Weibo Corporation (WB) Q3 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Weibo Corporation Report Third Quarter Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. And I'll now hand over the conference over to your first speaker, Ms. Wen Li. Thank you. Please go ahead.

Thank you, operator. Welcome to Weibo's 2018 third quarter earnings conference call. Joining me today are our Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Interim CFO and VP, Finance, Fei Cao and SINA CFO, Bonnie Zhang. The conference call is being broadcasted on the internet and is available through Weibo's IR website. Before the management's presentation, I would like to review 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 of 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 these and other risks, including the Weibo's Annual Report on Form 20-F and other filings with the SEC. All information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. 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 the future prospects. Our non-GAAP financial exclude certain expenses, gains or losses and other items that are now 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 lines for a brief Q&A session. With this, I'd like to turn the call over to our Chief Executive Officer, Gaofei Wang.

Thank you. Hello, everyone and welcome to Weibo’s third quarter 2018 earnings call. On today’s call, I will share with you highlights of Weibo’s user growth, product and the monetization, as well as our key initiatives in 2018. First, let me discuss our third quarter financial results. We continue to see strong revenue and user growth in this quarter. Our total revenue reached 460.2 million, up 44% year-over-year. Advertising and marketing revenue reached 409.3 million, up 48% year-over-year, with 83% of our ad revenue in Q3 from mobile. Non-GAAP operating margin during the third quarter reached 41% On the user front, Weibo’s monthly active users reached 445.9 million in September, an increase of 19% year-over-year. Additionally the daily active users in September was 195.2 million, up 19% year-over-year with 93% of Weibo’s MAUs for mobile. On the user front, Weibo’s monthly active users reached 445.9 million in September, an increase of 19% year-over-year. Additionally the active -- daily active users in September reached 195.2 million, up 19% year-over-year with 93% of Weibo’s MAU from mobile. Thanks to our continuous efforts to enhance the operation and distribution of [indiscernible], which are typically either hot issues or popular events discussed by users on Weibo. We will have further solidify its leading position as a platform for users to create and the consume content. This strategy has allowed Weibo’s user scale to continue to expand during the third quarter. Our focus to strengthen our platform ecosystem for social interactions among users and the content distributions has further increased the Weibo’s value proposition at the social media platform and strengthened our platform effect. In return more and more advertisers are recognizing Weibo’s ability in social marketing. In discussing our operational update for the third quarter, I will cover Weibo’s progress in area of users, content and customers. First on the user growth, we see that the organic growth of the mobile internet user is slowing down and the short video industry is becoming increasingly competitive. These factors have put some pressure on the growth rate of the user’s growth and the user engagement in the first half of 2018. In order to face these challenges we have redefined our strategy to be more focused on taking advantage of Weibo's core capabilities in social and the media areas to acquire users and to promote user engagement. For example we will have to remain as an important platform for the discovery and the distribution of press. This has been Weibo's main differentiators to acquire new users and to promote user engagement and we continue to improve these capabilities. This quarter we have adjusted our product operations strategy and the recommendation algorithm to strengthen our competitive edge. First, we have upgraded our topic product to highlight trends with hashtags adding as points of aggregation allowing users to discover and consume trends in multiple entry points such as our Weibo hash search and the topic within the discovery zone. Second, we enhanced the distribution of trends on other platform such as Weibo’s WeChat Mini Program. These upgrades have encouraged more users to discover, consume, distribute and participate in the discussion of the trend, which in return has allowed us to effectively acquire more users and promote user engagement. Notably, in Q3 the number of trends increased by triple digit sequentially and top content creators post on trends increased by double digits on quarter-over-quarter basis. For example, in the third quarter Super Typhoon Mangkhut the strongest storm of 2018 and the most intense typhoon to affect the region since recordkeeping began, hit Guangdong Province, we immediately engaged in more than 100 local government agency accounts and our city ambassadors to broadcast the disaster relief efforts and they report devastating effect of the typhoon in auto related coverage in real time. More than 200,000 top content creators participated in the discussion on our platform helping more people be aware of the natural disaster and to support recovery efforts. Over seven-day period the number of impressions on the topic Typhoon Mangkhut reached 7.3 billion, which result in an increase of 1 million of a daily active users. Moving to the fixed product, our focus have always been on enhancing software content production, and maintaining the users social relations as the top priority for content distribution. Our goal is to amplify the preference of social features and to distinguish ourselves on the market. During the past two years, the competitive landscape of information suite and videos