Weibo Corporation (WB) Q3 2020 Earnings Call Transcript

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Weibo Corporation (WB -1.17%)
Q3 2020 Earnings Call
Dec 28, 2020, 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 Reports Third Quarter 2020 Financial Results Conference Call. [Operator Instructions]

I would now like to hand the conference over to your first speaker today, Ms. Sandra Zhang. Thank you. Please go ahead, ma'am.

Sandra Zhang -- Investor Relations Officer & Senior Financial Analyst

Thank you, operator.

Welcome to Weibo's third quarter 2020 earnings conference call. Joining today are Chief Executive Officer, Gaofei Wang, and our VP-Finance and Interim CFO, Fei Cao. The conference call is also being broadcasted on Internet and is available through Weibo's IR website.

Before the management remarks, I would like to read the Safe Harbor statement in connection with today's conference call. During today's conference call, we will make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risk 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 these and other risks is included in Weibo's annual report on 20-F and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligations to update such information, except as required under applicable law.

Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures which exclude stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financials exclude certain expenses, gains or losses and other items that are not expected to result in future cash payments or are nonrecurring in nature or are not indicative of our core operating results and our outlook. Please refer to our press release for more information about our non-GAAP measures.

Following management prepared remarks, we will open the lines for a brief Q&A session.

With this, I would like to turn the call over to our CEO, Gaofei Wang.

Gaofei Wang -- Chief Executive Officer

[Foreign Speech]

Thank you.

Hello, everyone, and welcome to Weibo's third quarter 2020 earnings conference call.

[Foreign Speech]

On today's call, I will share with you highlights on Weibo's users, products and monetization as well as progress we made on our key initiatives in 2020.

[Foreign Speech]

Let me start with our third quarter financial results. In the third quarter, our total revenue reached $465.7 million, flattish year-over-year. Advertising and marketing revenues reached $416.7 million, an increase of 1% year-over-year. 90% of our ad revenues came from mobile.

[Foreign Speech]

On the user front, Weibo's MAUs grew 3% year-over-year to 511 million in September 2020 and average DAUs grew 4% year-over-year to 224 million in September 2020, both representing a decrease of 2% quarter-over-quarter. 94% of Weibo's MAUs came from mobile.

[Foreign Speech]

This quarter, with growing user base at steady pace and enhancing user engagement and retention as our key strategies for user product operation, we put more emphasis on increasing consumption efficiency and speed and enhancing users' social interaction.

[Foreign Speech]

With that said, on the user scale front, post the summer break in August, Weibo's user number decreased in September compared with June. We had faced incremental headwinds in terms of user growth for the second half of the year mainly due to negative impact from cutbacks in investments for variety shows and entertainment industries as well as back-to-school seasonality.

In addition, on the engagement front, our user engagement and time spend were also massively impacted -- influenced by the intense competition in the user market as short video [Indecipherable] aggressively investing in user acquisition. As such, for one thing, we have beefed up our investment in social attributes and video areas from both product and operation perspective to solidify our market competitiveness and user growth, leveraging Weibo's unique platform positioning. For another, we have also stepped up our efforts in channel and strategic partnership since the fourth quarter, hoping to sustain wider user coverage.

[Foreign Speech]

On the monetization front, we have further emphasized client past performance and offerings among KA and SME advertisers from key industries and reinforced our competitiveness in the market through business restructure which are determining factors for our business recovery post the pandemic. As a result, I'll talk in the industry sectors returned to the growth trajectory in the third quarter, underpinned by notable growth in the number of brand advertisers which contributed to the stabilization of our ad business in the third quarter on year-over-year basis.

[Foreign Speech]

In discussing our operating updates for the third quarter, I will elaborate our progresses made in areas of product and monetization.

[Foreign Speech]

We are facing increasingly intense market competition for the second half of the year. In response to this, it's crucial for us to -- it's crucial that we optimize our use of product to further enhance Weibo's uniqueness and core competitiveness in the social media sector. And meanwhile, we will step up our investment in video and user community in vertical areas, aiming to enhancing user acquisition capabilities through cultivating this habit of content consumption in this area.

[Foreign Speech]

On topic products, it's our core function to serve the public question and discussion around topics which help to bring new users and enhance user engagement on the platform. And thus, we kept our investments in the content generation, discovery and discussion around topics as well as expanded related content consumption. In the third quarter, [Indecipherable] topics continued to grow double digit year-over-year and user discussion around topics grew nicely as well.

