Weibo Corporation (WB) Q1 2016 Earnings Report, Transcript and Summary

Good evening and welcome to the Weibo Corporation First Quarter 2016 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lidya Yu [ph]. Please go ahead.

Thank you, operator. Welcome to Weibo's first quarterly earnings conference call. Joining me today are Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Herman Yu. The conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management presentation I'd like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F for the fiscal year ended December 31, 2015, filed with the SEC on April 28, 2016, and other filings with the SEC. Additionally, I'd like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financial excludes certain expenses, gains or losses and other items that are not expected to result in future cash payments or that are non-recurring in nature and will not be indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks we will open the line for a brief Q&A session. With this I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

Thank you. Hello everyone and welcome to Weibo's first quarter 2016 earnings conference call. On today's call I will share with you our key developments in user, product and monetization areas, as well as Weibo's key initiatives in 2016. First, on Weibo's financial results. In Q1 Weibo continued strong revenue growth. Our total revenue reached $119.3 million, up 24% year-over-year. Advertising and marketing revenue was $99.2 million, up 25% year-over-year with 66% of our ad revenue coming from mobile. Non-GAAP net income in the first quarter was $16.4 million, up 491% year-over-year. Turning to users, Weibo's monthly active users reached 261 million in March, up 32% year-over-year, while average daily active uses reached 120 million, up 35% year-over-year and 13% quarter-over-quarter. In March 85% of Weibo's MAU and 91% of Weibo's DAU were on mobile app. Also in March Weibo saw the highest sequential net user add ever. Our DAUs increased by 40 million and MAUs by 26 million over the same period last quarter. In the first quarter every year many Chinese in Tier 1 and Tier 2 cities will return to their hometown in Tier 3 and Tier 4 cities to celebrate the Lunar New Year with their family. The period around the Lunar New Year with city dwellers away from their offices present a unique opportunity for Weibo to accelerate its user growth. Due to Weibo's high mobile usage we are able to take advantage of this period to run a platform wide red envelope marketing giveaway campaign allowing businesses, brands and celebrities participate and they giveaway our red envelopes and coupons in exchange for [indiscernible] This campaign allows us to expand Weibo’s user base further in the second and third tier cities throughout China. The uniqueness of Weibo being a public open social platform enables to connect business, celebrities and users together in one large nationwide social campaign which helped us to achieve the high sequential user growth to-date. Turning to Weibo’s operations for the first quarter let me discuss our progress in the area of users, content and customers. First, on users, as stated on our previous earnings call a key focus for us in 2016 is to improve both the user experience and feed [ph] consumption as well as in speed posting, making the content sharing process easier and quicker. In Q1 we further rolled out Weibo’s upgraded information speed with the new upgrade for about half of the users. On top up time sequence speed our new information feed and search content based on users interest and users' relationship, which expands the time of - the amount of interesting feeds available on one timeline, whereas the previous information would be prioritized the feed chronologically. The new information feeds, adds back missed feeds that we algorithmally identify would be appealing to our users. This change has resulted in an increase in content consumption and user engagement. Our priority this year is to improve our users' content consumption experience through algorithmic adjustments and ultimately increase user stickiness. More importantly this change will enable Weibo to expand our targeted audience from one that provides instant real-time information to one that also leverages users' interest and social network to recommend interesting content. This expanded product positioning will lay a foundation for us to meet the needs of a wider audience, increase our user base and to scale content consumption on our platform. On user, our user growth has been accelerating. We added 26 million MAUs in March compared to the same period last quarter. In March 85% of Weibo's MAUs were on mobile. This can be attributed to the success of our marketing effort. In addition, we have been working with domestic smartphone manufacturers over the last two years to strengthen our relationship in the mobile ecosystem. Domestic smartphone manufacturers see us as not just a high usage app seeking to expand its presence on mobile handset. Weibo is also becoming a critical platform for them to conduct online marketing and engage with their customers. Currently we have started [ph] collaboration with key domestic smartphone manufacturers deeper than most of the other Internet companies in China. As these smartphone makers become more dominant in the mobile Internet market and their hardware configuration improves, Weibo's user and user engagement, derived from these smartphone manufacturers have seen an accelerated increase from the same period last year, such as those derived from Weibo app installed on Huawei, Oppo and Vivo smartphones. Furthermore, domestic smartphone manufacturers are seeking to expand their user base by increasing penetration in second third and fourth tier cities, much similar to Weibo's marketing strategy and thus are allowing us to acquire new users more effectively. Turning to products, and our progress in the multi-media front, in Q1, we focused on improving the user experience for short videos, which is a key product area for us in 2016 especially in content creation and consumption. In Q1, Weibo's average daily video views reached 474 million, up 489% year-over-year and 64% quarter-over-quarter. At March we further experimented with Autoplay and suggested video feeds with a small set of Wi-Fi users. Based on testing results we will make adjustments to our short video offerings and we plan to officially rollout these video features in next two quarters. The steps that we're taking will further solidify our position as the leading UGC video reach social platform in China and position us as a top 20 for domestic short video content producers. For example, a recently net [ph] payment KOL, key