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Edited Transcript of WB earnings conference call or presentation 23-May-19 11:00am GMT

Q1 2019 Weibo Corp Earnings Call

Beijing May 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Weibo Corp earnings conference call or presentation Thursday, May 23, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Fei Cao

Weibo Corporation - CFO & VP of Finance

* Gaofei Wang

Weibo Corporation - CEO

* Yunyun Zhang

Sina Corporation & Weibo Corporation - IR Head

* Bonnie Zhang

Sina Corporation - CFO

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Conference Call Participants

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* Binbin Ding

JP Morgan Chase & Co, Research Division - Analyst

* Freya Liu

HSBC, Research Division - Associate of Internet Research

* Xiaoguang Zhao

Barclays Bank PLC, Research Division - VP

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. And welcome to Weibo reports first quarter 2019 unaudited financial results conference call. (Operator Instructions) I must advise you that this conference is being recorded today, Thursday, 23rd of May 2019.

I would like to hand the conference over to your first speaker today, Ms. Sandra Zhang. Thank you. Please go ahead.

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Yunyun Zhang, Sina Corporation & Weibo Corporation - IR Head [2]

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Thank you, operator. Welcome to Weibo's First Quarter 2019 Earnings Conference Call. Joining me today are Chairman of the Board, Charles Chao; our CEO, Gaofei Wang; our Sina Group CFO, Bonnie Zhang; and our VP Finance and Interim CFO, Fei Cao.

This conference call is also being broadcast on the Internet and is available through Weibo's IR website.

Before management remarks, I would like to read to 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 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 would like to remind you that our discussion today include certain non-GAAP measures, which include stock-based compensation and certain other expenses. We used non-GAAP financial measures to gain a better understanding of Weibo's comparative operating results and the future prospects.

Our non-GAAP financial excludes certain expenses, gains and losses and other items that are now expected to result in future cash payments or that are nonrecurring in nature or 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'll open the lines for a brief Q&A session. With that, I would like to turn the call over to our CEO, Gaofei Wang.

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Gaofei Wang, Weibo Corporation - CEO [3]

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Thank you. Hello, everyone, and welcome to Weibo's First Quarter 2019 Earnings Conference Call.

On today's call, I'll share with you highlights in Weibo's user growth, product and monetization as well as progress we've made on key initiatives in 2019.

Let me start with our first quarter financial results. We continue to see solid growth in revenues and user base this quarter. Our total revenues reached $399.2 million, up 14% year-over-year or 21% on a constant currency basis. Advertising and marketing revenues reached $341.1 million, up 13% year-over-year or 20% on a constant currency basis, with 85% of our ad revenues coming from mobile. Non-GAAP net income during the first quarter was $128.5 million, up 14% year-over-year.

On the user front, in March 2019, Weibo's MAUs reached 465 million, up 13% year-over-year, representing a net addition of 54 million users on annual basis. Average DAUs reached 203 million, up 10% year-over-year. 94% of Weibo's MAUs came from mobile.

During the Chinese New Year, we delivered solid user growth and improved user engagement through innovative red envelope marketing and holiday specific branding campaigns. On the monetization front, KA business continued its [strong] (added by company after the call) momentum, thanks to sales team's efforts and our ongoing ad product optimization and innovation. SME business also exhibited some positive signs with progress made in customer structure revamp and ad product optimization.

In discussing our operational updates for the first quarter, I will cover the areas of users, content and customers of Weibo.

Let's start from user growth and user engagement. We have 2 areas of focus this year.

First, our user growth. We will strived to ramp up our user scale in the third- and fourth-tier cities further user product optimization and channel investments.

From the channel perspective, we continued to partner with major domestic smartphone manufacturers on user acquisition. From the product perspective, we'll continue to enhance the location-based content consumption and creation experience to meet the specific content and social interaction demands of low-tier city users.

In 2019, we'll further drive user engagement and time spent growth by boosting content consumption and social interaction of lower tier city users, underpinned by our step-up effort in creating location-based social and content consumption context. We will further penetrate into lower-tier cities, leveraging our core strengths in social attributes and trends discovery, coupled with our effective channel investments.

Second, on user engagement. Our emphasis this year is to increase frequency of usage by each Weibo user. To achieve this purpose, our first area of focus is to drive content generation and user engagement with strengthening our cooperation with partner in public sector, including media outlets, TV stations and sports events and also launching brand campaigns that integrate vertical resources and feature participation of top content creators combined with our effort to diverse user interactive functionalities.

