Hello, and welcome to the Meitu Incorporation 2019 interim results analyst conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question-and-answer session. Please note this call is being recorded. Today, I am pleased to present [Johanna Chen]. Please begin your meeting.
Hi, this is actually the CFO, Gary. Welcome everyone to the Meitu first half of 2019 analyst conference call. Today we have Mr. Cai, the chairman of the board, the CEO, Mr. Xinhong Wu, and myself, Gary, Chief Financial Officer. Now I'll pass the call to Mr. Cai for some opening comments. He will present in Chinese and then followed by an English translation.
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Thank you very much for everyone attending today's analyst call. In the first half of 2019, Meitu is still in the process of a strategic adjustment, but we have already achieved some interim results, which we think is very encouraging. First of all, our global MAU has already resumed to the growth trajectory, as we saw that in June 2019, our MAU was higher than December 2018 by 0.6%. The social transformation of the Meitu app is also doing very good. Not only we have a pretty solid user growth, the time spent per user on a daily basis has also grew over 100% compared to when it is a pure utility app. Subsequent to June, it's also showing a very positive growing trend in terms of the time spent.
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In terms of monetization, we have not only achieved a 27% year-on-year growth in our core advertising business. In overseas market, we have also started a premium subscription model, which was very successful and has become one of the fastest-growing subset under the IVAS segment. In terms of overall financial, in the first half of 2019, our adjusted net loss has narrowed significantly, compared to last year, the loss was 41.4% less, which is within our expectation. Facing the global uncertainty in terms of the macro environment, we are going to focus our resources in the highest projects that gives us the best return on investments, so that we can create long-term value for our shareholder.
Now, I would like to ask our Chief Executive Officer, Wu Xinhong, to share the operation.
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Thank you, Chairman. Welcome everyone again to the analyst conference call. In June 2019, the total MAU of Meitu's portfolio was 308 million, which is 0.6% higher than the 306 million MAU in December 2018.
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Since April 2019, our company's MAU has been rising every month. We believe that is a strong signal that our MAU has already resumed to a growth trajectory. Within which BeautyPlus, which is our overseas product, and our core product, the Meitu app, were the two major drivers for such growth.
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Although the MAU of BeautyCam and Meipai has been declining, we note that the MAU of BeautyCam, the decline has already decelerated substantially. Since April this year, BeautyCam's MAU has already been increasing every month. In terms of Meipai, the MAU decline is the highest among our portfolio. As the social transformation of the Meitu app continues, the position of Meipai is also going to change, and it will become part of Meitu app's ecosystem.
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On to the social transformation of the Meitu app. This has been one of the highlights since 2018. In the first half of 2019, we believe that the transformation has achieved some good interim results and has laid down a very solid foundation. First of all, the monthly active users of the social Meitu app in June has reached 16 million. The daily time spent of the social user has reached about 12 minutes in June, which compares to about five to six minutes when Meitu app was a pure utility app. It represents about over 100% growth. The time spent in July and August has still been growing.
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From the content creation point of view, in June, everyday users has been uploading about 780,000 photos and video combined on a daily basis, which represent about 550% growth compared to end of 2018. Although the content of the Meitu social platform right now, majority is coming from photos, we have seen the proportion of video content has been increasing. From a pretty low percentage in 2018 to about 11% in June 2019.
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Going forward, our Meitu app will also have more social features. For example, currently we are beta testing the private album functionality. This private album not only enables user to manage their cloud album much more effectively, but also they can invite their close friends to manage the album together and also interact together within this private album. We believe these initiatives will continue to increase the user engagement of the Meitu app and also bring more user growth.
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In our overseas business, not only we have achieved some very good growth in terms of user, we have also successfully found a new monetization model, which is the premium subscription. Simply put, the premium subscription means that user can unlock certain VIP functionality, such as some unique filters or AR filters that has IPs, such as Hello Kitty or Astro Boy, and all they need to do is to pay a subscription fee. This particular business has been growing very, very rapidly in the first half of 2019. Compared to the same period last year, it has grown over 600%, and it has become one of the very meaningful sub-segment within the internet value-added services.