opinion leader, Patti Jong [ph] shared 69 short videos on Weibo, which generated a total of 246 million views. The viewership of Patti's short videos on Weibo is probably close to the total of views of Patti's videos on all other video platforms combined. In Q1, we began testing live videos on Weibo. Compared to text, short videos and other text content live video is a better way to show what's happening right now. And is well suited for the social, public and bio [ph] nature of Weibo. We worked with selected traditional media, and corporate partners in the first quarter to experiment live videos in Weibo. For exmaple, People's Daily, the largest newspaper publisher in China used Weibo to provide 18 live broadcast sessions of the Chinese Congressional meetings in March. And Oppo and other domestic smartphone makers use live video on Weibo to broadcast their product launch events. Live videos are becoming quite popular in China and we are seeing very high user engagement and view on these broadcasts. In Q2 we will roll out live video capabilities to celebrities and other verified users, along with [indiscernible] and paid subscription features to help them better leverage Weibo to their lifestyle and talents. To raise the content production, on our last call we discussed our efforts to diversify the content on Weibo by working with South Media and dozens of content verticals. Weibo now has 12 verticals with a monthly view of over 10 billion, such as celebrities, comics, fashion, movie and finance. As we build our Weibo content ecosystem we also plan to enter [ph] the ecosystem to these individual in 2016 to form [indiscernible] alliances. We apply to work with the key opinion leaders of each industry, provide operational support, incentivize them to share more content and gradually expand their presence, to collaborate the key organization of each industry. Let me give you a few examples. In the fashion industry we have partnered with top local KOL agencies and in the entertainment industry we are partnering with major local and international talent agencies. As we move into the ecosystems of key verticals we hope to proceed from the perspective of the partners and collaborate in multiple areas, such as content sharing, fan base development and monetization. In doing so we hope to work closely with our partners in these verticals and jointly expand the size and influence of Weibo's vertical section. Over the past few years an increasing number of KOLs have used Weibo's cellular fan base to generate traffic and monetize whether there be social commerce or advertising. A number of them have grown to stardom developing strong reference [ph] brands, influence and commercial value. The system [indiscernible] occurred at the early stage of YouTube which started out with for video KOLs aka YouTubers. KOL in the U.S. generate viewing through mainly advertising. However in China, we're seeing monetization opportunities for local KOLs to include also e-commerce sales, paid subscription, [indiscernible] and so forth. We think it is a healthy and reinforcing cycle for KOLs to be able to drive commercial value on Weibo while helping us broaden Weibo's content offering and increase user engagement. KOLs share content and build their fans base on Weibo and then complete their monetization process on Weibo, Taobao or other platforms In working with Weibo not only do KOLs become part of Weibo's content ecosystem, they can also grow their personal influence and commercial value. In 2016 we'll focus on enhancing our product with reference to KOLs enabling them to grow their fan base and create more monetization opportunities. Through these measures, we hope better service KOLs, while increasing Weibo's influence and impact for the monetization of this industry as well as increasing demand for Weibo. Turning to monetization, SME and advertising and marketing investing was up 97% year-over-year. This revenue growth can be expedited for the new ad system we launched last quarter, which helps the performance of SME marketers. Ad revenue from SMEs for the first quarter was up 136% year-over-year. Weibo's SME customers, which include self-service reached 832,000, up 25% quarter-over-quarter. Turning to our key account business, our red envelop giveaway Weibo's TV and other platform initiative campaigns in Q1 have received positive feedback from the market and we activated many users in the first and second tier city, which has bode well for our KA customers and helped contribute KA ad revenue growing 60% year-over-year. In Q1 we begin experimenting with [indiscernible] on a limited basis, the addition of which we believe will increase Weibo's attractiveness as an ad customer and secure additional branding budget. Using Huggies as an example, they purchased Weibo's fixed feed campaign package, in conjunction with [indiscernible], targeted towards women. Huggies photo ad campaign reached an audience of over 20 million and its video was viewed 16 million times, which was instrumental in helping them achieve 100 million RMB in revenue, four times that of their sales doing their double-eleven e-commerce day last year. We are excited that Weibo's video traffic is growing at a rapid face and that the initial result of Weibo's video ads are encouraging. Although video ad market in China is huge, we recognize that it's also a very competitive space. Thus we will need patience to develop the right market entry strategy to attract meaningful video ad budget. In Q1 we also tested native ads, which are interactive native ads with three by three displays like a tic-tac-toe board. This format was developed by observing of habits of Chinese internet users. JoGunga [ph] is a popular format for displaying a set of photos on social network in China. Therefore Chinese Internet users are more accustomed to this type of ad format. Test results showed that this app format is well suited for e-commerce merchants and app developers because marketers can show nine plus coding or nine ads in one app feed. Using a local wellness app, [indiscernible] as an example, in Q1 they've purchased Native Ads, that target mobile users in the first and second tier cities between the ages of 20 to 30. And the native ads reach an audience of 20.8 million and the app conversion cost was half of Weibo's [indiscernible] ads. In Q2, our app development team will continue to enhance Weibo's social interest graph recommendation engine and we plan to have them coordinate with our mobile team to develop innovative app products suitable for mobile users. We believe that our continuous innovation in mobile advertising will bring new business opportunities for Weibo. With that let me turn the call over to Herman for financial update.

