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Edited Transcript of SINA earnings conference call or presentation 7-Nov-17 12:10pm GMT

Thomson Reuters StreetEvents

Q3 2017 SINA Corp Earnings Call

SHANGHAI Nov 9, 2017 (Thomson StreetEvents) -- Edited Transcript of SINA Corp earnings conference call or presentation Tuesday, November 7, 2017 at 12:10:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Guowei Chao

SINA Corporation - Chairman of the Board & CEO

* Sandra Zhang

* Yi Zhang

SINA Corporation - CFO

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Conference Call Participants

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* Chi Tsang

HSBC, Research Division - Head of Internet Research of Asia Pacific

* Eddie Leung

BofA Merrill Lynch, Research Division - MD in Equity Research and Analyst

* Fan Liu

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Tianxiao Hou

T.H. Capital, LLC - Founder, CEO, & Senior Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to today's call, SINA's Earnings Conference Call Third Quarter 2017.

I'll hand the call over to your first speaker today, Ms. Sandra Zhang. Thank you. Please go ahead.

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Sandra Zhang, [2]

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Thanks, operator and good evening. Welcome to SINA's earnings conference call for the third quarter of 2017. Joining us today are our Chairman and CEO, Charles Chao; and our CFO, Bonnie Zhang. This call is also being broadcast on the Internet, and is available through the company's IR website.

Before management remark, I would like to read to 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 cause actual results to differ materially from those contained in the forward-looking statement. SINA assumes no obligation to update the forward-looking statement in this call and elsewhere. Further information regarding these and other risks is included in SINA's Annual Report on Form 20-F for the fiscal year 2016, and its other filings with the SEC.

Additionally, I'd like to remind you that our discussion today includes non-GAAP measures, which mainly excludes stock-based compensation and certain other items. We use non-GAAP measures to gain a better understanding of SINA's comparative operating results and future prospects. Our non-GAAP measures exclude certain expenses, gains and losses, and other items that are nonrecurring in nature or are not expected to result in future cash payment or are not indicative of our core operating results and business outlook. Please refer to our earnings release for a more detailed information. During the call, we may discuss non-GAAP measures for Weibo, which has not been audited, and our best estimate of Weibo result applying the same methodologies we use to calculate non-GAAP measures for SINA at the group level.

After management remarks, we will open the lines for brief Q&A session.

With this, I would like to turn the call over to our Chairman and CEO, Charles Chao.

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Guowei Chao, SINA Corporation - Chairman of the Board & CEO [3]

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Thank you, Sandra, and good evening. Thanks for joining the SINA's earnings conference call for the quarter ended September 30, 2017. Before my discussion of the quarter, I would like say a few words about our announcement today. Today SINA also announced the final vote count for the company's 2017 Annual General Meeting of Shareholders held in Hong Kong on November 3, 2017, as well as the company's new initiatives to further enhance its Board and the shareholding structure.

As many of you probably are aware that over the past several months, the company engaged in a proxy contest initiated by Aristeia, a U.S. based hedge fund, which holds approximately 4.2% of the company. Although as a foreign private issuer, SINA is not subject to proxy rules and the U.S. security laws, and the company's directors and the senior management had to divert significant amount of time, attention and efforts from the company's normal business operations and the strategic planning, and the company had to utilize significant amount of resources to prepare proxy materials and engaging this proxy contest.

In the proxy contest, Aristeia claimed that the SINA is undervalued as it is traded at a discount the sum of net assets. And they wanted to push their candidates to the company's Board to make the changes despite the fact SINA has significantly outperformed the market and the most of its peers in the past 2 years. Aristeia has proposed several measures to unlock the value of SINA, some of these measures and not feasible for the company, which was also concurred by the third-party shareholder service fund, ISS, and the rest have already being implemented by the company.

Although the management agreed that SINA is somewhat undervalued based on net asset value, as we have told investors many times in previous earnings calls, we also recognize that it is not uncommon for such a trading discount to exist for parent company, which has a subsidiary that grows much faster and accounts for significant portion of the parent company's value.

