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LIZHI INC (NASDAQ:LIZI)
Q2 2020 Earnings Call
Aug 14, 2020, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen. Thank you for standing by for the LIZHI INC.'s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's remarks, there will be a question-and-answer session. Please note that today's conference is being recorded.

I will now hand the call over to your host, Effy Kang, Head of Capital Markets for the company. Thank you and please go ahead.

Effy Kang -- Head of Capital Markets

Thank you very much. Hello, everyone. Welcome to LIZHI INC.'s second quarter 2020 earnings conference call. We released our financial and operating results via Newswire services earlier today and they are available online.

Participants on today's call will include our Founder and CEO, Mr. Marco Lai; and our Acting CFO, Ms. Chengfang Lu.

Management will begin with prepared remarks and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, our earnings highlights presentation and a webcast replay of this conference call [Technical Issues]

Operator

Pardon me. This is the operator. I do apologize, but there will be a slight delay in today's conference, just please hold on and the conference will resume shortly. [Technical Issues].

Pardon me. This is the operator. We now have the host back on the line. Please resume.

Chengfang Lu -- Acting Chief Financial Officer

Hello. Okay. Thank you. Thank you all for your patience. So, we will start now.

Effy Kang -- Head of Capital Markets

Hi. Thank you very much and sorry for the disconnection. Hello, everyone. Welcome to LIZHI INC.'s second quarter 2020 earnings conference call. We released our financial and operating results via Newswire services earlier today and they are available online.

Participants on today's call will include our Founder and CEO, Mr. Marco Lai; and our Acting CFO, Ms. Chengfang Lu.

Management will begin with prepared remarks and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, our earnings highlights presentation and a webcast replay of this conference call will be available on the IR section of our website at ir.lizhi.fm.

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential continue or other similar expressions. Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, many of which factors are beyond our control. The company, its affiliate, advisors, representatives, and underwriters, do not undertake any obligation to update this forward-looking information, except as required under the applicable law.

Please note that LIZHI's earnings press release and this conference call includes discussions of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures. LIZHI's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.

I will now turn the call over to our Founder and CEO, Mr. Marco Lai. Please go ahead.

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

[Foreign Speech] Hello, everyone. Thank you for joining us today. For our second quarter, we delivered solid operational and financial results, as a go-to online audio platform for the younger generation in China. In the second quarter of 2020, our average mobile MAUs increased by 29% year-over-year, and we continued to convert our traffic to paying users, which grew by 51% year-over-year. As a result, total revenue increased by 56% from the same period one year ago.

We have also seen improving operational efficiency and profitability as non-GAAP gross margin jumped to 26% in the second quarter from 21% in the first quarter of 2020.

With these solid fundamentals in place, we remain at the leading position in our industry as one of the largest podcast platforms in China. We are committed to further strengthening our virtuous ecosystem by expanding our diverse and extensive user generated content library, attracting and cultivating more quality content creators and continuously expanding our highly engaged community, which now spans a variety of interactive social entertainment features.

In terms of audio content, we believe that compelling UGC-content delivered using our distinct audio-centric ecosystem is a key to our success in attracting new users and retaining our existing user base. In the second quarter, we stepped-up our efforts to expand the audio portfolio in our content ecosystem and optimized our content creation and operating capabilities.

Our most heavily trafficked verticals were around topics that younger generations are most drawn to, such as life and relationships, talk shows and ACG. We hosted a number of events around those verticals. For example, through The Voice radio station program, we invited popular celebrities to read poetry, reflecting their perception on life, which inspires a massive audience base on our platform, as well as elevating traditional Chinese culture. We also launched many cultural programs, including the LIZHI Film Club program, hosted by actors and movie fans.

Bulking on both contents hosted by celebrities, entertainers and KOLs is helping us to increase user attraction. During the second quarter, we added 119 entertainers, who carried out a total of 167 sessions in both live streaming and podcast format, where users enjoyed voice feature of interaction with their idols or favorite entertainers. These events attracted a total exposure of 520 million fans.