For example, during the Chinese New Year this year, we focused on aggregation of video content and innovation of online interactive activities to enhance user engagement, leveraging our collaboration with CCTV's Chinese New Year Gala. As a result, we are encouraged to see higher usage of Weibo in such context, with feeds posted surpassing 100 million, facilitating over 300 million social interactions and over 5 billion short video views. These 3 measures all growing at double-digit percentage year-over-year. We also organized the #ChineseNewYear photography contest# in concert with CCTV News, encouraging users to capture moments in their life during the spring festival, in the forms of pictures and videos. During the 20-days contest, over 10 million related photos and video contents were generated on Weibo, with nearly 100 quality photographic works selected to be shown on CCTV programs. The topic ["CNY Photographic contest"] (added by company after the call) was viewed over 10 billion times on Weibo during that period.

Our second area of focus is further enhance the social attributes of our user products and improve social interactions among users. For instance, we have established a social interaction arena designated for fans, based on Super Topic Communities and Fans Group function in the past 2 years. User penetration and user engagement generated through these 2 functions grew nicely year-over-year, with user interaction within Super Topic Community, the number of daily average users who access fans Group and their daily average user all delivering double-digit growth year-over-year in March 2019.

We believe our step-up investment in the social attribute of our user products will play a critical role in growing our user base, improving user engagement and particularly enhancing Weibo users content consumption frequency. Specifically, content consumption information feeds grew very robustly in 2019. Our emphasis on social attributes of our user product could enhance the competitive advantage of our products amid intense competition in the industry, lay a solid foundation for further user base expansion and elevate monetization efficiency, underpinned by user frequency improvement on the platform.

Next on content. Let's start with content consumption. For the relationship-based feeds, we further enhanced content distribution capability based on social relationships, leading to higher efficiency in social content consumption and improved the user engagement.

In first quarter, the average refreshments per user for the relationship-based feeds further increased year-over-year. For the interest-based feeds, we continue to optimize algorithm backing the feeds. On the one hand, the refined algorithm enhanced exposure of contents from Hot Search, Trend and Topic in interest-based feeds, leveraging stronger synergies within these products. On the other hand, we enhanced our data mining and distribution capabilities of contents from mid-tier and long-tail verticals in terms of traffic viewership, which led to over 50% year-over-year growth of content exposures from these verticals in interest-based feeds. Subsequently, in March, both user scale and monthly refreshment of interest-based feeds continue to grow from the same period last year.

From the content generation perspective, as of March 2019, Weibo's partnership with MCN have exceeded 2,800. Weibo will still hold distinct leaderships in area of top content creators, with number of top content creators, their posts and views generated in March 2019 all maintaining double-digit growth year-over-year.

Regarding video content generation, in the first quarter, daily video posts by top content creator increased over 50% year-over-year, primarily driven by PGC video content. The robust growth of PGC video content generation was mainly attributable to the below 2 factors:

First, benefiting from the rich expression of short videos, we saw an increasing adoption of video format among top content creators. For example, VLOG, which caught on last year, offered content creator a better experience to express their personalities to capture daily live moments in video format. Compared with photo and text, video format offers content creator a more vivid and immersive experience to interact with fans. In March, the number of daily posts on VLOG grew over 50% on a sequential basis.

Second, Weibo Video Community enabled us to derive massive targeted user traffic to high-quality video content creators. In the first quarter, we proactively invited content creators to generate quality video content or singled out quality video contributions, and then offered targeted traffic support to these video contents in interest-based feeds. We saw meaningful growth in average video views of those videos being selected.

Over the next 2 quarters, we will further strengthen traffic support mechanism with selective quality video content from 2 aspects. First, we'll distribute these quality video contents through multiple feeds to ensure and enhance their content exposure. Second, we will more precisely distribute those video contents to target users with different interests to various vertical channels within the Video Communities, which further promote this content exposure while solidify the new scene for video content consumption on Weibo.

We are encouraged to see that the average daily time spent per user for those who access the Video Community tab more than doubled compared with that for those who didn't. This year, we'll establish an operating mechanism for video content generators through further development of Video Community, which will fortify Weibo's competitive edge in the PGC content area.

