Good day and thank you for standing by. Welcome to Weibo second quarter 2022 financial results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. Now, I'd like to hand the conference over to Ms. Sandra Zhang from Weibo IR team. Thank you. Please go ahead.
Thank you, operator. Welcome to Weibo second quarter 2022 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang, and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management remarks, I'd like to read you the Safe Harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Weibo assumes no obligation to update a forward-looking statement in this conference call and elsewhere.
Further information regarding this and other risks is included in Weibo's annual report on Form 20-F and other filings with the SEC. All the information provided in this press release is accurate as of the date hereof. Weibo assumes no obligation to update such information except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which exclude stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payment and are non-recurring in nature or are not indicative of our core operating result and outlook. Please refer to our press release for more information about our non-GAAP measures.
Following management's prepared remarks, we open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang.
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Thank you. Hello, everyone, and welcome to Weibo's second quarter 2022 earnings conference call. On today's call, I will share with you highlights in Weibo's user, product, and monetization in the second quarter of 2022.
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On the user front, Weibo's MAUs reached 582 million, and DAUs reached 252 million in June 2022, adding approximately 16 million and 7 million users year-over-year respectively. In June, 95% of Weibo's MAUs came from mobile.
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On monetization, in the second quarter, the COVID resurgence, together with lockdown measures in certain major areas of China, adversely affected the ad placement by clients, and most of our clients postponed or cut back their marketing budget since the beginning of the second quarter. In June, when Shanghai and Beijing ended the lockdown step by step, businesses gradually came back into operation. As the June eighteenth e-commerce event kickoff, advertisers gradually resumed their online marketing campaigns. In this quarter, our total revenues reached $452.5 million, a decrease of 22% year-over-year, or 19% year-over-year on a constant currency basis. Our ad revenues reached $385.6 million, a decrease of 23% year-over-year. Ninety-five percent of our ad revenues came from mobile.
This quarter, our non-GAAP operating income reached $145.3 million, representing a non-GAAP operating margin of 32%, up from 29% in the prior quarter. Next, let me share with our progress made in product monetization in the second quarter. On product front, given the current market condition, we continue to focus on enhancing Weibo's competitiveness to improve operating efficiency, maintain user scale, and drive user engagement.
在渠道方面，二季度继续执行渠道优化策略，继续提升渠道ROI。今年上半年用户渠道获客成本单位获客成本比去年同期下降约三分之一。这一方面得益于我们继续削减了低ROI渠道的预算投入。另一方面，在一些优质的渠道上，我们继续深化渠道合作关系，提升投放的效率。我们与渠道战略合作伙伴在基于产品和内容层面一直保持着紧密合作，让微博的热点、社交内容和服务能覆盖至更多的用户，也促进微博成为合作伙伴自身生态中不可或缺的应用。我们在今年上半年重点加强了与合作伙伴基于热点产品的合作，扩充了以热搜内容为代表的在更多核心人口的覆盖，入口的覆盖，明显提升了用户的获取效率。在培养用户对微博热点兴趣的同时，也加强了我们热点品牌的影响力。六月，渠道的热搜用户规模较去年十二月提升超过50%。除此以外，我们与渠道在更多的合作模式，包括商业化上一直保持着积极的尝试，共同促进与合作伙伴在用户规模、品牌影响力、商业上的提升。这些尝试将会在下半年取得比较明显的进展，也将促进我们渠道整体ROI的进一步提升。
On channel front, in the second quarter, we continue to implement optimization strategies on channel investment and focus on improving channel ROI. In the first half of this year, our user acquisition costs decreased by about one third from a year ago. As we continue to reduce budget for low ROI channels and deepen our cooperation with high quality channels and increase user acquisition efficiency. With the strategic channel partners, we have been innovating our cooperation on product and content front in order to reach more users with Weibo's hot trend, social content and services, and to promote Weibo as the essential application in their ecosystem. In the first half of this year, we step up our cooperation with channel partners based on hot trends, making Weibo hot trends available in more key portals.
This initiative significantly increased user acquisition efficiency and strengthened the influence of Weibo's Hot Search. Channel users related to Hot Search in June this year increased by more than 50% from last December. In addition, we have been actively trying more cooperation approaches with channel partners, including our monetization, to jointly improve user scale, brand influence, and monetization for both sides. These attempts shall deliver notable results in the second half of the year and further improve the overall ROI of channel investment.
在社交活跃方面，二季度我们继续加强产品的社交属性，提升核心用户群体的规模和活跃。关系流方面，二季度在保持流量稳定的基础之上，重点对关系流的流量结构进行完善，让更多可以促进传播互动的内容在关系流里面得到呈现。一方面对优质KOL内容进行倾斜分发，另一方面针对优质UGC内容为主的社区，通过算法优化引入用户在社区的活跃行为，让更多的社区节点和内容在我们信息流中得到分发，促进用户在核心场景能够更高效地消费社区内容，建立关系和互动。这些流量结构的调整就取得了不错的进展。六月相比上季度，关系流流量环比三月份保证稳定增长的同时，互动效率提升了超过10%，关系流的社交粘性进一步增强。
On social attributes, we continue to enhance the social features of our products and increase the scale and engagement of our core users. On relationship-based feed, while maintaining stable traffic, we put more emphasis on optimizing the traffic mix of relationship-based feed to allow more exposure of content that can drive distribution and interaction. To this end, on the one hand, we lean toward the distribution of high quality content generated by KOL. On the other hand, in the communities dominated by high quality UGC, we increase user engagement via optimizing algorithms to distribute more community nodes and content in the relationship-based feed. We're encouraging users to consume community content, establish relationships, and make interaction more efficiently in the feed. Such adjustment on the traffic mix has shown notable progress.