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In terms of smart hardware, the first cooperation phone with Xiaomi, the Xiaomi Mi CC9 Meitu Edition, has been successfully launched in July this year. This particular product has received pretty good comment from both user and professional review agencies. Apart from smartphones, our smart hardware department right now is focusing on searching for these skin-related smart hardware, and putting some experimental efforts in it. Our long-term vision is that we can help user to become more scientific in terms of skin care, and become more beautiful in real life through Meitu's strong computer vision ability, the data analytics, and also the understanding of beauty.
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Let me take over and talk a little bit about the financial situation. In the first half of 2019, the most important change to our financial or P&L, is that we have classified the smart hardware as a discontinued business. This means the revenue and associated cost and expenses of the smartphone business will not be consolidated, and instead it will be summarized with one line at the bottom of the P&L. In the first half of 2019, the overall revenue is CNY 464 million , about 4.5% less year-on-year. Within which, online advertising is the largest segment, reaching about CNY 362 million . This business has grown 27% year-on-year.
Although starting from the second quarter this year, the global economic or global macro situation has a little bit more uncertainty, we know that our second quarter online advertising revenue actually still have a single digit quarter-on-quarter growth compared to the first quarter. In terms of IVAS, in the first half of 2019, the revenue was approximately CNY 100 million , down about 50% year-on-year. If we analyze this segment a little bit more, we can see that the major decline is coming from the decline of the live streaming business of Meipai. That is because this business is highly correlated with Meipai's user. We have already discussed that Meipai's user has been declining in the first half 2019. If we look closer to this segment, as we have mentioned, the premium subscription growth has grown very substantially.
We think that given this great initial success, we are going to focus more of our resource to work with great IPs globally so that we can try to grow this business by providing user with more IP branded filters going forward. As we said, in terms of the smart hardware, the Xiaomi Mi CC9 Meitu Edition was launched in July this year. In the first half of 2019, such revenue has not been reflected in our financials. We can see that after taking away the smartphone revenue, there is still a little bit of smart hardware revenues within this segment. As we have mentioned, Meitu is currently still in the exploration stage of beauty-related smart hardware. We do not expect this segment will have a very large revenue contribution in the short term.
We believe that helping user to become more beautiful in real life is an area that warrants more exploration. We believe that with our large user base, our data, and our understanding of beauty, we will eventually be able to get some achievement within this segment. Moving on to gross profit. In the first half of 2019, our gross profit is CNY 308 million , growing 28% year-on-year. The gross margin was 66.4% in the first half of 2019 compared to 49.3% in the first half of 2018. The gross margin expansion in the first half of 2019 is mainly because the high margin advertising business represented a higher percentage of total revenues compared to the Internet value-added services, which carries a lower gross margin.
In terms of sales and marketing expenses, the first half of 2019, it was about CNY 170 million , which is significantly less by 38% year-on-year compared to last year. The most important reason behind that was because we have adjusted our user growth strategy, which focusing more on the product itself as opposed to trying to spend user acquisition cost. We have previously mentioned that the June MAU is actually higher than the December MAU last year. You can see that against the backdrop of a reduced sales and marketing, we are still able to grow our user base, which means that we have achieved some success within this new user growth strategy. In terms of R&D and G&A expenses, the first half of 2019 is relatively stable year-on-year. The fluctuation is within 3%.
As we always mentioned, the R&D and G&A is mostly personnel expenses related, so we are not going to expand much on that. If investors and analysts have questions, we can answer that in the Q&A session. Moving towards the adjusted net loss. The first half of 2019 was CNY 172 million , which is 41% less than last year, CNY 293 million . The two main reason for this narrowing of losses was because the internet revenue growth and also a very effective cost control. Currently, while we expect that the full year of 2019, we are still going to make a loss, we believe this loss will be significantly less than the full year of 2018. Finally, in terms of cash, we have a very strong balance sheet. At June 30, 2019, we have about CNY 2.55 billion of cash, which can support our daily operation very smoothly.