Thank you Gaofei and good morning everyone, and good evening to those of you in the west. Welcome to Weibo's first quarter 2016 earnings call. Let me give you the top level numbers. At first quarter Weibo's total revenue was $119.3 million, up 24% year-over-year or 29% on a constant currency basis, exceeding the company's guidance. Non-GAAP net income reached $16.4 million, up 491% year-over-year. Non-GAAP diluted EPS was $0.07 compared to $0.01 a year ago. Adjusted EBITDA reached $19 million, up 182% year-over-year, representing an adjusted EBITDA margin of 16% compared to 7% last year. Let me give you more color on revenue. Advertising and marketing revenue for the first quarter was $99.2 million, up 25% year-over-year or 31% on a constant currency basis. Revenue from small and medium size businesses and key accounts was $88.1 million, up 97% year-over-year. On a constant currency basis, revenue from our SME and KA businesses together was up 106% year-over-year, which is acceleration from the 50% growth in the first half of last year and 82% year-over-year growth in the second half. Weibo's SME business continues to be robust while KA business is experiencing accelerated growth. As advertisers and marketers in China shift their budget from PC to mobile, we are benefiting from Weibo's strong mobile usage. As Gaofei mentioned, 91% of our DAUs in March was mobile. Historically, the period around our Lunar New Year, which occurred on February 8 this year is slow season for PC-based online advertising companies. For Weibo however we saw strong mobile ad revenue growth in the first quarter which was up 43% or 49% on a constant currency basis. Mobile ad revenue made up 66% of Weibo's total ad revenue in the first quarter. Another driver of Weibo's advertising and marketing revenue is the adoption of fan's marketing in China. Fans marketing allows businesses, brands and individuals to acquire both PC and mobile traffic by simply opening a user account on Weibo. Businesses and brands can focus on marketing their product and services, while leveraging the business tools and services on our platform to increase marketing effectiveness and generate sales, such as Weibo KA, red envelope and coupon giveaway campaign landing page, ID verification and so forth. We believe fan marketing is a cost effective way for many businesses and brands to drive PC and mobile traffic compared to maintaining a website and HTML5 sites and an app. In the first quarter Weibo’s ad customers reached 832,000, representing an increase of 114% year-over-year. Although the majority of Weibo’s customer adds came from self-service we also saw healthy growth in the number of SME customers through the channel. Let me talk about our SME further. In the first quarter Weibo’s SME revenue was $51.9 million up a 136% [indiscernible] 7% on a constant currency basis. Weibo’s SME is our largest advertising segment making up 52% of our advertising and marketing revenue in the first quarter and our fastest growing segment. On a constant currency basis revenue from the SME channel was up 138% while revenue from Weibo’s self-service ads grew 240% year-over-year. For SME revenue through the channel the majority of the revenue came from e-commerce merchants, app developers and auto customers and to a much smaller extent PDP finance companies. Weibo’s self-service ad platform allows Weibo user to contact Fan’s marketing and purchase Weibo ads within their Weibo app on weibo.cn or weibo.com with a very small amount of dollars. One can grow his or her fan base through continuous engagement with the fans and supplement this with the purchase of Weibo ads. The return on fan’s marketing is not just an initial period where one buys advertising but over the life of the acquired fans. Moving to KAs, Revenue from key accounts, mostly large brand advertisers in the first quarter, was $36.6 million, up 60% year-over-year or 67% on a constant currency basis. Revenue came primarily from advertiser in the fast moving consumer goods industry as well as the tech industry which we include Internet services, e-commerce and smartphone manufacturers. We are seeing increasing interest for social marketing from our KA customers this year compared to last year. As the largest social media in China that allows for public sharing, Weibo is well positioned to benefit from the growing popularity of social marketing in China. In addition Weibo initiated campaigns such as Weibo’s red envelope giveaway and Weibo Plus TV were drivers of strong Q1 revenues. Revenue for Alibaba was $11.1 million compared to $34.5 million a year ago. As previously discussed the strategic collaboration agreement we signed with Alibaba in 2013 expired in January 