In June, the traffic of the relationship-based feed maintained steady growth from March, with user interaction increased by more than 10%, which improved the social stickiness.
另外，在社区方面，我们继续加强超话产品建设，以及超话与核心消费场景的融合。六月，平台上线的独立的社区消费入口位于主界面底部的位置，满足用户基于兴趣社交、周边社交的消费需求和关系构建。同时结合社区内容在核心场景的分发，整体性地提升用户的社区内容消费和互动规模。六月相比上季度，社区的用户规模、发帖人数、发帖量继续保持两位数的增长。在当前的市场环境下，用户在社区活跃度的提升，进一步提升用户在微博社交粘性的同时，也推动了关系流逐步改善分发体系，从而更有利于社交性产品及微博平台的长期健康发展。
On the community products, we continue to enhance Super Topic product and its content distribution mechanism in the main feeds. In June, we upgraded product with Super Topic as an independent tab at the bottom of the main page of Weibo to meet users need to make consumption and build relationship based on interests and locations. In June, the user scale the number of users who posted and the number of the communities remained double-digit growth from March this year. In the current market environment, the increase in user engagement in a community further enhances users' stickiness on Weibo. It has also gradually improved the distribution system of relationship-based feed, which would benefit the long-term healthy development of our social products and the platform itself.
在内容生态方面，我们今年的重点是聚焦垂直领域和账号，提升平台的运营效率。上半年我们的资源和流量倾斜自己平台带来用户活跃和互动的重点账号领域上，整体取得了较明显的进展。这些领域的账号，领域和账号的流量较去年十二月份都提升了两位数的中枢。例如游戏领域，上半年我们重点投入电竞运营，通过加强与电竞赛事俱乐部的深度合作，以实现国内外影响力赛事、国内俱乐部在微博的全面运营覆盖，选手的入驻率达到90%。在游戏电竞内容生态领域的投入，进一步也促进了微博在游戏电竞领域拓展商业化变现的机会。体育领域，冬奥会结束后，我们继续投入头部运动员的活跃运营。运动员在微博的流量和互动量较去年十二月提升超过一倍，也促进了运动员在微博商业化的明显提升。视频号方面，视频号开通规模和视频播放量继续提升，其中优质视频号也由于社交属性获得了更多的流量推荐。六月整体视频播放量较去年十二月提升了两位数。目前已经以上述一些战略，也让微博在目前的社交平台竞争中成为头部用户入驻的必选平台。
On the content front, this year we focused on content and accounts of key verticals and improve our operating efficiency. In the first half of this year, we increased resources and traffic support to key accounts that can stimulate user engagement and interaction on the platform. In general, it made clear progress. The traffic from these verticals and key accounts grew double digits from last December. For example, in the gaming vertical, we focused on esports in the first half of this year. With strengthening in-depth cooperation with esports events and clubs, our cooperation fully covered influential events in China and abroad, as well as domestic clubs with over 90% of players verified their account on Weibo. Our investment around the content ecosystem for gaming and esports verticals further improved our monetization capability in the gaming and esports verticals.
In the sports verticals, after the Winter Olympics, we continued to focus on operation to encourage engagement of these top athletes on Weibo. The traffic and interaction of these top athletes on Weibo more than doubled from last December, which also promoted their monetization capability. On the video account front, the number of video account and its viewership continued to grow. Benefiting from platform social attributes, more traffic has shifted to their high quality video accounts, resulting in a double-digit growth in video views in June compared to last December. We are glad that our initiatives have made Weibo a must-have platform for top users to operate in the current competitive landscape for social platforms.
下面谈一下商业化。虽然二季度的营销环境较为严峻，但宏观经济的政策也逐渐落地，也释放了一定的积极信号，例如国家给予国产新能源汽车的扶持政策等。同时我们也注意到疫情驱动下客户投放行为的新趋势，例如品牌客户加大电商类和效果类的预算的投放。这些行业和客户营销模式的新趋势，也是微博获取预算的新机会。因此，我们下半年把商业化的重点也放在了提升微博品效广告模式的核心竞争力上。在广告产品技术和销售侧都会重点解决和突破，将品效广告与内容运营做更加深度的整合，形成更为成熟的组合营销方案，从而更加适应在预算竞争激烈的客户市场下，保持在广告市场的核心竞争力，并力争提升我们的广告预算份额。
Moving on to monetization. Despite the challenging market environment in the second quarter, we saw a positive signal of incentive policies on the macroeconomy being implemented, such as China's policy support towards domestic new energy vehicles. In the meantime, we saw clients new placement trend driven by the pandemic. For example, brand advertisers increased ad budget in e-commerce and performance-based ads. These new industry trends and marketing models create new opportunities for us to obtain budget. As such, in the second half of this year, we focus on beefing up the competitive edge of our brand plus performance ad offering in key verticals.
