Good day, gentlemen. Thank you for standing by. Welcome to the Kuaishou Technology Third Quarter 2021 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management's prepared remarks. This English line will be in listen-only mode. I will now turn the call over to Ms. Heather Diwu, Director of Investor Relations at Kuaishou Technology.
Thank you, operator. Good evening, and good morning to everyone. Welcome to our third quarter 2021 financial results conference call. Joining us today are Mr. Su Hua, Co-founder, Chairman, Executive Director of the Board of Kuaishou. Mr. Cheng Yixiao, Co-founder, Executive Director, CEO, and Chief Product Officer. Mr. Nicholas Chong, Chief Financial Officer, and Ms. Cynthia Wang, VP of Capital Market and FP&A. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update any forward-looking information except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only.
For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to our results announcement for the third quarter report ended September 30, 2021 issued earlier today. For today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous English interpretation in the prepared remarks session and a consecutive interpretation during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Now, I would like to hand over the call to Mr. Su Hua, Co-founder, Chairman, Executive Director of the Board of Kuaishou.
Dear friends, hello and welcome to Kuaishou third quarter 2021 earnings conference call.
We achieved encouraging results across the board in the third quarter of 2021 compared with the first two quarters this year. Kuaishou App has been accelerating user growth. Average DAU has exceeded 320 million, up 17.9% year-over-year and 9.3% quarter-over-quarter, the highest quarter-over-quarter growth since the second quarter of 2020. Average MAUs reached 570 million, increasing 19.5% year-over-year and 13.2% quarter-over-quarter, with 66.7 million MAUs added, marking the largest single-quarter net increase since the second quarter of 2020.
Average time spent per DAU was nearly 120 minutes, up nearly 35% year-over-year, and total traffic also increased by 60% year-over-year as user engagement continuously enhanced throughout the Kuaishou ecosystem. Meanwhile, our total revenues remained a healthy growth of 33.4% year-over-year to CNY 20.5 billion in the third quarter. In addition to business development, we also leverage our advantages and resources to fulfill our corporate social responsibility and make contributions to public society at large. During the flooding in Anhui Province, Kuaishou promptly donated to the disaster-stricken area for emergency relief and reconstruction. We launched a landing page dedicated to the disaster and timely released the latest disaster news and rescue information, thus rallying broad societal support and mobilizing all available resources to provide support to affected areas and local people.
We also actively contributed China's new digital infrastructure and helped drive the continued development of video service infrastructure in rural areas. We facilitate enrichment and expansion of basic service via digital application and consumption, live services, culture and entertainment, and in efforts to bring convenience to digitalization of users. From July to October, more than 420 million agricultural orders have been sent from rural areas to the rest of the country via Kuaishou's live streaming service, nearly doubling from the same period last year with the aim of making short video and live streaming a new channel to help farmers. We're advancing the standardization brand and e-commercialization of more agricultural products. Now I'd like to invite Yixiao to provide more details on our business. Hello, everyone. I'd like to share with you the achievements that we have made in traffic, content, and efficiency improvement.
We are pleased to report that the total traffic increased by almost 60% in the third quarter. First, we have continuously strengthened the social trust and social attributes in our community, which is the hallmark of Kuaishou's platform. By recommending more potential socially connected users on the single column pages, we're facilitating mutual following relations, as well as building and reinforcing users' social mentality. The number of mutual followers on our platform reached over 14 billion pairs cumulatively by the end of the third quarter of 2021, up 59% year over year. Our enormous interactive network constantly strengthens the user stickiness on our platform. It also creates social value and by expansion, commercial value. Secondly, we have been constantly enriching our content, further optimizing content distribution strategy, and strengthening the traffic and monetization support for our high-quality creators.
Through continuously building unique featured content verticals, we have constantly provided the high-quality content in public domain and attracted more users to consume. In the third quarter, the average DAUs of the distinctive Kuaishou platform reached 230 million, with more than 850 short plays viewed more than 100 million times each cumulatively. Our ongoing production of premium short plays has strengthened the user stickiness while raising shares of short video views and time spent. We have focused on our investment in the sports content vertical since the end of last year.