2016. Although we expect to continue our relationship with Alibaba we’ll be working with different business units of Alibaba to derive revenues after the expiration of the strategic collaboration agreement. Revenue for Alibaba in the first quarter was 11% of our total ad revenue. We expect revenue from Alibaba to decrease significantly in 2016 from the 2015 level which was 36% of our total ad revenues. At the same time we’re seeing our SME and KA ads together growing quite strongly, which when taken as a whole should allow Weibo to have a respectable revenue growth in 2016. Moving on to value-added services, Weibo VAS grew to $20 million in the first quarter, up 17% year-over-year, or 22% on a constant currency basis. Games services membership and other revenue was up 21% year-over-year, while data licensing revenue was down 3% year-over-year. Turning now to costs and expenses, total non-GAAP costs and expenses were $103.4 million, up 9% year-over-year. Cost of sales was $36.1 million, up 26% year-over-year, while operating expenses totaled $67.3 million, up 2% year-over-year. The increase in non-GAAP costs and expenses was primarily due to an increase in bandwidth cost, resulting from the strong video consumption and overall growth in traffic, increase in revenue share, value-added taxes, associated with higher revenues, and higher personnel-related costs. Non-GAAP operating income for the first quarter was $15.9 million compared to $1.4 million from the same period last year. Non-GAAP operating margin in the first quarter reached 13% compared to 1% last year which exemplifies the strong operating leverage of Weibo as a social platform powered by user generated content. We expect our profit margin to continue to rise over the long-term as our revenue scales. Non-GAAP net income was $16.4 million, up 491% year-over-year. Adjusted EBITDA, defined as non-GAAP earnings before interest, taxes, depreciation and amortization was $19 million, up 182% year-over-year. Adjusted EBITDA margin for the first quarter was 16% compared to 7% last quarter in the last year. Turning to balance sheet and cash flow items, as of March 31, 2016 Weibo's cash cash equivalents and short-term investments totaled $373.4 million. Cash provided by operating activities for the first quarter was $40 million; capital expenditure totaled $4.1 million and depreciation and amortization expenses were $3.5 million. Weibo shares floated in the market, according to our ADR depository firm approximately 70% Weibo shares outstanding are global for trading in the open market. Turning to Weibo's second quarter guidance, we estimate that Weibo's total revenues for the second quarter of 2016 to be $138 million to $143 million which do not take into account the foreign exchange rate fluctuations. Before I turn the call over to the operator, let me quickly recap our call. We begin 2016 on a strong note. In March, Weibo saw the highest sequential net user ads ever. With MAUs increased and reach in 260 million and average DAU reaching 120 million. Giving us significant reach to both users and consumers in China. We further grew our Weibo's upgraded information fee and selling suggested content based on interest and user relationship on top of time sequence content to improve Weibo users' content consumption experience. We also are executing on our UGC video and content verticalization strategies. This is adding great excitement to Weibo and the latter will allow us to better tag users and improve Weibo's social interest graph also known as SIG recommendation which internally will allow us to push more relevant content and targeted ads to our users. Last quarter we launched a new ad system that open up Weibo's advertising margin offerings to all of our customer segments. This quarter we launched matrix ad, an interactive ad format that we believe will hope us derive more our revenues from ad developers and e-commerce companies. These are example of product innovation from Weibo's development team and we expect to officially launch video ad later this year which we will help us tap into the tremendous video ad margin in China. SME and KA revenue in the first quarter grew 106% on a constant currency basis which is acceleration from last year. As we entered the second quarter of 2016 Weibo is well-positioned to continue our ad revenue and momentum leveraging our strength in social mobile and soon video advertising. As Weibo's revenue scales we believe there is much room for Weibo's profit margin to expand further. With that let me now turn to Q&A. Operator, we are ready for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Thank you. Our first question comes from George Meng from Goldman Sachs. Please go ahead.