have increased in the mobile internet industry. Both have been the key drivers for user growth and our main focus around product development. Our [indiscernible] two years of product development enhancements have been paying off. Weibo’s relationship based fees and interest-based fees user scale and user consumption have grown rapidly and have gain popularity among users to consume content. This quarter, user engagement rate of relationship fees as far as user consumption of interest-based fees both achieved a healthy growth on a sequential basis. Meanwhile, with video AGC format has become an important and a growing area of raising our content ecosystems. And we have achieved a meaningful progress with our video product. In September, there were short video views and posts grew by double-digit from last year. We will star its monthly active users and daily star its viewership, both achieved healthy growth on a sequential basis. The full video market has become increasingly competitive. In order to position Weibo for suppressing and sustain our long-term competitiveness, we are increasing investment of our user products to feature Weibo’s unique advantages in content creation, consumption, and user social interaction, so we can improve user acquisition efficiency. This quarter we rolled out a new version of Weibo app beyond initial test for users. Compared to the old version we made two primary modifications. First, we have a criteria of videotape and then video -- and the Weibo video community allowing users to access video content at a primary entry point and the featuring premium video content with IP and programs in period such as our daily Vlog, makeup tutorials, or set up videos with creating characters or things. The intent to cultivate habit for users to discover premium videos more efficiently and connect and interact with the creators we love. So the viral distribution of short video is showing great promise in the increase of user viewership and advertising inventory by leveraging our core capabilities in content distribution and social connectivity. We think video community will further help driving the growth of our video users scale and the user time span as it will be a designated center stage to a wide range of premium video and a platform for users to contact and interact with each other and with content creators. Further on the user product we have optimized our discover zone to further strengthen our competitive edge in the discovery and the discussion of the trend. We have structured the topics fees and provide users personalized recommendation on topics they might be interesting, helping to promote user discussion around topics. We have integrated topic product seamlessly into Weibo part search. On the one hand any content on the hot search that have been formed as a topic will be assigned with a separate topic page. Users not only to discover what they have and the new controversial content on the search and they will be able to view other valuable information including discussion, video, articles and others, raising that topic page. On the other hand, as more user discover comes soon share distribute and participate in the discussion of a particular issuer event. The high issuer popular event could become the hottest topic on the hot search eventually go viral on the web. This integration represents the information reinforcing insightful that effectively expands user content assumption for a longer period. We believe this upgrade is vital to further strength Weibo's uniqueness in social media market, especially in the creation and consumption of a video content and distribution of trends. It is also a key driver to accelerate Weibo’s future growth. The new version will be available to our users in the coming quarters based on the product optimization program and users feedback. Moving to live broadcasting, our strategic investment in e-live broadcasting has solidified our leading ad in the live broadcasting market for media and the collaborative vertical. Giving the current competitive landscape of live broadcasting we plan to acquire is live broadcasting business in Q4. Our goal is to provide Weibo's users with the improved live broadcasting experience by enabling better product integration between Weibo that focus in media, celebrity and showcase vertical. Ultimately this acquisition is intended to increase traffic and revenues to Weibo’s platform. Once the acquisition process is completed, it will take us a two quarters to fully integrate and optimize product. We believe the combination of its live broadcasting business with Weibo will further increase our content ecosystem offer better support to top content creators and improve our monetization capability and efficiencies. Moving on to content, in the third quarter we expanded strategic cooperation with over 2,200 top content creators post as well as post deals maintained double-digit growth from the last year, representing higher engagement of top content creators on Weibo. Weibo has become the inevitable platform for top content creators primarily because of the following two reasons. First, as I mentioned last quarter, more and more KOLs have recognized Weibo's uniqueness from our other content offering platforms. During this year's actual video platforms became more popular among users, many content creators returned to Weibo after establishing our baseline of influence and becoming top content creators on other platforms. Weibo is recognized as the ultimate platform for KOLs to expand their audience reach and to further gain public influence, whereby generating better monetization. In Q3, the number of top content creators for other platform that returned to Weibo increased nearly three times sequentially. Those returned top content creators have been actively creating content. Second, the value of the top content creator experience and the growth on Weibo. We have largely increased the traffic support and