Q2 2023 Bilibili Inc Earnings Call
Participants
Juliet Yang; Executive Director of IR; Bilibili Inc.
Ni Li; Vice Chairman of the Board of Directors & COO; Bilibili Inc.
Rui Chen; Chairman of the Board & CEO; Bilibili Inc.
Xin Fan; CFO; Bilibili Inc.
Kenneth Fong; Head of China Internet Securities Research and Regional Head of Gaming & Lodging Securities Research; Crédit Suisse AG, Research Division
Lei Zhang; VP in Equity Research & Research Analyst; BofA Securities, Research Division
Lincoln Kong; Equity Analyst; Goldman Sachs Group, Inc., Research Division
Xueqing Zhang; Analyst; China International Capital Corporation Limited, Research Division
Yiwen Zhang; Research Analyst; China Renaissance Securities (US) Inc., Research Division
Presentation
Operator
Good day, and welcome to Bilibili Second Quarter 2023 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.
Juliet Yang
Thank you, operator. During this call, we'll discuss business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange.
The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today.
As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com.
Joining us today from Bilibili senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan who will read the prepared remarks on behalf of Mr. Chen.
Xin Fan
Thank you, Juliet, and thank you, everyone for participating in our 2023 second quarter conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.
We set our sights on prioritizing profitability and DAU growth, and we have made solid steps towards these goals. In the second quarter, we meaningfully improved our gross profit and narrowed our losses while continuing to deliver healthy DAU growth and strong community metrics. I will share more color on both fronts.
First of all, our path to profitability. In the second quarter, we further improved our commercialization efficiency, enabling us to convert our growing traffic to quality top-line growth. The momentum we see in our advertising and live broadcasting business is encouraging. In the second quarter, our ad revenues increased by 36% and live broadcasting revenues increased by 32% both year-over-year. Moreover, our gross profit increased significantly by 66% year-over-year, driving our gross profit margin to 23%, marking the fourth consecutive quarter of improvement.
Meanwhile, we have continued to strengthen our expense controls. Our total operating expenses declined by 14%, including a 22% decrease in sales and marketing expenses, a 14% decrease in G&A expenses and a 7% decrease in R&D expenses or on a year-over-year basis. These margin enhancements and our effective cost management contributed to our bottom line improvement. We meaningfully reduced our non-GAAP net loss by 51% year-over-year.
Moving on to our community growth. Our DAUs increased by 15% year-over-year to 96.5 million in the second quarter, driving our DAU-to-MAU ratio up to 29.8%. Meanwhile, the users' average daily time spent on our platform reached 94 minutes in the second quarter, driving total time spent up by 22% year-on-year. We are pleased to see this strong DAU growth has continued in Q3.
As we move into the second half of this year, our main tasks will be in three core areas. First, we aim to further enhance our traffic commercialization efficiency by increasing our ad revenues and the live broadcasting revenues. Additionally, we will bring more high-quality games to our users, including the highly anticipated game, Pretty Derby.
Secondly, we will continue to take a prudent financial approach with strict control of our cost and expenses and further narrow our losses. Finally, yet importantly, we are committed to achieving ongoing DAU growth and fostering an inspiring video community for young generations in China.
With that overview of our progress, I'd now like to provide a brief update on our three core pillars of content, community and commercialization. Starting with content. Content creators continue to be our ecosystem's most valuable asset. Supporting these talented content creators and their ability to amass large followings and to be able to earn more money are among our top tasks. As always, we continue to optimize our algorithms and products to facilitate high-quality content and enable creators to be recognized.
In the second quarter, the number of daily active content creators on our platform and our monthly content submissions increased by 19% and 43% year-over-year, respectively. In the second half of this year, we plan to shift our video watching metric from video views to video time spent, which will help our users discover more high-quality content on Bilibili. We are also beta testing an AI-powered search feature in our community that enables relevant videos to be found more easily.