The Board and the management of SINA believe that the best way to narrow such discount is to focus on executing our current strategies and develop non-Weibo business, so that value contributed by our non-Weibo business will become more meaningful in the whole value of the company in the future. To achieve that, we need determination and then we also need a stronger Weibo to support our new initiatives. In addition to building new business at SINA, we will continue to look into the possibility of cash buyback and dividend as the ways to unlock the value of SINA's stock, taking into consideration of market condition and tax consequences, like we did in the past.

In the proxy contest, Aristeia advocated to elect to 2 candidates they have selected to our Board. Our Board recommended the shareholders to vote against both candidates due to their qualifications and other commitments they have. The votes for the contest came in last Friday, and have been certified by the independent inspector by now. Apparently, our shareholders agreed with the Board and the management, 77% of the votes were against 1 candidate. Mr. Brett Krause and 56% of the votes were against the other candidate, Mr. Thomas Manning. As a result, neither candidate proposed by Aristeia was elected. In addition, the shareholders overwhelmingly voted for the existing Board Director Yichen Zhang, with 94% of votes in support for his re-election. We want to express our sincere gratitude to all shareholders for your participation, support and input during this process. We have always been and we will always -- we will continue to be acting in the best interest of all shareholders. In the meanwhile, shareholders should recognize that SINA's management is the largest shareholder of the company. Our interest is completely in line with all other shareholders of the company.

Following the 2017 AGM, the company's Board of Directors resolved to establish nominating in the Corporate Governance Committee of the Board comprised of Independent Directors Mr. Yichen Zhang and Mr. Yan Wang, to be responsible for matters dedicated to the nominating committee, has set forth in the nominating committee charter adopted by the Board. The Board has also instructed and authorized the nominating committee to commence an active search of highly qualified Independent Director candidates who have (inaudible) for credentials and experiences that complement to existing Board and they can bring additional value to the company.

In addition to enhance the Board structure, the company Board of Directors has also reviewed the entire process of this proxy contest and concluded that it is extremely destructive, disruptive and meaningless. It is apparent that some of the hedge funds we deal with during this process have little knowledge about Chinese Internet industry, no understanding of the regulatory environments SINA operates and no interest in understanding of the company's long-term strategies. Their major objective was to force a financial engineering in the hope to score short-term gain at the expense of the company's long-term value.

As a (inaudible) issue, the company is not subject to proxy laws and the U.S. security laws and is not required to file proxy solicitation materials in connection with annual or special shareholder meetings. The company believes any future proxy context could be costly, time consuming and disruptive. More importantly, any proxy contest initiated by any shareholder was potentially value destructive proposals, may materially and adversely affect the company's stability in a highly regulated environment and its ability to execute business strategies for shareholder value enhancement over the long term under leadership of the Board and its senior management.

In light of the foregoing, the company has been exploring possible ways, permitted and applicable laws and the company's articles of association to protect itself from potentially disruptive and very destructive situations in the future. Subsequent to the 2017 AGM, upon authorization approval by the Board and independent audit committee, and in accordance with the company's articles of association, the company issued 7,150 newly created Class A preference shares with 10,000 votes per share initially at a par value of $1 per share. The New Wave MMXV Limited, a holding company that holds 79,44,386 ordinary shares of the company on behalf of senior management of the company and is controlled by me. This new issuance of Class A preference shares to New Wave effectively enables New Wave to have voting power equivalent to 10 votes for each ordinary share currently held by it. As a result of the company's issuance of 7,150 Class A preference shares to New Wave, the company's ordinary shares currently held by New Wave, New Wave's aggregate voting power in the company has increased to approximately 55.5%, please note Class A preference share have no economic rights, no (inaudible) to receive dividends or other distributions by the company.

This Class A preference share issuance is mainly for the protection of the company from potentially disruptive and very destructive situations in the future. So, the Board has imposed limitations and restrictions on the scope of its voting rights. Among other things, New Wave's vote associated with the Class A preference shares will not be counted if any existing management is to be elected to the Board at the shareholder meeting. In addition, where matter is subject to shareholder approval and (inaudible) the Board decided to submit such matter to a shareholder meeting for approval, the Class A preference shareholders will have to vote in accordance with the recommendation of the Board. Further, the votes attached to the Class A preference shares were decreased proportionally when New Wave sells or otherwise transport ordinary shares to any third-party.

