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Edited Transcript of WB earnings conference call or presentation 5-Mar-19 11:00am GMT

Q4 2018 Weibo Corp Earnings Call

Beijing Mar 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Weibo Corp earnings conference call or presentation Tuesday, March 5, 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

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Conference Call Participants

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* Binbin Ding

JP Morgan Chase & Co, Research Division - Analyst

* Thomas Chong

Crédit Suisse AG, Research Division - Regional Head of Internet

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the Weibo Report Fourth Quarter Financial Results Conference Call. (Operator Instructions) I must advise you that today's conference is being recorded on the 5th of March 2019. I'll now like to hand the conference over to your first speaker today, Ms. Sandra Zhang the Investor Relations Manager. Thank you. Please go ahead.

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Yunyun Zhang, [2]

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Thanks, operator. Welcome to Weibo's Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. Joining me today are our Chairman of the Board, Charles Chao; our CEO, Gaofei Wang; our SINA CFO, Bonnie Zhang; and our VP Finance and Interim CFO, Fei Cao.

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

Before the management remarks, I'd 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 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 and for the applicable law.

Additionally, I'd like to remind you that our discussion today include certain non-GAAP items -- certain non-GAAP measures, which include stock-based compensation and certain other items. We used non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future process.

Our non-GAAP financial excludes certain expenses, gains and losses and other items that are not expected to result in future cash payment or 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.

Though we mentioned prepared remarks, we'll open the line 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 Fourth Quarter 2018 Earnings Conference Call.

On today's call, I'll share with you the highlights of Weibo's user growth, product and monetization, review the progress that we have made in 2018 and lay out the strategies for 2019.

Let me start with our fourth quarter financial results. We continue to see solid growth in revenues and user base this quarter. Our total revenue reached $481.9 million, up 28% year-over-year, and advertising and marketing revenues reached [$471 million] (corrected by company after the call), up 25% year-over-year with 84% of our ad revenues coming from mobile. Non-GAAP net income during the fourth quarter was $183.6 million, up 26% year-over-year, representing a non-GAAP net margin of 38%.

For full year 2018, Weibo total revenue reached $1.72 billion, up 49% year-over-year. Advertising and marketing revenues were $1.5 billion, up 50% year-over-year. Non-GAAP net income reached $624.2 million, up 54% year-over-year, representing a non-GAAP net margin of 36%.

The sustainable growth of Weibo's revenue and profits in 2018 were mainly derived from the following 3 areas. First, the continued user base expansion has further solidified Weibo's indispensable position in China's mobile advertising market. Second, Weibo's monetization ecosystem continue to evolve to a more sophisticated level, in particular KOL marketing, which leveraged KOL's influence in branding and the performance out of campaigns as it enhanced our monetization efficiency and differentiated us from rivals in a highly competitive market. Lastly, through years of investment in a self-reinforced accounting change monetization ecosystem, we were nurtured and empowered many content generators to grow with the platform and eventually turn them into the build of our ad customers.

The native demand from these content creators laid good foundation for Weibo's growth and to the current economic cycle. The multiple roles served by our content creators is an essential component to our ecosystem and will benefit the platform even in the longer term.

On the user front, in December 2018, Weibo's MAU reached 462 million, up 18% year-over-year with a net addition of 70 million users during the year. Average day use reached 200 million, up 16% year-over-year. 93% of Weibo's MAU coming from mobile.

Weibo's ecosystem has been viewed upon itself reinforcing cycles of users, content creators and customers. To elaborate, Weibo's massive user base empowers content creators to accumulate social assets based on which content creator enhance their influence and monetize eventually. To accumulate such social assets, content creators have to generate premium content for user to consume, discuss and share, which drives user engagement growth in turn.

Completing the cycle, customer could reach out to user efficiently through the powerful distribution network, connected by social relationship, particular with participation from content creators. This aforementioned self-reinforcing cycle has continuously driven the platform expansion and strengthened our competitive edge. Therefore, I'd like to share our progress in areas of users, content and the customers for the fourth quarter 2018.

Let me start with user growth engagement. Leveraging stronger network effect and enhance social media functions, Weibo has been working closely with domestic smartphone manufacturers, TV networks and top applications, benefiting from the close collaboration with these partners in content and marketing solutions. Weibo maintained its competitive edge in user acquisition costs amid a market filled with fierce competition in traffic acquisition.

As for our use of products, we continue to optimize the user experience and enhance user engagement. Let me provide some color on our feed product first.