By the end of the second quarter, the cumulative number of podcasts uploaded to our platform reached a new record high of 215 million, up 48% year-over-year. With a massive creator base and effective operational campaigns, we are gaining even more diverse and innovative content submissions and further increasing our mass market appeal. What we are seeing is that every piece of content that we add on the platform helps create more engagement.

To better engage our users, we remain focused on advancing our AI-capabilities, in both content distribution and the recommendation engines, as it helps make premium content accessible to users in an effectively targeted manner. The integration of AI technology into our massive content base, empowers us to deliver superior experiences to our content consumers.

Content creator base is the cornerstone of our growing utility content library. One of the ways we cultivate our intellectual content creator growth is providing a wide array of supportive programs and state-of-the-art content creation tools for our content creators. We also hosted various operational activities and events to help grow the audience base, effectively engaged with their fans and better monetized their fan base.

The number of average monthly active content creators was approximately 6.15 million in the second quarter of 2020. Our goal is to boost the creation and curation of high-quality audio content and nurture an expanding group of top content creators and hosts, who are able to continually produce premium content and attract larger audiences.

In the second quarter, we launched our monthly average ramping program to motivate the creators to produce more high-quality podcast. Additionally, our Voice Discover plan, New Voice Star Award [Phonetic] were designed to discover and promote long-tail content creators who have voice talent.

We have been providing customized supportive programs for the popular creators by offering more user techniques, brochures and incremental bonuses. We also provide well-tailored training plan to enhance content creator's competency in performing.

For instance, we invited the famous music producer to coach the top creators out of the LIZHI Music Star Program in music arrangements and production. In addition, we plan to bring back the ACCO plan, second season, during the third quarter, which is an incentive program to attract new content creators, stimulate the output of more quality content and captivate more new users to our platform.

In this quarter, we further grew exclusive content creator base in order to enhance premium content offerings on our platform. We are dedicated to providing a platform for all kinds of talent creators to showcase their voice talent, grow their audience and constantly achieve considerable income. We've been seeing numerous successful stories from content creators and interims. One famous creator at LIZHI, named Tazhong [Phonetic], who used to be a gas station attendee before joining LIZHI, has now become a talk show performer with over 310,000 followers. He opened the first audio interview show called Tazhong Meeting Room, where he has interviewed more than 200 audio-based hosts. He also founded his own media company which signed and cultivated more than 1,000 audio content creators.

By leveraging the audio-centric technology, LIZHI's platform is well-positioned to empower more long-tail creators to be discovered and connected. We are proud of what LIZHI have innovated within the digital and entertainment space. And today, it has grown into a leading player with new exclusive audio content, original programs and a wide spectrum of audio content genres on the platform.

We have now cultivated one of the most attractive and friendly environments for audio creators, and we will continue to support and enable them to better engage users. We apply AI not only in the content distribution, but also to empower content creation, along with cutting-edge data analytics and insights into user behaviours and preferences. This helps our creators produce gripping content, target a broader base of audience, actively interact with users and ultimately enhance commercialization.

In terms of the expansion of our community, we remain focused on bolstering user engagement and interaction around users and hosts, by broadening social interactive features and products. Our users and content creators together generated over 3.1 billion monthly average interactions through chats, comments, likes and on-air dialogues in the second quarter.

Being the leading UGC audio platform in China, LIZHI has been a strong go-forward result dynamic content ecosystem, vibrant user community and advanced technology capabilities. Our highly engaging UGC community has always been our hallmark, as we can meet users demand for staying connected by recording and sharing their lives through their own voices, as well as making friends and finding companionship.

For instance, in the second quarter, LIZHI launched a Speak-Up campaign, promoting a number of voices to encourage girls to speak up for themselves and stand up for women's rights. Another creative program called Voice Post Office was designed for content creators to provide voice companionship by reading letters. The various activities in our community covers attachment-based topics and public welfare, establishing companionship through the power of voice.

In the second quarter, we also went the extra mile to enhance our community engagement by introducing a series of new interactive products and features and further enhancing the integration of fan-based membership programs across the podcasts and audio entertainment segments.