In the short term, we are not going to have any capital raising plans. That is all the prepared remarks that we have, and we can now open up the floor for Q&A. Thank you. Operator?
Ladies and gentlemen, if you do wish to ask an audio question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Once again, please press zero one to register for a question. There will be a brief pause while this question are being registered. The first question is from Robert Cao from 86Research. Please go ahead.
Hey, management. Thank you for taking my question. Congratulations on the return to growth of the MAU and also strong time spent data on the Meitu app. I am interested in how we are thinking about the user experience going forward, because we have now two key functions for the Meitu app. One is photo editing and the other is social. How are we balancing those two? Where do we see the user experience going in the future? Then also, if you could provide any color on the usage of those core photo editing apps, how that is evolving as social becomes a more important part of the experience. Thank you.
Okay. Hold on, let me just translate the question.
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From the strategic point of view, the utility now is being positioned to serve the social function. Going forward, I think the innovation on the utility part is actually going to drive more social usage. To give an example, as you can see that the video sharing is growing in the Meitu app. So in the future, there will be more video editing functionality in the Meitu app to support the growth of the video sharing in the social feature.
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From the social transformation since September, October last year, we have seen data for both utilities and social in terms of user engagement has been growing. We also have discovered that a lot of users directly share their photos after they edit it with our utility. So this means that we are slowly building up the user trajectory of the loop of edit the photo and then share it on the social platform. So we believe this usage trajectory is starting to take form.
Thank you.
Once again, if you would like to ask a question, please press zero one on your telephone keypad. Once again, please press zero one on your telephone keypad to ask a question. Press zero two to cancel the question. The next question is from Thomas Chong at Jefferies. Please go ahead.
Hi. Thanks management for taking my questions. I have a question about the advertising revenue trend. Given the fact of macro headwinds, and we see a solid momentum in the first half, how should we think about the trend as we go into the second half in 2020? My second question is about the premium subscription revenue growth. Can you share about how we should think about the second half in 2020? Thank you.
Sure. In terms of advertising, obviously because of the global uncertainty, we don't have a very strong visibility beyond Q3. Right now, as we saw in Q3, it's still going to be a positive growth against Q2. But in Q4, I think the visibility dropped a lot. I'm not saying that it's going to be worse, it's just that we haven't really seen much pre-order coming in. But that has always been the case for our business. Right now, most of our advertising orders is not like a full year commitment and things like that. We'll just have to see how that unfolds. What we want to note here is that our advertising portfolio is actually quite diverse. If you look at the first half momentum, a lot of those is actually driven by programmatic advertising.
[inaudible] is still the largest contribution, but programmatic advertising has also grown quite a lot, and overseas advertising is slowly growing as well. I think our advertising portfolio is quite diverse, and this could be one of the points that could withstand such a macro uncertainty. In terms of the premium subscription model, I think what we can tell you is that the growth has been very strong in the first half. To give you a sense, in December the revenue was a few hundred thousand RMB, and in July it has been CNY 8 million, and every month it has been growing. Right now it is too early to call what is the peak or the trend is still very strong.
We do not really know how to put a figure for the second half, but I think we can expect the growth to be strong in the second half.
Once again, if you would like to ask a question, please press zero one on your telephone keypad. Press zero two to cancel the question. Once again, if you would like to ask a question, please press zero one on your telephone keypad. Press zero two to cancel your question. There are no questions on the line at the moment. I will return the conference back to the management.
Thank you once again for dialing into our analyst briefing call. If you have further questions, feel free to email our IR team at ir@meitu.com and we will respond to you at our earliest convenience. Thank you very much once again. Goodbye.
Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect.