Ladies and gentlemen, thank you for standing by, and welcome to the Phoenix New Media 2019 first quarter earnings call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Tuesday, 14th of May, 2019. I would now like to hand the conference over to your first speaker today, Qing Liu. Thank you. Please go ahead.
Thank you, operator. Thank you, and welcome to Phoenix New Media first quarter 2019 earnings conference call. I am joined here by our Chief Executive Officer, Mr. Shuang Liu, and Chief Financial Officer, Ms. Betty Ho. For today's agenda, management will provide us with a review on the quarter, and also include a Q&A session after the management's prepared remarks. The first quarter 2019 financial results and webcast of this conference call are available at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings press release, which apply to this call as we will make forward-looking statements. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.
Thank you, Qing. Good morning and good evening, everyone. I am pleased to see a solid start in 2019. Our first quarter total revenue reached RMB 287.3 million, exceeding the high end of our previous guidance. This outstanding performance was the result of new growth initiatives in our content offering strategy, digital reading, and expansion into lifestyle-related verticals. We have optimized our flagship product, the iFeng app substantially. We continue to focus on enhancing our AI framework by further improving the synergies with our editorial system. Our successful integration of human expertise and AI algorithm has helped us to improve our ability to generate and distribute high quality unbiased coverage of major events and breaking news. It also helps to improve our news delivery efficiency. For example, our coverage of the Two Sessions in March once again demonstrated our preeminence in the fields of covering major events.
During our coverage of the Two Sessions, we fully utilized the advantages of artificial intelligence and our editorial expertise to produce and to distribute hundreds of editorial articles and videos based on our exclusive interviews with influential leaders, all of which were well-received by our users. We believe that consumers read news for three reasons: to obtain information, to fulfill interests, and to be entertained. A good news app should satisfy all three requirements and strike a healthy balance at the same time. The sad reality is that nowadays, there are many news apps that only focus on monetary return and chase after users spend time using clickbait content and fake news. Such practice lead to addictive consumption of worthless and even harmful information. In fact, these practices are also detrimental to news apps' user retention rate and their commercial interests.
Accordingly, we have decided to uphold our professional and moral standards. Furthermore, we continue to carry out our mission of providing truthful, objective, and balanced news coverage to users. In addition to providing high-quality coverage of major events and breaking news, we have also strengthened our operating efficiencies in the production of non-time-sensitive premium content. This has been accomplished by combining our AI framework's data processing power with our editorial team's ability to skillfully curate these materials. In fact, we produce and distribute non-time-sensitive premium content more effectively than ever before, which is evidenced by the increasing time spent from our users. More specifically, the average time spent on our news app during the first quarter increased by 16.4% sequentially.
Furthermore, the retention of new users on app increased by 16.9% sequentially in the first quarter, again demonstrating the attractiveness of our news content and effectiveness of our content distribution system. Similar to these operational improvements, we also expanded our WeMedia operations during the quarter, with a particular focus on top-performing WeMedia accounts. As a result, the number of our top-performing WeMedia accounts increased by 25.2% sequentially in the first quarter. In terms of our IP strategy, the initial session of our original series, "Super Town" aired in the first quarter and was a smash hit. The 12-episode show recorded over 1 billion total views online and registered over 600 million interactions on social media.
Another example of successful IP creation is the second season of "A Journey Through Literature." In the first quarter, this show was viewed over 5 million times and praised as the most artistic culture show by the People's Daily and others in the Chinese media industry. In addition, we have a powerful pipeline of new original IP content, including Camera Wrong Talk, [Foreign language], [Foreign language], Our Classroom, [Foreign language], and others, which has the potential to engage a large audience and kick off a re-acceleration in advertising growth. The social and economic success of our proprietary content has once again demonstrated our industry-leading content production capabilities. Going forward, we remain committed to building competitive IP and providing premium content to our users.
We believe both will further enhance our brand image, differentiate us from our peers, and help us expand our user and client base. Let's move on to the recent developments of our new growth drivers. I'll first discuss the progress of our digital reading business. In March 2019, we acquired the majority equity interest in Beijing Yitian Xindong Network Technology. This company operates the leading online reading mobile app, Tadou. Following this strategic investment, we utilized Tadou's strong technology development and distribution capability to significantly enhance our digital reading business. During the first quarter of 2019, Tadou launched a free for read model. This model is very successful, as demonstrated by increase of AAU, average user time spent, and diversification of revenue streams for our digital reading applications.