We introduced the voice talent [Indecipherable], an option to appeal to the Gen Z demographic, which also increases the paying activities and consumption for social interactive content. We remain diligent in our efforts to optimize and upgrade social interaction tools to further appeal the immersive atmosphere among our community to connect content creators and users.

Turning to commercialization. We saw improvement in optimization of revenue structure in the second quarter, where the monthly paying user from our Podcast segment increased by 174% year-over-year. We also believe there's great potential in the growth of monthly paying users for our services, aside from audio entertainment.

Looking forward, we can further optimize our revenue streams in the long run, while further upgrading the level of engagement in our community, along with a strong content ecosystem.

In addition, we are open to exploring additional and new audio-social entertainment initiatives, such as tiered privilege plans and memberships to further increase user loyalty and stickiness, and ramp up commercialization potential, ultimately strengthening our competitive position in the online audio market.

We will work toward developing more new products and supporting tools that drive unrivalled entertainment experiences with fascinating discovery and in-depth dynamic engagement.

We believe we are well-positioned in the audio entertainment industry to meet the market growing demand, as we continue adding new attractive content, cultivating more content creators, expanding our community and amplifying our brand.

Thank you, everyone. With that, I will now turn the call over to our Acting CFO, Ms. Chengfang Lu, who will discuss our financial results in more detail.

Chengfang Lu -- Acting Chief Financial Officer

Thank you, Marco, and hello, everyone. Our second quarter financial performance underscores our improving operating efficiency and profitability.

In the second quarter, our total net revenue increased by 56% to RMB350.9 million from the same period one year ago, driven by our robust growth in our paying user base. Our average number of monthly paying user increased by 51% year-over-year to 463.4 thousand in the second quarter, mainly driven by our content enrichment strategy and continuous efforts in driving user engagement.

Currently, we generate our revenue primary from our audio entertainment business, which contributed to RMB344.21 million to net revenues in the second quarter of 2020, representing year-over-year growth of 55%.

We remain focused on bolstering user engagement and interactions among users and hosts, by broadening social interactive features and products. This has driven the expansion of our user base and an improvement of the paying ratio in our interactive audio-social entertainment products during the period.

Additionally, podcast, advertising and other revenues grew by 141% year-over-year to RMB6.8 million in the second quarter of 2020. The increase was primarily attributable to the increase in the number of paying users in our podcast services. This also demonstrates the positive progress in our diversified commercialization. Cost of revenues increased by 65% year-over-year to RMB265.2 million, and a decrease of 11% quarter-over-quarter.

The year-over-year increase was primarily due to the increase of revenue sharing fees, payment handling costs and bandwidth costs, generally in line with growth of our business, as well as the recognition of share-based compensation expenses.

The quarter-over-quarter decrease was because of the revenue sharing fees and other costs decreased generally in line with the decrease of audio entertainment revenue. And we scaled down our incentive program in February 2020, which led to a decrease in revenue sharing fees for content creators in the second quarter of 2020. We may adjust our incentive program from time-to-time in the ordinary course of business.

Our gross profit was RMB85.7 million in the second quarter of 2020, representing an increase of 33% year-over-year, and an increase of 80% quarter-over-quarter.

Our non-GAAP gross profit was RMB90.5 million in the second quarter of 2020, representing an increase of 41% year-over-year, and an increase of 16% quarter-over-quarter.

Gross margin increased by 470 [Phonetic] basis points from the first quarter of 2020, reaching 24% in the second quarter. Our non-GAAP gross margin increased by 470 basis points for the first quarter of 2020, reaching 26% in the second quarter of 2020. Operating expenses decreased by 1% year-over-year and 8% quarter-over-quarter to RMB107.8 million in the second quarter of 2020.

Research and development expenses, a key component of operating expenses, was RMB54.8 million in the second quarter of 2020, representing a year-over-year increase of 66%. The increase was mainly due to our efforts in the development of AI-applications and enhancing data security, as well as the share-based compensation we recognized after our IPO.