The company's Board of Directors have noted that the large number of leading Internet companies in China and in the U.S. have adopted a (inaudible) stock over similar structures to ensure the management has the ability to make the crucial long-term strategic decisions which is vital for any leading company in the fast evolving Internet industry. The company's issuance of Class A preference shares to the management team, who has a proven record of creating new business and delivering strong shareholder value will put SINA in part with the leading Internet companies in the world in terms of preferred shareholder structure and then will help ensure the company's stability in a highly regulated environment and its ability to execute business strategies for shareholder value enhancement of the long- term and the leadership of the Board and its senior management.

With that I'm going to turn to my discussion on the quarter. We're very pleased with another quarter of outstanding performance as we set records for revenues, operating profit and GAAP net income. Total revenues for the third quarter reached $440.5 million, up 62% from the same period last year. Weibo continue to be the major driver for the strong growth with 81% increase in revenues year-over-year as the leading social media platform continue to build its scale and improve its monetization efficiency.

In the meanwhile, we are pleased to see SINA portal business has recorded 27% growth in revenues in the third quarter on a year-over-year basis driven by an increase in advertising revenues with continued improvement of mobile monetization and the strong growth in advertising revenues as we've continued to make encouraging progress on our finance business.

Let me talk briefly about our Weibo business first. User growth continue to be healthy in the third quarter with MAU grew by 27% to reach 376 million and DAU grew by 25% to reach 165 million. We continue to see good results from our spend in channel marketing on localized country operation in lower-tier cities and (inaudible) enhanced video offerings with show video and live broadcasting. During the third quarter, our recently launched UGC video product, Weibo Story, continued its user attraction with user base expanding to 40 million recently. In addition, we have continued our effort in enhancing our machine learning capability for content distributions through interest-based fee and the video fee which has a result in further improvement in content distribution efficiency and enhanced content consumption per user has also increased.

On the Weibo monetization front, the results has also been very encouraging for the third quarter as we saw significant revenue increases in both advertising and non-advertising businesses. For advertising business, the growth came from both KAs and SMEs and from both brand advertising and performance-based advertising. Advertising revenues from KA customers grow by 71% year-over-year, while advertising revenues for SMEs grow by 70% year-over-year for the same period. We believe that the ever-growing scale of Weibo platform result in more platform network effect, which helped generate significant more monetization efficiency. The launch of the new advertising systems for (inaudible) in late part of quarter has helped improving the eCPM of the performance-based advertising for the information feed and will further enhance the efficiency going forward.

On the other hand (inaudible) and will further enhance the (inaudible) going forward.

On the other hand, Weibo's unique position as the leading mobile, social and video platform has helped attract marketing demand from many different customer bases. Hence, we believe our strong growth in Weibo advertising business will continue. The growth in non-advertising business for Weibo was mainly coming from the increase in membership service and data service as close to 80 million Weibo users have activated the payment accounts, we believe there is a good potential for Weibo to develop its fee-based services going forward.

Now let me talk about SINA's portal business. For the third quarter 2017, we continue to see healthy growth of mobile traffic generated from SINA News app, with daily active users growing in 30% annual base. In addition, the frequency of the usage and the user time spent on SINA News app have shown consistent improvement in the first 9 months of 2017.

For the last few quarters, we have leveraged Weibo to accelerate the user acquisition pace and to better use live data across two platforms in content distribution and at the filing campaign targeting. We continue to leverage the synergy developed between SINA portal and Weibo to improve accuracy in personalized news documentation and short video content distribution, which will lead to the further expansion of our user base and user engagement level.

On the monetization front, we are delighted to see portal advertising revenue grow by 9% year-over-year basis during the third quarter. Much of the advertising revenue growth of the portal came from mobile with advertising revenues generated from mobile devices representing 63% for the third quarter comparing to the 57% for the previous quarter. This is very encouraging.

Going forward, user growth and user time spend enhancement will remain the top priority for SINA mobile team followed by improvement and mobile monetization efficiency.

During the third quarter, we have significantly increased our marketing spending in user acquisitions through handset manufacturers, app stores and other third-party channels for our news app. We believe a largest scale of user base is crucial for achieving a competitive monetization scale in the market and it's the foundation for developing other vertical business going forward. Hence, we intend to invest further in channel marketing for user acquisition in the future for our news app, and as a result, our operating margin for non-Weibo business may suffer.

