Good day and thank you for standing by. Welcome to iQIYI fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during these sessions, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I'll now like to hand the conference over to your first speaker today, Ms. Chang Yu, IR Director of the company, to read the opening remarks and the safe harbor statement. Please go ahead.
Thank you, operator. Hello everyone, and thank you for joining iQIYI's fourth quarter and fiscal year 2021 earnings conference call. The company's results were released today and are available on the company's investor relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO, Mr. Jun Wang, our CFO, Mr. Xiaohui Wang, our CCO, Chief Content Officer, Mr. Wenfeng Liu, our CTO, Chief Technology Officer, Ms. Vivian Wang, our CMO, Chief Marketing Officer, Mr. Youqiao Duan, Senior Vice President of our membership business, and Mr. Xianghua Yang, Senior Vice President of movies and overseas business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, Xiaohui, Wenfeng, Vivian, Youqiao, and Xianghua will join Mr. Gong and Jun in the Q&A session.
Before we proceed, please note that the discussion today will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statement except as required under applicable law. With that, I will now turn the call over to Mr. Gong. Please go ahead.
Hello, everyone. Thank you for joining us today. 2021 was a unique year for iQIYI. One year ago, we shared with investors in our shareholder letter that iQIYI delivers its core value by producing and distributing premium entertainment content. Including My Heroic Husband, and Who Is The Murderer, just to name a few. We continued to rank number one in various user metrics according to third-party data. Today, we would like shareholders to recognize that iQIYI is leading the opening of a new chapter in Chinese long form video industry, which involves a number of structural changes. The market competition shifts from quantity to quality. The operational priority shifts from market share to business efficiency.
Everyone, we think the industry is now taking a more balanced approach that result in higher business efficiency, profitability and positive social impacts. These changes are positive. These changes are the consensus of industry leaders, including iQIYI, and they will help the entire industry to achieve sustainable growth in the long term. These structural changes also brought near-term benefits, resulting in a healthy fourth quarter for iQIYI. For instance, we proactively dropped projects that generated low ROI and had limited value creation. Meanwhile, we are more disciplined when investing in the non-core business and initiatives with low long payback periods. Our organization become slimmer and nimbler. We are more focused on our core business than ever, resulting in significant improvement in our cost structure and operating efficiency. The initial results have been very encouraging.
In the first quarter of 2021, the non-GAAP operating loss, a key measure for our business performance, decreased significantly by 45% annually and 52% sequentially, exceeding our expectations. The benefits from this change will extend beyond Q4. We expect the non-GAAP operating loss to be further narrowed significantly in the first quarter of 2022. Our goal is to reach operating breakeven for the full year of 2022 on the non-GAAP basis. We hope to reach quarterly non-GAAP operating breakeven as soon as possible. We believe that we are in the right direction in reaching our goal. We will continue to increase our operating efficiency and improve the quality of our diversified content portfolio through content innovation, production refinement, industrialization of video production, and diversified monetization methods.
We firmly believe premium long-form video content is one of the core needs of human beings. Through the exact execution of our short-term strategy and the rich experience we have accumulated in the industry, we will continue to produce and deliver more high quality and diversified premium content to expand our member and user base over the long term. Now let's go through the performance of business segments in the first quarter and the full year of 2021. Let's start with memberships. Our core business strategy remains focused on the three aspects that drive membership service growth. First, increasing average revenue per membership, also known as ARM, A-R-M. Second, improving retention of paying members. Third, continue attracting new members and reconverting inactive members.
In the first quarter, our membership revenue grew by 7% annually, and the full year 2021 membership revenue grew slightly from last year, mainly driven by our improvement. For the first quarter, monthly ARM was RMB 14.16, up 14% annually and 4% sequentially. The improvement of ARM was mainly attributable to more premium services provided for our users. The success of our innovative operating initiatives and efficient promotion efforts and the successful price adjustment that will be rolled out in November 2020. For example, we launched many innovative marketing campaigns for a number of highly anticipated content launched in December, such as our original drama series, Fengqi Luoyang and Who Is The Murderer from Mist Theater bring exclusive perks to our members.
Benefiting from the success of last year Mist Theater, the membership revenue of Who Is The Murderer recorded historical high among all Mist Theater dramas. During the first two months of the quarter, we faced a great uncertainty in content scheduling, and many key titles were delayed towards the end of the quarter. The average daily number of total subscribing members for the first quarter was 97 million, compared to 102.7 million for Q4 2020, and 104.7 million for Q3 2021. As we launched many premium titles since December, the current number of subscribers is now back at ideal level. Despite the sequential fluctuation in average daily subscribers for the quarter, we are happy to see that subscriber growth on large screen devices maintain good momentum.
The user time spent on TV devices continue to increase, showing the acquisition of content distribution where big screen is growing. This trend presents as a greater monetization potential on big screens. In the future, we will continue to improve the acquisition and the retention of paying subscribers through refined operation strategies. At the same time, the penetration into large screens will be another driving force to the continuous growth of our business. Moving on to overseas business. Our overseas business made great progress. With user base and revenue achieved significant growth year-over-year. The influence of our overseas platform continues to increase, bringing a wider recognition of Eastern culture among overseas user. First, the user base recorded explosive growth, and the average DAU in 2021 tripled from last year. We saw the best growth momentum in Thailand with annual growth of nearly 700%.
Meanwhile, the growth rate in many other regions exceeded 100%, such as countries in Southeast Asia, the U.S., Korea, and Australia. Second, the overall revenue growth of the overseas platform was also encouraging. Membership revenue grew by over 40% sequentially in the fourth quarter and over 80% for the full year. Advertising revenue grew by about 10% sequentially in the fourth quarter and over 100% for the full year. Thirdly, continuous releases of key titles successfully won recognition from overseas user, driving a rapid increase in the ability to continuously expand our user base. During the year, a wide variety of Chinese mainland content such as original and licensed dramas and original variety shows achieved top trend ranking in 14 countries including Malaysia, Thailand, Japan, Korea, and the U.S.
Lastly, we continue to improve our platform capabilities and expand cooperation with local partners. We launched our app on Amazon Fire TV and local TV in North America, and also on many TV devices such as Samsung, Hisense, and LG TV. During the year, we also launched an overseas ad platform to expand our cooperation with overseas brand advertisers and agencies. In the future, we will continue to focus on expanding the scale of our user base and revenue. By leveraging the premium content on iQIYI main app and the continuous improvement of operation efficiency, we are striving to maximize our monetization capability for our overseas platform. Moving on to advertising. The advertising revenue decreased 10% year-over-year during the quarter, mainly due to the decline in brand ads.
The decline in brand ads was mainly attributable to, first, the lack of key content, both for the dramas and variety shows in the first two months of Q4. Second, weak overall macro environment. Despite the decline in brand ads, we are pleased to see that ad revenue from the Mist Theater doubled in 2021, highlighting the success and importance of our vertical theater model strategy. For 2022, we are targeting to secure more key accounts and increase their revenue contribution driven by continuous content innovation and the development of sequels to our success titles. Revenue from performance ads achieved steady growth both annually and sequentially during the quarter. iQIYI Lite was a major driving force. The operating metrics of iQIYI Lite increased significantly, specifically, the inventory increase benefited from strong traffic increase.
The annual growth of performance ads also benefited from the improvement of our ad products as we continue to optimize our algorithm. Moving over to content. We experienced a turbulence and faced many uncertainties that directly impacted content launch during the year, and especially in the first two months of the first quarter. As we gained a deeper understanding of the latest industry policies, we are able to better comprehend the boundaries of content production and scaling. Thus, we proactively managed the process and increased our resilience related to content scaling uncertainty. We launched many premium content towards the end of the first quarter. Optimization of the overall content cost is the most aspect of our recent operational strategy. For the first quarter, the content-related cost ratio continued to improve.
This ratio, as we introduced in the last call, it effectively reflects the operating efficiency of the content we invested in. The ratio has improved over 20 % points annually for the first quarter, as a number of low performing titles decreased both annually and sequentially. Meanwhile, we have utilized our intelligent production technology to increase our data analytical and forecasting capabilities, which in return increased our content success rate. We believe we have a team of content professionals that have the best industry know-how. By executing the aforementioned initiatives, the overall quality of our content team will further be improved. Now let's go through the key titles during the quarter and in 2021.
During the quarter, we ranked number one for the number of new dramas launched in the industry, according to Enlightent, [Foreign language], and we maintained the leading position in terms of market share for variety shows, cartoons, and animation. For the full year 2021, our market share of movies, dramas, variety shows, cartoons, and animations all ranked number one. The number of new drama launched was the highest in the industry. One, for dramas, we focused on enriching and diversifying our IP monetization capabilities. For example, we are building the IP, Chinese Historic City Universe franchise, developing content which is based on the traditional Chinese culture, showcasing the history of rich Chinese culture to the global user through diversified original production. We debuted our first work on the franchise.
Well, as the original TV drama, Fengqi Luoyang, which generated immediate buzz among viewers. The popularity index of Fengqi Luoyang broke 9,000 on the second day of launch, become one of the top-ranking hit dramas that achieved such high index score on our platform. In the future, we anticipate to develop a series of of productions under the same concept to expand the franchise. For the second season of Mist Theater, a number of titles were debuted in first quarter, further enhanced its brand influence among viewers. The monetization capability for the Mist Theater series has become an important growth driver for our membership service. Who Is the Murderer generated the highest membership revenue among all titles. The success also attracted more advertising budget to our platform and demonstrated great flexibility in working with advertisers under the vertical theater model.
Two, for variety shows, we continue to explore new genres and received praise from both industry professionals and audiences. For Q4, our original production, The Super Sketch Show, [Foreign language], maintained solid number one in user time spent for the variety genres. Three, for films, we continue to build our Cloud Cinema during the quarter, aiming to further expand the monetization possibility and establishing a new online ecosystem for film distribution. For example, part of our original films were only released online via PVOD model, and the initial success was encouraging.
In 2021, we launched a total of nine films under the PVOD model, among which our original film, Northeastern Brother , [Non-English content], was released in Q4 and was the second best-performing PVOD film of the year. This recently increases the supply of premium content and gives talented content creators better exposure. Thus achieving a win-win result for both film makers and our platform. For cartoons and animation, we also achieved substantial success in the fourth quarter. We introduced the animation [Non-English content], a project within the iQIYI Chinese Historic City Universe franchise, and a good example that demonstrates our diversified IP monetization strategy. Its popularity index broke 4,000 within 13 hours of its launch, topping the chart on our platform.
Looking into 2022. One, for dramas, we will continue to improve the quality of our content portfolio, especially for our premium original production, and build competitive barriers for our content ecosystem. The key is enforcing brand awareness, explore the brand value of vertical content, and extend the content life cycle by producing multi-season dramas and short series under the vertical theater model. We will continue to pursue achievements with our iQIYI Chinese Historic City Universe franchise. We now have three vertical theaters that provides differentiated content and services to our users, namely the suspense and mystery-themed, Mist Theater, the romance-themed, Sweet On Theater, and our new launched comedy-themed, Laugh On Theater.
We recently launched A Lifelong Journey, [Foreign language], on January 28th, our first key drama for the year, and it has maintained a leading position in terms of effective viewership according to the latest Enlightent data. Two, for variety shows, we will maintain our leadership position in these genres, and focus on the categories that we have rich experience with, such as mystery style competition games, comedy, music and romance. We will further innovative and develop shows in sports and performance competitions to meet the latest user demands. Three, for films, we will upgrade the number of projects, scales and genres of original films as compared to 2021. We anticipated to have six to nine theatrical releases of our original films.
For cartoons and animations, we will continue to cultivate and develop our IPs by making self-realized productions. For example, our original cartoon, The Oath of Wulin, is the first original Chinese animation broadcasted in Nickelodeon TV channel. It has become an instant hit, and it's already under multi-season development. Next, moving on to products and services. In the fourth quarter, iQIYI Lite, [Non-English content] , achieved outstanding performance across various operating metrics. In particular, peak DAU reached 5 million during the period. iQIYI Lite helps us in penetrating into low-tier cities, and we have observed low user overlap between iQIYI Lite and our main app, and such overlap continues to decline. The consumption of library content is much higher on iQIYI Lite, showing different user behaviors between these two apps. As for our interest-based community, Suike continued to improve and enrich our content ecosystem.
For the full year 2021, Suike contributed about 17% user time spent on our platform. Interest-based video constitutes as one of the very important components of our content ecosystem. Since the cost of the content on Suike is relatively low, it eased our cost pressure to some extent. In addition, traffic generated by Suike contributed to the growth of the performance as inventory driving revenue growth. We hope the user-generated short-form videos will attract attention and drive consumption of respective long-form videos creating a closed loop for our online video ecosystem. Special events in Q4. During the quarter, we optimized the organizational structure and created a flatter organization structure that helped us to bring more focus back to our core business and increase the efficiency of our operations.
