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Weibo Corporation  (NASDAQ:WB)
Q3 2018 Earnings Conference Call
Nov. 28, 2018, 6:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Weibo Corporation Reports Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is recorded today.

And I'll now hand the conference over to your first speaker, Ms. Wen Li. Thank you. Please go ahead.

Wen Li -- Investor Relations Manager

Thank you, operator. Welcome to Weibo's 2018 third quarter earnings conference call. Joining me today are our Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Interim CFO and VP, Finance, Fei Cao; and Sina CFO, Bonnie Zhang. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website.

Before the management presentation, I'd like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about 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 the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in our Weibo's Annual Report on Form 20-F and other filings with the SEC. All information provided in this press release is current as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law.

Additionally, I'd like to remind you that our discussion today includes certain non-GAAP measures, which excludes 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 financial excludes certain expenses, gains or losses, and other items that are not expected to result in future cash payments or that are non-recurring in nature or will not be indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks, we'll open the lines for a brief Q&A session.

With this, I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

Gaofei Wang -- Chief Executive Officer

(Foreign Language) Thank you. Hello, everyone, and welcome to Weibo's third quarter 2018 earnings call.

(Foreign Language) On today's call, I will share with you highlights of Weibo's user growth, product and monetization, as well as our key initiatives in 2018.

(Foreign Language) First, let me discuss our third quarter financial results. We continued to see healthy revenue and user growth in this quarter. Our total revenue reached $460.2 million, up 44% year-over-year. Advertising and marketing revenue reached $409.3 million, up 48% year-over-year with 83% of our net revenue in Q3 from mobile. Non-GAAP operating margin during the third quarter reached 41%.

(Foreign Language) On the user front, Weibo's monthly active users reached 445.9 million in September, an increase of 19% year-over-year. Additionally, the average daily active users in September reached 195.2 million, up 19% year-over-year with 93% of Weibo's MAU from mobile.

(Foreign Language) Thanks to our continuous efforts to enhance the operation and distribution of a trend which are typically either hot issues or popular events discussed by users on Weibo. Weibo has further solidified its leading position as a platform for users to create and consume content. This strategy has allowed Weibo's user scale to continue to expand during the third quarter. Our focus to strengthen our software ecosystem for social interactions among users and content distribution has further increased Weibo's solid position as a social media platform and strengthened our platform effect. In return, more and more advertisers are recognizing Weibo's ability in the social marketing.

(Foreign Language) In discussing our operational update for the third quarter, I will cover Weibo's progress in area of users' content and customers.

(Foreign Language) First on the user growth. We see that organic growth of the mobile Internet user is slowing down and the short video industry is becoming increasingly competitive. These factors have put some pressure on the growth rate of the user scale and the user engagement in the first half of 2018. In order to face these challenges, we have refined our strategy to be more focused on taking advantage of Weibo's core capabilities in social and media areas to acquire users and promote user engagement.

(Foreign Language) For example, Weibo has remained as an important platform for the discovery and distribution of trends. This has been Weibo's main differentiator to acquire new users and promote user engagement and we continue to improve this capability. This quarter we have adjusted our product operations strategy and recommendation algorithm to strengthen our competitive edge.

First, we have upgraded our topic products to highlight trends with hash tags adding as points of aggregation, allowing users to discover and consume trends in multiple entry points such as our Weibo hash search and the topic feed within the discovery zone. Second, we enhanced the distribution of trends on others platforms such as Weibo's WeChat mini-program. These upgrades have encouraged more users to discover, consume, distribute, and participate in the discussion of the trends, which in return has allowed us to effectively acquire more users and promote user engagement. Notably, in Q3, the number of trends increased by triple digits sequentially and top content creators post around trends increased by double-digits on quarter-on-quarter basis.

For example, in the third quarter, Super Typhoon Mangkhut, the strongest storm of 2018 and most intense typhoon to affect the region since record-keeping began, hit Guangdong province. We immediately engaged more than 100 local government agency accounts and our city ambassadors to broadcast disaster relief efforts and report the devastating effect of the typhoon and other related coverage in real time. More than 200,000 top content creators participated in the discussion in our platform, helping more people be aware of the natural disaster and support recovery efforts. Over a seven-day period, number of impressions on the topic Typhoon Mangkhut reached 7.3 billion, which resulted in an increase of millions of daily active users.

(Foreign Language) Moving to the feeds product, our focus have always been on enhancing social content production and maintaining the user's social relations as the top priority for content distribution. Our goal is to amplify the platform for social features and to distinguish ourselves from the market. During the past few years, the competitive landscape of information feed and short videos have increased in the mobile Internet industry. Both have been the key drivers for user growth and our main focus around product development.

(Foreign Language) Our two years of product development and enhancements have been paying off. Weibo's relationship-based feed and interest-based feed users scale and user consumption have grown rapidly, and have gained popularity among users to consume content. This quarter, user engagement rate of relationship-based feeds, as well as user consumption of interest-based feeds, both achieved a healthy growth on a sequential basis.

(Foreign Language) Meanwhile, with video, viral as a PGC or UGC (ph) format has become an important and growing area within our content ecosystems, and we have achieved a meaningful progress with our video products. In September, there were short video views and posts grew by double-digits from last year. Weibo Stories' monthly active users and daily Stories viewerships both achieved healthy growth on a sequential basis.

(Foreign Language) The short video market has become increasingly competitive. In order to best position Weibo for success and sustain our long-term competitiveness, we are increasing investment in our user products to feature Weibo's unique advantages in content creation, consumption, and users' social interaction, so we can improve user acquisition efficiency.

(Foreign Language) This quarter, we built out a new version of Weibo app beyond initial test for users. Compared to the old version, we made two primary modifications. First, we have created a video chat named Weibo video community, allowing users to access video content at a primary entry point, and featuring premium video content with IP and programs in series such as our daily vlog, makeup tutorials or set of videos with recurring characters or themes. We intend to cultivate habits for users to discover premium videos more efficiently, and connect and interact with those creators a lot. So the viral distribution of short video is showing great promise in the increase of user viewership, and advertising inventory. By leveraging our core capabilities in content distribution and fans' social connectivity, we think the video community will further help driving the growth of our video user scale and the user time spent, as it will be a designated center stage to a wide range of premium videos and a platform for users to connect and interact with each other and with content creators.

(Foreign Language) Further, on the user products, we have optimized our discovery zone to further strengthen our competitive edge in the discovery and discussion of the trends. We have structured the topics feeds and provide users' personal life recommendation on topics they might be interesting, helping to promote user discussion around topics. We have integrated topic products seamlessly into Weibo's hot search. On the one hand, any content on the hot search that have been formed as a topic will be assigned with the separate topic page. Users not only could discover what are hot and new controversial content on the hot search and they will be also able to view other valuable information including discussions, videos, articles and others based on that topic page. On the other hand, as more users discover, consume, share, distribute, and participate in the discussion of a particular issue or event, the hot issue or popular event could become the hottest topic on the hot search, and eventually go viral on Weibo. This integration represents the information reinforcing that effectively extends user content consumption for a longer period.

(Foreign Language) We believe this upgrade is vital to further strengthen Weibo's uniqueness in social media markets, especially in the creation and consumption of video content and distribution of trends. It is also a key driver to accelerate Weibo's future growth. The new version will be available to our users in the coming quarters, based on the product optimization progress and the users' feed back.

(Foreign Language) Moving to live broadcasting, our strategic investment in live broadcasting has solidified our leading edge in the live broadcasting market for media and celebrity vertical. Given the current competitive landscape of live broadcasting, we plan to acquire Yi's live broadcasting business in Q4. Our goal is to provide Weibo's users with improved live broadcasting experience, by enabling better product integration between Weibo and Yi that focus in media, celebrity, and showcase vertical. Ultimately, this acquisition is intended to increase traffic and revenues to Weibo's platform. Once the acquisition process is completed, it will take us one or two quarters to fully integrate and optimize product. We believe the combination of Yi's live broadcasting business with Weibo will further enrich our content ecosystem, offer better support to top content creators, and improve our monetization capability and efficiencies.

(Foreign Language) Moving on to content, in the third quarter we expanded strategic cooperation with over 2,200 MCNs. Top content creators posts as well as post views maintained double-digit growth from the last year, representing higher engagement of top content creators on Weibo. Weibo has become the inevitable platform for top content creators, primarily because of the following two reasons.

(Foreign Language) First, as I mentioned last quarter, more and more KOLs have recognized Weibo's uniqueness for other content offering platforms. During this year, our short video platforms became more popular among users. Many content creators returned to Weibo after establishing a baseline of influence and becoming top content creators on other platforms. Weibo is recognized as the ultimate platform for KOLs to expand their audience reach and further gain public influence, whereby generating better monetization. In Q3, the number of top content creators from other platforms that returned to Weibo increased to nearly three times sequentially. Those returned top content creators have been actively creating content.

(Foreign Language) Second, we value the top content creators' experience and growth on Weibo. We have largely increased traffic support and subsidies to help top content creators monetize their content. For example, in Q3, we have provided more than RMB500 million worth of advertising inventory as a subsidy to support top content creators to grow. At the same time, Weibo has allowed more top content creators to more effectively monetize those social assets (inaudible) Weibo advertising alliance program. As a result, the average number of posts generated by those content creators who entitle with our revenue sharing increased double-digit.

The considerable subsidies we are providing might temporarily restrain the demand of our native app on the platform, thus affecting our short-term financial performance. However, based on our proven track record of successful cases, we believe its more important to help top content creators grow on Weibo and accumulate social assets and be able to monetize our platform over the longer run. We believe our strategy will facilitate top content creators greater incentives to create higher quality content, enhance user acquisition and user engagement and further broaden Weibo's content ecosystem. All of this will in return help our long-term sustainable growth of our future monetization.

(Foreign Language) Lastly, financial monetization. We achieved healthy revenue growth in the third quarter. This quarter KA revenue increased 73% year-over-year. More and more advertisers do not just pass their marketing content on Weibo, they have increasingly realized Weibo's unique value of social marketing and the power of leveraging our content distribution and then the KOLs' influence. In short, they have to consider Weibo as a strategic partner. This achievement could not be made without Weibo's continuous investment in the innovation and optimization of our monetization products. Our focus to strengthen the strategic cooperation with third-party help KA customer better recognize Weibo's marking value, and enable them to have a better marketing experience.

Separately, the Weibo uni-marketing program, our cooperation with -- collaboration with Alibaba launched in Q2 have made impressive progress this quarter. Currently, more than hundreds of brand advertisers have joined the program and are benefiting from its broad reach. For example , after joining the Weibo uni-marketing program, Dyson was able to more precisely identify the target potential customers by leveraging the existing customer base of Weibo and Ali. After the marketing campaign, users' favorability of Dyson's vacuum increased 43%. Moreover, data confirmed that more a user interacts with the Dyson app on Weibo, the higher possibility the user will make a purchase through Dyson's Tmall store.

(Foreign Language) Turning to SME. In the third quarter, SME revenue were up 35% year-over-year. However, our SME app business compounded challenges in the following two aspects.

(Foreign Language) First, macroeconomic headwinds are expected to continue in the near future, which have already led to a decrease in merchant advertising spending in our field vertical industries such as out of services, wedding business, and other consumer sectors with large ticket size and with a focus on targeting users in the first and second-tier cities.

(Foreign Language) Second, the gaming industry has been one of our top sector of SME app business. However, the recent regulatory changes in the gaming industry had a significant impact on marketing demand of gaming companies. We expect the regulatory impact and the length of supervision lasting longer than we expected.

(Foreign Language) In response to these challenges, we have made strategic adjustments by focusing on the following three aspects.

(Foreign Language) First, we have adjusted the structure and the focus of our sales teams proactively seek for more opportunities to expand the customer base, including regional brand customers and deploy tailored products and marketing solutions to advertisers across more verticals. Notably, we made a meaningful progress in the online education sector in this quarter. Revenue contributed by this sector increased by triple digits year-over-year.

(Foreign Language) Additionally, we tend to further subsidize MCNs and top content creators to grow and monetize on Weibo under the current macroeconomics condition as they are one of our unique assets help Weibo differentiate from other platforms. Our process support and investments have enabled large amount of MCNs and top content creators to grow rapidly on Weibo in the past few years. The considerable subsidies we provided might temporarily restrain the demand of our native app on the platform, thus affecting our short-term financial performance. However, we believe our investment will benefit Weibo's overall ecosystem in the long run.

(Foreign Language) Plus, although we expect the gaming sector's revenue contribution will decline in the short-term, we insist on increasing the investment to strengthen the operation of gaming vertical on Weibo. On the one hand, we believe the resources we invested in the gaming vertical will enable us to acquire younger users at a lower cost, while the gaming industry is currently in the adjustment cycle. And in the longer term, we expect it will bring us corresponding returns after the industry returns back to normal. Notably, in this summer, we acquired many users in the gaming vertical through a series of activity and events.

(Foreign Language) Overall, we have encountered challenges to grow our SME business in the second half of the year, including the impact of macroeconomic headwinds on selected industry segments, and the short and medium-term impact of regulatory and economic policy changes on gaming. However, we will continue to invest in expanding customer base from resilient industries, supporting MCNs and top content creators to build a better monetization ecosystem, developing more verticals that users will be interested in. All of this will, in return, help us to promote the growth of Weibo's SME ad business in the longer-term.

(Foreign Language) With that, let me turn the call over to Fei Cao for a financial update.

Fei Cao -- Chief Financial Officer

Thank you, Gaofei. Welcome to Weibo's third quarter 2018 earnings call. As a remainder, we adopted ASC Topic 606 on January 1, 2018, and our new revenue guidance is consistent with this standard. In order to provide investors with clear comparisons during today's call, I will also refer to our revenue and expense figure under the old revenue guidance, which exclude barter transactions and include value-added tax, to the reported figures in our earnings release.

Now, let me walk you through our financial highlights. All comparisons are on a year-over-year basis, unless otherwise noted. Weibo's third quarter net revenue was $460.2 million, up 44%, or 43% under the old accounting standard, or an increase of 48% on a constant currency basis. Strong advertiser revenue growth was offset by the recent regulatory changes in certain verticals, particularly in the gaming industry, which led to a decrease in merchant advertising spending during the quarter, especially for SMEs. We expect these regulatory adjustments may continue to affect growth of this vertical's advertising spend in the near term.

In addition, the continued depreciation of RMB related to US dollar had an unfavorable impact on revenue growth during the quarter, and we expect foreign currency headwinds to continue in the near term. Non-GAAP operating income reached $188 million, up 42%. Non-GAAP net income attributable to Weibo was $171.8 million, up 49%. Non-GAAP diluted EPS was $0.75 compared to $0.51 a year ago.

Advertising and the marketing revenue for the third quarter reached $409.3 million, up 48%, or an increase of 52% on a constant currency basis. Mobile ad revenue in the third quarter was $341.6 million, (ph) up 58%, representing 82% of our total ad revenue. Our focus to strengthen our platform ecosystems in users' social interaction and content distribution has further increased Weibo's value proposition as a social media platform, and strengthen the platform effect. Thereby, we continue to benefit from the shift in corporate ad spending toward mobile, social, and video with 93% of MAUs from mobile in September. As a result, we are pleased to see that our total advertisers continue to grow from the last quarter.

Turning to KA, in the third quarter, our KA ad revenue reached 136.2 million, (ph) up 73%, or an increase of 78% on a constant currency basis. This strong KA advertising revenue growth was driven by both an increase in ARPA and the expansion of Weibo's key advertiser base. Weibo is tracking key advertisers of all backgrounds based on social relationships combined with the competitive differentiators we have with our unique celebrity assets, KOLs, network effect, content diversity, and integrated marketing solution. (inaudible) we continue to see (inaudible) growth in Weibo's top take industries, with FMCG and IT, electronics, telecom namely firstly growing at triple digit year-over-year. In addition, I will stress the cooperation with Alibaba and third parties such as AB Master and Nielsen in data analytical integration will further allow our key customers to realize better return on their marketing efforts. In return, we anticipate generating increased KA ad spending.

Moving on to SMEs, in third quarter, Weibo's SME ad business delivered revenue of $194.5 million, up 35%, or an increase of 39% on a constant currency basis. The number of SME advertisers continued to grow. The top categories of our SME business include app downloads, O2O companies and e-commerce. Nevertheless, the recent macro and regulatory headwinds have slowed growth in several sectors, particularly the gaming sector, which was considered as one of our top industries of SME ad business with outstanding results from some of our top industries during the quarter, including online education, entertainment and others.

Revenue of $28.5 million from Alibaba contributed 6% of our net revenue, up 13% or an increase of 16% on a constant currency basis. Revenue from Alibaba is highly correlated with its marketing campaign and initiatives spending, which can fluctuate significantly in any given quarter. Weibo also has a unique position in Alibaba's ecosystem. We not only provide marketing channel for Alibaba's core e-commerce business, but we're also integrated into Alibaba's O2O payment solutions, products, and video integration, entertainment and video businesses. Value-added service, VAS, revenue was $15.9 million in third quarter, up 18% or an increase of 20% on a constant currency basis. Game services declined year-over-year, and it now makes up only 6% of our VAS revenues. Membership fees, which include individual memberships, enterprise account verification, and V-plus membership, were up 45%.

Turning to cost and expenses, total non-GAAP costs and expenses were $272.2 million, up 45% or 43% under the old basis. Excluding the related barter transactions, marketing expenses were $108.9 million under the old basis. The increase in expense was primarily due to the increase in sales and the marketing fees, as well as product development costs. We continue to taking a more focused approach to increase user acquisition and retention, as well as expand user engagement over multiple channels. As such, the non-GAAP sales and marketing expense as a percentage of net revenue was 24% during the third quarter under the old basis, up 1% from the same period last year, and it's mainly due to the increase in channel marketing spending and the investments relating to the promotion of Weibo Lite. The increase in product development expenditure was primarily attributable to an increase in personnel-related cost.

Non-GAAP operating income was 188 million in third quarter, up 42% representing a non-GAAP operating margin of 41%. Income tax expense was $37.9 million compared to $22 million last year. The increase was primarily due to the deferred tax liabilities recognized from the fair value changes of investments and higher profitability. Non-GAAP net income attributable to Weibo in the third quarter was $171.8 million or up 49%.

Turning to our balance sheet and cash flow items, as of September 30, 2018, Weibo's cash, cash equivalents, and short-term investments totaled $1.6 billion. Cash provided by operating activities was $122.1 million. Capital expenditures totaled $6 million, while depreciation and amortization expenses amounted to $4.5 million. As a leading social media platform in China, Weibo's scale and brand strength have allowed us to grow the platform efficiently. As a result, we delivered free cash flow of 116.1 million (ph) in third quarter.

According to our ADR Depositary Form, as of September 30, 2018, approximately 28% of Weibo's share outstanding were represented by ADR shares, 86% of which were considered floating shares. Regarding the acquisition of Yi's live broadcasting business, as Gaofei mentioned in his remarks, the combination of Yi's live broadcasting business with Weibo will further enrich our content ecosystem, offer better support to top content creators, and improve our monetization capability and efficiency. We plan to complete the acquisition process in fourth quarter.

Now let me turn to our financial outlook. We anticipate our first quarter of 2018 revenue to be in the range of $480 million and $490 million, which assumes a foreign exchange rate of RMB7 to $1, or an increase of 35% to 38% year-over-year on a constant currency basis. This forecast lacks the potential impact of matters and regulatory uncertainties as well as currency translation headwinds.

With that, let me now turn the floor over to the operator to begin the Q&A portion of the call.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Juan Lin, 86Research. Please ask your question.

Juan Lin -- 86Research -- Analyst

Thank you, management. Good evening. Thanks for taking my questions. My first question is on your Q4 guidance. I notice that the Q4 guidance shows a slowdown compared to the third quarter in terms of growth, I'm wondering whether the guidance is mainly due to the regulatory environment change and also the macro impact on certain categories that you have already noticed or whether you have noticed some more for the impact from the macro environment change and how should we look at 2019? The second question is on your margins. I notice that non-GAAP operating margin actually improved versus last quarter, especially sales and marketing expenses seem to be well controlled. So I wonder what is future investment plan for user acquisition and how should we look at margins going forward? Thank you.

Gaofei Wang -- Chief Executive Officer

(Foreign Language) I think I addressed somewhat just this issue in my prepared remarks. From -- as I indicated in my script, there's two main elements that are affecting our growth rate in the fourth quarter as you have -- we indicated that our growth rate in the fourth quarter will be slower compared to the third quarter. The first element will be the macro situation, and particular for those items with big dollar ticket size in the -- we're looking at industry segments such as auto segment with the travel and like big ticket item such as wedding services. And the other element we -- I addressed on the call is the gaming industry. I think you are very much aware of the regulatory challenges most companies are facing these days and that has had an impact on the marketing dollars spent on that particular industry. That impact was larger than the initial estimates we had made at the beginning of the year. As a result, that could impact our growth rate in the fourth quarter.

(Foreign Language) What I have indicated earlier, these we will consider external factors. There will be few like company-specific factors for you to consider. One, as I indicated in my remarks, during the tough period of the macroeconomic situation, we are doing -- we are actually expanding our investments in the gaming verticals. We believe that right now it's a good time to acquire users, Weibo users at a much more reasonable cost. That's one factor, even though this is not too much related to the revenue growth. The other thing which I also indicated on my script is we have significantly increased our investments in those MCN multi-channel network agencies who are actively -- who are being very active with Weibo. We are providing our operating inventory for them to subsidize their content creation as well as to help them to monetize. The new subsidy we have been providing to them would effectively reduce their native app's demand on our platform. However, we believe these would be a short-term impact. Our history or our past experience have been telling us that, these things, once the overall economic situation improves, those entities tend to return to their normal spending levels. This is the first question.

The second, on the margin expansion question, I think we've been very much -- been very disciplined in terms of our spending throughout the years. I don't think that has been a particular issue for the third quarter. If you look back to the past few quarters, as we indicated at the beginning of the year, we have been expecting our margins for the year be relative stable on a year-over-year basis. As a result, our sales growth -- our sales and marketing on absolute dollar as a percentage of revenue has been a relative stable basis. So we do not have any particular reduction in sales marketing or cutback of sales marketing per se. So these are our plans. I think most of our sales and marketing expenditures were planned ahead from a quarter perspective. So hopefully that answers that question.

From a forward-looking point of view, I think excluding the impact from Yizhibo which is a bit of a different from margin compensation point of view from our normal business, I think our core business will continue to bear margin that's similar to the level with last year.

Juan Lin -- 86Research -- Analyst

Thank you very much. That's very helpful.

Operator

Thank you. Our next question comes from the line of Ding Binbin from JPMorgan. Please ask your question. Moving on to the next question from Karen Chan, Jefferies. Please ask your question.

Karen Chan -- Jefferies -- Analyst

Thank you, management, for taking my question. So my first question is, just wondering what's the general thoughts on China's social ad market growth going into 2019, and how should we think about Weibo's growth profile versus industry as peers like Tencent, they start adding more ad inventories? My second question is, any color management can provide on each Yizhibo current monthly grossing level or how much of a revenue contribution should we be expecting starting first quarter 2019 as a result of consolidation? That would be very helpful. Thank you.

Gaofei Wang -- Chief Executive Officer

(Foreign Language) I would divide the question into, I guess, two parts, to address your question on the social ads outlook for 2019. Starting with the brand ads, I think we look at the competitive landscape in the social ads for brand advertisers, there are limited competitors in the marketplace and our primary competitors in this area is WeChat.

(Foreign Language) From demand of brand advertiser in terms they execute a campaign at Weibo, they are not simply looking at the traffic we are providing. They are more concerned about their brand influence, brand awareness, their influence, also the participation of our KOL in their distribution and amplify their brand impact. As a result, we have seen continued growth of our ARPA from our brand advertisers. And on top of that, we are further expanding our customer bases, where we're looking into further going to at a local brand advertiser level in 2019.

(Foreign Language) For a brand, the growth of our brand advertisers, I think that the primary pressure is not from the competition we had with WeChat. More so, it's from the market acceptance, meaning that we can acquire more marketers to our brand advertisers who are willing to accept our social ad products and to understand and utilize our social marketing efforts.

(Foreign Language) On the other side, let's move onto SME side. Overall, we believe for 2019, SME growth will be a bit of a challenging. There's twofold. One is with the current macro condition, the overall demand is decreasing and on the other side, we're looking at increasing supply in traffic in the market.

(Foreign Language) In the past few years, our growth of SME has largely depending on the growth on our traffic and we have been paid a little bit less attention in terms of our product with the social marketing features. With 2019, I think we're going to shift some of the focus into this area.