Meanwhile, for the development of ecosystem of IP from Fanyue, we added more audiobooks to our library, increasing our total audiobooks content to more than 13,000 hours in the first quarter of 2019. Our comic books also performed very well. Our hit comic series, A Deal is a Deal, 一 纸 契 约 , and Marriage and Love Junkie, 婚 爱 成 瘾 , achieved 400 million and 540 million views in first quarter respectively. We believe Fanyue and Tadou will continue to work together to create a superior online reading experience and help to secure our digital reading business as a long-term driver of growth. Lastly, I'll discuss our mobile games expansion efforts. Our entertainment subsidiary, Miaochu, has developed animated movies and video games based on content from Adventure in the Skies, a story of martial arts originally developed by Phoenix New Media.
While the animated series will not be available until the end of this year, its first promo video was an instant success on popular video sharing platform in China. At the same time, Miaochu is also actively developing games for smartphones, PCs, and other games consoles based on storylines in Adventure in the Skies. We are now working closely with some of the most highly regarded game operators in China, and plan to launch our games in late 2018. We not only expect Adventure in the Skies to become one of the most celebrated titles in its genre, we also plan to use it as a roadmap for the creation of future content IP. In regards to Yidian, we are very close to the due date for fulfilling certain closing conditions, and expect to complete the transaction by June 2019.
Yidian has proven to be one of the most successful investments made in the past several years, and we are pleased to share investment proceeds from the sale of Yidian with our loyal and supportive shareholders. Having said this, we are still in the midst of a business transformation and have yet to return to profitability. In addition, while the Yidian transaction has provided a handsome return, it also meant that we relinquish an integral piece of our newsfeed and algorithm development strategy. As a result, we will need to explore additional investment opportunities that are capable of contributing to organic business growth. Therefore, as we consider a dividend plan, we are also trying to strike a balance between rewarding shareholders and ensuring that we have sufficient working capital to fuel future business investments.
In fact, only a handful of companies with ample cash reserve in the Chinese internet space have paid dividends in the past. Consequently, we have preliminary planned the use of proceeds as follows: 15%-25% for potential special dividend payment, 25%-35% for investment in content and verticals to accelerate our organic growth and general working capital, and 40%-60% for strategic investment. This proposed use of proceeds is still subject to the final approval from our board of directors. We remain prudent in selecting strategic investment opportunities. We're only willing to consider those investment targets closely aligned with our funding principles, business philosophies, brand image, and target audience.
As more and more companies reevaluate their traditional marketing strategies in the face of macroeconomic headwinds and industry challenges, our ability to generate accurate and highly relevant sales leads in a variety of niche verticals has made us an ideal partner for many businesses and advertisers. In short, we can help them achieve a high ROI with the limited marketing budgets. Going forward, we believe that we are well positioned to continue enjoying the benefits of this shift away from the traditional advertising model. We strive to enhance our competitive advantage through the professional editing of content, timely coverage of newsworthy topics, and efficient dissemination of information. We seek to differentiate ourselves by seamlessly integrating technology, algorithms, and professional judgment. While relentlessly advancing our core competence, we are also actively expanding new innovative ways to monetize our original and proprietary content.
We are revitalizing growth through strategic investment in new initiatives, including digital reading and verticals. We are confident that by augmenting our leadership in the new media industry, we will eventually become one of the leading news app in China. With that, I will turn it over to our CFO, Betty Ho, for final update on the quarter.
Thank you, Shuang, and thank you all for joining our conference call today. Now let me take you through our financial highlights for the first quarter of 2019. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP consist of share-based compensation and income or loss from equity method investments, net of impairment. iFeng total revenue for the first quarter of 2019 were RMB 284.9 million, which beat the high end of our previous guidance and were flat as compared with same quarter last year. Non-GAAP net loss attributable to Phoenix New Media Limited for the first quarter of 2019 was RMB 111.8 million. Non-GAAP net loss per diluted ADS in the first quarter of 2019 was RMB 1.54. Firstly, on revenue, I will provide details on our revenues for the first quarter of 2019.
Net advertising revenue for the first quarter of 2019 decreased by 11.3% to RMB 216 million from RMB 243.4 million in the same period last year, mainly attributable to a 9% year-over-year decrease in PC advertising revenue and a 12.4% decrease in mobile advertising revenue. This decrease was mainly due to macroeconomic headwind and intense competition. Paid services revenue for the first quarter of 2019 increased by 66.1% to RMB 68.9 million. Revenues from paid content for the first quarter of 2019 increased 147.8% to RMB 52.9 million from RMB 21.4 million in the same period last year, mainly due to the inclusion of digital reading revenues from Tadou. Revenues from games for the first quarter of 2019 were RMB 3.1 million, representing a decrease of 35%. Revenues from MVAS for the first quarter of 2019 were RMB 7.9 million, representing a decrease of 42%.
Revenues from others for the first quarter of 2019 were RMB 5 million, representing an increase of 200.8%. It was mainly caused by the increase in revenues from commission generated from online transactions. Non-GAAP gross profit for the first quarter of 2019 was RMB 108.2 million, compared with RMB 156.4 million in the same period last year. Non-GAAP gross margin for the first quarter of 2019 was 38%, compared with 55% in the same period last year. Non-GAAP content and operational cost as a percentage of total revenue was 51.1%, as compared to 37.1% in the same period last year. It was mainly due to an increase in IP production cost. Revenue sharing fees as a percentage of total revenue was 6.1%, as compared to 3% in the same period last year.
Bandwidth cost as a percentage of total revenue was 4.9%, as compared to 5% in the same period last year. Non-GAAP operating expenses for the first quarter of 2019 were RMB 226.3 million, as compared to RMB 210.8 million. Non-GAAP operating loss was RMB 118.1 million as compared to RMB 54.4 million in the same period last year. Non-GAAP operating margin for the first quarter was negative 41.5%, as compared to negative 19.1% in the same period last year. Net loss attributable to iFeng for the first quarter of 2019 was RMB 119.7 million, as compared to net loss of RMB 57.5 million in the same period last year. Non-GAAP net loss attributable to iFeng for the first quarter was RMB 111.8 million, as compared to RMB 51.7 million in the same period last year. Now I will discuss our balance sheet.
As of March 31st, 2019, the company's cash and cash equivalents, term deposits, short-term investments, and restricted cash were RMB 1.75 billion or approximately $260.3 million. Restricted cash represents deposits placed as security for banking facilities granted to the company and are restricted in their withdrawal or usage. The increase of cash balance was due to the receipt of the $100 million deposit from the sale of Particle Inc. I'd like to provide our business outlook for the second quarter of 2019. We are forecasting total revenues to be between RMB 374.1 million and RMB 394.1 million, representing an increase of 2.8%-8.3% year-over-year. For net advertising revenue, we are forecasting between RMB 308.8 million and RMB 323.8 million, representing a decrease of 2.7% to an increase of 2% year-over-year. For paid service revenue, we are forecasting between RMB 65.3 million and RMB 70.3 million, representing an increase of 40.3%-51%.
This outlook is made in the face of near-term headwinds and a macroeconomic slowdown in China that we expect to persist for some time. In light of the greater market conditions, we are taking measures to actively combat these challenges. In addition to that, we are anticipating continuous investments amid the transformation period. Our initiatives including expanding our own IP productions to cultivate a full IP ecosystem, strengthen on our original content production, and enlarging our content library by investing on lead media. We are confident that our investment and focus on these initiatives will allow us to enter into a fresh growth cycle. We expect our total revenue for the year of 2019 remain unchanged to increase by over 20%. This concludes the prepared portion of our call. We are now ready for questions. Operator, please go ahead.
Thank you, Betty. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait your name to be announced. If you wish to cancel a request, please press the pound or hash key. Your first question comes from Frank Chen from Macquarie. Please ask your question.
Good morning, Shuang Liu, Betty, and Qing Liu. This is Frank from Macquarie. Thank you for taking my question. I basically have two questions. One is on your traditional core advertising business. We experienced an 11% year-over-year decline in ad revenue in first quarter, while the second quarter guidance suggests a relatively flattish advertising revenue. Could you share more about what's the driver behind the recovery of our advertising business, given the still very weak macro condition in China? The second question is on your new initiatives. Could you share more details on the development of your new initiative, including digital reading and maybe online games, mobile games?
For the digital reading, could you share more operating data with us, including the DAU trend, time spent trend, and how many writers do we have, and how do we sign contract with our writers? For paid online reading, could you share with us what our pool looks like for now? For the newly launched free reading model, could you share some outlook on the potential ad revenue per DAU? For the online gaming business, it only contributes a very small portion of our revenue for now. Could you share with us what's the potential in this business, and when should we expect a meaningful revenue contribution from our gaming business? That's all my questions. Thank you.
Thank you, Frank. That was a very long question. I will take the first two questions, and if there's anything to add, Shuang will add. For your first question regarding the traditional advertising business, we are actually experiencing a transformation period in the coming two years. In terms of advertising, we are seeing that advertisers have cut their budgets since Q4 last year, and is prolonging to this year due to macroeconomic headwinds. Our DSP advertising income has been decreased this quarter due to the intense competitions among the advertising based on performances. Those advertisers' budget are always going to big players. That's why the competition has become very fierce. As a result, we need to strengthen our brand advertising by investing more on innovative advertising solutions, on providing more relevant events, original video content, and IP creations, et cetera.
We are also diversifying our revenue streams to transactional basis like online literature, e-commerce, et cetera. We have laid a very good foundation for our brand advertising to continue to grow when we adopted the IP strategy last year. As you have heard the script from Shuang, that the three IPs that we have launched last year were very successful. We are seeing that our brand advertising revenue actually has been increased by 7% this quarter. We will be adding more IP and/or original production this year, and we expect that revenue generated from these IPs will be growing at least 300% as compared with 2018. This is for the advertising income part. For your second question regarding the digital reading and mobile games. As for digital reading, I'm sorry that we are not providing the operating metrics at this moment for competitive reason.
At the end of last year, we completed the acquisition of Tadou, and we made this acquisition because we believe that Tadou's technological capabilities and content resources were greatly complementary to ours. Our goal is to establish a complete digital reading IP ecosystem, which leverages our diverse library of intellectual property, and to monetize it through a full range of IP products. For example, like audiobooks, movie series, comic, and games, et cetera. To achieve this, we are actively expanding our content library and enhancing our technological capabilities. By adding Tadou, it will create synergies on our content acquisition and product diversifications. Tadou actually launched a free reading model early this year, and it was proven to be very successful. That's why we have a better-than-expected result of Tadou, during first quarter this year. As for our gaming business, it has been ongoing for three years already.
Actually, we have launched Miaochu about three years ago as our game division. This Miaochu is aimed to provide original and premium entertainment content with an emphasis on traditional Chinese culture. The founder of Miaochu, Mr. Zhang Yijun, he's known as Gongtangjun. He is a veteran game developer with a proven record of accomplishment. His previous productions including Chinese Paladin, "Xian Jian Qi Xia Zhuan," and Sword of Legends, "Gu Jian Qi Tan." These are all very well received by gamers in China. Zhang has been developing Adventure in the Skies for it to be the full IP operations originated by Phoenix New Media. The novel version has been already published after three years of development. Animated movies and video games are on the way. In terms of games, Miaochu has already initiated beta testing for its RPG version, which received very positive feedbacks from our beta testers.
We are confident that these efforts will ultimately earn us the prestige of a top IP developer and operator in China. That's all our response to your two questions. Frank?
Right. Yes. Very clear. Can I have a quick follow-up question on our margin? We are experiencing a loss temporarily. When do we expect a turnaround point in the future?
As I mentioned earlier, that due to the economic headwinds and the fierce competitions in the market, we are actually experiencing a transformation period. I expect that it will be for the coming two years. We are still at investment period. At least another two more years.
Sure. Thank you. Very clear. Thank you, Betty.
Thanks.
Your next question comes from Alex Yao from J.P. Morgan. Please ask the question.