This year, we'll continue to execute against our vertical content strategies with a special focus on building out ecosystem around top verticals and empowering top KOLs to uplift their fans engagement, and thus better monetize within our ecosystem. Through years of investments, Weibo has well established the monetization ecosystem for content creators to monetize through advertising, e-commerce, live streaming and paid subscription, et cetera. This year, we'll facilitate more top content creators to benefit from the ecosystem, further reinforcing the platform ecosystem around the content, influence and monetization. Moreover, for mid-tier and long-tail verticals, we'll focus on expanding the scale of top content creators and uplifting their influence. Take aviation and collection verticals as examples. In the first quarter, the 2 verticals ranked among top 5 out of the 60 verticals by year-over-year growth in the scale of top content creators and monthly views. In particular, the collection vertical was the most rapid growing vertical with monthly viewership more than doubled year-over-year.

Lastly, on monetization, KA revenue continue to grow robustly in the first quarter, increasing 31% year-over-year or 39% on a constant currency basis. We attributed the strong growth to multiple reasons. First, in the past several years, we benefited from the gradual ad budget shift from offline to online for brand advertisers. Second, Weibo capitalized on the trend that an increasing number of brand customers desire to associate their campaigns with a blockbuster IP and also accurately measure their campaign results through data analytics afterwards. Leveraging IP partnerships with TV stations and celebrities, etc., as well as in the Uni-Marketing Program with Alibaba, Weibo continuously elevated its capability to satisfy customers various marketing demands. Third, we pioneered the innovation in social marketing products and ad formats in the digital ad industry and showcased desired ROI to customers, with a series of successful cases. For instance, we offer integrated social marketing solutions for customers to uplift their marketing performance by associating Weibo's ad inventory with our rich IP content resources, such as celebrities, variety shows, TV programs and films.

Take the marketing campaign of Yili, the national famous dairy group, as an example, where Weibo worked closely with the TV program Singer 2019 to maximize the brand and marketing effect Yili. During the campaign, for the first time, fans interaction on Weibo greatly impacted the competition rules of the TV program, effectively transforming the contestants and their fans into Yili's endorsers. Weibo also proactively invited over 30 enrolled celebrities and over 100 participating singers to generate around 500 posts, which brought in 1.6 billion views, 20 million interactions, significantly uplifting Yili's brand exposure. In total, views on topic discussion around the Singer 2019 program exceeded 20 billion. According to a third-party research, campaign drove up users' brand preference on Yili's promoted products by 41% and desire for consumption by 25%.

SME business, on the other hand, will continue to face intense competition across the feed advertising market. First, top SME customer ad spend became more scattered across platform following a drastic surge of ad inventory released into the market. The oversupply of ad inventory also caused pricing pressure in the bidding process across the industry. And meanwhile, starting from the third quarter and fourth quarter of 2018, macro uncertainties and tightening financing environment also weighed on the growth of the entire SME ad market.

In response to these challenges, we took decisive steps to form a separate sales team to directly serve our top SME customers, aiming to improve their ad performance. We also enhanced our capability to acquire mid-tier and long-tail customers through adjustments to our sales agency structure. Overall, our SME business reach a trough in March and April, and started to recover in May with double-digit sequential growth in daily ad spend. As these above initiatives gradually play out, we estimate that our SME ad business will covered in a more meaningful way in the latter half of 2019.

On the ad product front, we had made plenty of optimization as well. For example, we launched an automatically recommended targeted data package on Super FST system to meet customers' industry-specific targeting requirements. We saw double-digit growth in ECPM and ad engagement for the same customer upon the adoption of such package. We have also refined functionalities of vertical video ad products in terms of traffic direction and social interaction, leading to double click-through rate and higher sell-through rate as well as customers' purchase intention.

Finally, on gaming sector, despite a resumption of gaming license approval and modest recovery of ad spend in the second quarter, our view is that it will still take 1 or 2 more quarters for a market rebound. In view of the current situation, we have, nevertheless, stepped up our operating efforts to engage more users in the gaming sector, hoping to lay a good foundation for the monetization in the future.

With that, let me turn the call over to Fei Cao for financial update.

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Fei Cao, Weibo Corporation - CFO & VP of Finance [4]

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Thank you, Gaofei, and hello, everyone. Welcome to Weibo's First Quarter 2019 Earnings Conference Call.

Before the detailed financial review, I would like to remind you that my prepared remarks will focus on non-GAAP results and compared results on a year-over-year basis, unless otherwise noted.

Now let me walk you through our financial highlights for first quarter 2019.

Weibo's first quarter 2019 net revenue was $399.2 million, up 14% or 21% on a constant currency basis. Operating income reached $136.8 million, representing operating margin of 34%.

Net income attributable to Weibo was $128.5 million, representing a net margin of 32%. Diluted EPS was $0.56 compared to $0.50 last year.

Let me give you more color on our first quarter 2019 revenue growth. Advertising and marketing revenues for the first quarter 2019 reached $341.1 million, up 13% or 20% on a constant currency basis.

Mobile ad revenue was $288.4 million, up 19% or 26% on a constant currency basis, representing 85% of total ad revenue, up from 80% last year.

Let's start with KA. In the first quarter, our key ad revenues reached $168.8 million, up 31% or 39% on a constant currency basis. Despite macroeconomic condition and a highly competitive digital advertising market in China, our KA sector continued a strong momentum and demonstrated the resilience derived from Weibo's unique value proposition to brand advertisers as an indispensable platform for mobile and social marketing demands. Among various brand industries that Weibo covered, we're particularly impressed with strong performance of FMCG sector, as Weibo consistently adjust value for these customers to target broader audience to enhance brand awareness and deliver better ad performance through our differentiated social marketing tools and the powerful KOLs' influence.

Turning to SME, in the first quarter, Weibo's ad revenue reached $155.7 million, up 5% or 12% on a constant currency basis. We are pleased to see a solid growth from a few sectors such as e-commerce, mainly attributable to team's efforts to optimize targeting capability and improve ROI of ad campaigns for these customers. Despite of these positive moves, we continued to face challenges from O2O segment, especially high-ARPU categories, amid macro uncertainties as well as from attrition in the performance ad market.

Ad revenue from Alibaba was $16.6 million, a decrease of 37% or 33% on a constant currency basis. This decrease is partially resulted from a tougher comparable base in the same period last year where Alibaba actively invested in marketing campaigns, which were one-off for fourth quarter 2018, such as its sponsorship for 2018 Chinese Lunar Year Gala and the Winter Olympic Games. On top of this, as we mentioned in the third quarter, the ad spend from Alibaba highly correlated to its marketing strategy, which may change time from time.

Value-Added Service revenues was $58 million in the first quarter, up 24% or 31% on a constant currency basis. This growth was primarily driven by increased revenue contribution from live streaming business.

Turning to costs and expenses. Total cost and expenses for first quarter was $262.4 million, up 14%. The increase in cost and expenses was primarily due to the incremental cost of revenue share we incurred by that live streaming business and increase in personnel-related costs and expenses. Sales and marketing expenses remained flat year-over-year, and the sales and the marketing expenses as percentage of revenue decreased 4 percentage points from the same period last year, reflecting further operating efficiency, mainly achieved through more disciplined channel investments.

Operating income in the first quarter was $136.8 million, representing operating margin of 34% at similar level compared with last year.

Turning to income tax. Under GAAP measure, income tax expense for first quarter was $21.1 million, compared to $18.3 million last year.

Net income attributable to Weibo in the first quarter increased 14% to $128.5 million, representing net margin of 32%, similar as last year.

Turning to our balance sheet and the cash flow items. As of March 31, 2019, Weibo's cash, cash equivalents and short-term investments totaled $1.49 billion. In the first quarter, cash provided by operating activities was $80.8 million. Capital expenditures totaled $7.7 million, and depreciation and amortization expenses amounted to $6.2 million.

Now let me turn to our financial outlook. We anticipate our second quarter of 2019 revenue to be in the range of $427 million and $437 million, or an increase of 7% to 10% year-over-year on a constant currency basis. This assumes a foreign exchange rate of RMB 6.90 to USD 1.00. This forecast reflects Weibo's current and preliminary view and is subject to change.

With that, let me now turn the call over to the operator for Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Binbin Ding from JPMorgan.

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Binbin Ding, JP Morgan Chase & Co, Research Division - Analyst [2]

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My question is about SME advertising revenue. As you and many other Internet companies indicated in their 1Q earnings report, condition in ad inventory supply is one major reason leading to the weakness of the performance ad growth. I'm just wondering if management can share some color regarding your current views in terms of the competition intensity on Weibo's SME advertising versus last year. And what kind of measures are you going to take in response to this competition? Lastly, how shall we think about the long-term growth rate of SME advertising revenue, say, in 2 to 3 years?

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Gaofei Wang, Weibo Corporation - CEO [3]

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Based on our ad industry tracking and other peer operating results, virtually, we see the overall ad market growth is significantly slowing down, or even a comeback in the first half of 2019. This was mainly caused by the macro and the regulation headwinds as well as the competition on the inventory supply side.

For us, we saw sluggish ad growth from some of our top SME customers since the latter part of 2018, particularly in those industries that hit hard by macro and the regulation factors.