Let's talk about the performance of portal non-advertising business. For the third quarter of 2017, portal non-advertising revenues increased by 102% on an annual basis, thanks to the growth of revenues generated from SINA online finance business, which grew by 250% on a year-over-year basis. During the third quarter, we recorded $16.5 million in revenue in online payment service which included transaction fee we charged on providing payment service to third-party online merchants or fintech companies as well as service fees for providing the payment system to third parties based on SaaS model.

During the third quarter, we started to record revenue from online micro loan service by consolidating victory of fintech companies specialized in micro loan service. We believe such service will help to further grow our non-advertising business on both portal and Weibo platforms going forward. Although we do recognize the significant regulatory risk in the current micro loan service in China market, which may impose challenges to the scale and the margin for the business in short-term, we also believe there is significant market opportunities in China for such a service, as a large number of customers, consumers in China are not covered by the credit card service offered by traditional financial institutions like the banks. Over the longer period, the path on which traffic, data and the capital like SINA will have great opportunity to develop such service and the business.

As I indicated in the past earnings call, we believe that online finance in general is one of the factors with significant opportunities in the next 3 to 5 years, given its huge addressable market and the low penetration by Internet. Our Board has previously approved an established $500 million investment fund that was focused on investing on our finance companies to capture the potential of this segment. We believe there is strong synergies among SINA, Weibo and our online finance investees companies, in brand equity, user acquisition, transaction execution and the credit risk control, leveraging our existing traffic and data.

With that, I'm turning the call to Bonnie, our CFO for more detailed financial review.

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Yi Zhang, SINA Corporation - CFO [4]

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Thank you, Charles, and thank you all for joining our conference call today. Let me walk you through our financial highlights for the third quarter 2017. A further detailed financial review, I would like to remind you that unless otherwise noted, my prepared remarks would have focused on non-GAAP results, which mainly excludes stock-based compensation, gain or loss on sales of investments and impairment, and the amortization of intangible assets. All of our comparisons are on a year-over-year basis unless otherwise noted.

We had another strong quarter for the 3 months ended at September 30, 2017. SINA's net revenue for the third quarter were $440.5 million, up 62% from the last year. Weibo platform and the non-Weibo businesses delivered a year-over-year revenue growth of 81% and of 27% respectively. Gross margin reached 76%, up from 68% when year ago.

Income from operations increased 157% to $145 million, representing an operating margin of 33%, up from 21%. Net income attributable to SINA increased 32% to $57.7 million, and the diluted net income per share was $0.77.

Now let's turn to key financial items. SINA's online advertising revenue for the third quarter grew 56% to $364 million, driven by a 77% growth of the Weibo advertising revenue and the 9% increase in portal advertising revenue. Portal advertising (inaudible) resumed the growth trajectory as we further ramp up SINA's mobile traffic by leveraging the synergy developed in between SINA Media Properties and the Weibo platform.

Mobile app revenue contributed 63% of total app revenue, up from 50% last year. We are also delighted to see the healthy growth of key account customers from number industry segment. And SINA Media Properties have been able to gain more share of wallet in key account customers in ad budget shift to mobile.

Turning to Weibo's advertising business. Weibo's ad revenue grew 77% to $276.8 million, the strong momentum was again broad-based across all customer and industry segment, supported by various Weibo advertising products. Key accounts ad revenue grew 71% year-over-year and 34% quarter-over-quarter, mainly driven by the significant increase in number of brand customers which well demonstrate that Weibo's social marketing value has been increasingly recognized in the marketplace. The traditional heavy ad spending industry sectors such as FMCG, Internet service, IT-related services and automobile have all increased ad spending meaningfully and altogether contribute approximately 64% of Weibo brand advertising revenue in the third quarter.

We are also delighted to see factors such as entertainment, and our luxury brand continue to deliver triple-digit of growth on a year-over-year basis. Besides this, ad revenue from Alibaba posted triple digit growth as well, which was a direct result of the increase in marketing campaign initiated by Ali in the second half of 2017. SME ad revenue grew 70% year-over-year and 15% quarter-over-quarter. The drivers for the solid performance at SME sector included the continued expansion of SME customer base, higher customer retention rate, and improved (inaudible) spending. As we mentioned in the previous call, we have officially launched our upgraded advertising system (inaudible) in late August. (inaudible) enabled Weibo to provide a more scalable and targeted ad solutions as well as more advanced ad measurement tools to our customers. We are pleased with the positive results at its initial stage, evidenced by the double-digit increase in eCPM in the bidding process and improved ad engagement rate.