As the pioneer short video and live streaming platform on broadcasting the Olympic event, we took advantage of the real-time nature and extensive coverage of our platform and combined news, sport content, interactive activities together as a new approach to sport broadcasting, which helped us to further encourage interactions based on the enriched content. Video views on the Olympic related content and topics on our platform reached aggregate of 73 billion times, with interaction on Kuaishou app total over 6 billion by August of 2021. As of today, Kuaishou covers more than 40 sports categories, with total time spent on sports content in the third quarter up more than 150% year-over-year. Kuaishou has become a massive industry-leading content platform and social matrix integrating diverse sports categories.
We have noticed that user demand for short videos and live streaming is increasingly moving away from pure entertainment consumption toward diversified and interesting content. In addition to inviting knowledge influencers from various fields to share content on Kuaishou, we also roll out our self-made Pan-knowledge talk show in the third quarter to share expert opinions and academic concepts to a wider, broader user base. Pan-knowledge has become one of the fastest growing content categories in terms of video views this year. Upholding the principle of universal dissemination, we continue to provide traffic and revenue support to our content creators. We are the backbone of our product and platform. Over 50% of the video views in the third quarter were generated from the mid-tier content creators. On Kuaishou platform, creators has a clear path for growth and monetization.
Our strength in private domain traffic also encourages the creators to prioritize long-term success. In third quarter, the number of high quality content creators on our platform continued to rise quarter over quarter, and also in the coming quarters, we will further strengthen our support to content creators. Last but not least, we continue to iterate and optimize our product experience. At the end of August, we upgraded our main app with the discovery page, discovering double column feeds while turning on the single column layout after accessing content, allowing users to swipe up and down to provide more immersive consumer experience. This upgrade improved both the time spent and also the consumption activities, and help further optimize our understanding of users and recommendation capabilities.
In addition, with a single column feed, we enhanced content distribution with follow creators and also to improve user experience and switching efficiency. While making progress, also we're securing the high quality users and increased traffic. We are also prioritizing efficient optimization as, more refined operation and, management. Our maintenance cost per DAU turned down month by month during the third quarter, and user acquisition per MAU also fell in third quarter compared with second quarter. Sales and marketing expenses as a percentage of total revenue dropped from 69% in the first quarter to 54% in the third quarter. Building on the continuous increase in public and private domain traffic, our total revenues reached 20.5 billion RMB in the third quarter, increasing by 33.4% year-over-year.
Now, please give me opportunity to give you more detailed update on various business lines and achievements. Despite the increasing challenges from the macroeconomic environment, our online marketing services maintained rapid growth in the third quarter, with revenue reaching CNY 10.9 billion, up 26.9% year over year, accounting for increasing share of total revenue, 52.2%. Also to demonstrate the resilience of our business stemming from the increasing popularity of short video and live streaming ad, our unique position as a content community and advantages of a closed business ecosystem. The growth of our online marketing services was also driven by increased traffic, expanded advertising space on our platform, consistent optimization of advertising system and growing pool of advertisers.
As the short video and broadcasting partner for the 2020 Summer Olympics, we conducted special marketing campaigns with the industry-leading in fast-moving consumer goods, automobiles, e-commerce, beauty and household appliances and sportswear, among others. The campaign helped advertisers to gain all-around improvements in brand recognition, favorability and sales conversion, demonstrating Kuaishou's potential and capabilities in marketing to more broader consumers and also advertisers. In addition, we have improved professional competencies in areas such as planning operations with our direct sales teams, especially our key account teams, empowering them to serve advertisers with more professional and timelier services. Boosted by these efforts, brand advertisers on our platform have recorded a high double-digit growth year-over-year in third quarter.