Moving forward, on the product front, we will optimize those features to encourage users to put and reinforce content discovery and topic distribution mechanisms to improve the efficiency of content generation. On the operation front, we will further encourage media outlets and KOLs to create topics and participate in topic discussion which enrich content offering around topics.

On content consumption side, we will further enhance user consumption and discussion around hot topics through more public [Phonetic] content offering within the discovery zone. It is achieved through optimized algorithm mechanism of hot topic chart and hot search functions and the collaboration with platform, including handset manufacturers.

[Foreign Speech]

Moving on to social. It's our focus to enhance product social features to drive content offerings and social interaction. First, for relationship based feeds, we have further upgraded distribution mechanism and launched new features to facilitate user interaction in the feeds. For instance, we reinforced selective content distribution in relationship with the feed to beef up social content offerings such as enhancing traffic social to post -- to post a user might have made and post that with [Indecipherable] among users to follow.

Additionally, on top of our commentary on reposted features, we added social features to enhance the interaction among users such as enabling users to leave message on others' main page. Second, for community products such as [Indecipherable] we have further enhanced its social attributes and promoted dense social relationship buildup and their interaction around interests which in turn drive users' social stickiness in relationship based feeds. As a result, in the third quarter, DAUs [Phonetic] of super topic and the number of post interaction and relationship buildup in super topic all grew double digit year-over-year and nearly 60% of the top KOLs have created various super topics. We believe the progress that we have made to strengthen competitive edge of our community products will enable us to tap into growth of the overall self-media market, attracting more self-media to Weibo and driving user engagement.

[Foreign Speech]

That concludes our remarks on [Indecipherable] social attributes as Weibo's core competitiveness.

Next, let me share some color on the progress of video account program. Since the launch of the program in July, we have been focusing on optimizing our platform mechanism to better facilitate traffic distribution and fans accumulation around video accounts as well as strengthening our brand recognition among video KOLs and users. As of November, we had over 750,000 content creators participating through video account program on Weibo, among which over 13,000 already had fanbase over 1 million.

Taking the November metrics as an example, the number of daily video submissions and daily video viewership both increased over 30% year-over-year for those monthly active -- active video accounts. We are encouraged to see a notable trend among Weibo's top content creators to shift to video, leveraging introduction of video account program. And meanwhile, video account program also attract talented video content creators from other platforms to join and accumulate social assets on Weibo which will supplement our current KOL network and enrich our content ecosystem.

Going forward, for one thing, we have lowered the entry barrier for opening video accounts, enabling more KOLs to join and benefit from traffic support from video account program. For another, we will reinforce video content distribution based on social recommendation within the video community hoping to nurture user mindset to visit the video community and thus further drive video content consumption as well as video accounts.

[Foreign Speech]

To sum up, on top of channel investment amid market competition, first we will solidify our advantage in topic and social media functions to grow our user base and improve user engagement so as to enhance our competitiveness in the user acquisition. Second, we will focus on increasing users' time spend and frequency mainly through improvement of consumption experience of video and the community products and thus enhance our competitiveness in the market.

[Foreign Speech]

On the monetization front, we continue to reinforce our competitiveness in the advertising market, and that implies overall [Indecipherable] externally and solid progress on the monetization system reform internally. As a result, Weibo's advertising revenues have almost returned to the same level last year or increasing 22% quarter-over-quarter.

[Foreign Speech]

Our KA revenues increased 12% year-over-year or 33% quarter-over-quarter. The robust growth was mainly driven by a notable increase in the number of brand customers which reached historical highs this quarter. From an industry perspective, the FMCG category saw a growth acceleration benefiting from a considerable increase in the number of customers [Indecipherable] transactions also booked solid double-digit growth. Entertainment, previously hit hard by pandemic, started to come back this quarter, although still fell short of the same level last year.

On top of the overall ad demand recovery, we also attributed such robust growth to our differentiated value proposition to brand customers, mainly on two fronts. First, leveraging our unique strength in the distribution and discussion around top IPs such as blockbuster shows and sports events. We managed to open up incremental ad inventories by curating content around these IPs. IP-based marketing would enable us to tap into a broader customer base as well as drive monetization through content operation. Second, we focus on offering integrated brand performance and solutions to KA customers to capture higher ad wallet, especially with auto and FMCG sectors.