Turning to non-advertising revenues. F or the third quarter, non-advertising revenues grew 98% to $76.6 million. Weibo non-ad revenue grew 114% to $43.2 million, which is mainly attributable to the increase of membership revenue and the revenue share on the live broadcasting business generated from (inaudible) technology. The revenue share from live broadcasting business, though immaterial to the top line, did contribute an incremental profit to Weibo in this quarter.

Non-Weibo non- advertising revenues grew 102% to $37.2 million, primarily driven by an increase in revenue generated from our online finance business. In the third quarter, we reported $16.5 million revenue from online payments business that operates on transaction fees, plus tax service fee model. We derived a new revenue stream from an online lending-related service firm, which we invested and start to consolidating our financial statements in this quarter.

We believe there are strong synergy we can deploy in between the online finance business and our multiple media platform that generates significant traffic and the valuable user data profile, which are the key factors critical to the success of the online finance business.

Turning to gross margin. F or the third quarter, gross margin was 76%, up from 68% last year. Advertising gross margin for the third quarter 2017 was 77%, up from 71%. The increase in advertising gross margin was primarily due to the stronger advertising demand from Weibo advertisers, operating leverage of Weibo and improved performance of the portal business. No-advertising gross margin was 70%, up from 50%, which is mainly resulted from higher revenue contribution from business with better margin profile, such as Weibo's membership services and SINA's online finance business.

Now moving on to operating expensive. For the third quarter, operating expenses totaled $189.7 million, up 48% from last year. Weibo's operating expenses for the third quarter of 2017 grew 61% to $126.6 million. Excluding Weibo-related expenses, operating expenses for non-Weibo business totaled $63.1 million, up 28% year-over-year. The increase in operating expenses was primarily attributable to the increase in sales and marketing expenses for user acquisitions for both Weibo and SINA News app.

Operating income for the third quarter was $145 million, representing an operating margin of 33%, up from 21% last year. The improved operating income and operating margin was a result of the further operating leverage achieved by Weibo platform, and it's a step up of margin profile from non-Weibo business line.

Turning to non-operating items. Under GAAP measures, we have reported a non- operating income of $11.1 million for the third quarter compared to $143.1 million last year. Non-operating income for the third quarter 2017 was primarily composed of the following items; a $10.2 million net gain on sale of an impaired investment, which is excluded under non-GAAP measure, a $11.1 million loss pick up from equity- method investments, which is accounted for under equity method and reported 1 quarter in arrears, mainly resulted from earning loss picked up from company's investment in (inaudible) and $12 million net interest and other income. We have (inaudible) suffered significant losses in lieu of the tight real state investment policy. We do not expect there will be an immediate turnaround in their operation, which will likely have negative impact on our financial results in the near- term. Please refer to the press release for more details of the non-operating income for last year.

Turning to taxes. Under the GAAP measures, income tax expenses for the third quarter was $24.6 million compared to $19.1 million last year. Turning to net income. Net income attributable to SINA was $57.7 million compared to $43.7 million last year. Diluted net income per share for the third quarter of 2017 was $0.77 compared to $0.56 last year.

Now, I will turn to the balance sheet and the cash flow items. As of September 30, 2017, SINA's cash, cash equivalent and short-term investments totaled $2.2 billion compared to $1.8 billion as of December 31, 2016. Out of $ 2.2 billion balance, $737 million related to Weibo's cash and short-term investment. For the third third quarter 2017, net cash provided by operating activities was $188.1 million, capital expenditures totaled $7.3 million, and depreciation and amortization expenses amounted to $8.7 million.

Before turning to the questions, I would like to take this opportunity to thank our shareholders for the support and participation in our 2017 Annual General Meeting. W e appreciate our shareholders, the recognition of the management for what we have achieved so far. We are dedicated ourselves to continuously improving our business performance and delivering solid results in the days to come.

With that, operator, please open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Eddie Leung of Merrill Lynch.