Creator monetization on Bilibili increased as well in the second quarter. Over 1.58 million creators earn money through various Bilibili channels, showing a 40% increase year-over-year. In addition to our cash incentive program, more creators are earning income through advertising and the live broadcasting channels. For example, our video commerce apps have opened up new efficient, earning opportunities for content creators.
In the second quarter, the number of creators who earned money through video commerce grew by over 220% year-over-year. Resonant content and multi-scenario products like Story Mode continue to drive platform traction.
In the second quarter, our total daily video views were up 31% year-over-year to 4.1 billion, among which, Story Mode daily video views grew by 76% year-over-year. It has become one of the key video consumption scenarios for our users, contributing to our growth in DAUs and ad revenues.
Turning to our community. Our users remain highly engaged and sticky. The user's average daily time spent on our platform was 94 minutes in the second quarter, reaching the highest second quarter level in our company's history. The monthly interactions reached nearly 15 billion in the second quarter, up 19% year-over-year.
Our core group of official members also increased by 26% year-over-year to 214 million with a solid 12-month retention rate of around 80%. Our signature offline events also bring our community together in person. This July, we hosted 2 exciting offline events, BilibiliWorld and Bilibili Macro Link in Shanghai. Over 200,000 tickets sold out almost immediately. The tremendous response highlights Bilibili's strong influence among young generations as well as users' willingness to pay for our unique community experiences.
Finally, let's look at our commercialization and financial progress. Total revenues for the second quarter increased by 8% year-over-year to RMB 5.3 billion. Specifically, revenue from our advertising and live broadcasting businesses increased by 36% and 32% year-over-year, respectively. Meanwhile, we continue to improve our gross profit and margin. Our gross profit in the second quarter grew by a notable 66% year-over-year, driving our gross profit margin up to 23% from 15% in the same period last year.
Looking at this in more detail. Revenues from our value-added services business grew 9% year-over-year to RMB 2.3 billion in the second quarter, primarily driven by increased revenues from our live broadcasting business, which grew by 32% year-over-year. As we further integrate live broadcasting within our video operations, we have opened up multiple opportunities to expand and diversify our live broadcasting content by converting content creators into live broadcasting hosts.
In the second quarter the number of monthly active live broadcasting hosts increased by 15% year-over-year. In addition, we are exploring new live broadcasting products to create more paying channels for our users, including live celebration events. We expect our ongoing integration activities to support our revenue growth in the second half of 2023.
By the end of June, we had 20.5 million premium members, over 80% of whom are on an annual subscription or auto-renew package, highlighting our trust-based user relationships.
In Q3, we released several highly anticipated Chinese anime titles, including Fog Hill of the Five Elements, (foreign language), and our self-produced title Link Click Season 2, (foreign language), to bring more exclusive high-quality content to our premium members.
Turning to our advertising business. As we progress our initiative to integrate sales conversion with ad products, we believe we have found an effective way convert our high-quality traffic to advertising revenue growth. For the second quarter, our advertising revenues grew 36% year-over-year to RMB 1.6 billion, mainly led by our performance-based ad revenues growth, which increased by over 60% year-over-year, and revenues from our brand and Sparkle offerings also grew by a double-digit percentage year-over-year.
Our top 5 advertising verticals in the second quarter were: games, e-commerce, digital products and home appliances, skin care and cosmetics, and food and beverage.
Our continuous improvements to our integrated industry ad solutions have also helped us gain more ad budget spend from industries such as games and e-commerce. Specifically, by introducing video commerce products, ad revenues from the e-commerce industry increased by 144% year-over-year in the second quarter. Meanwhile, content creators were able to benefit from more ad opportunities. The number of creators who earn income through video commerce grew over 220% year-over-year.
Moving forward, we will continue to build our commercial database, refine our algorithms as well as optimize our ad product offerings. We are confident that we can improve our ad revenues per DAU and achieve solid growth in the second half of 2023.