As a result, there was a non-recurring s everance cost recorded in the first quarter. By optimizing the organization structure, we have assembled a more elite team, which enables us to better focus on our core business and improve operational efficiency. To summarize, we have seen initial positive effects from our cost optimization and organization alignment. Despite the turbulence in the past year, we still maintained our market leadership while dramatically improved our business performances. We will keep enriching and improving the quality of our diversified content portfolio, refine operations of our vertical theater model, improving the efficiency of content investment, and cultivating our content ecosystem that grows our community culture. In addition, we aim to continue increasing our penetration in different geographies and user cohorts through iQIYI Live, large screens, and overseas business initiatives. As a result, our fundamentals will continue to improve.
Our goal is to reach non-GAAP operating breakeven for the year, for the full year of 2022, and to reach quarterly non-GAAP operating breakeven as soon as possible. We have strong confidence and are looking forward to bring everyone a better and healthier iQIYI in 2022. Now, I will hand over to Mr. Jun Wang to go through our financials.
Thanks, Tim. Now let me walk you through our key financials for the fourth quarter. In this quarter, we introduced the concept of non-GAAP operating loss for the very first time. We believe it will help our shareholders to better understand and track our business performances. Starting with the revenues, in fourth quarter, our total revenues reached RMB 7.4 billion, a solid performance considering macro headwinds. Our membership services revenue increased by 7% year-over-year, mainly driven by the growth of ARM or average revenue per membership. Our fourth quarter ARM increased by 14% annually and 4% sequentially. We expect the momentum to continue going forward. Next, move to the costs and expenses.
With all the initiatives previously explained, the fourth quarter cost of revenue decreased by RMB 277 million compared with the same time last year, the major contributor to the narrowing of our operating losses. On the other hand, our operating expenses also decreased by RMB 125 million, down by 6% year-over-year, even with a one-time severance cost. As a result, our fourth quarter non-GAAP operating loss decreased significantly, down 45% annually from RMB 941 million to RMB 516 million, representing a saving of RMB 425 million. Compared with the previous quarter, the non-GAAP operating loss is also narrowed by RMB 557 million or 52% down sequentially.
Heading into the first quarter of 2022, we expect to see further significant improvements in both GAAP and non-GAAP operating losses compared with the fourth quarter 2021. Again, this benefits from our initiatives in cost optimization and efficiency improvement. Our goal is to reach non-GAAP operating break even for the full year of 2022, and to reach quarterly non-GAAP operating break even as early as possible. As of December 31st, 2021, the company had cash equivalents, restricted cash, and short-term investments of RMB 4.4 billion. For detailed financial data, please refer to our press release on our IR website. Now I will open the floor for Q&A.
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone and wait for your name to be announced. To cancel your request, please press the pound or hash key. Kindly ask your question in Chinese first, and we'll translate the questions into English. The participants are requested to restrict to one question at a time. The first question comes from the line of Alicia Yap from Citi. Please go ahead.
Hello, thank you. [Non-English content] Thank you for taking my questions. My question is related to the cost and the profitability. It seems like, you know, you have successfully, you know, narrow down your loss ratio over the past few quarters. Can management elaborate how the company has managed to effectively lower the operating losses? I think you mentioned about the full year breakeven timeframe. Is that indicating, it is possible that you can even achieve profitability as soon as even second quarter or even the third quarter? Thank you.
[Non-English content]
In the fourth quarter, we proactively adjusted our operating strategy, which focuses on optimizing cost and improving operating efficiency to reduce our operating loss. Overall, the results have been very encouraging and we also optimize our organization alignment, which will help to reduce our employee cost and also create a flatter operation and more elite team to help us to focus on the core business of iQIYI and also to improve the overall operating efficiency. On the content side, we are more focusing on the head premium high-quality content, and for that aspect, we won't decrease the number of head content, but we will use content-related cost ratio to help us to identify the low-performing content and practically drop those content investment. Overall, our process for investment, procurement and operation will be refined to overall increase the operating efficiency.
We also build a promotional mechanism that focuses on increasing the revenue performance of the library content. It increases the content portfolio utilization, also creating more inventory for the advertising side and also prolong the lifespan of our content as well as increasing the subscriber revenue. More importantly, for the industrial video industrialization that we've been talking about, whether it's from the short term and mid-term and long term perspective, it's a core focus for our area. We'll continue to push for industrialization as it creates efficiency for content production and operations.