To elaborate, we will stack up our efforts to address these trends and make breakthroughs both on the technology and sales front, aiming to further integrate brand plus performance ads with content operations to devise more mature marketing solution combo, which enable us to maintain our core competitiveness and capture higher ad wallet share amid intense market competition.
行业营销方面，二季度上海和北京地区的疫情及管控措施对企业的生产、物流、销售和线下活动都带来了较大的负面影响，这也直接作用于广告营销市场。特别是对电商和日化美妆行业产生较大的冲击。相比往年的传统广告旺季六幺八的电商节点，今年客户的预算明显削减。在其他行业，虽然客户也受到疫情和供应链等行业性问题，但得益于政策对新能源的扶持，新能源车行业在疫情后逐步恢复增长，而我们也提供了更加完整的线上发布营销方案。例如理想L9的上市，从上市预热到发布到深度解读各环节中，组织媒体、明星、KOL生产和运营微博话题，通过热搜放大传播效果，再加上微博品效广告的助推，短短三十六小时，新车相关话题阅读量超过十二亿，讨论量超过八十万。向更多的行业再次展现了微博独有的内容营销和品牌引爆的驱动能力，让客户更加清楚地感知到微博在传统的品效营销模式之外，通过组织媒体、KOL生产话题和内容，并结合微博热点的营销能力，放大话题的传播和讨论，形成破圈的品牌造势能力。在L9发布之后，更多的数码、汽车、快消、奢侈品的新品发布选择在微博进行。客户给微博的预算较原有预算提升明显，新品营销效果得到了客户的认可。另外，游戏行业在二季度仍保持了同比的快速增长，主要是这两年我们坚持在游戏行业拓展品效加内容运营结合的营销模式，巩固了微博预算的获取能力。
In the second quarter, a series of lockdown and prevention in Shanghai and Beijing significantly disrupt production, logistics, sales, offline activities, etc., which directly weighed on the end market, especially on e-commerce and the cosmetic industry. During the 618 ad rush of the June 18 e-commerce event, this year's clients significantly reduced their ad budget. As for auto industry, despite COVID headwinds and industry-wide problems such as the supply chain, the new energy vehicle industry gradually resumed growth, benefiting from policy support. In response, we offered a more integrated marketing plan of the online release. For example, upon launching the Li L9, we organized KOLs and media to generate and operate topics on Weibo from pre-launch to release, and then in-depth interpretation stage, while amplifying the organic distribution effect with hot trends.
Coupled with brand plus performance ads in just 36 hours, topics related to L9 were viewed 1.2 billion times and discussed 800,000 times. The success story with Li Auto demonstrates again Weibo's incomparable capability of content marketing and blockbuster creation to more industries. In addition to the traditional brand plus performance models, Weibo is capable of organizing media and KOLs to produce topics and content, and combining hot events to amplify topic dissemination and discussion, enabling customers to build brand momentum beyond the industry. After the L9 release, more digital, auto, FMCG and luxury brands chose to launch their product on Weibo. They significantly increased their original budget for Weibo, recognizing the marketing effect of the new product launch.
In addition, the game-related industry maintained rapid growth in the second quarter as we kept on expanding the marketing model of integrated brand plus performance ads with content operation in the past few years, which reinforced Weibo's capability to capture ad budget.
从目前看，三季度整体的广告业务，整体客户市场在广告投放方面仍偏向谨慎。在汽车和奢侈品行业，随着疫情缓解和政策释放带来的市场消费能力一定释放，行业逐步在恢复到原有的增长通道中，整体行业发展和品牌营销趋势保持持续向上。这两个行业的广告预算在三季度表现出回暖的趋势。伴随着微博在这些行业内容和内容整合营销方案的成熟，客户认可微博差异化的营销服务能力，也促进了微博预算份额的提升。截至目前，截至八月底，这两个行业三季度的收入较二季度同期增长明显。另外，由于我们在游戏领域的持续投入取得一定效果，在版号尚未完全恢复的情况下保持了份额。但在电商和日化美妆领域，我们看到客户市场在品牌投放的意愿仍趋保守，广告预算的全面恢复仍需一定时间。例如在疫情期间，日化美妆行业客户在生产和物流等方面受到较大挑战，各品牌面临降低库存的压力，整体预算向促销的方向倾斜。这种新趋势也给了我们下半年的广告产品技术和销售方面提出了新的突破方向。针对这些带有电商促销需求的行业和客户，三季度我们会重点推动和部分电商平台的合作，通过加强广告产品研发上的投入，提升客户在微博的电商效果转化能力，从而提升客户在微博的效果预算。目前看日化美妆行业有一定恢复，但是因去年奥运会的高基数，同比仍面临较大的压力。另一方面，我们还将继续丰富我们内容营销场景，将原有以娱乐为主的内容营销场景，拓展媒体内容营销、节日营销等更多的内容元素，将微博特有的话题运营和账号拓圈能力充分发挥在客户的营销场景中，全面提升微博在客户的预算获取能力，这对于稳固我们在广告市场竞争力至关重要。
Entering into the third quarter, advertisers do seem to be conservative on their ad budget in general. On the upside, the auto and luxury verticals have gradually exhibited recovery trends and returned to the growth trajectory in the industry development and thus branding campaigns with ease of the pandemic and the policy support that resulted in pickup in consumption. Currently, we are encouraged to see a notable sequential ad growth and capture higher ad wallet share in these two sectors, leveraging Weibo's differentiated integrated content marketing offerings that resonate greatly in the market. Besides, on the gaming sector, despite that the gaming license approval has not fully recovered, we still maintain solid market share of the game ad budget.