As for our games business, our revenues were RMB 891 million for the second quarter, a 15% decline from the same period last year. The year-on-year decline was mainly due to a lack of new game launches in the second quarter and a growth in decline for certain titles. Our top 2 performing games, Azur Lane and FGO, remained stable. Particularly during Azur Lane's 6-year anniversary, the game reached a new peak in paying users and revenues. In addition, we have also successfully extended our exclusive license of Azur Lane for another 5 years.
In July, we launched our first self-developed game in the female romance genre, Alkaidland Records, (foreign language). Welcomed by a host of female users, the game ranked #1 on the iOS free download chart shortly after its release. We are actively working on developing more games that users love. In the meantime, we have seven new titles that we plan to release in domestic and overseas markets in the second half of the year, including the highly anticipated game, Pretty Derby, (foreign language). Pretty Derby is scheduled to launch on August 30 and is now available for preregistration. Over 2 million players have already preregistered as of today.
Given said that, the launch of Pretty Derby as well as few self-developed titles were delayed by several months than we initially planned due to lower revenue contribution from games and other non-core businesses such as IP derivatives and others. We now expect the full year 2023 revenue to be between RMB 22.5 billion and RMB 23.5 billion.
As I mentioned earlier, our key financial goal for this year is to improve our gross profit and narrow losses. We have delivered on this goal with 66% increase in gross profit and a 51% cut on adjusted net loss in the second quarter.
Look ahead, we are committed to further improve our gross profit and control our expenses and meaningfully cut down losses in the second half of this year and reach our breakeven target by 2024.
As we progress on achieving our financial targets, we will continue to lead the healthy growth across our platform and enrich the everyday life of young generation in China.
This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the second quarter of 2023.
As mentioned in Mr. Chen's remarks, our financials continue to improve. We are improving our margins and showing clear results in our bottom line with narrowed losses. Total net revenues for the second quarter were RMB 5.3 billion, up 8% compared with the same period last year. Our total net revenues breakdown by revenue stream was approximately 43% VAS, 30% advertising, 17% mobile games and the 10% from our IP derivatives and other businesses.
Our cost of revenues decreased by 2% year-over-year to RMB 4.1 billion, driving our gross profit to RMB 1.2 billion, up 66% year-over-year. Our gross margin was 23%, up from 15% in the same period last year. We expect gross margin to continue to improve throughout the back half of the year.
Our total operating expenses were down 14% year-over-year to RMB 2.5 billion. Tight control of our expenses is ongoing while we improve our monetization at the same time. We cut sales and marketing expenses by 22% year-over-year to RMB 918 million, while our DAUs grew by 15%. As a percent of total revenues, sales and marketing was 17% compared with 24% in the same period last year. G&A expenses were RMB 539.7 million, down 14% year-over-year. R&D expenses were RMB 1 billion, down 7% year-over-year.
Our net loss and adjusted net loss were RMB 1.5 billion and RMB 964.1 million, respectively, narrowing by 23% and 51% year-over-year, respectively. Our adjusted net loss ratio in the second quarter was 18%, improving from 40% for the same period a year ago.
Turning to our capital allocation and liabilities management. In June 2023, we completed the repurchase right offer for our 2027 notes with a total principal amount of USD 746 million. As of the end of the second quarter, our outstanding convertible bonds totaled a principal amount of USD 876 million. As of June 30, 2023, we had cash and cash equivalents, time deposits and short-term investments of RMB 14.3 billion or USD 2 billion. We believe this amount is sufficient to cover all of our remaining convertible bonds and fund our future operations.
Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.
Question and Answer Session
Operator
(Operator Instructions) And the first question, Xueqing Zhang from CICC.
Xueqing Zhang
(foreign language) Congrats on advertising towards profitability. My question is about user engagement. Do you further increase in the second quarter, so the DAU trend going forward? And can management share more details on the user engagement during the recent summer holidays?
Rui Chen
(foreign language)
Juliet Yang
[Interpreted] Last year, I have been emphasizing increasing our earnings power and achieve healthy and sustainable DAU growth are the top 2 priorities of our company, and we have been executing on that strategy.