For advertisers, our public domain has a breadth to reach massive and diverse user groups, while we also have a highly active and engaged user community to connect brands and users in greater depth. Recently, the series of advertising products upgrade and integration have enabled advertisers to manage operation indicators more dynamic and achieve a compounded effect of brand promotion and performance advertising. At the same time, Kuaishou features a more complete closed loop business ecosystem, which could help the advertisers improve the overall conversion ratio, accumulate the product operating data, and optimizing the market decisions. Related to our trusted market share, our online marketing business penetration is still low. Looking ahead, we will continue to increase our online marketing market share through further enhancing our traffic matching efficiency, advertising system as well as sales.
Our e-commerce GMV reached RMB 175.8 billion in the third quarter, representing 86% year-over-year increase. Kuaishou Shop, the closed loop model of our e-commerce business, increased in the contribution of total e-commerce GMV to 91% from the third quarter of 2021, as we boosted investment in underlying infrastructure, enhanced content supply, optimized matching efficiency and user experience, and expanded the e-commerce exposure. In the third quarter, we continued to enrich the merchandising offerings with a wider range of categories. We're bringing more branded merchandise to Kuaishou Selection, our official platform for e-commerce product selection, to refine matching with efficient optimization. This initially further helped improve the selection to our GMV contribution in the third quarter.
We also continued to increase investment in branded e-commerce with the GMV of the brand lab segment leading the overall platform, as we demonstrate success cases in key industries such as apparel, FMCG, electronics, home appliances during 618, and increasing number of brands joining our platform. The establishment of the service platform is also one of Kuaishou's priorities in the e-commerce development. Since the beginning of the third quarter, we have devoted efforts to aggressively develop brands and base strategy, strategic service partners and promotion of GMV from merchant service by Kuaishou service partners with Raise and Cosmit, which help merchants to prove their professionalism and many operational capabilities. Professional operations combined with Kuaishou's trust base and e-commerce ecosystem have brought a certainty to growth and also in the long run.
We increased investment in trust-based e-commerce, introducing the measures to protect the user experience and also strengthen the platform governance. In September, our e-commerce repeat purchase rate increased to over 70%. The amount our pool continued to grow. In the third quarter, we gradually improved the DAU penetration rate of current e-commerce live streaming, increasing our e-commerce content exposure in public domain and accumulated additional data and feedback to optimize the recommendation system with a goal of enhancing e-commerce distribution efficiency and sales conversion. As the pillar of our platform and our deeply engaged user ecosystem and community, our live streaming ecosystem content and also introduced the more streamers in different content verticals to maintain a high level of live streaming activity as measured by streaming frequency and duration.
We also distributed additional live streaming content in public domains, helping more high quality and professional live streaming content to reach a broader user base. These efforts result in the gradual expansion of our live streaming DAU penetration rate to 78% in third quarter from 66% in first quarter of 2021. Our enriched content supply and efficient traffic distribution led by a rebound in content consumption that is demonstrated by a live streaming revenue, which rose by 7.4% quarter-over-quarter to RMB 7.72 billion. Especially, average MPU for live streaming in the third quarter of 2021 were 46.1 million, growing 3.6% quarter-over-quarter.
Monthly, our pools for live streaming on our Kuaishou app also expanded 8.8% year-over-year and 3.7% quarter-over-quarter to RMB 55.9. With respect to the content governance, Kuaishou has taken an active part in the Qinglang, a campaign that the CAC launched to rectify the sector. Multiple officially certified anti-fraud government accounts are now stationed on Kuaishou platform, making full use of the tools such as short video plus live streaming to spread awareness of the campaigns of government affairs, policy interactions and also the policy communication therefore, expanding anti-fraud information dissemination through the short video platform. To date, over 15 government accounts have been stationed in Kuaishou's platform. Finally, please allow me to share with you some of the overseas business.
Following the stellar user growth in the first half of the year, we adjusted overseas strategy in the second quarter or half of the year, focusing on the key markets and turning on product optimization and content enrichment as our key priority. Our efforts paid off, and also you can see us making a quarter-over-quarter improvement of our MAU, DAU to MAU ratio, user time spent and the retention rate, in contrast, quarter-over-quarter reduction in the overseas marketing and sales expenses. Furthermore, we implemented an organizational consolidation in our overseas business by integrating different regional sub-product operation and middle office teams with aim of optimizing overseas business collaboration and resource utilization.