On the flip side, customers in the e-commerce and beauty care and cosmetic sectors continue to be cautious in ad sentiment, meaning that it still takes time for a full recovery. For instance, during the COVID resurgence, customer in the cosmetic and personal care industry have shifted their ad budgets towards sales promotion to clear their existing inventories amid challenges in the production and logistics. In light of that trend, we will step up our efforts to make breakthrough on the ad technology and sales execution front accordingly to elaborate to fulfill sales promotion needs for this industry and customer. We will focus on pushing forward with cooperation between certain e-commerce platforms, coupled with investment in ad product in order to optimize customers e-commerce conversion results and thus capture higher performance based ad dollars.
For personal care and cosmetics category, we have witnessed demand pickup from prior quarters, but still face challenges on a year-over-year comparison due to the tough comp of last year with Olympics-related budget. Meanwhile, we will continue to enrich our content marketing scenarios, expanding the previous entertainment-focused one to more diversified elements such as media content, holiday-based, etc. Our differentiated ad playbook featuring topic operation and across Internet influence enable us to elevate our capability to capture ad budgets, serving as the cornerstone in further strengthening our competitiveness in the market.
在介绍财务数据前，我想就微博在成本和费用控制方面的举措和成果稍作说明。如同我们在上季度财报中提及那样，本季度——本年度我们持续进行成本费用优化，提升经营效率，上半年取得了一定成果。二季度，在收入受到疫情影响明显的情况下，我们的调整后的运营率达到32%，处于行业内较高的水平，其中调整后的销售及营销费用同比下降了27%，调整后的销售及营销费用占收入的比例同比下降了2%，这充分体现了我们持续提升经营效率的成果。同时，我想强调的是，我们的成本控制并不是简单地削减各项成本费用，而在目前的宏观环境和竞争格局下，将资源更多地向我们优势的领域做倾斜。例如在渠道上，我们大幅增加了战略渠道的合作，让我们可以获取更多的高ARPU值用户。在产品运营方面，我们也加大了与内容战略伙伴的合作，让我们提升了在热点以及垂直——重点垂直领域，比如电竞、体育方面的优势。在商业产品上，我们增加客户营销、内容营销相关服务和投入，以提升我们的竞争优势。在提升优势领域增——投入的同时，我们持续提升运营效率，削减了部分渠道投放以及非核心垂直领域的内容投入，同时也减少了非核心产品的研发投入。在下半年，我们将持续这个策略，以保持微博的长期竞争力。
Before moving to financials, let me briefly share some color on Weibo's initiatives and achievements in the cost and expense optimization front. As we mentioned in the last earnings call, this year we will continue to optimize cost and expenses and improve operating efficiency, achieving solid results in the first half of this year. In the second quarter, despite the disruption from COVID resurgence, weighed on the top line, our non-GAAP operating margin reached 32%, which remained at a relatively decent level in the industry, with non-GAAP sales and marketing expenses decreasing 27% year-over-year and its percentage of revenue decreasing 2% versus the same period last year.
That said, we'd like to highlight that the cost and expense control is not simply cutting down all the costs, but rather allocating more resources to our advantageous areas against the backdrop of the current macroeconomic situation and a competitive landscape. For instance, we have beefed up our cooperation with strategic channels, resulting in more users acquired with high ARPU. On product operation, we deepened partnership with strategic content partners, solidifying our strengths around hot events and vertical areas such as esports and sports. While on monetization, we set up content marketing service and investment to extend our leading edge. Meanwhile, we cut back investing in non-advantaged fields, such as certain underperforming channels, content in non-core vertical fields, as well as R&D expenses in non-core products.
We'll keep up with this efficiency initiative in the second half of the year, boding well for Weibo's long-term competitiveness. With that, let me turn the call over to Fei Cao for financial review.
Thank you, Gaofei Wang, and hello, everyone. Welcome to Weibo's second quarter 2022 earnings conference call. Let's start with user metrics. In June 2022, Weibo's MAUs reached 582 million, representing a net addition of approximately 16 million users. Average DAUs reached 252 million, representing a net addition of approximately 7 million users year-over-year. This was achieved through our disciplined channel marketing strategy, demonstrating Weibo's core value proposition to users. Turning to financials. As a reminder, my prepared remarks would focus on non-GAAP results. All monetary amounts are in U.S. dollar term, and all the comparisons are on a year-on-year basis, unless otherwise noted. Now, let me walk you through our financial highlights for the second quarter of 2022.