In the second quarter, with sales and marketing down 22% year-on-year, we have grown our DAU by 15%, reaching 96.5 million and our daily time spent -- daily user time spent reached 96 -- 94 minutes. This is the record high of same period in our operating history. And our overall time spent of the entire community grew by 22% year-over-year, all of above metrics shows a very healthy and robust growth of the community.
The reason why we have been emphasizing on the healthy growth of our DAU is because we believe the healthy growth of DAU is the foundation and preliminary requirement for Bilibili to achieve sustainable profit. And we believe we have already discovered an effective way to convert our high-quality traffic into increasing top line through advertising and live broadcasting. And we believe with this effective route and methods, we can achieve DAU and top-line growth, and this will be a virtuous cycle.
In the second quarter, our ad revenue and live broadcasting revenue achieved 36% and 32% year-on-year growth, respectively, which exceeded the industry average growth a lot.
As for the outlook into the summer, given that we're in August in a period of the summer vacation, we have been witnessing and experiencing a strong DAU and daily user time spent growth. We do expect that in the third quarter, our DAU can surpass a very exciting milestone of 100 million. And we also expect our average daily time spent can reach a new historical high.
We are very confident with tight control on sales and marketing expense. We can continue to attract our users with high-quality content and return our user with our engaging community and achieve DAU sustainable and healthy growth. And we also believe this high traffic can be effectively converted to our sustainable top line-growth.
Operator
And the next question from Lei Zhang from Bank of America Securities.
Lei Zhang
(foreign language) Congrats on the solid advertising growth. My question also relate to ad business. Can you share with us the major driver on also ad business, follow the strong base of second quarter? Also, can you give us some updates on the June 18 promotion ad growth on our platform? In addition, how should we look at the second half ad growth on Bilibili? And how should we think about the new business, e-commerce streaming development to our ad business?
Ni Li
(foreign language)
Juliet Yang
[Interpreted] In the second quarter, our ad revenue grew by 36% year-on-year. And overall, for the first half of this year, our ad growth rate has exceeded the industry average. At the same time, if you look at the ad revenue per -- ad revenue as percentage of total revenue, it has increased from 25% same period last year to 30% in the second quarter, which directly leads to growth of our gross profit.
The one horizontal, one vertical strategy we mentioned last quarter is beginning to pay off, and that's been driving our advertising revenue growth. The one horizontal is actually referring to the technology middle platform and the data capability. It includes optimizing the recommendation model, improving the advertising inventory and matching efficiency and the application of AIGC to improve overall ad efficiency.
The one vertical is referring to the six customized industry app models, including games, e-commerce, FMCG, automotive and Internet service, among which e-commerce and games starting to show very positive results. In the second quarter, ad revenue from e-commerce industry grew by over 140% year-on-year and game -- and advertising revenue from game industry grew by over 40% year-on-year.
The second reason is that since last year, we have sticked to the integration of content and commercialization and expand ad inventory in different scenes of the community on the basis of ensuring user experience. In the first half of this year, it has formed very good growth momentum and drove the accelerator at revenue growth.
Thirdly is that you -- many of you probably already aware that we have established the training ecosystem, the ecosystem center, to focus on building video e-commerce-related capability in the second quarter by integrating the transactional scenario into the advertising products to further boost the revenue growth. We expect the video e-commerce-related ads would generate about 10% to 15% of ad revenue this year. And in the next few months is we also plan to upgrade the membership shopping (foreign language) on our main page to (foreign language) shopping tab and creating a new entrance for more commercial opportunities.
As for the June 18 period promotions, how we performed, through our in-depth data collaboration with e-commerce platform, the revenue of the e-commerce industry -- ad revenue from e-commerce industry, including transaction scenario during June 18 period, actually grew by 200% year-over-year. And we expect to achieve 15% to 16% ad revenue year-on-year increase from e-commerce industry during upcoming Double 11 festival. As for examples, we actually did a collaboration with Alibaba's Spark program AKA (foreign language) and the results exceeded our expectations.