Good morning management. Thank you very much for taking my question. Congratulations on the great quarter. So my question is regarding your user growth, as far your DAU up 35% year-on-year which is the fastest in the past two years. And also MAU also sustained about above 30% growth for the past few years which is in contrast with some of the other applications who we saw the - I'll say, most of the other application where the growth rate will tend to decelerate relatively quickly. So my question is what do you think about the total addressable market of your users both MAU and DAU in the long run? In particular I think you mentioned before that in top tier cities your user growth is already slowing down. But you do have a lot of room to grow in lower tier cities that [ph] 268 per MAU and 120 million DAU what do you think about the room left for your user growth in the lower tier cities? And thank you very much.

Yeah. Our current MAU is about 261 million. And we can see that in China and other mobile apps such as Q2, WeChat and Qizone have MAUs over 500 million. If you look at how our users are geographically dispersed in tier 1 cities, we have a penetration rate of probably around 50% and we're growing probably around 10%. And then if you look at tier 2 to tier 4, we probably have a penetration of 20% to 30%. So we have still plenty of opportunity to actually grow. So in the next two to three years, we think that our users in tier 2 and tier 3 cities will probably approach their penetration rate in tier 1 city and then below tier 4 probably not as fast, but still we think that there is still great opportunity to grow.

And I think the other thing is George, we mentioned that historically we've been on kind of the social market. But as you have been seeing us in the last two quarters, we've been - in China especially from last year we are seeing a strong growth in video market especially on mobile. And as Weibo start entering in this space with user generated content or short videos and also with live streaming with - I think that probably enlarges the markets go beyond social and to focus on user related - users especially consumer to mobile devices.

Got it. And I have a quick follow-up if I may. So you also mentioned on the call that you're basically catering to more users because previously it's more about the information and now you're going to do more social-related stuff. I think a few years ago you also tried to do more social network. So at this time, how are you going to accelerate [ph] and also by if you can achieve that what the incremental user that you can cater to, where in the previous case when you are focusing more on the instant information that you cannot address. Thanks.

Yeah. First of all in the last two years, we weren't positioned ourselves as information consumption [ph]; we've been positioning ourselves as a social media. So comparable companies in the U.S., we will be addressing users like those of Twitter and Instagram. So on top of these markets we will also focus on user-generated content video short videos. And we think that this market could be bigger than social.

Great, thank you very much. That’s very helpful.

Thanks George.

The next question comes from Dick Wei from Credit Suisse. Please go ahead.

Hi, thanks for taking my questions. I have two questions. The first question is regarding the new information feeds and ranking. I wonder if you can give little bit more details on the new algorithms and how you weigh between different attributes and maybe the results from the testing before and after. And the second question is on KOL. I wonder any progress you can share in terms of KOL-related advertising currently and maybe in the future. Thank you.

Yeah, so our original information feed is based off of what the user thought - the content from the account that the user follow and it's basically a time sequence. The new information feed will also take into consideration user interest and the information that users can follow. And this will be added to a user, if for example if a user is looking at the content and the user hasn't been using the content for several days, versus the content that probably old that the user missed we will add back what we think are more interesting content and we suggest those contents to the user. So we can take an example of if a user comes on to Weibo and looks at Weibo two to three times a day, some of the users may not have much content to read after they come on a couple of times that day. And then what we will do is we'll look at the content that the user missed probably over the next three days and then we'll also consider the content from the information that the followers, the user's followers viewed in the last few days and then recommend this kind of content, so that will increase the amount of interesting content that the user will be able to see. So if you look at first quarter, you'll notice from rolling out this new information feed to 50% of users that the refresh of these users growth is faster than the growth of our DAU, which is faster than the growth of our MAU. So we’re seeing that as a roll out, actually it’s increasing the content consumption on our… Yeah, so we push out this information feed. We started our beta testing in Q4 and we’ve been testing this for the last two quarters. So this year we’re going to continue to roll out to the remaining users at the same time our development teams are going to look at ways to actually improve further the information feed relevancy.