Weibo's second quarter 2022 net revenues were $415.2 million, a decrease of 22% or 19% on a constant currency basis. Operating income was $145.3 million, representing operating margin of 32%. Net income attributable to Weibo reached $109.7 million, representing a net margin of 24%. Diluted EPS was $0.46 compared to $0.79 last year. Now, let me give you more color on revenues. Weibo's advertising and marketing revenues for the second quarter 2022 grew to $385.6 million, a decrease of 23%. Mobile ad revenues was $364.5 million, contributing approximately 95% of total ad revenues.
The second quarter of 2022 proved challenging as we expected, with the lingering nationwide Omicron outbreak disrupting economic activities, resulting in broad-based headwinds across the overall advertising market for the second quarter 2022. Our leading verticals in terms of ad revenue contributions were FMCG, fresh food products, and gaming. In terms of growth, gaming, food and beverage, and electric vehicle sector continued to trend up against the tough market conditions. Benefiting from relatively resilient ad demand from this sector, we are pleased to capture incremental ad wallet share from clients in these sectors, leveraging the wide adoption of our integrated social marketing solutions by customers and our solid sales execution. On the flip side, discretionary consumption categories, such as apparel and cosmetics, underperformed due to logistics disruptions and weak consumption sentiment.
E-commerce platforms and FMCGs also turned increasingly conservative in their marketing spend amid lukewarm June 18 sales and regulatory challenges. From the ad product perspective, promoted feeds continued to be the largest part, followed by social display ad, and search, and topic ad offerings. Entering second half 2022, we have seen signs of advertising market bottoming out in second quarter and gradual recovery on a sequential basis. However, in light of COVID resurgence and the macroeconomic uncertainties, the recovery trend in the second half could be gradual and be more drawn out than the cycle post-COVID in 2020, considering the more fluid COVID situations and wider regions impacted. Looking forward, we have lots of experience in navigating through challenging market environment and coming out stronger from the downturn.
We remain confident in our long-term monetization opportunities that our unique value proposition and a diversified content ecosystem will unlock. Ad revenues from Alibaba for the second quarter decreased 41% to $23.7 million, primarily attributable to its own conservative marketing strategies and cost optimization initiative amid weak consumption and lockdowns, as mentioned earlier. Value-added service, VAS revenues, was $64.6 million in the second quarter, a decrease of 10%. The decrease of VAS revenues was mainly due to less revenue contribution from membership service and game-related service. Turning to costs and expenses. Total costs and expenses for the second quarter was $304.9 million, a decrease of 13%, demonstrating our initiatives to control costs and expenses while enhancing operating efficiency. The decrease was primarily due to 27% reduction in sales and marketing expenses.
We have since then reduced the channel investment and the offline activities. Operating income in the second quarter was $145.3 million, representing operating margin of 32%, exceeding our expectations as it factors in operating deleverage amid COVID headwinds and our initiatives for expense optimization. Turning to income tax and the GAAP measure. Income tax expense for the second quarter was $17.5 million, compared to $36.9 million last year. Net income attributable to Weibo in the second quarter was $109.7 million, representing a net margin of 24% compared to 32% last year. Turning to our balance sheet and cash flow item. As of June thirtieth, 2022, Weibo's cash equivalents and short-term investments totaled $3 billion, compared to $3.1 billion as of December thirty-first, 2021.
In the second quarter of 2022, cash provided by operating activities was $83 million. Capital expenditures totaled $14.8 million. Amortization and amortization expenses amounted to $14.1 million. Before turning to the Q&A session, I would like to provide update on our ESG initiative. In August, we released our first ESG report, which details our policies, initiatives, and performance in key ESG areas for fiscal year 2021. The ESG practices described in the report demonstrate our long-term commitment to sustainable development and social responsibility with the vision of making the world a better place with the power of Weibo. You may visit our IR website to obtain more information of our ESG disclosure. With that, let me now turn the call over to the operator for the Q&A session. Thank you.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Once again, to ask a question, please press star one one on your telephone. Our first question comes from the line of Miranda Zhuang from Bank of America Securities. Please ask your question.
Thank you for taking my questions. My question is about the advertising. Can you share more color on outlook for the ad spend in the second half and the measures that you are taking to address the new trend and demand in the brand advertisers that you discussed before, and to get more ad spend amid this weak macro and the COVID uncertainties? Thanks.
这个问题是想问一下关于广告方面在下半年的一些展望。因为之前也说到就是品牌还有一些广告主有一些新的趋势，那么你们打算怎样应对？还有包括就是要考虑到我们这个未来可能发生的一些疫情，对于微观和宏观的一些影响。
OK，谢谢。那整体来看的话呢，下半年如果我们看微博的广告收入结构，我们占比超过三分之二的行业是跟消费挂钩的，比如说FMCG、手机、数码、电商这些。那所以说呢，微博广告收入在下半年的恢复节奏也会和整体宏观经济跟消费回暖会高度相关。
In general, if we look at the second half of the year and if we look at the revenue structure of Weibo, we see that two thirds of our revenue is related to consumption related industries, for example FMCG or cell phones or consumer electronics and also e-commerce.
Those things are highly related to the recovery trend of the macro economy.