There are a few interesting data points I can introduce. About 70% of the users who entered Taobao through Bilibili were new customers, and this ratio reached even to 90% for certain industry. That shows that we have the effective ability to consistently convert user to [advertisers]. In addition, Bilibili user maintained a very high conversion value 15 days after the related video was posted. And during June 18 period, the ad revenue from Alibaba actually increased by 300% year-over-year.
While many other content platforms choose to build their own e-commerce platforms, Bilibili, on the other hand, we choose to take an open approach, partnering with e-commerce players and brand owners to grow the sales volume together on Bilibili.
First of all, cultivating users' consumption behavior and mind share on Bilibili is our top priority. We believe that the young generation has strong willing to consume, and building the mind share is very important as we unleash their consumption power on our platform. In the first half of this year, near 30 million user clicked on the shopping link on Bilibili's video commentary section, which leaded to a transaction-related behavior. As we unleashing our user consumption demand, the number of videos that carries product links increased by 8x in the first half of this year, and the number of live broadcasting e-commerce shows increased by 7x in the first half of this year.
Secondly, we will continue to help our content creator to achieve sustainable operations through our video e-commerce initiatives. More content creator already started to try out Bilibili video e-commerce. This includes, but not limited to, many well-known content creators such as (foreign language) and et cetera. We are very delighted to find the model is very valid and successful, and this also broke the rumor that Bilibili's user have no consumption power. And actually, as a matter of fact, from the data that's shown that we have a lot of female user with consumption potential and power. Actually, 45% of Bilibili user are female. We do notice that they are -- they do have strong willingness to consume on Bilibili and they have strong purchasing powers.
Thirdly is that we intend to try more categories from our -- on top of our traditional strong verticals, in addition to the IP derivative AKA at our membership shopping, which is focused on the ACG preferential products and content. We intend to explore more categories such as food, beauty, 3C and digital products, home appliances and et cetera. And here is the example, in mid-April, Xiaomi launched a live broadcasting e-commerce show promoting its new cellphone. Based on the data that I have in hand, Bilibili ranked #1 in terms of GMV among all content platforms. It not only reflected that the strong word-of-mouth influence that we had among our young user group but also the strong consumption power our users had.
I think the Bilibili app model has evolved from establishing brand perception and mind share to a true integrated ad solution, a full advertising chain of brand building, seeding and sales conversion.
In the first half of this year, we have upgraded our industry ad solution for game and e-commerce and transactional strategy and is already starting to show positive results. In the second half, I personally plan to conduct additional upgrade for our leading ad inventory -- ad industries such as FMCG, 3C and digital products. We believe as we deliver healthy and sustainable user growth, we are confident that we can achieve 25% to 30% ad revenue growth on a full year basis year-on-year.
Operator
Next question from Kenneth Fong from Credit Suisse.
Kenneth Fong
(foreign language) We noticed that we lowered the full year revenue guidance. Can you share with us the key considerations behind? Are we still on track for narrowing losses for this year?
Rui Chen
(foreign language)
Juliet Yang
[Interpreted] The reason why the guidance update is largely due to two reasons. Number one is a number of our games launch plan was delayed. And secondly is certain non-core business such as our comics and the IP derivative and others business is in the period of adjustment of strategy, and its revenue is lower than expected.
The -- we believe the reason for guidance update, the core is just -- it's for a temporary phase change, and it's not a change of foundations. The core business actually remains intact. For example, the delay of games is just that we are recognizing the revenue a little bit later. For example, Pretty Derby is already scheduled to be launched in August 30. And this -- we will be releasing this game on that day. This is confirmed and certain.
And our outlook for -- and our confidence in the quality of the game and the revenue is unchanged.
And as you may already see that in the second quarter, the core business, Bilibili live broadcasting and advertising, has achieved very solid growth.
We do expect that in the second half of this year and look forward to 2024, the advertising and live broadcasting business will sustain a very healthy and solid growth.
In the beginning of this year, we have set our financial target to increase gross profit and narrow our net losses. So as a requirement -- financial requirement or KPIs to each department business line is to ensure the absolute dollar growth for its gross profit.