(Foreign Language) I think we recognized this could be challenging. However, with these social platforms such as Weibo and WeChat, other than providing traffic for purchase conversion, we do have advantages in terms of interaction between merchant and their fans or merchants and their followers compared to other pure media platforms. Of course, in the midst of that, we still need to have -- we have to pay efforts in terms of the ecosystem to support the growth at SMEs, that including our distributors.

(Foreign Language) In terms of the Yi live broadcasting, we just take over -- just took over the Yi live broadcasting team in the month of October. For the first two quarters, we believe our focus will be on the product side, particular the product features with Yi live broadcasting with few -- with our Weibo platform that need to be well interfaced. As a result, we have had no specific revenue forecast for 2019 on live broadcasting yet.

(Foreign Language) Just to give you supplemental comments on the live broadcasting, I'm sure a lot of you are aware of that. The live broadcasting industry have been quite impacted by the popularity of short video in 2018. In the past the Yi live broadcasting have been focusing on the live broadcasting of showcase and KOLs. Rather, this is not an area that Weibo has significant competitive advantage compared to others. We plan to, for the first few quarters, spend more time to develop on the selected verticals or celebrity live broadcasting with Yizhibo, so that these two platforms can have better converging efforts.

Thank you.

Karen Chan -- Jefferies -- Analyst

Very much -- very helpful. Thank you.

Operator

Thank you. Our next question comes from the line of Ding Binbin from JPMorgan. Please ask your question.

Binbin Ding -- JPMorgan -- Analyst

Hi, good evening, management. Thanks for taking my question and congratulations on strong third quarter results. My first question is on your short video strategy. So can you elaborate the progress on execution of the short video strategy so far? What is the current revenue and traffic contribution from short video in the third quarter? In terms of monetization, is there any particular sectors factored into focus at the initial stage? And also what kind of impact will short video monetization bring to our existing KA and SME advertising revenue? My second question is, quickly -- so between the live streaming and short video content, how do you prioritize your focus on the investment in these two type of content formats? And lastly, I would like to quickly ask if there any new initiatives that we expect from your partnership with Alibaba in the next year? Thank you.

Gaofei Wang -- Chief Executive Officer

(Foreign Language) I think, most of you aware that in the last two years, the short video has been the primary drivers of our platform growth, both from viewership and from a user growth point of view. However, for the first half of 2018 with the popularity of few short video platforms that has put pressure in terms of user growth rates on the video side.

(Foreign Language) In the third quarter, we have made adjustment in terms of user acquisition from video content. So we will be focusing more effort in terms of the content consumption and interactions between the content creators and the users to acquire users. And from the content type and on the content type point of view, we have switched more focusing on the PTC content, and the content with particular IP.

(Foreign Language) In terms of advertising demand, rather they try to put more advertising material into the video format. They haven't been strictly associated their video campaign with particular video content on the platform. As a result, you see continued stable growth of our video advertising dollar as a percentage of our total advertising dollar. This quarter has been up 2 percentage points to 27%.

(Foreign Language) In terms of your second question, our investment priority in between live broadcasting and short video, no doubt short video will continue the top priority for this platform. We believe short video will be the baseline media format going forward in terms of content creation and content consumption.

(Foreign Language) In terms of the volume of the short video and live broadcasting, short video creation on the platform on a daily basis is in the millions, while the live broadcasting might be in the 10,000. So from that volume difference you could see who has been the dominant player. Live broadcasting will be primarily used by our top content creators such as celebrities as a supplemental media format for their content distributions.

I think, at this point of time, we have not started our particular negotiation or discussion with 2019 plan with Alibaba. So we have no -- at this point, there's no indicator in terms of the further new programs we'll be working with Ali. Neither, there will be the firm contracting advertising dollars. So we'll be working with Ali for the following years.

Binbin Ding -- JPMorgan -- Analyst

Thank you.

Operator

Thank you. As there are no more further questions, I'll hand the call to the presenter for closing remarks. Please continue.

Wen Li -- Investor Relations Manager

That concludes today's conference call. Thank you for joining us, everyone. Thank you.

Duration: 67 minutes

Call participants:

Wen Li -- Investor Relations Manager

Gaofei Wang -- Chief Executive Officer

Fei Cao -- Chief Financial Officer

Juan Lin -- 86Research -- Analyst

Karen Chan -- Jefferies -- Analyst

Binbin Ding -- JPMorgan -- Analyst

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