[Non-English content]
The whole premise is to remain stable revenue performance and also remain stable market share as well as traffic. We will lower the employee costs. We are also trying to reduce the content costs and also the marketing expenses.
[Non-English content]
Okay, so for Q4, as you all, the investors will see, we have reduced our content costs as well as operating expenses and narrowed our Opex by approximately RMB 500 million. These positive impacts will continue to release in the next couple of quarters. As you mentioned about breakeven timetable, first, I would like to mention that we will deliver our goal for the year. Our goal for the year is to reach non-GAAP operating breakeven for the full year of 2022 and to reach quarterly breakeven on a non-GAAP operating level as soon as possible.
Thank you for the question. The next questions will come from the line of Thomas Chong of Jefferies. Please go ahead.
[Non-English content]
Thanks management for taking my questions. My question is about the competitive landscape for the long-form video market. Is management seeing any changes that we need to anticipate in 2022? Number two is more about the content production and procurement side. Are we getting more and more rational going forward? Finally, in on the policy or the regulatory environment side, are we seeing the sector is getting more stable? What we should expect, any policies that may come out in the future? Thank you.
[Non-English content]
For the overall competitive landscape for the online video industry, we think it is entering a new chapter. Within this chapter, it focus more on the efficiency aspect and hoping to reduce our operating loss and increase the profitability. This is kind of different compared to the competitive landscape from before. Before, driven by various reasons, the major players are more focus on the quantity of the content versus the quality and etc. We think that the operating focus now is back to the operating efficiency is much more healthy as compared to the market share driven aspect. For the content side, I think, for content production, whether it's for the original productions, it's very different from the licensing content. Overall, the competitiveness within the industry should be relatively softer. Why?
Because the production process for this is much longer as compared to the procurement for the licensed content. There are various key stages or key friction points that we can hit along the lines of this whole process. It gives us more leeway in increasing the overall quality of our original production. Third, regarding the policies, right now we think it's relatively stable. As we have better comprehension of the whole online video regulation and industry and regulatory environment, we know the boundaries of content production as well as content scheduling. The forecast capability increase overall and that will help in terms of our subscriber growth as well as on the revenue advertising side.
[Non-English content]
And in the past two or three years, our strategy focus has been in extending our original production. scale and also including the production capabilities. So in 2022, everyone will see our original production capability and supply will increase significantly compared to before. And I think we now have an industry leading team and also a good number of highly competitive original productions in our platform. Thank you.
Thank you for your questions. Next question comes from Eddie Leung of Bank of America Merrill Lynch. Please go ahead.
[Non-English content] So my question is about the membership growth. We have seen a bit of a slowdown last year probably related to regulation and content issues. Just wondering any outlook for the membership growth into this year and future. Thank you.
[Non-English content]
Okay. For our overall membership subscribers, we have seen some relative pressure in growing the overall membership numbers, because there are different aspects. One is, there is the COVID impact, as well as second, the regulatory environment uncertainties. Third is our overall video production capabilities. All these are the negative impacts that will contribute somewhat to our overall membership growth. Secondly, I think for the overall online video, long form online video, the user time spent have been decreasing. That are relatively true factors for the market. But we want to raise that the importance of online video industry, the long form video, we think is a core need for human beings. The importance is irreplaceable.
I think for the overall Chinese online video market as well as the users, the market is being more mature, and this is a positive impact and positive factor for the overall industry. Third, for the large screen, as we see, namely the iPad, the screens in the cars as well as the smart home, the number of screens has been increasing. There are different user behaviors for different screens. For example, for the cell phone, the most frequent used aspect is communication. But versus the large screen, I think the most used feature is for video viewing experience. Overall, this is a very positive impact or a factor that will drive a future potential revenue growth, as well as the subscriber growth, as well as the ARM that we mentioned before.
Overall, lastly, for the IP protection, we are seeing better improvement on this front, especially for the long-form video IP production. All these will be beneficial factors to contribute to the overall growth of our revenue in the future. Thank you.
Thank you for the questions. Due to time constraint, I would now like to hand the call back to the management for closing.
Thank you for joining us today. Feel free to reach out to us if you have further questions. Thank you.
That does conclude today's conference call. Thank you for your participation. You may now disconnect the line.