Strategically, we have lowered the revenue contribution of low-margin business or loss-making business, even though some of the revenue growth rate has been impacted. However, the absolute dollar of our gross profit has sustained a very healthy and robust growth.
In the second quarter, our gross profit grew by 66% year-on-year, and our gross margin has experienced four consecutive quarterly growth. And our adjusted net loss has narrowed by 51% year-on-year.
I'm confident to achieve our loss-cutting target for 2023 and achieve our breakeven target by 2024.
Xin Fan
Yes, this is Sam. I just want to add that on the loss reduction side, even though the revenue growth rate [and then called by] Mr. Chen already mentioned that, will be lower than expected. But we are still confident to achieve the loss-cutting target. We said in the beginning of this year, which is to cut our adjusted operation loss by RMB 3 billion. So through the gross profit increase and expense control.
And notably, in the second quarter, our operating cash flow was close to breakeven. We think there are good chance that we can achieve operating cash flow positive in the fourth quarter this year.
Additionally, we are confident to continue to improve our gross profit margin in the second half of this year and achieve our breakeven target by 2024.
Lastly, the updated full year guidance reflect our current projection of various potential outcome. We will try our best to ensure smooth product launch as well as achieve our goal of increasing the gross profit and narrowing losses.
Operator
The next question from Yiwen Zhang from China Renaissance.
Yiwen Zhang
(foreign language) My question is on the [our liking] business. Can you discuss on the pipeline and especially for the Pretty Derby? How should we think about your expectation? And also, can you talk about our self-development game strategy and the direction?
Rui Chen
(foreign language)
Juliet Yang
[Interpreted] In the second half of this year, we have seven titles in our pipeline ready to be launched domestically and internationally. Among those 7, 5 of them have already gained approval and ready to be launched in the domestic market. Two will be launched internationally.
As for the highly anticipated game Pretty Derby, we have already scheduled the launch date to be August 30. And right now, within just 2 weeks of preregistration, over 2 million users are already preregistered for this game. This is a new record for -- in our operating history for the preregistration amount.
Just because that it's such a highly anticipated games with large fan base, we actually spent a lot of effort doing the localization work, making sure that our gamers will be having the very original Pretty Derby experience. That's actually one of the reason why it has been delayed by several months.
We believe that Bilibili's game launch team is the best ACG game launch team in China, and they are very experienced and they will make sure a very smooth and successful launch of Pretty Derby. And we're confident Pretty Derby will be a very successful title and also have good user feedback and reputation.
As for our self-development pipeline, we have -- actually, we have two ACG card game will be launched in the second half of this year. This includes one game called (foreign language) which was already launched today, and there will be another game called (foreign language) This is -- will be scheduled to launch in October.
As for our self-development game strategy, as you may you are aware, there's been a very heavy competition among the game industry this year. As for our own self-development game, the strategy will remain unchanged, which is focus our -- on the content -- on the genres that Bilibili has most advantage of. Me, personally, will be spending a lot of time to ensure a success rate as we have only started doing self-development games, and we will be very down to earth and grounded to take a step-by-step approach to ensure every game that we launch will be high quality and will be successful. This is the target that I personally will spend a lot of time to ensure and also require our team to achieve.
Secondly, it's about the long-term operation of the game. I believe in the future, all the game will be a long-term operation cycle. Otherwise, it won't make any profit. So this is the requirement I have for our self-development game. If the title from day one is not a long-term operation title, we won't be -- we won't allow it to be set up. As for the licensed game, if it's a long -- not a -- small life cycle game, we won't sign it, we won't license it. As for the game that's already online, the long life cycle management and operation will be -- also be one of the most important KPIs I have for the team.
As for Bilibili, we have very good track record on making sure a long life cycle operation. As a matter of fact, our Azur Lane just celebrated 6 years of anniversary. And FGO, just last week, we celebrated its seventh year anniversary. And all of the user data metrics remain very healthy for both of the games. As a matter of fact, during the sixth anniversary of FGO, its DAU even surpassed the 6 years anniversary DAU. So we will stick on this route and making sure that all of our game will sustain a long life operation cycle.