On our relationship-based feed, we strengthened social interactions and content distribution through the continued optimization of our algorithm this year. This enhanced social content consumption efficiency and improved the user retention, with the average refreshment of relationship-based feed per user increasing by double-digit year-over-year in the fourth quarter. On our interest-based fees, we were confronted with challenges and escalating our competition due to the surge of similar product in the market. Beginning in the third quarter, we took step to reinforce our competitive edge by emphasizing the strategic focus on hot search and hot topics as well integration of these 2 functions.

By featuring trend discovery and facilitating viral discussions, the hot search and topic products not only attract massive level of traffic from general users but also incentivized top content creators to generate and improve the professional content, which further elevated our competitive edge among feed products. As a result, in the fourth quarter, the traffic of our hot search and topic products grew double-digit and triple-digit percentage, respectively, on a year-over-year basis.

In December, the number of topics with weekly views over 1 billion increased by triple digit QoQ, and the daily post of topics from our top content creators increased by double-digit quarter-over-quarter.

Moving on to multimedia products. We saw short videos gain traction over the past two years. Compared with other short video platforms, Weibo's core competence in videos still centers on our social media positioning, specifically by helping video content creators in vertical areas, use up their social relationship with users and uplift their influence.

Since the second half of 2018, Weibo has continued to enhance PGC video offerings on top of the existing advantages in traffic-centric areas, such as media and hot events. Specifically, we expanded content categories and lowered barriers for top content creators to engage the PGC video production, which resulted in further adoption of video products amount in Big Vs.

In addition, we strived to foster an increase sense of belonging for user when consuming video content by strengthening the connection and interaction between content creators and users.

In the fourth quarter, we also rolled out video community for a select user base. The average daily time spent of user, who entered the video community surpassed the average time spent of the rest users by 50%. T The daily PGC video posts from top content creators grew by triple digits year-over-year.

Heading into 2019, we'll continue to invest in the following 3 areas to grow our user base and engagement. First, we'll continue to constructively engage and collaborate smartphone manufacturers, TV network and top APPs, particularly in the content area, to improve the efficiency of user acquisition and enhance user engagement.

Second, we'll continue to optimize the algorithm behind the two feeds and beef up efforts in machine learning to improve feeds relevancy. We are also working to differentiating the positioning of the two fees and creating more synergies between them, especially for our trend, search and topic products. This will enable us to transform the enormous one-off traffic brought by the hot events and interest exploration to social network build-up, which bodes well for our long term competitive edge.

Third, we will continue to focus on advancing the adoption of video product among top content creators and enriching the series video program offering. Our goal is to reinforce our social media position to help content creators express their personality and empower them to accumulate fan base and facilitate interactions, which solidify our competitive edge in the market.

As for content creators, we have 3 consistent initiatives, namely: reinforcing fan's social attachment to content creators, expanding content verticals and empowering content creators to increase their monetization opportunities within our ecosystem. Through years of operational efforts, we have already established social network for top content creators, grounded by a general fans community, organized by core fans accounts and curated to super topics. Within these network, leaders in the fans community continues to generate quality content and sustain the popularity of the topics, inspiring general fans to discover, develop their interest and to continuously consume topics and content. For example, the top celebrities on our platform. There has been 13,000 super topic communities and 15,000 fans organization, covering 130 million users interested in this vertical. We are encouraged to see double-digit growth in active fan base and posts due to the aggregation of fans through super topic community, as well as double-digit growth in average post per user and interaction, once the celebrity follow their own different topics. By cultivating active participation from accounts at all levels, Weibo continues to shape the content ecosystem and solidify its leadership position in the celebrity vertical.

In the fourth quarter, the number of MCNs which we cooperated with has expanded to 2600. In December, the number of daily post by top content creators and monthly views grew double-digit, with 32 verticals surpassing 10 billion monthly views, an increase of 9 verticals from last year, such as travel, maternal and baby and automobile verticals, et cetera. We continue to see huge potential for most our verticals to further expand and evaluate to increase traffic contribution across the entire platform.

Specifically, Weibo can effectively gain user traffic through hot topics and discussion on breaking news and celebrities. However, to retain users, trends in social network and ultimately makes them an integral part of the platform, it's critical to enhance content generation and engagement from content creators and enrich and diversify the content ecosystem through verticalization.