Yeah, so the second question Dick, I believe you talked about the KOL advertising and the revenue we derive from that. So basically the KOL that we’ve been talking about is KOL revenue derived from e-commerce, and we see a lot of people on Weibo creating their fan base and then directing this traffic to Taobao and to other e-commerce sites. The way we look at this is that we think that from monetization prospects for Weibo it really comes into two sets. The initial set is if e-commerce KOL is trying to generate revenue they need to build a fan base. So we see in the initial stage that these KOLs would be buying impressions on Weibo to increase their fan base, and then also buying other type of Fans marketing so that they build up engagement, they build up the scale of their audience, and I think once they have a certain level of audience then they can probably generate meaningful GMB [ph]. And at that point we’ll start pushing down enterprise services which we’re developing now, so that they would have more effectiveness in their marketing push to these e-commerce sites. So this is kind of a two set process and we started - we tested Weibo Showcase in the fourth quarter which allows close loop purchase to e-commerce sites like Taobao. So that when KOL pushes a particular set of line of clothing and so forth, that from a user perspective they can go for branding to interest generation and to actually making that push on Weibo and remain in the information pool. So this is how we’re progressing with the monetization of KOLs.

All right. That’s was great. Thank you very much and congrats on the good quarter.

Thank you Dick.

The next question comes from Claire Cao from Morgan Stanley. Please go ahead.

Hi thanks, management for taking my questions. I have three questions here. First one is that Gaofei mentioned going forward Weibo may cooperate more with the institutions. So I'm just wondering what kind of money transition model will probably become the major contributor in the future and what could be the margin profile? And the second one is regarding our sales and marketing expense in the quarter. I noticed that this line declined on a year-over-year basis. So I'm wondering what’s the reason behind that and how should we think about the magnitude of trading leverage going forward? And my third question is just a housekeeping one, regarding the CPM and ad load for the promoted feed ad? Thanks.

Working with agencies, KOL agency is just a part of our overall KOL strategy. Yeah, so when we look at the current development of KOLs on Weibo we're seeing that it's very similar to the early stage of YouTube where KOLs was developing. And we see that actually today that - KOLs on YouTube and other social platforms that there is been agency forms what they call multi-channel networks, MCN. So we're seeing that in China these MCNs are also forming that are starting to represent KOLs and that these KOLs are branching into different industries. So we will work with these KOL agencies on two levels. Number one is on content collaboration. So we'll help them build the scale of their fan base for the KOLs, help them to improve the quality of the content. So in terms of monetization, as I mentioned earlier it really comes into two formats. One is initially when we see KOL agency actually investing in these KOLs by spending marketing dollars for fans marketing, helping their KOLs build their fan base. And once their fan base become meaningful scale than they will probably help them with the enterprise services to allow their KOLs to be more effective on Weibo. And then we'll also look at other perhaps revenue sharing models.

So the second question Claire I understand is you're asked about our sales and marketing dollar amount on a year-over-year basis. On a non-GAAP basis, sales and marketing dropped very little, dropped little over $1 million. So I think in the first quarter of 2015 we had a more marketing spending especially around the red envelope. So I don't think that the small drop is too meaningful. I think overall I think this is a year where our revenue - we expect our revenue to grow continuously and then on top of that we expect our margins to also be growing in correlation. We think that we have great potential as a social media platform with UGC content to expand on margins. So we should see that as our revenue grows that our margins will continue to grow. And then the third question is on ad load. First of all let me clarify [indiscernible] of ad load. If you look at our platform there is really three type of advertising right. One is the advertising information flow; the second one is display ads; and then a third one is based on events. So ad load only pertains to the advertising portion from the information feed. And that makes up about 49% of our total advertising revenue in the first quarter. So we're only talking about that. And in terms of ad load in the first quarter it's over 3%, it's about 3.3%. Okay, Claire?

Okay. Herman, can you also talk about the CPM in this quarter?

CPM, we don't…

[indiscernible].

You are talking about the pricing of our advertising?

Yes, I think during the last quarter we mentioned the CPM is about 18 RMB in the quarter. So I just want to have that comparable number.

So our CPM because of our inventory makeup, as I mentioned earlier we have a different type of inventory. Our CPM actually varies very drastically positive and have [ph] inventory type. But with regards to information feed I think you were alluring to earlier, that RMB18 comparable in Q1. That has dropped to RMB 15 per CPM. But we also have for example looking at CPM for our brand advertising, and that has been a pretty stable quarter-over-quarter. Okay?

That's very helpful. Thanks.

Thank you.

This concludes our question-and-answer session. This concludes the time allocated for it. I would now like to turn the conference back over to Lidya Yu for any closing remarks.

That concludes today's conference call. Thank you for joining us everyone.