broad content coverage with more than 20 million followers, we plan to use it to fortify our brand influence rather than to drive monetization going forward. On the other hand, we have our vertical content accounts such as finance and economy and fashion. Our IP accounts such as living, side engines [ph] and the accounts of our MCNs contracted influencers. These accounts target more specific audience base with a more detailed user profile, their plans to be the main category for monetization. Also our focus on building content larger differ from platform to platform in order to attract quality traffic and target followers as the characteristics between platforms are quite different. For example, WeChat has a large user base for finance and culture. Bilibili for tech and knowledge and so on. These plans would not only work with streamlined operational process and effective performance evaluation, we have established qualitative performance indicators such as numbers on content publishing, article views, followers, reshares and comments across different platforms. By evaluating these metrics, we can decide whether or not we have met our operational targets. Along with our persistent focus on content quality and influence as well as our sales efforts, we believe our client base and average revenue per customer will both increase. And, of course, the commercial value of these traffic will naturally follow. Yes, this is my answer. Thank you.

[Operator Instructions] I would now like to hand the conference back to Qing. 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.