Heading into 2019, we'll further invest in the following 3 areas to reinforce our content ecosystem. First, we'll further strengthen our social network with more verticals where we have advantages. Based on each verticals development status, we will help expand the scale of general fans, core fans accounts and top content creators. And we will help content creator convert more general fans into more engaged fans or eventually into monetizable fans. Second, we'll further expand our vertical into a broader range and improve the content generation and consumption of each vertical and enrich Weibo's content ecosystem. Third, we will continue to empower top content creators across more verticals with monetization opportunities, such as monetizing through e-commerce and live broadcasting models, leveraging Weibo's powerful social network effect, as we believe there's still ample room for content creators to grow and monetize at a greater scale in Weibo's ecosystem.

Lastly, on monetization front, we achieved solid growth in ad revenues in the fourth quarter with KA revenue growing 62% to $205.9 million and SME ad revenues grew 8% to $179.6 million on a year-over-year basis.

Our KA business continue to deliver robust growth in the fourth quarter and for the first time, surpass SME revenue contribution in the last the 3 years. We are encouraged to see both the number of KA customers and their ARPA hit record high. The robust growth was mainly driven by two factors. First, rent advertising in China gradually increased their marketing prices on social platform, as Internet penetrate deeply into the mainstream consumer groups. Weibo still has distinct competitive advantage in social advertising sector, leveraging continued user base expansion and KOL's unique value proposition. More notably, Weibo has been able to capture higher wallet share from these top advertisers' budget despite of a slowdown of growth in their overall ad budget in the recent years, as we tailored our marketing solutions to the strategic needs of these customers and leveraged our social marketing offerings.

Second, Weibo has been putting emphasis on the data analytic aspect of our social marketing products and the campaign performance in enhancing our ad offerings. For instance, through the cooperation with Alibaba in a Uni Marketing program, which will help advertisers better evaluate their sales conversion achieved on Tmall stores, associated with the fans accumulated on Weibo through advertising campaigns, which bridge the connection between advertisers and potential customers. . This enabled us to tap into KA customers' performance ad budget in addition to the branding ad dollars, which was one of the key drivers in ARPA improvement.

Specifically, in 2018, the total ad budget Weibo acquired from the top-100 KA customers grew double digit year-over-year. Particularly Estee Lauder, the globally renowned beauty and skin care brand, more than doubled their ad budget on Weibo and the number of marketing campaigns it conducted on Weibo surpassed 100.

Moving on to the SMEs. In the fourth quarter, our SME revenue grew 8% or 14% year-over-year in a constant-currency terms. On the one hand, regulation has impacted ad budget of customer in certain sectors. For instance, we have seen shortage ad revenues from online gaming sectors since the second quarter in 2018 and did not see turnaround in the second half of 2018. On the other side, the SME revenue growth rate was further compromised due to pricing pressure resulting from the inventory oversupply in the feed ad market.

In addition, we incentivized content creators with native demand by our operating resources, which might curtail their ad spending needs in the short term. But we believe investment in the self-reinforcing ecosystem will benefit our monetization in the long run.

In response to this, we took efficient steps to revamp our SME customer structures and shift our strategic focus in the latter half of 2018. For one thing, we invested more operating resources to refine our management on existing customers and acquire more of their ad budgets through our innovative social advertising products.

For another, we stepped to adjust our SME customer structure and devote more resources to expanding into untapped industries and exploring opportunities with customers with native advertising demand on our platform. Specifically, we have adapted our ad products and business reporting system to align with the new customer structure and improve the functionality of our customer development system.

For instance, despite the robust user growth from third tier and fourth tier cities, we saw ad spend growth from those high ARPU customer sectors, such as O2O customers in tourism and wedding sector, lag behind. Yet e-commerce customer, especially customer like Taobao merchants, ramp up their spending on our platform. This changing customer composition requires a structural change in our agency and regional agency system, which constitute the primary initiative for our SME market in 2019.

Heading into 2019, we'll continue to strengthen our monetization capability from the following 3 perspectives. First, we attempt to further reinforce our unique strategy position and capture higher ad wallet share in the market. Particularly, we will further invest in products and operating resources in KOLs marketing and data analysis to capture higher marketing dollar from KA customers. Second, adjusting customer structure of SME customer is our top priority as our user penetrating into more cities. We will tap into more industries in the SME sector and improve the sell-through rate to acquire higher ad budget. Third, we'll continue to improve our advertising algorithm. This improvement will boost ad conversion to our new ad formats and the fill rate of our new advertising inventories, which resulting in higher ad dollars. They will also further expand our ad marketing dimensions beyond the current level from user targeting to content targeting, to continue refining our ad system and enhancing our ad performance. Meanwhile, we will strengthen our WAX platform in terms of data and algorithm capabilities to enhance our efficiency in monetizing traffic across the platform.