Selling and marketing expenses were RMB31.2 million in the second quarter of 2020, decreased by 55% from RMB69.6 million in the second quarter of 2019. The year-over-year decrease was primarily attributable to the reduced expenses related to branding and promoting activities in the second quarter of 2020.

General and administrative expenses were RMB24.8 million in the second quarter of 2020, compared to RMB9.7 million in the second quarter of 2019. The year-over-year increase was primarily due to increasing expenses in the salary and welfare benefits, other professional service and recognition of share-based compensation expenses that became effective upon the IPO.

Our operating loss was RMB25 million in the second quarter of 2020, narrowed down by 48% both year-over-year and quarter-over-quarter. Our non-GAAP operating loss was RMB11.2 million in the second quarter of 2020, narrowed down by 77% year-over-year and 61% quarter-over-quarter.

Net loss was RMB22 million in the second quarter of 2020, narrowed down by 50% year-over-year and 54% quarter-over-quarter. Non-GAAP net loss was RMB8.2 million, narrowed down by 81% year-over-year and 72% quarter-over-quarter.

Our basic and diluted net loss per ADS were RMB0.48 in the second quarter of 2020, compared to RMB8.89 and RMB5.33 in the second quarter of 2019 and first quarter of 2020, respectively. Our non-GAAP basic and diluted net loss per ADS were RMB0.18, compared to non-GAAP basic and diluted net loss per ADS of RMB3.4 and RMB0.77 in the second quarter of 2019 and first quarter of 2020, respectively.

The difference between GAAP and non-GAAP EPS is mainly due to adjustments to the accretion of preferred shares redemption value and share-based compensation. As of June 30, 2020, we shave cash and cash equivalents, as well as short-term investments of RMB352.7 million, compared to RMB326.9 million as of March 31, 2020.

Overall, amid the pandemic-related and broad-based economic challenges, we achieved positive progress in the second quarter of 2020. We continue to be optimistic about the future of the broad online audio industry and are confident in the overall ecosystem and product pipeline that we are building.

Our focus on enabling content creators and hosts to better serve the audience community will continue to drive user engagement and enhance commercialized efforts.

Going forward, we remain dedicated to enhancing our content ecosystem, strengthening brand recognition, continuing to invest in and improve technologies and -- finally -- advancing our strategic initiatives for our growing community.

With that in mind, for the third quarter of 2020, we currently expect total net revenues to be in the range of RMB350 million to RMB370 million, translating to year-over-year growth in the range of 6.5% to 12.6%. This forecast reflects our current and preliminary views of the market and operational conditions, which are subject to change.

Now, this concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] So our first question today comes from VW from Citi. Please ask your question.

Vicky Wei -- Citi -- Analyst

[Foreign Speech] Good morning, management. Thanks for taking my questions. I have two questions. The first is, what does management think of the competition with other internet companies, such as TME, which also introduced audio live streaming. What does it imply to the company user growth and retention of hosts?

And my second question is about gross margin and revenue sharing ratio trend. We see that gross margin in the second quarter has improved greatly from the first quarter. So, would management provide some color about the future margin trend? Thank you.

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

[Foreign Speech] Okay. Yes. I'm Marco, and I will answer the first question about competition, and our Acting CFO, Chengfang Lu, will answer the second question about the margin trend.

We have noticed with the recent initiatives of other players in the industry -- including the TME -- in the audio entertainment sector, which indicates the trend that more and more people or like big companies, are turning their attention to the audio entertainment market, including the growing impact of audio entertainment, as well as the increasing user demands in there.

And so, actually, it has highly interactive product offerings and excessive content library. So, like, our users content community are built off of a long time of cultivation. As a result, we have built a stronger bond between users and the content creators, and relatively are higher stickiness. So, in addition, our content spans a wide variety of verticals, such as life and relationships, talk shows and ACG, which are very popular and very favored by younger generation on the platform.

But our contents are not limited to these verticals. We will also continue our efforts to expand the content to run and explore more premium content for our users.

So, in the long run, we believe our platform will deliver superior experiences to our users and help creators showcase their talents and even gain considerable income through our various tools and audio technology. So, we believe it will be appealed to most of the users who are in favor of audio content and enjoying interacting with others through voice.

So, for us, the competition with other players is about like two critical areas, meeting user demand and attracting while empowering more content creators. These are two areas where we have been putting great efforts on and will continue to make progress. The total interactions in the second quarter of 2020 has reached 3.1 billion, which indicates that our platform is highly interactive and highly favored by users.

We will continue increasing user engagement, improving loyalty and stickiness through interactive features and innovative products, and ultimately enhancing the community ecosystem. In general, we are confident about the future, and we will continue our strategy and maintain the solid growth.

Okay. So, Chengfang will continue the second questions about the margin trend.

Chengfang Lu -- Acting Chief Financial Officer

Okay. Thank you, Vicky. And let me take your second question. Yes, in the second quarter of 2020, our total revenue share fees were accounted 69% of our total revenue, representing a decrease of 500 basis points from last quarter. Accordingly, our non-GAAP gross margin increased to 26%, increased 500 basis points from last quarter.

Yes, as discussed before, we have launched an incentive program, with additional revenue share fees in the third quarter of 2019, to attract more content creators. And this stimulates the content creation.

We have seen positive progress on the growth of our content creator base and improvement on content quality. As stated, we have more than 6 million active content creators on our platform. But beginning from last quarter, we are adjusting the incentive program by scaling down the revenue sharing proportion and motivating the content creators through mixed measures instead of cash bonus owning, such as more exposure, professional coaching, etc. Besides, our incentive programs were more associated with the content quality, not just related to revenue.

Looking forward, we will continue to support our content creators from multi dimension and may adjust our incentive program from time-to-time. We expect to maintain relatively stable revenue sharing proportion in the second half of this year and further improve our gross margin through expanding our massive long-term content creators and developing diversified products and features. Thank you.

Operator

Thank you. Okay. Your next question comes from Vincent Yu from Needham & Company. Please ask your question, Vincent.

Vincent Yu -- Needham & Company -- Analyst

Sure. Thank you, management. Thanks for taking my question. I have three questions. First question is about the Podcast. So, we noticed Podcast has become quite popular in the marketplace as the leading UGC audio platform. Are we planning like capitalize or monetize on the growing content of this content pool? Any progress we have made or we are going to make, such as adding ads to podcasts or anything we can share on the monetization?

Second question is on the celebrity or content provider you have mentioned earlier in the prepared remarks. So, do we plan to sign exclusive contracts with some of the popular podcast content providers on the platform?

And my third question is in terms of user retention rates, any color you can provide on the user retention rates? [Foreign Speech]

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

[Foreign Speech] So, we've seen like lot more attention in the podcast industry. So, when LIZHI have been founded, all were required to -- like everyone is podcast creator. So as a leading UGC audio platform, we think podcast is a very important part for our platform and we are always committed to supporting the original content, as we understand that high-quality podcast is a crucial competency for us to attract more users.

So currently, the podcasts are becoming increasingly popular in response to the growing user base -- user demand, actually. So meanwhile, content creators now have more opportunities to present themselves.

So, in the future, we plan to further enhance the content creation and curation and help users better discover more high-quality content through like AI-recommendation engines. We will continue discovering content creators and encourage them to create content, and further expanding our content library, as well as to speed up the growth of like medium to long-tail content creators into the middle or top creators.

So, of course, we also plan to help podcast creators achieve considerable income through our commercialization efforts on the podcast, as we also noticed that in China, now there is no like direct commercialization model for podcast creators currently. So, in the future, commercialization opportunity on the podcast business can be brought in three major aspects.

Firstly, about the paid content, we believe users are willing to pay for high-quality content. So, we aim to boost the creation of high-quality and premium audio content and focus on some key verticals and further assisting our paid content creators in growing their audience base with the support of more traffic and exposure, and ultimately increasing their paying ratio.