从目前的情况来看，刚才我根本也介绍了一部分呢。行业变了，宏观经济有一些刺激政策逐渐地落地，比如说新能源汽车的扶持，以及一些部分地区的消费券的发放，这对下半年的消费会有一定的刺激。当然一个是从政策落地到消费复苏，再到广告需求的恢复，我们看还是需要一定时间的。不过我们认为中国的消费市场升级的大趋势还会继续，以及用户消费习惯的改变，从线下到线上的这个改变也会带来一些互联网广告的结构性利好。例如说一些品牌，比如说像汽车，包括一些日用品，他们的发布越来越转向线上。所以说我们还是看好中国互联网广告的中长期的趋势和发展空间。
Currently, I think for a part of the industries, there are already some stimulus policies, for example, the NEV industry and also there have been some issuance of the consumption coupons that brings us some stimulation to the macro economy.
It takes time for the policies to pass on to the economy, for the economy to recover, and then it gets reflected in the advertising industry. We still think that the trend of the consumption upgrade will continue. Also the habits and behavior of the consumers are already shifting from offline to online, and that brings some structural benefit to the advertising industry. For example, like the automotive industry and some other industries are already shifting their strategies and they are already putting some of their product releases online, and those are very favorable for our industry.
那在当前这个中短期这个市场环境下，那外部的宏观经济和消费趋势是有一定恢复，但是呢，回暖的速度不同，行业的差异性是比较大的。对。
In the midterm and short term, of course, the economic recovery trend is real, but the speed of recovery for different industries are quite different.
首先呢，受疫情的影响，有一部分行业的客户的品牌预算，特别是新品发布的预算，有明显的从线下到线上的这种迁徙趋势。通过汽车、奢侈品，包括快消这些行业可以明显地看到这个趋势。这个情况和2020年疫情刚开始出现的时候，手机行业的新品发布从线下转线上是比较相似的。而且我们会看到客户从之前的这种单纯的品牌投放，更多地关注内容营销，例如说我们综合让微博来组织媒体、明星垂直领域的达人来发布营销内容，再通过热搜和话题进行放大。那这方面微博我们会看到，我们相对于传统媒体，包括其他的这种社交媒体平台的优势还是存在的。去强化我们这部分的优势，是我们整个二季度包括下半年工作的重点。
Actually, since the COVID is here, we saw that for some of the brands and for some of the advertisers, actually they are shifting their budget from offline to online. For example, the automotive industry, luxury industry, as well as the FMCG industry. We saw very obvious trends from those industries. Compared to 2020, when a lot of cell phone brands are actually shifting their product releases, especially the new product releases online, the trend is quite similar. On the other hand, for some of the brands, actually they are actually investing in certain areas like, for Weibo, we are very good at, you know, taking a media and also gathering the stars and KOLs and try to work out and bring up the social chatter on certain topics.
In this area, compared to the traditional media, we definitely have the advantage over them. In the second half of the year, we will definitely focus on that advantage of ours.
但是在日化和美妆这些领域，因为二季度疫情，包括三季度的一些部分地区的疫情，整个日化美妆，包括电商平台，其实现在有比较多的广告投入是在商家促销和清库存方面的营销。这方面实事求是来讲，不是微博这样一个平台的这种营销的优势。但是目前得益于我们整个用户和流量还在保持稳定和增长，我们的库存、流量库存和价格还是有竞争力的。我们也在下半年开始会加强广告算法，针对于这种效果类的电商做一定程度优化。目前看还是有一定效果，但是短期内对我们整体大盘的增长助力其实是一般的。
For the cosmetics industry, due to the COVID situation in Q2 and some smaller outbreaks of COVID in Q3, for the cosmetics and e-commerce industry, actually they're spending more budget on their promotions and also some other marketing activities to reduce their inventory. In that area of marketing, actually this is not our strong suit, but we still have the advantage in our users and our traffic, and those two things are still steadily growing for us. We do have the advantage in the traffic inventory as well as the pricing of our traffic. We want to optimize some of our algorithms to improve our you know, outcome in the performance based ads. We also would like to help in that area, but for that area of the marketing approaches, actually it may benefit us in the midterm or long term, but it will not benefit that much for us in the short term.
所以说在整个下半年来看的话，我们的策略也比较清晰。一方面我们会针对于一些电商效果类，特别是一些营销和清库存的，我们会增加目前的流量，增加广告精准算法匹配上的投入，我们提升客户在微博的电商效果转化。但是这部分呢，就是不是我们工作最中心的。我们工作最中心呢，还是让继续丰富我们的内容营销场景，去增强我们在品效广告，特别是新品发布上面的这个营销的能力。然后呢，这是微博目前特有的话题运营和账号破圈的能力，在我们的客户新品发布，包括品牌营销获取方面还是有优势的，这对于稳固我们整个微博在广告市场的竞争力是至关重要的。
In the latter half of the year, our strategies are pretty clear. In the e-commerce performance-based ads and marketing, we would like to improve the efficiency and also improve the algorithm to improve the conversion rate for the customers. Of course, that's not our key in the second half. Our key in the second half is still to improve our content marketing, including brand plus performance-based ads, to improve our capability in that area, especially for the brands to release the products. In that area, we hope that we can help our customers because we have clear advantage in bringing up the social chatter on certain topics. Also we have strong capability to break the circle to really let some of the topics and accounts go viral. We would like to improve in that area.