the subsidies to help the top content creators monetize and learn content. For example, in Q3, we have provided a more RMB 500 million worth of advertising inventory as a subsidy to support top content creators to grow. At the same time, we will have to allow more top content creators throughput to more effectively monetize their social assets after we'll have to end the Weibo advertising, alliance program. As a result, the average number of the posts generated by those content creators who are entitled with our revenue sharing increased double-digit. The considerable subsidies we're providing might temporarily restrain the demands of our native app on the platform, thus affecting our short-term financial performance. However, based on our proven track record of successful cases, we believe it’s more important to help top content creators to grow on Weibo and accumulate social assets and be able to monetize our platform over the longer run. We believe our strategy will facilitate top content creators greater incentive to create higher quality content. Enhanced user acquisition and the user engagement and to further broaden Weibo's content ecosystem. All of this will in return help our long-term sustainable growth of our future monetization. Lastly earnings monetization, we achieved healthy ad revenue growth in the third quarter, this quarter KA revenue increased 73% year-over-year. More and more advertisers do not just pass our marketing campaigns on Weibo, they have increasingly realized Weibo’s unique value of the social marketing and the power of elaborating our content distribution back in the KOLs influence. In short, they have considered Weibo as a strategic partner. This achievement could not be made without Weibo’s continuous investment in leading the innovation and the optimization of our monetization product. Our focus to strengthen the strategic cooperation with third-party help KA customer better recognize Weibo’s marketing value and enable them to have a better marketing experience. Separately the Weibo uni-marketing program our corporation with -- collaboration with Alibaba launched in Q2 has made impressive progress this quarter. Currently more than 100 of the brand advertisers have joined the program and are benefiting from its front use broad reach. For example, after drawing the Weibo uni-marketing program, [indiscernible] was able to more precisely identify the target potential customers by leveraging the existing customer base and Weibo and Ali after the marketing campaign, users’ favorability of the vacuum products increased 43%. Moreover, data confirmed that more user with the [indiscernible] on Weibo, the higher possibility that user will make a purchase in the Tmall store. Turning to SME, in the third quarter, SME revenue were up 35% year-over-year, however, our SME app business confronted challenges in the following two aspects. First, macroeconomics headwinds are expected to continue in the near future, which have already led to a decrease in merchant advertising spending in our field vertical industry such as auto services, wedding business and auto consumer sectors with large ticket size and with a focus on targeting users in the first and second tier cities. Second, the gaming industry has been one of our top subsector of SME app business. However, the rates and record rate changes in the gaming industry had a significant impact on marketing demand of a gaming company. We expect the regulatory impact in the lens of a supervision lasting longer than we expected. In response to these challenges, we have made strategic adjustment by focusing on the following three aspects. First, we have adjusted a structure in the focus of our sales team, but we will actively seek for more opportunities to expand the customer base including regional brand customers and deploy to the product and the marketing solution to advertisers across more verticals. Notably, we made a meaningful progress in the online education sector in this quarter. Revenue contributed by this sector increased by triple digits year-over-year. Additionally, we tend to further subsidize MCNs and top content creators to grow and monetize our Weibo under the current macroeconomic condition, as one of our unique assets help Weibo differentiate from other partner. Our path to support an investment have enabled demand of MCN and top content creators to grow rapidly on Weibo in the past few years. The considerable subsidies we provided might temporarily restrain the demand of our native app on the platform, thus affecting our short-term financial performance. However, we believe our investment will benefit Weibo’s overall ecosystem in the long run. Plus although we expect the gaming sector’s revenue contribution will decline in the short term, we insist to add in creating the investment to strengthen our operation of gaming vertical on Weibo. On the other hand we believe the resources we invest in the gaming vertical will enable us to acquire younger users at a lower cost while the gaming industry is currently in the adjustment cycle. And in the longer term we expect it will bring us corresponding returns after the industry returns back to normal. Notably in this summer we acquired many users in the gaming vertical through a series of activity and events. Overall we have encountered challenges to grow our SME app business in the second half of the year including the impact of macroeconomic headwinds on selected industry segment. And the short and medium term impact of regulatory and economics policy changes on MA. However we will continue to invest in expanding customer base from resilient industries supporting MTMs and top content creators to build a better monetization in consistent, developing more verticals that users will be interested in. Our test in return help us to promote the growth of Weibo’s SME app business in the longer term. With that let me turn the call over to Fei Cao for our financial update.