Operator
The next question from Lincoln Kong from Goldman Sachs.
Lincoln Kong
(foreign language) So my question is about AIGC's application to Bilibili. So from past Investor Day, we already seen some development or strategy showcase in terms of AIGC speeding up the production efficiency, the marketing promotion tools as well as this AI-integrated search. Could management elaborate more around how we think about AIGC could benefit Bilibili?
Rui Chen
(foreign language)
Juliet Yang
[Interpreted] We believe this is a breakthrough technology of the AIGC we can bring to the industry. The way we look at it, it equals to the mobile Internet that happened 10 years ago and this will not only benefit Bilibili. It will actually benefit everyone.
So as for Bilibili, our core business is video and ACG, and it is very -- it has been very clear that AIGC can enable an increased efficiency in a large amount on both fronts, for example, on content production as well as content recommendation. Also in terms -- based on the LLM, we can increase a lot of the efficiency of managing our community by understanding what the text means, the content means within our community. And we believe this technology, AIGC, has multifaceted applications and scenarios to help us to improve all around user experience.
As for the application scenario, actually, we have already conduct some extended research and development. And we believe there's a lot of scenarios that we can leverage. For example, the prepared remarks that spoken by Sam just now before this Q&A session, actually, it was not actually conducted by Sam. It's powered by our self-developed AI tool, text-to-speech, TTS tool. And similar products like this, we have already starting to research and develop and apply it in our various scenarios.
And there are other examples. For example, this year's Bilibili Macro Link, our live virtual host, 22 and 33, their voice was also generated by the same tool, TTS AI tool that Bilibili self-developed.
And another example would be knowledge-related video creation. As many knowledge content creators, they generally write the text and they record their voice. With the help of this AI tool, they can -- it can largely improve its production efficiency.
As for the LLM, even though we haven't marketed quite aggressively, but actually, we have already started to apply LLM in various daily operations.
Another example would be on the content auditing side. In the past, we have to spend a lot of human resource and power in managing the content with the help of large language models because it can understand the voice, the text, the meaning and all of the implied meanings behind the text. It can drastically increase the efficiency of how our content audit team process the content.
And another application scenario would be enhanced search because Bilibili has a vast content library, and each videos carries a lot of scatter information and we can leverage the LLM to drastically enhance the search efficiency. We're actually beta testing a new enhanced search that by just in typing question in our search box, our large language model can summarize and answer questions. A very valid example would be with the recent version upgrade of Genshin Impact, people can just simply ask which card is worth drawing and which character is worth spending time to improve. And the large language model can summarize the valid information and just provide it to the user versus in the past, they have to watch several videos to summarize that content information. Now they -- with a just stroke of hand, they can get the correct and fast answer.
Another function upgrade that we are testing is AI assistance. This will accompany users when they are watching a video, help them to summarize and extract useful information. For example, in a MacBook review video, user can ask the AI assistant, what's the difference between M2 Pro chip and the M2 chip? What's the price difference? What's the efficiency difference? And the AI assistant can extract the exact information to help the user to get what they want. This -- all of this will help to increase Bilibili user experience.
Internally, we really value the AIGC technology. We believe this is a once-in-a-lifetime opportunity. This will be similar to the invention of mobile Internet, which enable Bilibili's mobile user grow by tenfold. And we believe with the AIGC technology matures, we can leverage this technology to largely enhance our user experience, our content creators' experience and productivity as well as increase our commercialization efficiency.
That concludes the questions. Operator, we can close the call today.
Operator
And that concludes the question-and-answer session. Thank you once again for joining Bilibili's Second Quarter 2023 Financial Results and Business Update Conference Call today. If you have any further questions, please contact Juliet Yang, Bilibili Executive IR Director or Piacente Financial Communication. Contact information for IR in both China and U.S. site can be found on today's press release. Have a great day.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