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Eddie Leung, BofA Merrill Lynch, Research Division - MD in Equity Research and Analyst [2]

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My first question is a bit about the competitive landscape for news feed, as well as social advertising. One of the leading independent news feed applications announced very aggressive revenue target for 2018. And it's interesting to see they're also getting a little bit more show - show, with more multi-media formats and some of the KOL content. So just wondering from the SINA point of view , because you have cooperation with Weibo and do you guys together run both mobile use app as well as social platforms. Together, how you can think about synergies and complete (inaudible) a prepaid card competitor? Thanks.

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Guowei Chao, SINA Corporation - Chairman of the Board & CEO [3]

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Hi, Andy. This is Charles. Thanks for your question. I think this is a question -- I think in the previous call, it's also addressed by our Weibo's CEO, in terms of competitive landscape, in terms of the information feed on mobile application. And 2 parts of the -- point I should consider here. Why is that? In terms of competition in bidding , the leading news feed company versus Weibo is more or like a social based information feed. The differences, I mean, as we explained before that the news feed is purely based on recommendation, and our Weibo is more based on the social distribution, with the social ID, which makes the difference. So the users can (indiscernible) user social assets by contributing more content and the cumulative fact of such content contribution. And you're right, some of the leading news apps also started to provide social and multimedia, which is similar to Weibo. But we believe -- just that Weibo also provides recommendation-based interest feed, I mean this is complementary to our social feed. On the other hand, you just feed one app, some social element and multimedia, which is further understandable. But fundamentally, I think that Weibo will be more based on social, and the news will -- news app will -- content app will be more based on the recommendation. And so I think that social portion probably is not that critical for the news app. On the other hand, I mean for our Weibo platform, I think social plays much more important role with the social element, and which actually is our advantage in our competition because into social ID (inaudible) social media [where] probably the only one whereas for the news app, you have multiple players in the market, they're only from different portals, but from (inaudible) analytical players. So it's much more crowded, much more competitive, okay. And in terms of the revenue target, I cannot really comment on that, because I mean it's a non-public company, we don't know that where the number comes from, okay. And in terms of synergies between SINA news app and our Weibo social app, I think we talked previously and SINA, Weibo is very important for SINA news app to generate traffic and user base and more importantly, to obtain KOL and multimedia content, show some content for our news app. So that are the synergies in between and we're utilizing these synergies, actually helping to actually grow our user base for our news app. Hope that answered your question.

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Eddie Leung, BofA Merrill Lynch, Research Division - MD in Equity Research and Analyst [4]

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Just a quick follow-up. Remember, Charles, you mentioned that for the portal pieces, you guys are trying to penetrate into the SME segment as well. Could you give us an update of the progress in terms of the number of the titles or revenues, anything thing you can share will be great. Thanks.

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Yi Zhang, SINA Corporation - CFO [5]

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Hey Eddie, this is Bonnie. So to answer your question, SME revenue as a percentage of the total revenue is about 50% this quarter. That is quite consistent for the last few quarters. However, the mobile revenue as a percentage of SME revenue is much higher compared to key accounts. We continue to -- at this stage, we'll continue to expand our customer base for our SMEs, but this is the one area we're talking about very significant competition among different news apps as well as [BAT] players. So we do have dedicated distribution, SME distribution team working on that, but our priority at this point really is looking for new customers and also to increase the retention rate of further existing customers and the same time increase their spending per customer base.

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Operator [6]

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Our next question comes from Fan Liu, Goldman Sachs.

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Fan Liu, Goldman Sachs Group Inc., Research Division - Equity Analyst [7]

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Would you mind showing us what's revenue generated by online payments and also online macro finance this quarter? I just want to see the breakdown between the 2. And I would you mind to share with us any color on the business update for your $500 million funds, fintech funds? Thank you.

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Yi Zhang, SINA Corporation - CFO [8]

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Hey Fan, this is Bonnie. I'm going to address your first question. The online payments for -- the revenue attributable to online payment is about $16.5 million, and for the landing service firm, for this quarter contributed about $12.8 million revenues for us. And your second question, it's relating to the $500 million, do you mind if you...