Thank you Gaofei. Welcome to Weibo’s third quarter 2018 earnings call. As a reminder we adopted ASC Topic 606 on January 1, 2018 and our new value guidance is consistent with this tender. In order to provide investors with clear comparisons during today's call and will also leverage our revenue and expense figure under the old revenue guidance, which excluded other transactions and includes value added tax to the reported figure in our earning release. Now let me walk you through our financial highlights. All comparisons are on a year-over-year unless otherwise noted. Weibo’s third quarter net revenue was 460.2 million, up 44% or 43% under the old accounting standard, or an increase of 48% on constant currency basis. Strong advertiser revenue growth was offset by the recent regulatory changes in certain verticals particularly in the gaming industry which led to a decrease in merchant advertising spending during the quarter especially for SMEs. We expect these regulatory adjustments may continue to affect growth of these verticals, our advertising spend in the near term. In addition, the continued depreciation of RMB related to U.S. dollar had a favorable impact on revenue growth during the quarter and we expect foreign currency headwinds to continue in the near-term. Non-GAAP operating income was 108 million, up 42%. Non-GAAP net income attributable to Weibo was 171.8 million, up 49%. Non-GAAP diluted EPS was 0.75 compared to 0.51 a year ago. Advertising and the marketing revenue for the third quarter was 409.2 million, up 48% or an increase of 52% on a constant currency basis. Mobile ad revenue in third quarter was 341.6 million, up 58% representing 82% of our total ad revenue. Our focus to strengthen our platform ecosystem and user social interaction and content distribution has further increased Weibo's value proposition as a social media platform and strengthened platform effect. Thereby we continue to benefit from this shift in corporate ad spending to our mobile, social and video, with 36% of MAU from mobile in September. As a result we are pleased to see that our total advertisers continue to grow from the last quarter. Turning to KA, in third quarter our KA ad revenue increased reached RMB106.2 million, up 73% or an increase of 78% on a constant currency basis. This turnkey had revenue forward was driven by both an increase in ARPA an expansion of Weibo's KA advertiser base. Weibo is tracking KA advertisers or bad social relationship, combined with the competitive depreciation we have with our unique celebrity assets, KOLs, network impact, content diversity and the integrated marketing solution. Monopoly, we continue to see notefully growth in Weibo's top tech industries, with SMCG and IT electronics, telecom, namely to receive volume at triple-digit year-over-year. In addition, our strength in the cooperation with Alibaba and third-parties, such as [indiscernible] and Nielsen data analytical integration, will further allow our key customers to realize better return on their marketing efforts. In return, we anticipate generating the increase KA ad spending. Moving on to SMEs, in first quarter Weibo’s SME ad business delivered revenue of $184.5 million, up 35% or an increase of 39% on constant currency basis. The number of SME advertisers continue to grow. The top categories of our SME business include app downloads, O2O companies and e-commerce. Nevertheless, the reason, the matter and the regulatory timeliness have slowed growth in several sector particularly the payment sector, which was considered as one of our top sub industries of SME ad business. With outstanding results from some of our sub industries during the quarter, including online education, entertainment and others, revenue of $28.5 million from Alibaba contributed 6% of our net revenue, up 13% or an increase of 16% on constant currency basis. Revenue from Alibaba is high correlated with its marketing campaigns and initiative spending, which can fluctuate significantly at any given quarter. Weibo also has a unique position in Alibaba’s ecosystem. We not only provide marketing trend for Alibaba’s full e-commerce business, but we’re also integrating to Alibaba’s O2O, payment solutions, products and data integration, entertainment and video businesses. Value-added service VAS revenue was $15.9 million in third quarter, up 18% or an increase of 20% on constant currency basis. Game services declined year-over-year and now makes up only 6% of our VAS revenue. Membership fees, which include individual membership, enterprise account verification and V-Plus memberships were up 45% Turning to costs and expenses, total non-GAAP cost and expenses were $272.2 million, up 45% or 43% under the old basis. Excluding the relative barter transactions, marketing expenses were $108.9 million under the old basis. The increase in expense was primarily due to the increase in sales and the marketing fees, as well as product development cost. We continue to taking a more focused approach to increase user acquisition and retention, as well as expand user engagement over multiple channels. As such, the non-GAAP sales and the marketing expense as a percentage of net revenue was 24% during the third quarter under the old basis, up 1% from the same period last year, and is mainly due to the increase in channel marketing spending and the investments related to the promotion of Weibo Lite. The increase in product divestment expenditure was primarily attributable to an increase in personnel-related costs. Non-GAAP operating income was $108 million in third quarter, up 42%, representing a non-GAAP operating margin of 41%. Income tax expense was $27.9 million compared to $22 million last year. The increase was primarily due to the deferred tax liability recognized from the fair value changes of investments and higher profitability. Non-GAAP net income attributable to Weibo in the third quarter was $171.8 million or up 49%. Turning to our balance sheet and the cash flow items, as of September 30, 2018, Weibo’s cash, cash equivalents and the short-term investments totaled $1.6 billion. Cash provided by operating activities was $122.1 million. Capital expenditures totaled $6 million while depreciation and amortization expenses amounted to $4.5 million. As leading social media platform in China, Weibo’s scale and brand strength has allowed us to grow the platform efficiently. As a result, we delivered free cash flow of $116.1 million in third quarter. According to our ADR depositary form, as of September 30, 2018, approximately 28% of Weibo's shares outstanding were represented by ADR shares, 86% of which were considered floating shares. Regarding acquisition of live webcasting business, as Gaofai mentioned in his remarks, the combination of live broadcasting business with Weibo will further enrich our content ecosystem. Also better support and protect content creators and to improve our monetization probability and efficiency. We plan to complete the acquisition process in fourth quarter. Now, let me turn to our financial outlook. We anticipate, our first quarter of 2018 revenue to be in the range of $480 million and $490 million, which assumes foreign exchange rate of RMB7 to $1, or an increase of 35% to 38% year-over-year on a constant currency basis. This forecast lags the potential impact of MAU and regulatory uncertainty as well as currency translation headwinds. With that, let me now turn the call over to the operator to begin the Q&A portion of the call.

