Ladies and gentlemen, thank you for standing by and welcome to Weibo Reports Second Quarter 2020 Financial Results Conference Call. And at this time, all participants are in listen-only mode. And after the speakers' prepared remarks, there'll be a question-and-answer session. [Operator Instructions]. And please be advised that this conference is being recorded. I would now like to hand the conference over to your first speaker for today, Ms. Sandra Zhang. Thank you. Please go ahead, ma'am.

Thank you, operator. Welcome to Weibo's second quarter 2020 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang, and our VP, Finance and Interim CFO, Cao Fei. This conference call is also being broadcast on Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the Safe Harbor statement in connection with today's conference call. During today's 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 statements. 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 and other filings with the SEC. All the 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 exclude 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 financials exclude certain expenses, gains or losses and other items that are not expected to result in future cash payments or are non-recurring in nature or are not 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'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang.

[Foreign Language] Thank you. Hello, everyone, and welcome to Weibo's second quarter 2020 earnings conference call. [Foreign Language] On today's call, I'll share with you highlights on Weibo's users, product and monetization, as well as progress we made on key initiatives in 2020. [Foreign Language] Let me start with our second quarter financial results. In the second quarter, our total revenue reached $387.4 million, a decrease of 10% year-over-year or 7% on a constant currency basis. Advertising and marketing revenues reached $34.6 million, a decrease of 8% year-over-year or 5% on a constant currency basis. 89% of our ad revenues come from mobile. [Foreign Language] On the user front, Weibo's MAUs grew 8% year-over-year to 523 million in June 2020 and average DAUs grew 9% year-over-year to 229 million in June 2020. 94% of our Weibo's MAU came from mobile. [Foreign Language] With the COVID-19 pandemic situation in China stabilized and people's work resumption, we observed the normalization of pandemic-related content consumption, which led to sequential pullback of traffic from the peak level in the first quarter. But it's worth mentioning that we still note a growth of user content generation and user engagement during this quarter led by our strategy to improve user engagement and retention on top of user growth. Particularly, we have reinforced our investment on feed distribution efficiency and social interaction to enhance user stickiness on the platform. On the monetization front, we further refined and strengthened our ad offerings designated for clients' evolving market needs during the pandemic. With that and benefiting from domestic ad demand pickup amid a stabilization of pandemic and work resumption, our ad business [indiscernible] declining rate from prior quarter. [Foreign Language] In discussing our operating update for the second quarter, I'll elaborate our progress made in the areas of product…

Thank you, Gaofei. And hello, everyone. Welcome to Weibo's second quarter 2020 earnings conference call. Let's start with user metrics. In June 2020, Weibo's MAUs reached 523 million, representing a net addition approximately 37 million users on a year-over-year basis. Weibo's average DAUs reached 229 million, representing a net addition of approximately 18 million users on a year-over-year basis. Despite the normalization of user traffic from the peak level in the first quarter, Weibo maintained a decent level of user activities with higher proportion of users generating content on the platform and higher user engagement during this quarter. Let's turn to financials. As a remainder, my prepared remarks would focus on non-GAAP results and all the comparisons are on a year-over-year basis unless otherwise noted. Now, let me walk you through our financial highlights for the second quarter of 2020. We saw the overall recovery for the advertising business in the second quarter with the pandemic largely brought under control in China. Weibo's second quarter 2020 net revenues were $387.4 million, a decrease of 10% or 7% on a constant currency basis, reaching the high end of our guidance. Operating income was $121.9 million, representing an operating margin of 31%. Net income attributable to Weibo was $114.5 million and diluted EPS was $0.50 cents. Now, let me give you more color on revenues. Weibo's advertising and marketing revenue for the second quarter 2020 reached $340.6 million, a decrease of 8% or 5% on a constant currency basis. Mobile ad revenues were $304.4 million, contributing approximately 89% of total ad revenues, up from 86% last year. Moving on to KA. In the second quarter, Weibo's KA ad revenues reached $165.9 million, a decrease of 3% of that on a constant currency basis. Excluding the barter transaction revenue impact from handset sector,…

Thank you. [Operator Instructions]. First question from the line of Gregory Zhao of Barclays.