Good morning, management. Thanks for taking my question. I have a question on your growth strategies, especially the organic growth. I think advertising segment has become a very mature business with slowing growth across the board, no matter for Phoenix or the overall industry. After the disposal of Yidian and you mentioned a number of new initiatives and strategic investments such as digital content, verticalization and IP strategies. However, no matter the strong end or end verticals, we have seen intensified competition from incumbent leading players who throw a lot of cash in these areas. I understood that we have committed 40%-60% cash in strategic investment moving forward. In my humble view, I think it might be better to concentrate our cash in some very promising areas instead of trying in too many different opportunities.
I was wondering if management have identified some very promising areas that could become our organic growth driver in the mid to long run. Thank you.
Thank you, Alex Yao. This is Shuang. You are quite right that advertising business is becoming a very mature business. I want to add that it still have room for further improvement. For our core news app in the first quarter, admittedly, we experienced a deceleration in its growth. We have notably improved the efficiency of our algorithm and our content management process. As a result of push and cold start strategies, as well as the integration of AI technology and our editorial expertise, our DAU actually has shown improvement in the first quarter. We are confident about its growth trajectory for the remainder of 2019. It is worth to note through 2019 will still be a year of progress and development for our core news apps.
Nevertheless, as we continue to invest in its development, we are laying down a solid foundation for the future growth in 2020. For our advertising business, we do think there is still room for further improvement. It will also lay down a solid foundation for future growth. As you mentioned, the strategic investment, we definitely carve out 30%-40% of our investment return policies for future acquisition and investment. I think as I said in my opening remarks, the future investment will focus on the area which can release the synergy, which is beneficial to our brand and address the unfulfilled needs of our core users. The content and AI and vertical areas will be the major focus. Certainly, whether the target can significantly enlarge our user base and better release our superior monetization capability is also a top concern.
From the competitive reasons, at the present stage, I cannot disclose too much on the exact target. Definitely, we have definitely identified several targets. We are in the process of due diligence and the negotiations, it is still not the time to disclose too much details, we will keep the market updated on this. Thank you, Alex Yao.
Thank you, Shuang. I have a quick follow-up. 4 to 5 years ago, you spent around one third or close to 50% of your cash in EDM investment. Moving forward, are we considering such large amount of investment like what we did 4 to 5 years ago?
45.
4 or 5 years ago.
4 or 5 years ago. Yes, I think that's about the range. Yeah, that's about the range.
In a single company, like 30-50 of your cash position?
It's still too early to tell, yeah.
Okay.
I'll keep you updated. Okay, thank you.
Thank you. Thank you very much. Thanks for the call.
Thank you.
Your next question comes from Chuck Lee from First Shanghai Securities. Please ask the question.
Hi, management. This is Cameron on behalf of Chuck. My question is that we don't usually see internet companies pay dividends, especially when considering that you are still transitioning your business. What are you going to do to ensure your growth after you pay the dividend?
Thank you. This is Shuang. As for the dividend policies, I believe that less than 10% of all Chinese internet companies have paid dividends in the past. For those who adopt a dividend policy, are mostly actually engaged in the gaming business and are profitable. Currently, our market cap is deeply undervalued. If you multiply the dividend payout ratio as planned, it's equivalent to a large proportion of our current market cap. In addition, we're still in a transitional period and expect to continue generating loss in the near future. While the Yidian transaction has provided a handsome return, it also meant that we relinquish an integral piece of our newsfeed and algorithm development strategy. As a result, we'll need to explore additional investment opportunities that are capable, as I said in my opening remarks, that are capable of contributing to organic business growth.
The key areas that we can focus on include enhancing our AI capabilities, expanding our content library, accelerating our user base expansion, improving the monetization capabilities of our ADS, strengthening our brand influence, and exploring more investment opportunities in new markets. In fact, we already have identified a few key targets, and we will keep our investor posted on progress. Given our proven record in investment, in last four years, we invested in the Zixun, and we achieved very handsome return. We're confident going forward we'll replicate this legacy. Thank you.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I would like to hand the conference back to Qing. Please continue.
Thank you, operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us on this call. Have a good day.
Thank you.
Thank you all.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.