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Guowei Chao, SINA Corporation - Chairman of the Board & CEO [9]

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Yes, I think at this stage of the investment trend and of course we spent some money investing the micro loan payment service -- micro loan service in the third quarter and we also plan to spend quite a bit of cash in terms of investing in some traditional bank, new bank or financial institutions, which could license and potentially will be as we've discussed before, will be the top priority partners in terms of working on the Internet banking, Internet insurance, these type of business. So that's the plan and so we are going to probably accelerate the spending in the next 12 months.

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Operator [10]

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Our next question comes from Chi Tsang from HSBC.

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Chi Tsang, HSBC, Research Division - Head of Internet Research of Asia Pacific [11]

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I'm wondering if you could just explain a little bit more on your micro loan services. Maybe you can give us a sense of the size and scope of this business and I think you mentioned that you consolidated (inaudible) has there any sort of impact on the balance sheet aside from sort of revenue contribution that you've mentioned? Thank you.

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Yi Zhang, SINA Corporation - CFO [12]

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Hi Chi, this is Bonnie. Let me start with your second question, yes, right now we are -- the company we have acquired it's an online landing surface company, it does not -- it actually provides -- facilitate loan match in between the lender and the user on Weibo's platform. So it provides services related to like a credit assessment, background check, data mining, data analytical, these type of service. At the same time, they are the ones, sort of provide a partial guarantee for the payment. The funds actually is distributed or serviced by another what we call micro loan company that holds a license. So to answer your question, the loan balance actually -- loan itself is serviced by a third-party as a result that is part of our balance sheet. So we only recorded the service revenue related -- the service revenue element in this landing prospects. So that's your -- I think the first part and your second question really relate to the scale, I think given the fact that we are only a service company, we've recorded a service revenue, which I already just explained in the previous question that we've recorded about $12.8 million this quarter, so the scale of the loan really is irrelevant issue for us.

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Operator [13]

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Our next question comes from Tian Hou from T.H. Capital.

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Tianxiao Hou, T.H. Capital, LLC - Founder, CEO, & Senior Analyst [14]

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I have a question related to your Internet segment. So we saw a lots of Internet finance company IPOs, either in Hong Kong or in U.S., if you look at them, you can see (inaudible) insurance company, Internet insurance, and GBN is micro loan and (inaudible) P2P lending, what is SINA's position in Internet finance? That's my question.

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Guowei Chao, SINA Corporation - Chairman of the Board & CEO [15]

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Well, I think we talked about that before and it's a big category for us. And basically, if we can, we'd like to get into most of categories, majority of these categories you just mentioned in terms of Internet financing and the loan business and also the Internet banking and also Internet insurance. The reason being, and of the longer period, I think the competitiveness of an Internet financing company will be depending on, and as I mentioned, would depend on scale with problems with user and traffic, would dependent on how much data that has to provide accurate personalized service and a more accurate credit rating for any individual users and also the capital, I mean scale the capital that we have and so eventually you see a lot of players in this market (inaudible) a lot of new IPOs, it's a very big market with a lot of potential, on the other hand, there's always a risk when too many people playing in this market, right and as I said the strong, significant regulatory risk here, I mean in getting in this market, because there's so many players with a lot of prospects. That's probably not a very good sign for the market, but I think that we do expect some correction or there maybe challenges in near-term in the regulatory environment and new policies introduced by the government, which will help to reduce the scale on margin of such business. But over the longer- term, as long as you have these the advantages I mentioned in terms of traffic data and capital, what you mean through will prevail, because, I mean, there is a big demand for these services in China for sure, because there is a large number of people are non-serviced, by current financial institutions and Internet makes it possible for services these individuals -- who are not traditionally the customers of our traditional financial institution. And so these are the kind of areas, I mean, the angles we look at in this particular industry. And although we are making some very good progress, we're very cautious, very conservative in the sense our financials and also will be very conservative and cautious in terms of near-term expectation. But we are very hopeful, I expect to (inaudible) of the long-term perspective of this business.

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Operator [16]

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Thank you. I'll hand the call back to Zhang Sandra. Please go ahead.

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Sandra Zhang, [17]

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Thank you all for joining our conference call today. We'll see you next quarter.

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Operator [18]

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Thank you. Ladies and gentlemen, that does conclude our conference call today. Thank you for participating. You may all disconnect.