On top of that, pricing pressure across the industry was caused by the oversupply of ad inventory in the market. The growth of our SME business was short of expectations.

Also, I think, just for particular industry on the gaming part, the halt of the licensing approval for gaming happened in Q2 2018, which means gaming customers still contributed very meaningful revenue to us in the first quarter 2018. So the tough comp was another reason for the deceleration in our SME business.

So coming back to our results. In response to the external environment analytics competition, we have been focusing on 3 areas since fourth quarter 2018. And we are start to see some initial progress. One is we introduced the social marketing playbook to SME as well as to the KOL marketing to highlight our unique value proposition in the market.

Number two, we beefed up our efforts in optimizing our advertising algorithm so that we could improve our targeting and ad conversion and ultimately customer ROI. This is very essential for both our customer acquisition and retention.

To give you some color, our e-commerce customer, particularly Taobao merchant, ramped up their ad spending platform in Q1 2019, mainly to cause a better targeting on our platform. As are indicated in the prepared remarks, we have introduced the target data package to them.

The other thing is we initiated a series of adjustments to better line up our agency or distribution channel structure and the incentive mechanism. To encourage them to develop new industry and customers, we started to provide direct service to our top customers. To give you an update, since 2019 Q1, we saw higher percentage of revenue coming from new customers as their spending also continued to increase in Q2. But I think that will take a while and to see meaningful growth for those new customers. So this is quite typical as new customers generally have low ARPA in the initial stage. So for us, in the coming quarters, our next step is to further work on our service, and the targeting gradually to drive up their spending. Just trying to give you a more updated information. If we revisit the old monthly figures, we believe the revenue growth for SME costs is the bottom for the month of February, March and April, and relative meaningful rebound in May, even though we continue to experiencing price decline in our ad service.

Our daily ad spend has grown over 20% on a Q-over-Q basis. Having said that, I think we still need more time to fully execute against these strategies to drive a more considerable growth.

Currently, our take is that we will probably take 2 more quarters for SME vendors to return to a healthy growth rate with our focus much more on the new customers and to grow ARPA versus the CPM itself. We believe the customer structure change and product optimization are essential for our platform in the longer run.

For the gaming sector, which, I think, a lot of people are asking questions about when will we see initial recovery. So ad spend from gaming sector was still at relatively historical low levels in Q1 2019. We are encouraged to see some resumption of gaming license approval and a gradual turnaround in the industry. And our ad from the gaming sectors will be better in Q2 as well. However, we believe that in the second half, our gaming revenue will be returned to a meaningful percentage of first half 2018, so that will still take a little bit more time to get there.

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Binbin Ding, JP Morgan Chase & Co, Research Division - Analyst [4]

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Thank you. May I have a quick follow-up on the expansion into the new customer base in new categories? So are there any specific industries are we going to focus in the next few quarters? And will these new initiatives bring some support to your revenue growth in 2019?

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Gaofei Wang, Weibo Corporation - CEO [5]

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I think in terms of the segments for new customers, it continues to be relatively broad. So we're talking about auto, we're talking about e-commerce, even the gaming sector. Historically, our key SME customers, I mean, meaning those top SME customers, takes the relative large percentage of our total SME revenue. However, we are slowly making adjustments with this composition. Now we are giving priority to new customers for certain inventories. So for us, on scale and the market share being the key focus at this point.

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Operator [6]

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Your next question comes from the line of Binnie Wong from HSBC.

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Freya Liu, HSBC, Research Division - Associate of Internet Research [7]

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This is Freya on behalf of Binnie Wong. My question is regarding to the user growth strategy. So the company mentioned that we are going to increase the online video sector exposure. So I was wondering like what is investment we're going to make in this sector and how we expect our users to grow in the rest of the year?

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Gaofei Wang, Weibo Corporation - CEO [8]

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Even though I have mentioned that our user engagement and time spend growth has been major benefiting from our new video tab. But for the scales growth on the platform, it's more coming from our efforts in enhancing the social attributes on the product.

I'll probably go back to look at 2018. If you are familiar with our results, particularly our increased investments on user growth in 2018 through the channels. We have achieved a relative solid user scale in 2018 by means of our increased investments. However, our total user scale expansion lagged behind the growth of user engagement, especially the growth of the users' social interaction as our platform core competence lies on our users' social relations and interaction. Our data tracking through the user behavior of new user versus the old user or royalty users has proved that. As a result, in the first half of 2019, we will put more emphasis on promoting our user engagement and the frequency of usage by each user through enhancing their user social interaction. Along with the increase of user frequency, we believe our monetization scale and efficiency could also grow.