So, my question is about advertising business. So, first, how shall we think about the KA and SME advertising recovery trend in the second half? And what's your plan to further improve the monetization? And also, in the prepared remarks, you mentioned advertising system upgrade. So, how shall we think about OCPX trend and coverage post the upgrade? And also, it'd be helpful if you can share some colors for the entire online advertising market and the colors about competitive dynamics will be very helpful. Thank you.

[Foreign Language] First, let me briefly recap on our second quarter performance and share some color on the recovery trends we've seen so far for KA and SME business in the second half. [Foreign Language] On the KA front, we saw the overall KA business come back at a nice pace during the second quarter and leveraging the recovery of the market demand and also the improvement of the social marketing capability of our team. And several key industries, including FMCG, ecommerce and automobiles, already delivered positive year-over-year trends. However, entertainment and travel sectors still fell short of the ad dollar compared with same period last year due to the pandemic which dragged the growth of KA business. [Foreign Language] Entering into the third quarter, we saw the overall brand sentiment has turned more positive backed by the stabilization of pandemic situation and improvement of the macro environment, especially the consumption side. As mentioned earlier, key sectors of brand business such as FMCG, automobile and handset continued to book healthy growth trends in the third quarter. But on the flip side, despite some sequential pickup, sectors like entertainment are still on a descending trend, given the relatively weak market demand compared with same period last year. At this moment, assuming no further impact from the pandemic in the coming quarter, we expect the KA business to continue to improve sequentially with the stronger demand fueled by the ecommerce seasonality. [Foreign Language] On the SME front, on the performance ad front, despite the overall ad budget pickup from a low point in the first quarter, as any business, customer remain cautious in their marketing spend since the SME advertiser are generally more vulnerable to the macro downside, particularly for the offline merchants. So, the SME business continued to decline on a…

Next question is from the line of Miranda Hui of Bank of America.

Thank you, management, for taking my question, which will be about the video content and video monetization? Can management explain to us what's the positioning of your video account initiatives in the video product space? And also, what's the growth strategy for that? And how is the progress of the video content creator development? And then secondly, how is the monetization for the video account and for your video ads? And what could be the potential impact to the profit margin resulting from the video ad sharing? And lastly, if time is allowed, can you update us how is the activity level and the retention level trending for your top content creators? And what's your competition strategy for the top content creators? Thank you.

[Foreign Language] In terms of the video account you mentioned, the initial soft launch is to attract those emerging video content creators to join Weibo platform by offering a more systematic video product to enrich our overall content in the system. [Foreign Language] On the content generation side, the video accounts will enable us to attract more content creators to join the platform. With the rise of the video content platform and low barrier for the video content creation, a bunch of high quality video content creators have emerged in China. With video accounts, we could ease the process of video submission and facilitate social assets as accumulation and interaction for those video content creators. With multimedia formats, Weibo distribution capability and monetization opportunities will be very attractive to the top video content creators. Now that with the launch of the video accounts, we could offer more systematic approach to entice high quality video content creators to join Weibo and leverage our overall KOL ecosystem. As of now, we have over 500,000 content creators join the video accounts program, among which over 5,000 had a fan base over a million per person. [Foreign Language] With more and more video content creators joining our platform through the program, we could attract wider user community through the diverse and high quality video offerings. For instance, for the online gaming vertical, the total fan base accumulated by the video content creator in the gaming vertical grew over 40% in the past year and the overall influence – our influence in the gaming vertical also being elevated. Additionally, this video content creator not only post video content on our platform, but also interact with fans in the image and text formats, further leading to deepened user engagement on our platform. [Foreign Language] For monetization,…

Thank you. Ladies and gentlemen, that concludes the question-and-answer session. I'd now like to hand the conference back to Ms. Sandra Zhang. Please go ahead.

Thanks, operator. And thank you all for joining us. We'll see you next quarter.

Thank you, ladies and gentlemen. That concludes our conference for today. Thank you for participating. You may now all disconnect.