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

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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 Fourth Quarter and Fiscal Year 2018 Earnings Call.

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

In addition, as we adopt to new revenue guidance since January 2018, we are ordered to provide investors with comparison under the same basis and they also indicate our current shared revenues for expand figures under the old revenue guidance, which excludes revenues or expenses related to barter transactions and add back value-added tax to the reported current period of financials.

Now let me walk you through our financial highlights for the fourth quarter and the fiscal year 2018. Weibo's fourth quarter 2018 ad revenues were $481.9 million, up 28%. Operating income was $186.4 million, representing an operating margin of 39%.

Net income attributable to Weibo was $183.6 million, representing a net margin of 38%. Diluted EPS was $0.80 compared to $0.64 last year.

For full year 2018, total revenues reached $1.72 billion, delivering an annual growth of 49%. Operating income was $662.2 million, up 45% and representing an operating margin of 39%.

Net income attributable to Weibo was $624.2 million, up 54%, representing a net margin of 36%, up from 35% last year.

Diluted EPS was $2.73 compared to $1.80 in 2017.

Let me give you more color on fourth quarter and the full year 2018 revenue growth.

Advertising and the marketing revenues for the fourth quarter 2018 reached $417 million, up 25% or 32% on a constant-currency basis. Mobile ad revenues were $350.1 million, up 33% or 40% on constant-currency basis, representing 84% of our total ad revenues, up from 79% last year.

Full year 2018 advertising and marketing revenues grew 50% to $1.5 billion with mobile ad revenues contributing 83% of total ad revenue, up from 76% in 2017. The continued momentum of our Weibo business business demonstrated the relative resilience derived from our unique value propositions to advertisers and wide industry exposure amid macro headwinds and regulation uncertainties.

Let's start with KA. In the fourth quarter, our KA ad revenue reached $205.9 million, up 16% or 70% on a constant-currency basis. The strong performance of the KA sector was primarily driven by nice growth in average revenue for advertiser spending, namely ARPA, as well as continued expansion of KA customer base on Weibo.

Full year 2018 KA ad revenues reached $674 million, up 77%, representing 45% of Weibo's total ad revenue.

From industry perspective, advertisers from our top 3 industries, such as FMCG, IT products, entertainment and the luxurious brands, all booked high revenue growth rate in fiscal year 2018 despite of the downward changes in macro economy environment. As a leading social media platform in China mobile Internet space, Weibo has demonstrated its indispensable value proposition to brand advertisers as a platform to enhance brand awareness, accumulate social assets and leverage KOLs influence to connect with a broader Internet audience in an increasingly mobile, social and the multimedia Internet space. Leveraging further changes in vertical industry, digitalization of the brick and mortar, and consumption upgrade in China, we are pleased to help drive value for these early adopters of the mobile and the social marketing solutions.

Nevertheless, in the latter half of 2018, we are increasingly confronted with the macro environment with uncertain factors and the decelerated growth of multiple industry sectors in China, among which IT product, automobile and entertainment sectors are likely pose pressure to us in the first half of 2019. This industry segments are going through their cycle under the current economy downturn. On top of that, our ability to further grow our share of wallet is limited due to our deep penetration into the ad budget of these sectors.

Turning to SMEs. In the fourth quarter, Weibo's SME ad revenue reached $179.6 million, up 8% or 14% on a constant-currency basis.

On full year basis, SME ad revenues totaled $707.5 million, up 33%. Macro and regulation headwinds and industry competition continues to weigh on the growth prospect of our SME ad revenues in the near term. Specifically, we saw a shortage of ad revenues from online gaming sector in the fourth quarter due to the regulation impact. We also experienced ad budget cutback from O2O customers who have products in large ticket price amid macro uncertainties.

Ad revenues from Alibaba was $31.6 million, a decrease of 18% or 13% on a constant-currency basis, which is generally in line with our expectation. The decrease was partially due to our high base in the fourth quarter 2017 when the e-commerce giants spend heavily for head-to-head competition with peers and aggressively invest for new strategic initiatives back then.

Full year ad revenues from Alibaba reached $117.7 million, up 39%. Alibaba has outstand their annual contract with us and be more reciprocal in data change and advertising system integration at Weibo, as we saw our uni-marketing program carry better revenues in the brand advertiser community.

Value-added service, VAS revenues, was $64.9 million in the quarter, up 44% or 51% on a constant-currency basis. The increase was primarily driven by the incremental revenues from the newly consolidated live broadcasting business in the fourth quarter and healthy growth of Weibo membership revenues.

The increase was partially offset by the decline of gaming revenue. Full year 2018 VAS revenue grew 43% to $219.3 million, mainly attributable to the growth in membership revenues and the increased revenue contribution from the live broadcasting business.

Turning to costs and expenses. Total cost and expenses for the fourth quarter were $295.5 million, up 34% or 27% under the old accounting guidelines. Other than inclusion of marketing expenses related to further transactions under the new revenue guidance, the increase in cost and expenses was primarily due to the incremental cost of revenue share incurred by live broadcasting business as well as the increase in personnel-related costs and expenses.

Under the old accounting guidance, sales and the marketing expenses in the fourth quarter merely increased to 10% during the year and represented 22% of net revenues, down 2% from the same period last year.

Full year cost and expenses totaled $1.06 billion compared to $693.8 million for 2017. As percentage of revenues, other than sales in the market, all expensive categories either decreased or remained stable on a year-over-year basis.

Sales and marketing expenses as a percentage of revenues was 23% and 30% in 2017 and 2018, respectively. That increase mainly resulted from the adoption of new accounting guidelines in 2018.

Under the old guidance, full year sales and the marketing expenses as a percentage of revenues would have been only increased 1 percentage point from prior year to 24%, which demonstrated the team's disciplined spending schemes and operational efficiency achieved instead of the intensified competition for mobile traffic in China Internet space.

Operating income in the fourth quarter was $186.4 million, representing an operating margin of 39%. Operating income for the full year 2018 was $662.2 million, up 45% and representing operating margin of 39% compared to 40% in 2017.

Excluding the impact from the consolidation of live broadcasting business, the operating margin of our hot business remained intact compared with prior year. It was in line with our expectation as we strategically prioritized the platform expansion over margin expansion during 2018 in response to the changes in the competitive landscape.

Turning to income tax. Under GAAP measures, income tax expense for the fourth quarter was $14.9 million compared to $17 million last year. Full year income tax expenses was $96.2 million compared to $66.7 million, mainly attributable to higher profits generated in 2018 than prior year.

Net income attributable to Weibo in the fourth quarter increased 26% to $183.6 million, representing a net margin of 38% compared to 39% last year. Net income for full year 2018 increased 54% to $624.2 million, representing a net margin of 36% for 2018 compared to 35% for 2017.

Turning to our balance sheet and the cash flow items. As of December 31, 2018, Weibo's cash, cash equivalents and short-term investments totaled $1.83 billion.

In the fourth quarter, cash provided by operating activities was $164 million. Capital expenditures totaled $10.4 million and depreciation and amortization expenses amounted to $5.8 million. We delivered free cash flow of $153.6 million for the fourth quarter of 2018.

Now let me turn to our financial outlook. We anticipate our first quarter of 2019 revenue to be in the range of $395 million and $405 million or an increase of 20.5% to 23.5% year-over-year on a constant-currency basis. This assumes a foreign exchange rate of RMB 6.75 to USD 1. This forecast also reflects Weibo's current and the preliminary view and is subject to change.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question comes from the line of Thomas Chong from Crédit Suisse.

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Thomas Chong, Crédit Suisse AG, Research Division - Regional Head of Internet [2]

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I have 2 questions. My first question is about our expectation regarding the advertising trend in first half and second half of this year. Should we expect revenue reacceleration as we go into the second half when things are getting normalized? And second question is about -- with regard to market share gain story. Should we expect Weibo to continue to gain market share in the next 3 to 5 years despite we see macro uncertainties?

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Gaofei Wang, Weibo Corporation - CEO [3]

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Other than the key accounts and SME sort of split, let me further break our customer base into 3 category. The first category, we referred to those customers who were affected by policy changes in 2008 that would have -- the example of online gaming and the entertainment business. What we see is these are -- the revenue from these segments were negatively impact in 2018 while heading into 2019, while with the policy become a lot more clear, we see a recovery pass for these segments. One thing I would like to indicate that the corresponding traffic related to this industry segment are very -- are doing very well on our platform. So it's just a matter of time as customers are coming back with their ad dollar. So our traffic will be able to meet their demand. However, in terms of online gaming, we think that recovery process could be a bit slower. That's why we have not factoring in that much of incremental revenue from the online gaming part in the first half.