所以说从下半年来看的话，行业展望从微博的角度来看，我们目前这些行业展望，一方面我们分成一类，就是下半年还是有新品的发布，包括正常的客户进行正常的销售的行业，比如像汽车、手机、奢侈品。那这部分大家会看到以汽车为代表，在三季度会有非常密集的新品发布。那这部分基于微博内容营销的品效广告的竞争力，我们应该是可以获得不错的增长，或者获得不错的跑赢整个市场大盘的能力。所以这是一类行业。另外一类，一些行业呢，在下半年会体验到跟往常不同的，比如像FMCG和部分的电商平台，那这部分客户市场其实下半年在目前的经济形势下面临着较大的清库存和降价促销的这种压力。那这一部分我们虽然信息流的广告的流量充足，但是考虑我们用户的调性和微博的流量的长期价值，我们不太希望我们的用户在微博看到的都是低折扣的打折促销。这方面我们会用一些偏长尾非核心的流量承接客户的营销需求，但是我们的核心场景，不太会拿出来去做类似的这种售卖，特别是可选性的消费行业，比如说日化美妆跟鞋服。所以说这部分行业的恢复和它的增长，可能在下半年相对来讲的话恢复得会慢一些。对。
Actually for the latter half of the year for we see several aspects for the first part in the latter half of the year. There are still gonna be some new product releases for the industries with the normal sales, for example, industry, especially represented by the automotive industry.
In Q3, there will be very dense product releases. For us, since we have the advantage in content marketing with our brand plus performance based ads, we will still see very good growth maybe higher than the industry average. On the other hand, there are some other industries like FMCG or e-commerce, in the latter half of the year, due to the economic situation, they will still face some pressure and they want to reduce some of their inventory, and they want to conduct some promotions and campaigns. Even though we still have very good inventory and our information feed ads.
Still, in order to keep our long-term momentum, and also we need to take a look at the taste of our users. We don't want the users to see the discounts everywhere, so we would look at the long tail effect, but still we will not sacrifice our core scenarios, especially, for example, for our software and apparel industry. For those industries, we still may see a slower recovery.
OK. [Foreign Language]
I think that's it. Thank you.
Thank you. Next question comes from the line of Ashley Xu from Credit Suisse. Please ask your question, Ashley.
感谢管理层接受我的提问。我这里主要想了解一下咱们降本增效的一些措施，以及在财务上到了下半年可以给我们带来的效果。然后我自己很快翻译一下。
My question is related to our efficiency optimization and cost control. What types of measures would be in place for second half? And what's the financial impact? Thank you.
大家也看到二季度我们整个的non-GAAP的运营利润率大概在32%左右，比Q1稍微持平或者略提升了三个百分点。这个其实核心还是说从年初开始，我们当时判断今年的宏观经济会有影响，当然只是说当时没想到疫情的影响会这么大，我们当时已经做了一些降本增效的措施，例如说营销费用方面来讲的话，当然刚才我也介绍过了，市场营销费用比去年同期下降27%，比上季度下降了9%。但是同时我们通过优化，让用户的获客成本比去年同期下降了三分之一。这样的话，其实我们在二季度的获客的规模其实是没有太大变化，但是获客质量是获得了提升。另外在产品研发上面来讲的话，有一些边缘型的业务，或者说亏损这个现金流表现不佳的业务，其实我们做了剥离。同时来讲的话，有些核心产品我们还是在保持着研发和投入。翻译一下。
For Q2 actually as I've already mentioned, our profit margin was around 32%, which is similar or even 3% higher than that of Q1. Actually starting from the beginning of the year, we already foresaw some of the impact from the macro economy. It was just that we didn't expect the impact of the COVID outbreak. Back then, we already started to make some approaches. Actually our marketing fee actually went down by 27% year-on-year and went down by 9% compared to the last quarter. Still, at the same time, the user acquisition cost for our customers went down by one third. With similar user acquisition scale, the quality of the user acquisition actually got better. Also for some of our non-core businesses with bad cash flow, we tried to peel them off, and at the same time, we continued to invest in our core business scenarios.
Mm-hmm. 当然刚才也说了，就成本优化我们不是只从财务角度来看，而更多是基于目前公司对于这个市场竞争的一个判断，以及整个行业趋势的一个判断。实事求是来说，如果我们现在科学地来判断疫情的这样一个趋势，我们很多市场里面有声音，疫情防控放开，对于市场的恢复会有很快的反弹。但是我们科学来看的话，其实对于疫情防控政策，对于线下消费在中短期有明显的刺激和放开，还是过于乐观的。那所以说我们目前的核心整个降本增效的举措，其实核心还是紧盯，一个是运营效率的提升，另外一个是公司核心竞争力的提升，这是我们整个表现。虽然表现出来的是降本增效，但是其实从公司角度来讲的话，还是聚焦于运营效率提升跟核心竞争力提升。
So actually, we see that the optimization of our operation efficiency is not just from the financial perspective. Actually we are doing things based on the judgment of the market competition landscape as well as the industry trend. So if we were to scientifically look at the COVID situation, some may say that the lifting of the control policies may bring benefit to the industry. But in the midterm and short term, we think that that kind of judgment may be a little too optimistic, because the outcome was not that optimistic. Actually for our cost reduction and efficiency improvement approaches, actually we were focusing on two things. One is to improve our operating efficiency, the other is to bring up our core competitive edge. So it may be reflected in our approaches to cut the cost and improve the efficiency. But actually our two targets are to improve our operation efficiency as well as our core competitive edge.