We also began to test the waters via monetization in overseas markets as we target the third monetization model through the live streaming advertising in the near term. Now I'd like to pass to Nick to share the financials. Thank you. Now, please let me have a look at the financial performance of third quarter of 2021. Our revenues for the third quarter of 2021 increased by 33.4% year-over-year to CNY 20.5 billion. The increase was primarily due to the high contributions from online marketing services and other services, including e-commerce business. Our cost of the revenues increased by 37.1% year-over-year to CNY 12 billion for the third quarter of 2021. The year-over-year increase was primarily the result of the three factors.
The first one is increased revenue sharing costs and related taxes in line with our revenue growth. Second, increased broadband expenses and service facility costs, as well as the higher depreciation and amortization costs of assets driven by the increased traffic. Third, increased employee headcount to support the business growth, which led to higher share-based compensation expenses. Our gross profits for third quarter of 2021 reached 8.5 billion RMB, growing 28.6% year-over-year, with a gross profit margin of 41.5%. Our selling and marketing expenses decreased by 2.2% quarter-over-quarter to 11 billion RMB for the third quarter of 2021. That's a percentage of the total revenues. It dropped from 58.9% to 53.8% for the second quarter of 2021.
This was due to tightening spending in the overseas business development and increased sales and marketing expenses efficiency in domestic market. Administrative expenses for third quarter of 2021 increased by 5.7% quarter-over-quarter to RMB 913.1 million, representing 4.5% of total revenues. This was primarily due to an expansion of the headcount to support the business growth as well as the related increase in share-based compensation expenses. Research and development expenses for the third quarter of 2021 increased by 7.8% quarter-over-quarter to RMB 4.2 billion, representing 20.6% of the total revenue. This increase was primarily driven by expanded R&D headcount in the quarter.
We continue to increase investment in big data and other advanced technologies and related share-based compensation expenses. Our loss attributable to equity shareholder, equity holder of the company, was RMB 10.1 billion for third quarter of 2021, and adjusted net loss for the third quarter of 2021 was RMB 4.8 billion. We maintain a very strong balance sheet positioning in the third quarter with cash and cash equivalents, time deposits and restricted cash and wealth management products of RMB 52.4 billion as of September 30, 2021. Now please allow me to hand over to Su Hua.
Our achievements in the past quarter were very encouraging. This June marked the tenth anniversary of Kuaishou's founding. Over the past decade, we have continuously expanded the scale of our organization, along with the creation of a derivative business line, as well as the overall development of the capacity and also scale of each business. We are also constantly review and iterate internally. Over the past few months, Yixiao and I reflected extensively on Kuaishou's long-term strategy development, as well as organizational restructuring and efficient optimization. Fortunately, our decisions have been receiving support from the board. At the end of June of 2021, we took the lead in consolidating report lines of user growth and product departments, integrating online user data, product data, and budget management and alignment product. Notable results as evidenced by enhanced our acquisition and also the retention efficiency.
At the end of September, we went a further step with the restructuring by merging operations, user growth, and product departments to optimize growth efficiency. The essential transformation of our business from a function-based to a business unit-based one. We moved some departments that were previously mid-office to front office and also making part of a closed-loop system. Meanwhile, we revised and also reviewed the overall reorganization of the various functional lines at the back-end to strengthen business development support. The restructuring has clarified each business unit's rights and responsibilities, and also enables more efficient resource utilization and internal coordination. Following the restructuring, mine and also Yixiao's management roles have changed while continuing to work together on the same goal. As Chairman of the board, I will focus on the company's overall strategy, planning and development with more strategic and also ability to explore new directions.
Yixiao as CEO will focus on managing the company's day-to-day operations and business development. We are confident that we will systematically achieve our long-term business goals with a leaner organization and stronger organizational agility. At the same time, we wish to elevate everybody's unique sense of happiness as we contribute to industrial world innovation and overall development. This is the end of the prepared remark. We will now open to junquen.