If you look at our DAU versus MAU percentages, you might note that such percent in the number has moved to a higher percentage level sequentially. And from operation KPI perspective, the user content consumption frequency and the volume of their content consumption will be our key focus or the key KPI for right now.

From user growth perspective, there's still a large room for us to further penetrate into lower-tier city. However, as I indicated, the first half of 2019, we will be focusing to increase the user engagement level of those customers we acquired in last year. So we tend to convert those new users from pure content consumption users to users that will be engaging in social interaction on the platform. In terms to whether we will or we'll not adjust our user growth strategy, that depends on how the progress we're making in terms of user engagement growth performance on the operation. So there's possibility we will adjust our channel marketing strategy, particular in the lower-tier city, in the second half as we judge on the market condition as well as to develop our current user base.

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Operator [9]

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Your next question comes from the line of Gregory Zhao from Barclays.

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Xiaoguang Zhao, Barclays Bank PLC, Research Division - VP [10]

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Two quick questions. First, can you share any colors of the user activities of your new version Weibo app? And how does the new version can help improve your user engagement?

And secondly, we see KA advertising revenue strong growth momentum in Q1. While consistent of some of your other peer companies, your media advertising have some very substantial differentiation. We want to understand your bargaining power in your key advertising and what's your current price trend and the contract especially the contracts signed after the Chinese New Year compared to last year?

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Gaofei Wang, Weibo Corporation - CEO [11]

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I think to comment on the new version, particularly on the new video community, I think, as I indicated in the prepared remarks, that has helped in the time spent of our users in a meaningful way. For us, we think the functionality of our video community is to attract KOL in the video creation area so that the high-quality PGC video creators would have be able to have a specific place to land their product or their content. So effectively, we will have the ability to track users in the video community as well.

So we have seen significant growth from video KOL content creation in the first quarter. We are in the process to optimize their creation and their content in an easier way for users to consume. There's updated version likely to come out in the month of June. By then, we will push much harder for the new users or user engagement at the video community tab.

In terms for the lower-tier-city users, we are actually in the progress of generating a new feed to specifically targeting these users. What we have noted that users from third-, fourth-tier cities, they are not typical user to consume content related to celebrities or hot topics or hot trend on Weibo. They have tendency to consume much more UGC content compared to people from first- or second-tier cities. With that, our feed has been revised that you provide a more UGC content. And we have started a pilot run in selected locations. The initial test has indicated with updated content with focusing on UGC, the user retention rate in third-, fourth-tier cities has doubled for those contents offered for the first- and second-tier-city people.

So that's on the question on the user part.

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Bonnie Zhang, Sina Corporation - CFO [12]

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From the key accounts, I think, in general, ad advertising is very sensitive to economic cycles. So with the current macro situation, we are tempted to take a much more cautious view on the overall growth for ad market.

So despite the strong key accounts growth in first quarter 2019, we are beginning to see some signs of [macro] (corrected by company after the call) headwinds weighing on the spending from several factors. I think those ones are -- if I break into different industries, we see FMCG being very resilient, particularly in the dairy products for beverage customers. For automobile, on the contract was very vulnerable in a challenging market. I think that while responded to the declines in the auto sales in the general market.

In terms our frame contract execution, it was better than we initially expected. We see meaningful growth in terms of the overall frame contracts signed in the first and even going to the second quarter. For us, I think the key accounts continue to be a very important component for our revenue growth. And I think in a market like this, other than the traditional marketing dollar where we try to take a cut on that, we also are tapped into key accounts in those areas that tap into brand customers' performance driven by ad budget. So these were typical, we would say, brand e-commerce budget.

This is the one area, particularly with our cooperation with Alibaba under the Uni Marketing program. Because the data existing between these platforms, our ability to promote their products and achieve conversion results remain as very competitive in the marketplace.

So that's on the key accounts. I think, Greg, you did ask a question on the price part for the key accounts. I think so far we see a relative stable pricing for key accounts, so there's not so much of a change of our price mechanism at this point for this particular segment.

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Operator [13]

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I would like to hand the conference back to these presenters. Please continue.

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Yunyun Zhang, Sina Corporation & Weibo Corporation - IR Head [14]

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Thanks, operator. This concludes our conference call today. Thank you for joining us. See you next quarter.

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Operator [15]

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