那运营效率提升方面我举两个例子吧，就是我觉得是有助于大家去理解我们的降本增效的这个思考的逻辑的。那以渠道策略方面，刚才我也讲了，我们今年减少了渠道成本，这个市场营销成本大概下降了20%多。但是我们希望大家更关注的其实是我们大幅提升我们渠道的ROI，也就是说我们大概一块钱买一个用户，我们用多少时间可以回收这个用户的成本。那以往在渠道获客方面，我们是要求一年左右收益为正的，因为在中国的用户的换机周期大概在一年半左右。那今年我们通过一方面是重点渠道，我们其实是加大了这种合作的投入，同时来讲把产品和技术方面针对于重点渠道去做战略性的合作。那目前我们大部分渠道是可以做到六个月之内回收用户获客成本的。那个别的这种战略合作渠道，比如说手机厂商，大部分的手机厂商，我们可以做到三个月之内就回收我们获客成本。那这首先保证了我们目前渠道的有效性和利润率。但是我们之所以这么做，更多的核心还是看中长期的。中期的一个趋势就是如果广告市场进一步下探，那我们也不会出现投入产出比为负，也就是说我们不会因为未来用户的广告收益减少，不得不去砍掉一些渠道。对，这特别是一些优质的渠道。但是我相信在市场里面，很多APP是没法在用户的换机周期内回收他们的获客成本的。那同样来讲的话，当我们做到了这些重点的合作渠道的这种产品和回收的优化之后，如果市场快速转好，我们在这个渠道里面就可以帮我们快速扩大我们优质用户的获取，从而帮我们快速提升我们的收入和我们的利润。
So actually I can give two examples about the operation efficiency improvement in respect of our approaches to cut the cost and improve our efficiency. So for our channel strategy, actually, as I said before in marketing expense and in channel cost, we are reduced by 20%. But actually at the same time, we improve the channel ROI by a lot. So that means for one RMB spent on the users, how much time it takes for us to get that cost returned. So the normal payback time for us in the past was one year, because we know that the cycle for the users is one point five years. But now, since for the key channels we are actually investing even more in the key channels and we conducted some strategic cooperation with very important channels as well. So now actually the payback time is just six months. And for some of the very special channels like for cell phone, the payback time is just three months. So actually the efficiency is much better. And actually it's not just about improving that efficiency. Actually, we're looking at the mid and long term of the industry, because even if the industry goes bad, we wouldn't have to worry about the negative ROI. Or in other words, even if the economy gets worse, we won't have to give up certain channels because of the bad ROI, because we already have very short payback time. And for other apps, actually they cannot normally get the cost back within a user cycle. So that means we have the advantage. And afterwards if the economy gets better, then that means for us we can easily increase our user base with a very good quality user acquisition and that means we can even improve our margin even better.
那同时来讲的话呢，在我们的核心竞争力提升方面，比如说我刚才也提到，在一些公司核心优势明显的领域，我们更加聚焦了投入，比如说在重点垂直，比如说游戏、电竞、体育，甚至包括我们在新闻资讯方面，我们今年也加大了和各大官方媒体的内容和商务合作，特别是我们跟官方媒体更多的推动内容营销的模式，形成互补互利的营销服务，给媒体预计今年可以产生比去年增长数倍的这种收入。那同时来讲的话，我刚才也介绍了，这有力地加强了我们的微博的内容营销的优势，让我们跟其他平台在内容营销和品效广告方面更具有差异化的背书。那也就是说我们整体来讲的话呢，在投入方面，在我们的核心竞争力的投入方面，我们还是会不遗余力地今年下半年增加这方面的投入的。
And at the same time, we also have some other approaches in our core competitive edge. For example, for the verticals that we have advantages in, for example, the gaming industry, esports, sports and the news and information. Actually we are cooperating much better with the official media platforms. We took advantage of our content marketing so that we can offer very mutually complementary solutions to those media platforms. We actually multiplied their income several times compared to the previous year. At the same time, the cooperation also benefited us, because that adds to our advantage and our content marketing. Compared to other platforms, we are more differentiated and we get the endorsement of the official platforms. That adds to our core competitive edge. In the latter half of the year, we will definitely continue to invest more in those areas. In the latter half of the year, in respect of our core competitive edge, actually we are using the cost reductions to help our teams, especially the R&D teams, to focus on areas where we can improve the efficiency and where we have the advantage. For example, we can generate more cooperations with more platforms, and also we can improve our content marketing. In respect of our margins, we are trying to maintain a similar level to the previous guideline and the previous level. In the long term, we are always aiming at a higher gross margin level compared to our industry peers. We are trying very hard to maintain high quality and high efficiency growth, as well as the very steady gross margin and cash flow levels. Those things are very important in a market conditions such as right now. With all those approaches, we aim to have more flexibility financially.
All right. Thank you very much for your questions. We have now reached the end of the question and answer session. I'll now turn the conference back to Ms. Sandra Zhang for closing remarks.
Thanks, operator. Conference call today. Thank you for joining us. We'll see you next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.