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Uh, good evening management, and thanks for taking my questions.
Congrats on the very strong set of results. I have two questions. First, we saw that the traffic for third quarter had been very strong. May I ask what are the drivers behind? What is the roadmap to reach the 400 million DAU target with a continued strengthening user engagement? My second question is the regulatory headwind and slower macro have hurt the China advertising demand. Yet we have delivered a very strong advertising revenue growth for third quarter. Can you share with us the drivers behind and your growth outlook? Thank you.
[Non English content]Thank you very much for your question, and please allow me to address the question related to traffic.
First of all, we are firmly optimistic on the short video sector. We believe the long term DAUs in China can potentially reach 1.1 billion. Traffic on Kuaishou also has the potential to continue to increase as short video and live streaming become widely used infrastructure in our society and further empower diverse industries such as public welfare, education, e-commerce and local services, and so on.
The excellent user growth in the third quarter gives us even more confidence that we can achieve our mid to long term user target of 400 million DAUs.[Non English Content]
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The increases in user base and also user time spent were mainly due to our continuously enriched content, merchandise and services. On a content side, the Pan-knowledge vertical has enjoyed a rapid growth in the user time spent, and we also launched novel formats such as the debate contests, which were quite popular among the users. Other examples are spot and short plays, both of which have seen increased number of views and user time spent. In terms of merchandise, we actually continue to bring new categories and branded products to our platform, providing more choices to our users.
With respect to services, we are exploring visualization opportunities for more user and usage scenarios. Meanwhile, taking into account of the different characteristics of public and private domains, we continue to improve the distribution efficiency to better match the value of content with users and improve the experience and happiness of our users. Recently, we gradually increased exposure of content from follow creators in our swipe up and down single column feed, which not only increases the recommendation of interested content for users, but also improves the traffic conversion between our public and private domains. Overall, the pace of the growth in our user traffic has exceeded our initial expectation. Growing forward, we will prioritize the user demand more dynamically and continuously iterate our ecosystem development strategy.
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Second of all, please allow me to address the question relating to the advertising. Like our peers, we did feel the pressure from recent regulatory and macroeconomic environment. Some advertisers pulled back and adjusted their budgets, which resulted in a weaker bidding environment across the ad industry. However, looking at ourselves, our ad business growth has been faster than the industry and we have been constantly gaining market share. Let me provide with more color. First of all, for the overall industry, the video-based ads in the form of short video and live streaming have become increasingly popular among the advertisers. Our unique position as a social platform and content community, as well as our featured combination of private and public domain traffic, have won us a growing share in the budget allocation. In the third quarter, our traffic also maintained a very strong growth momentum, which contributed to the continuous rapid development of our business despite the challenging macro environment. With the optimization of our advertising materials and recommendation capabilities, our ad load in the third quarter increased slightly as we planned, and we also open up new ad space.
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Secondly, our advertising system and products are constantly iterating. For example, we connected Xiao Diantong and Kuaishou's Fen Tiao to build Magnetic Gold Bull, allowing customers, consumers to advertise in both public and private domains at the same time and allocate budgets dynamically to improve decision making efficiency, which not only optimizes the customer ROI, but also releases more ad spaces based on the same traffic. Certainly, we continued to improve our sales and services capabilities and quality, proactively expand industry coverage and optimize direct sales and agent channel management. With these, we were able to achieve growth in both number of advertisers as well as the ARPU. For brand ads, we have become increasingly recognized by advertisers, given the success of our benchmark cases in many industries.
Recently, we began to work on marketing campaign initiatives with several well-known brands in different industries, including not only merchant brands, well-known market brands, but also upscale luxury brands. Lastly, thanks to another highlight of Kuaishou, we provide a native closed-loop system to our advertisers for e-commerce transactions. Our large-scale e-commerce GMV has enabled us to maintain our own growth pace while facing a challenging macro environment.