Thank you. Ladies and gentlemen, we’ll now begin the question-and-answer session. [Operator instructions] Our first question comes from the line of Juan Lin, 86Research. Please ask the question.

Thank you management and good evening. Thanks for taking my questions. My first question is on Q4 guidance. I noticed that the Q4 guidance shows a slowdown compared to the third quarter in terms of growth. I’m wondering, whether the guidance is mainly due to the regulatory environment change and also the macro impact on certain categories that you have already noticed or whether you have noticed, you know some more further impact on the macro environment change and how should we look at 2019? The second question on the margins I noticed that non-GAAP operating margins actually improved versus last quarter especially on sales and marketing expenses seem to be well controlled. So, I wonder what is future investment plan for user acquisition and how we should we look at the margins going forward? Thank you.

I think I addressed this -- somewhat addressed this issue in my prepared remarks. As I indicated in my script there's two main elements that are affecting our growth rate in the fourth quarter as you have -- we indicated that our growth rate in the fourth quarter will be slower compared to the third quarter. The first one will be the macro situation, particular for those items was big dollar ticket size in the -- we’re looking at industry segment such as auto segment with the travel and the -- like a big ticket item such as wedding services. And the other element I addressed on the call is the gaming industry. I think you’re very much aware of the regulatory challenges that most of the companies are facing these days and that has had an impact on the marketing dollars spent on that particular industry. That impact was larger than the initial estimate we had made at the beginning of the year. As a result that could impact our growth rate in the fourth quarter. What I have indicated earlier these are considered external factors. There will be few like a company specific factors for you to consider. One as I indicated in my remarks, during the tough period of the microeconomic situation, we’re doing -- we are actually expanding our investments in the gaming verticals. We believe right now it's a good time to acquire users, Weibo users at a much more reasonable cost. That’s one factor, even though this is not too much related to the revenue growth. The other thing which I also indicated on my script is we have significant increase in our investment in those MCN multi-channel network agencies, who are actively with -- who are being very active with Weibo. We are providing our operating inventory for them to subsidize their content creation as well as to help them to monetize. This subsidy we have been providing to them would effectively reduce their media ad demand on our platform. However, this would be a short-term impact. Our history or our past experience have been telling us that these things once the overall economic situation improved those entities tend to return to their normal spending levels. This is the first question. The second on the margin expansion question. I think we’ve been very disciplined in terms of our spending throughout the years. I don't think that has been a particular issue for the third quarter. If you look back to the past few quarters as we indicated at the beginning of the year, we’ve been expecting our margin for the year, to be relative stable on a year-over-year basis. As a result, our sales growth, our sales, marketing absolute dollar as a percentage of revenue has been a relatively stable basis. So, we do not have any particular reduction in sales, marketing or cut back over sales per se. So these are all our plan, I think most of our sales marketing expenditures work had from a quarter perspective. So hopefully that answer that question. From a forward-looking point of view, I think the -- excluding the impact from report which is a bit of a different from the margin composition point of view from our normal business. I think our core business will continue to bear margin that similar to the level with last year.

Thank you very much. Very helpful.

Thank you. Our next question comes from the line of Binbin Ding of JPMorgan. Please ask the question. Moving to the next question from Karen Chan, Jefferies. Please ask your question.

Thank you, management for taking my question. So my first question is just wondering what your general thoughts on China's social ad market growth going into 2019 and how should we think about Weibo’s growth profile versus industry as peers like Tencent, they start adding more ad inventories? My second question is any color management can provide on [indiscernible] current monthly growing level or how much of a revenue contribution should we be expecting starting first quarter 2019 as a result of consolidation. That would be very helpful. Thank you.