As I indicated in the -- my remarks, on the KA part, we continue to see our budgets shift from the TV to the online. And on the online part, the social marketing part continue its trend taking more shares from other segments. And on top of that -- on top of these 2 factors, what we have noted other than the branding awareness or branding coverage needs from key accounts, there would be more demand on the performance side for our KA customers. In particular, after the connection we had at the e-commerce platform, with the data we have, we see stronger growth in the KA demand. So that's not only from the brand advertising, but just more so it's from their performance ads, of course.

On the SME side, I think as many of you are aware, there's a bit of a oversupply in the market in 2018, which had led the decrease in our pricing for our SME customers, particular in this -- the second half of 2018. In -- beginning of 2019, we see some level of a recovery. As I indicated, gaming is, for example, there's a increased demand for our ad services. With -- we are entering more and more cities and the third, fourth tier cities. We are making structure changes in terms of our customer mix and e-commerce and lower-tier cities, O2O industries are those ones that we're currently focusing on. We believe with the right mix of the composition of our customer to match our user mix, we'll be able to mitigate the risk on the SME weakness at this point. And the third point, we also increased our capability on our algorithm. One thing is to have a better conversion or better click-through rate for our app. The other thing is to correspond the algorithm to fill the traffic -- a significant traffic increase in our hot search and hot topics traffic, and we tend to increase our field rate in these traffics.

In terms of the market share question, as you're aware of, the overall mobile user penetration growth in China has been significantly slowed down, however, with a market like this, a product without -- is now considered a must-have or a product that now have a definitive positioning in the market will be slowly fade out in the current market. In the second half of 2018, we made it very clear and refocused our operation emphasis on the hot search and our social interaction among users, which led to the good -- very good traffic growth and our MAU growth in the second half of 2018.

I think you are pretty curious about the short video competition we are facing right now. I think in 2018, short video has surged in the Internet market. So we look at this type of competition very much like 2010 while Weibo has first the push out mobile/social product into the market and then there will be competitors coming to the market and then each competitors will position itself according to its product characteristic and attributes. I think we made it quite clear that Weibo being a public/social product with focus on the hot or breaking news, the hot search items to obtain and -- to obtain our users and also we focus on our operations, on our top content creators and on top of that, we also have a very clear verticalization strategy in terms of -- to enhance the social relationship between the verticalized content creators and our users.

We made a quite clear adjustment in terms of our channel investments and our product functionality. In 2019, we'll be much more focused on our channel spending, with total budgets being very comparable with what we have spent with 2018. In terms of our products, we had a very clear positioning, as we just indicated, in the -- just indicated above. If we look at the traffic volume and the user acquisition pace in -- before and after our Chinese -- 2019 lunar years, we see its quite significant growth in these areas.

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Operator [4]

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We'll move on to the next question from Binbin Ding from JPMorgan.

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Binbin Ding, JP Morgan Chase & Co, Research Division - Analyst [5]

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Given we're running out of time, I will be really quick on 2 questions. So first is on the MAU growth target in 2019 and the corresponding user acquisition strategies. Second is video feed monetization. Given you have launched your new version of Weibo app on a larger scale, can you share some color on operating metrics regarding the user adoption of the video functionality and also what is your monetization plan now on video feeds in 2019?

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Gaofei Wang, Weibo Corporation - CEO [6]

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In terms of the MAU, I would just reiterate. Most of our user acquisitions through the preinstallations, through handset manufacturers, that will be our major channel investment. In last year, we also supplement that investment with spending in TV stations and top app -- top applications. And for this year, I think we slightly will continue this path, but it was more optimization on the components of how the amount is being spend on the handset manufacturers and under the TV and under the application -- top applications.

So for 2019, the spending will be optimized with more focus to retain the new users and their engagement rate with the platform. We feel a bit less pressured in terms of the MAU acquisition.

Well, I think you understand that we have pushed out our video community on our product from fourth quarter last year. In terms of video content, we will definitely have a leading competitive edge in terms of breaking news, hot events and/or celebrity vertical, these types of things. However, compared to other short video platform, for those content -- for those content that's pure for user consumptions where we have -- we don't have -- I think we are in short of that. So our strategy for 2019 is encourage more Big V or top content creators in verticalized areas to create and distribute their video contents in our video community.

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Yunyun Zhang, [7]

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This concludes our conference for today. Thank you for joining us. We'll see you in the next quarter.

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Operator [8]

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Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect your lines.