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Of course, we remain cautious and will continue to closely monitor the short-term fluctuations in the advertising industry. In the long run, we are confident that the continuous growth of our advertising business as we believe, compared to our traffic market share, our online marketing business penetration still has huge potential to grow. Looking ahead, along with the improvements of our ecosystem and advertising system, we will continue to optimize user experience, empower advertisers, and enhance our own monetization capabilities.
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My question is about your sales and marketing efficiency.
It seems like the user growth in the third quarter pretty decent, while sales and marketing costs actually dipped sequentially. Just wondering how you guys balance expenses and user slash revenue growth. What could be the sales and marketing trend in upcoming couple quarters? Any difference in terms of your planning versus, let's say, you know, couple of quarters go before the restructuring? Thank you.
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All right. Thank you very much for your question. Internally, we are determined to reduce the costs and enhance efficiencies and started to take actions in the third quarter. As mentioned earlier, we saw noticeable effectiveness of our user retention rate optimization after merging user growth department and product department at the end of June. Through integrating the user and product data, accuracy and relevance of our content recommendations and user experiences were further enhanced. Also, the DAU retention rates across the next day, seven-day and 30-day periods were all improved. With respect to user acquisition, we conducted systematic and refined channel efficiency assessments and proactively eliminated certain inefficient channels while exploring new ones. We further merged the operational team into the user growth and product department at the end of September.
Through strengthening the collaboration among our content, community operations and user growth. We aim to more effectively elevate the user activeness and engagement, and further increase the traffic growth contribution from the organic channels. The optimization of retention rate and user acquisition channels also contributed to a sequential improvement in CAC per user in a third quarter.
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With respect to maintenance, we adopted a more refined approach to manage subsidy. After this adjustment, our customized incentives targeting different user groups showed more significant results. In the third quarter, the maintenance cost per DAU decreased month by month. Meanwhile, as the short video industry moves into the next development stage, the growth has been increasingly driven by organic and differentiated supplies and operations. With respect to our organization structure, in September, we completed the adjustment of our business unit-based organization. This, along with our efforts to strengthen management financial report of each business lines over the past few months, allow us to more clearly see revenues and also expenditures at each business line, helping us optimize efficiency more effectively.
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In the overseas market, we also adjusted our strategy to make more efficient regional investments and improve the level of user activeness through optimized products, content and algorithms.
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In the long run, we believe revenues were driven by the dual drivers of average DAUs and per DAU monetization efficiency, and we still have considerable upside in the revenue per DAU. As for gross margin, we also see substantial room for further improvements driven by increasing revenue contributions from our higher margin advertising and e-commerce businesses. With respect to our sales and marketing expenses domestically, we expect to lower the maintenance costs per DAU by enhancing advertising efficiency and improving retention rates, as well as refining operational management. Our sales and marketing expenses as a percentage of our total revenues will also decrease as our revenue per DAU increases. This is one of our key goals for next year's business planning.
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We have also made clear plans to reduce the costs and expenses, and also improve efficiency in areas such as bandwidth usage and server deployment and so on, targeting to be in line with the industry peers. While our total traffic grew 22% quarter-over-quarter in the third quarter, our operating cost only increased 3.8% compared with the second quarter, demonstrating our improvement in operating efficiency. On the other hand, investments in assets such as servers are front-loaded, meaning our user time spent and unit time spent monetization efficiency normalize over time. We expect our operating cost as a percentage of revenue to decrease significantly.
In terms of staff-related expenses, in fact, this year we have shored up sufficient human capital, and there is no plan to increase headcount significantly next year.
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I have two questions. The first question is about the live streaming business that we are seeing the MPU and people are improving on a quarter-over-quarter basis. Just want to get a sense about how we should think about the live streaming business going forward and our expectations in coming quarters. The second question is more about the regulation side. Just want to get a sense about how PIPL and also the Data Security Law would impact our operations, if any. Thank you.
[Non English Content]Thank you very much for the question.