Secondly, is the advertising. So, with the massive user base, we are able to continue expanding our advertising businesses, and help content creators to gain more income through the Advertising Distribution Program, and enhance the cooperation between creators and our platform.

Thirdly, is about the membership. So, we plan to launch more tiers of privilege plan or membership on the podcast to diversify the monetization models for content. So, based on our distinct, diverse ecosystem and massive user base, we believe LIZHI will have further developments on the podcast.

So, the second question is about the exclusive contract with our podcast provider. So, actually, we have already signed exclusive contract with some of the podcast creators on our platform.

So, in the second quarter, there was a significant increase in the number of exclusive podcast creators on the platform. So, in the future, we plan to attract more podcast creators through the second season of the ACCO plan, and more cultivation programs and sign exclusive contracts with those popular ones through our long-term supportive programs.

Besides the ordinary content creators we've mentioned, we've also noticed that many celebrities, entertainers, and KOLs have joined LIZHI without any business cooperation with us, as they've also realized and noticed that LIZHI has a strong community atmosphere, which can help them better communicate with users and their fans and [Indecipherable].

Notably, we are an open UGC audio community platform, where all kinds of content creators are welcomed, not only limited to creators with exclusive contracts, because we deeply understand that a diverse content ecosystem is significant for the long-term development of the platform. Okay. Thank you.

Chengfang Lu -- Acting Chief Financial Officer

Okay, I will take the question about our user retention rates. Yes, in the second quarter of 2020, our net month retention rates of active users on our platform remained stable at 67%. I believe it is a relatively high level. And in the third quarter, we will continue expanding the content verticals, improving content quality and encouraging user engagement. And we believe we are able to maintain this high level of retention rate in the second half of this year. That's all. Thank you.

Vincent Yu -- Needham & Company -- Analyst

Thank you.

Operator

Okay. Your next question comes from the line of Ivy Liu from Credit Suisse. Please ask your question, Ivy.

Ivy Liu -- Credit Suisse -- Analyst

[Foreign Speech] I'll quickly translate myself. So my question is, can management share some color on the current user growth strategies, as well as the strategy to further grow the paying user base? Thank you.

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

[Foreign Speech] Okay. There are two questions. One is about the user growth strategy and another one is about the paying behaviors. I will take the first one and Chengfang will continue with the second question.

So, we focus on the high-quality, original content, strong community atmosphere, and creating interactive features as a core to attract more users.

With our massive content library pays, which also bring more user growth in pays. So, our strategy is to attracting more users through the boosting the creation and curation of high-quality content and bunking up new content hosted by celebrities, entertainers, and KOLs.

In the second quarter, LIZHI have operated with a number of celebrities, entertainers and brands. Through our platform, these celebrities and entertainers can share their life, communicate with their fanbase and interact with other users through diverse audio content and various entertainment features.

For example, we host a special program cooperated with the popular show, the second season of UNCVR, which introduces a number of talk shows about the story, featuring the singer, song writer and their music. So, our talk show with the famous music star Chen Lin [Phonetic] has reached a total of 3 million fans exposure we've admitted on the platform.

We have seen that with more high-quality content we are able to achieve more user engagement. Besides, we will continue optimizing and upgrading our social interaction tools to help users make friends and with same interest and meet their social interaction list and further improve user retention rate and user stickiness.

More importantly, now we have 55.9 million MAUs on the platform. So, these users are many young generation, who enjoy sharing and social networking. Therefore, we have developed many creative features, ultimately increased the sharing activities. For example, we have recently launched the audio-based video sharing tool, which also attracts many users to create the podcasts and share the audio-based short videos with their friends on other social media platform. And these activities have attracted more users with the same interest to join our platform, which have enhanced the virtuous cycle of the whole ecosystem.

Chengfang Lu -- Acting Chief Financial Officer

Okay. Thank you, Marco. And I will take the question about our strategy to post paying behaviors. Yes, as mentioned before, we are highly engaged and interactive UGC audio community. So, we put our paying behaviors mainly from two aspects, which are content and interaction.

First, in terms of content, through various cultivation program, we could nurture an expanding group of content creators and hosts, who are able to continually produce premium content. Then we developed a distinctive content category by effective operations. I think it has helped us to attract more users and boost paying behaviors.

For example, in the second quarter, we have noted that our talk show verticals were highly favored by young generation, where of our host Wyoming Shushing [Phonetic] joined LIZHI in late March this year through our supporting and premium content operation. By the end of the second quarter, he has gone to the top-30 paid content on our platform, with high retention rate exceeding 80%.

We also launched numerous programs to discover and cultivate medium and long-term content creators, such as Voice Discover Plan and New Voice Star Award. We also hosted many creative events, including cooperation with number of popular shows to promote premium pay content to all users.

The second effect is interaction. I think higher engagement and more interactive activities can effectively increase our users willingness to pay. So, we also focus on having user engagement through diverse interactive products and features.

For example, we launched a voice talent PK and virtual guest option to increase user account adoption on our platform.

We have also introduced tier privilege plans and membership program to further strengthen the strong bonds between users and content creators on our platform. We are aiming to increase user retention rates and maintain sustainable consumption in the long-term. That's all. Thank you.

Operator

Okay. And your final question, sorry, comes from Sarah Hu from Haitong International. Please ask your question.

Sarah Hu -- Haitong International -- Analyst

[Foreign Speech] Thank you for taking my question. This is Sarah from Haitong International and asking questions on behalf of Steven Li. So, my first question is, can you please share your views on the existing competition in the audio industry?

And my second question is, how do you think the short video industry affects our business? For example, how much is user time they've taken up, and how they're going to look like in the long run? Thank you.

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

[Foreign Speech] Firstly, I think LIZHI has gained a strong foothold with our unique competitive advantages. So currently, many other platforms, including some video platforms, rely more on the famous IP, along some audio content and audio books to attract users, which can be interpreted as a new model to monetize their current user base and traffic.

So, at LIZHI, we put our main focus on UGC content, spanning a wide array of content categories, which can meet the various demand of users. And this is quite different from the audio books.

On the other hand, we are community-centered. After years of cultivation, we've built a highly interactive targeted user base, and more socialized content creator base, and has increased the stickiness of users and the content creators to the platform.

So, turning to the competition on time spending with the short video platform. Previously, we've also received like similar questions before, as few years ago the short video platforms were quite popular in the industry. But actually, we are not in direct competition with those short video platforms, due to -- we have like different user scenarios and user profiles.

In LIZHI, we have more female users on the platform. And most of the users are from third tier or lower tier cities. We need to understand that these users have natural social needs with a strong desire for companionship, and audio can meet their demands well. Furthermore, we noticed that audio can also be adapted to a wide range of user scenarios, like commuting, working or other small pieces of time. Specifically, some of the users are getting used to listening to the podcast after watching the short form video, and before they speak, to release their mood. Some would like to chat or socialize and seek companionship via the audio on the platform.

Therefore, we believe we are well-positioned in this industry to meet the market's growing demand, as we continue to add more new attractive content and cultivating more content creators, enhance the community atmosphere and further increase the user engagement.

Sarah Hu -- Haitong International -- Analyst

Thank you.

Operator

As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks.

Effy Kang -- Head of Capital Markets

Thank you once again for joining us today. If you have further questions, please feel free to contact LIZHI's Investor Relations through the contact information provided on our website at ir.lizhi.fm or the TPG Investor Relations. Thank you.

Operator

[Operator Closing Remarks]

Duration: 84 minutes

Call participants:

Effy Kang -- Head of Capital Markets

Chengfang Lu -- Acting Chief Financial Officer

Jinnan (Marco) Lai -- Founder, Chief Executive Officer and Director

Vicky Wei -- Citi -- Analyst

Vincent Yu -- Needham & Company -- Analyst

Ivy Liu -- Credit Suisse -- Analyst

Sarah Hu -- Haitong International -- Analyst

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