I'll divide the question into I guess two parts to address your question on the social ad outlook for 2019. To start with the brands, I think we look at the competitive landscape in the social ads for brand advertisers, there were limited competitors in the marketplace and our primary competitors in this area is WeChat. This from demand of a brand and advertiser in terms of they execute a campaign at Weibo. They are not simply looking at the traffic we're providing. They're more concerned about their brand influence, brand awareness, their influence, also the participation of our KOL in their distribution and amplify their brand impact. As a result we have seen continued growth of our ARPA from brand advertisers. And on top of that we are further expanding our customer basis where we’re looking into further going into local brand advertiser level in 2019. For a brand -- the growth of our brand advertisers, I think that the primary pressure is not from the competition we had with WeChat. More so it's from the market acceptance meaning that we can affirm more marketers or brand advertisers who are willing to accept our social ad products, and to understand and to utilize our social marketing efforts. On the other side, let’s move on to SME side. Overall, we for 2019 SME growth will be a bit of challenging. There’s two-folds, one is with the current macro condition, the overall demand is decreasing. And on the other side, we are looking at increasing supply in traffic in the market. In the past few years our growth of SME has largely depending on the growth of our traffic and we have been paid a little bit lot less attention in terms of our product with the social marketing features. With 2019, I think we're going to shift some of the focus into this area. I think we recognized, this could be challenging, however with the social platforms such as Weibo and WeChat, other than providing traffic for purchase conversion, we do have advantages in terms -- interactions between merchant and their fans or merchant and their followers compared to other pure media platform. Of course in the midst of that we still need to have -- we have pay efforts in terms of the ecosystem to support growth of SMEs that including our distributors. In terms of the e-live broadcasting we just take over -- just took over the e-live broadcasting team in the month of October. For the first two quarters, our focus will be on the product side particular the product features with e-live broadcasting with few -- with our Weibo platform that need be well interfaced. As a result we have had no specific revenue forecast for 2019 on live broadcasting yet. I’ll just give you supplemental comments on the live broadcasting. I’m sure a lot of you are aware of that. The live broadcasting industry have been quite impacted by the popularity of short video in 2018. In the past, the e-live broadcasting have been focusing on the live broadcasting showcase and KI. Rather this is not a area that Weibo has significant competitive advantage compared to others. We plan to -- plan to for the first few quarters spend more time to develop on the verticals -- selected verticals or celebrity live broadcasting with [indiscernible] so that these two platforms can have a better converging to aspirants.

Thank you very much. Very helpful. Thank you.

Thank you. Our next question comes from the line of Binbin Ding from JPMorgan. Please ask the question.

Hi. Good evening, management. Thanks for taking my question and congratulations on the strong third quarter results. My first question is on your short video strategy. So can you elaborate the progress on the execution of the short video strategy so far? What is the current revenue and traffic contribution from short video in the third quarter? In terms of monetization, is there any particular sectors factored into focus of the initial stage? And also what kind of impact that short video monetization bring to our existing KA and SME advertising revenue? My second question is quickly, so between the live streaming and shot video content, how do you prioritize your focus on the investment in this type of content format? And lastly, I would like to quickly ask if there are any new initiatives shall we expect from your partnership with Alibaba in the next year? Thank you.

I think most of you are aware of that in the last two years the short video has been the primary drivers for our platform growth both from our viewership and from a user growth point of view. However, for the first half of 2018, we saw popularity of few short video platforms that have put pressure in terms of our user growth rates on the video site. In the third quarter, we have made adjustment in terms of user acquisition from a video content. So, we’ve been focusing more efforts in terms of the content functioned and interactions between the content creators and the users to acquire users and a firm with the content type point of view we have -- which more focusing on the PTC content and the content with particular IP. In terms of advertising demand rather they try to put a more advertising material into the video format. They haven't been strictly associated their video campaign with particular our video content on the platform, as a result, you see continued stable growth of our video advertising dollar as a percentage of our total advertising dollar. This quarter has been up two percentage points to 27%. In terms of your second question on our investment priority in between live broadcasting and short video, no doubt short video will be continued the top priority for this platform. We believe short video will be the baseline media format going forward in terms of the content creation and the content consumptions. In terms if the volume of short video and the live broadcasting, short video creation on the platform on a daily basis is in the millions while the live broadcasting might be in the 10,000. So from that volume difference, you could have seen, who has been the dominant player. The live broadcasting will be primarily used by our top content creators such as celebrities as supplemental media format for their content distributions.

Okay.

I think at this point of time, we have not started our particular negotiation or discussion with 2019 plan with Alibaba. So we have no – at this point there’s no indicator in terms of the further new programs will be working with Ali neither they will be the frame contracting in advertising dollars, so we’ll be working with Ali for the following years.

Thank you. As there are no more further questions, I’ll hand the call to the presenters for closing remarks. Please, continue.