First of all, let me answer the question relating to the live stream. Our various business lines add different value to Kuaishou's ecosystem. Live streaming is a hallmark of our community and a place of streamers and users to interact and build trust as well as a destination for content. Through live streaming, we have also seen the user needs for physical goods and services.
When these needs are effectively met, the trust based interactive relationship between the streamers and users is further reinforced, while our monetization model broadens at the same time
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In the third quarter, we cooperated with more diverse streamers, maintaining a high level of effectiveness on the supply side. Because of the high quality content and traffic distribution support in the public domain, more users have been attracted to the live streaming, raising the live streaming DAU penetration rate to 78%. This has led to a consumption rebound with MPUs rising quarter-over-quarter and ARPU improvement both quarter-over-quarter and year-over-year.
Going forward, we will adhere to the value proposition of our live streaming business and ensure an active live streaming ecosystem by further optimizing content supply.
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Now I would like to answer the question relating to regulation. We constantly attach great importance to data security and personal information protection related work.
We have been proactively and orderly advancing various compliance measures within the framework of laws and regulations, and in accordance with the guidance and opinions of the relevant authorities, while continuously optimizing the product functions。
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As for the quantified impact, we are still evaluating like the rest of the industry.
Also as a comprehensive platform, we believe that we are well positioned to provide more efficient online marketing solutions to advertisers, given our sizable user base, technological expertise, business potential, as well as our understanding towards the user and community, and our closed loop commercialization capabilities. In the long run, despite the combined impact from macro environment and economy, we hope to continuously create more value for users and advertisers.
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Thanks, management, for taking my question.
The first question is regarding our e-commerce business. In Q3, we notice the GMV growth accelerate, it surpassed our expectation and also the branded e-commerce is also growing very well. Can you discuss in more details our future development strategy? Secondly, on the overseas business, in prepared remarks, you mentioned there was an organizational upgrade. Can you discuss how is overseas business trending and what kind of adjustment we made to the development strategy? Thank you.
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Thank you for your questions. Let me address the first one related to the e-commerce. As a new content format and channel, live streaming e-commerce has shown great advantages for both consumers and supply side. Our strategy is mainly in four areas. The first one is we will continue to reinforce our trust based e-commerce model. Kuaishou's live streaming e-commerce is built upon the trust between users and platform, as well as the users and streamers, resulting in a high repeat purchase rate on a basis. From a platform perspective, we will further strengthen the rules for quality control and order fulfillment assessment, introduce more user rights and protection measures such as nine times compensation for any counterfeit sold, no hassle seven-day return policy.
Launch stricter protection and compensation policies for special categories such as the centralized warehouse for authenticating jewelry and jade, and official verification and quality assurance for second-hand mobile phone, etc. We also make user evaluation an input into the traffic distribution algorithm, introducing evaluation indicators like the product cost-effective measures to continue to optimize the trust-based purchasing experience. With these ongoing efforts, our e-commerce monthly repeat repurchase rate increased to over 70% in September, while the monthly ARPU expanded further as well.
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Second, our traffic on traffic and matching. Through our user insights, we can provide users with products that better meet their needs and interests, consequently improve conversion efficiency for streamers and merchants. By means of a high conversion rate of our private domain traffic and distribution support from our public domain traffic, we aim to fully leverage the traffic on our platform and continue to drive e-commerce user penetration and expand paying ratio.
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Third, we continue to build out our ecosystem infrastructure, including introducing more merchandise suppliers, expanding to the origin of the supply chain, diversifying the number of product categories and SKUs, and strengthening cooperation with service partners. In the third quarter, we aggressively developed the branded industrial base and strategic service partners and on-boarded hundreds of them. These service partners have assisted the merchants in training and recruiting streamers, as well as provided the traffic operations, supply chain and logistics, and after-sales service, all aim to help the merchants to grow and improve their operational efficiency. The GMV contribution of the merchants served by service partners have increased constantly. E-commerce is a business with long and deep industry and development chain.
Looking ahead with a longer time horizon, we need to devote more time and resources to establishing a solid infrastructure. The pace of our investments and development is also similar to that of other mature e-commerce platforms. Lastly, we will further strengthen and scale up the branded e-commerce through attracting more brands to our platform, launching more support plans, and increasing the proportion of brand self-operated live streaming. Our e-commerce and ad business provide a closed-loop platform and foundational support for brands that unite brand promotion with performance-based ads. We are pleased that the proportions of the branded merchants and branded GMV on our platform grow constantly, which help drive the increasing number of active e-commerce buyers and higher value per order.
Especially, we set up a SKA team to better serve, brands and brand customers and providing them with one-on-one business services, detailed platform operating rules, as well as operating methodology of successful cases to empower business to grow. Our SKA team also helps the businesses integrate, marketing resources, spanning Kuaishou products and platform, providing supports in business review, problem diagnoses, commercialized product, tie-ins, and marketing tie-ins. We also leverage our advantages and characteristics to empower brand merchants in many aspects, including but not limited to the establishment of a brand persona for self-operated live streaming, operations of public domain traffic, precise targeting of KOLs for distribution, refined guidance to accumulate customer assets in private domain to improve repeat repurchase and so on. Now please allow me to answer the question relating to the overseas business.
We are firmly optimistic about the potential of overseas short video market and confident in the Kuaishou's core competencies. Following the remarkable user growth we achieved in the first half of the year, we have further optimized and adjusted our overseas strategy in the second half. First, in terms of organization, in parallel with the group, our overseas teams that supported different regions were consolidated into integrated products, operations and mid-office teams in order to optimize overseas business collaboration and resource utilization. On the market side, we are more focused on development in key regions to improve the single market efficiency. We have also decreased our investments in markets with low returns.
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Our priorities have shifted from user growth to building a positive flywheel products, content and algorithms. Our goal is to break through the cold start stage, improve user quality and solidify the user stickiness as well as accumulate the valuable experience for a broader overseas strategy in the future. After the adjustment, key metrics such as the average MAUs, DAUs to MAUs ratio, the user retention rate, and user time spent all improved in overseas market in the third quarter. At the same time, we started the trials in monetization. Going forward, we will make paced progress in implementing our long term overseas strategies.
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We have seen that recently Kuaishou has invested in and published several special content genres such as short-form dramas, sports and knowledge.
We are wondering what is your future plan for the content ecosystem? Thank you.
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Thank you for your question. We have always operated our content community on the core values of authentic, diverse, beautiful and beneficial, aiming to help our users discover a world of content where they can expand their life experiences and interests. Our investments in content are tailored to user needs. As we provide more diversified content catering to evolving needs, we aspire to be a consistent source of fun and value to our users.
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Pan-knowledge is a great example. We noticed that the user demand is shifting from pure entertainment consumption to wholesome content with values. After launch, Pan-knowledge content gains stronger popularity among our users.
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We're also aware that content operations are equally important as content itself, as it can better help unlock the content value, enhance the user engagement, and further expand user base. For example, we started to introduce numerous sports content to our platform from the end of last year. We attach great importance to attaining rights for derivative work as well as developing related user interactive activities. Our systematic content operations contributed to a noticeable growth in both the penetration and consumption of the sports content and activeness of content creation, which in turn benefited our content supply.
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Generally speaking, UGC is the dominant form of content of Kuaishou. As a platform, we will continue to optimize the creation experience and empower creators to maintain high productivity, providing them with social value, economic value and traffic as well as monetization support. With respect to emerging content verticals, we will take a modular approach to look into their overall supply chain. For example, the PGC that requires investments in copyright, we will evaluate the returns comprehensively and invest selectively. Over a longer time frame, ongoing improvement in content depth, breadth, quality and level of differentiation will help us achieve more organic growth and a higher level of user engagement. As such, we will continue to value the content and remain committed to its investment.
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Thank you very much everyone for your participation. If you have any further question, please feel free to contact Ms. Cynthia Wang, VP of Capital Market and FP&A, and also the IR team of Kuaishou. Thank you.