[Foreign Speech]

Moving on to SMEs. Our SME revenues decreased 15% year-over-year and increased 20% quarter-over-quarter. Notwithstanding the gap to the overall revenue level last year, we are pleased to see gaming and online education sectors become the core growth lever of our SME business. This year, we have achieved breakthrough with these two sectors as we beefed up our efforts to drive conversion and enhance our operation capabilities. Consequently, ad revenues from gaming and online education sectors continued to book triple-digit growth on an annual basis.

For example, we [Indecipherable] solutions for these two sectors. More specifically, our products hold big days to serve customers' new game release marketing needs as well as solutions targeting high school and college examination for online education customers. Ad products like these effectively fulfill customers' marketing needs around product launch and achieve timing, leading to broader customer coverage and higher ad wallet for us in return.

With respect to other sectors, we continue to focus on optimize -- optimizing customer mix, expand customer base and improve ad quality this year. During this quarter, we took steps to optimize on areas where we frequently receive massive user feedback by setting higher ad quality standards. Despite the short-term revenue loss, we believe the improvement of the overall ad quality will benefit us in expanding our customer base and optimizing ad performance in the long run.

[Foreign Speech]

Finally, let me share some color on the progress with our ad products and technologies. First, we took a targeted approach to improve ad algorithm and traffic distribution strategy. A good example is the game, Life of Kingdoms, a blockbuster -- blockbuster game. In view of customers' goal to reach targeted user group rapidly upon release, we refined our ad attribution and back-end system to accommodate such marketing needs, allowing these customers to reach incremental targeted users beyond the original book and gain higher conversion. As a result, we could better fulfill customer's new game release goals while helping the customer enhance its marketing efficiency significantly. It can significantly enable us to capture incremental ad budget. To build upon such success story, our next step is to put together an industry-specific ad solution and make a standard ad offering for the gaming industry.

Second, we will focus on tax optimization around our full-funnel marketing in the next few quarters. For example, with the Internet service sectors, we advanced our ad technology to deliver better app download queries and completion rate through optimization on the download and registration process. We successfully lowered the app acquisition costs by over 50%. Third, to address customer lead generation needs, especially with education, e-commerce, cosmetic surgery industries, etc., we facilitate easy buildup of our landing page using our own CMS. Currently, customers who use our CMS saw their conversion rates improve -- improving by over 50% upon the adoption. With solid execution of the above initiative, we are well-positioned to capture higher performance ad wallet in the market.

[Foreign Speech]

With that, let me turn the call over to Fei Cao for financial review.

Fei Cao -- Vice President, Finance

Thank you, Gaofei, and hello, everyone.

Welcome to Weibo's third quarter 2020 earnings conference call.

Let's start with user metrics. In September 2020, Weibo's MAUs reached 511 million, representing a net addition of approximately 40 million users on a year-over-year basis. Weibo's average daily use reached 224 million, representing a net addition of approximately 8 million users on a year-over-year basis.

Let's turn to financials. As a reminder, my prepared remarks would focus on non-GAAP results and all the comparisons are based on a year-over-year basis unless otherwise noted.

Now let me walk you through our financial highlights for the third quarter of 2020. Weibo's third quarter 2020 net revenues were $465.7 million, flat, or a decrease of 4% on a constant currency basis, exceeding the high end of our guidance. Operating income was $179.4 million, representing an operating margin of 39%. Net income attributable to Weibo was $152.9 million, and the diluted EPS was $0.66.

Now let me give you more color on revenues. Weibo's advertising and marketing revenues for the third quarter 2020 increased 1% to $416.7 million. Mobile ad revenues were $376.1 million, contributing approximately 90% of total ad revenue, up from 87% last year.

Moving on to KA. In the third quarter, Weibo's KA ad revenues reached $221.2 million, an increase of 12% year-over-year and 33% quarter-over-quarter. Leveraging a nice rebound in domestic consumption and ongoing digital transformation, our KA business demonstrated great recovery momentum with a number of brand advertisers' spending in fact this quarter hitting record high. We're delighted to see a growing number of brands recognizing Weibo's unique value proposition in connecting to younger generation, leveraging KOLs' influence as well as delivering brand/performance goals. This quarter, on top of traditional brand budget, KA customers notably allocated higher budget to performance-driven products such as speed and the KOL marketing offerings to drive users all the way down the funnel which presents us with opportunity to catch the incremental ad wallet in the long run. Industrywide, the strength in our KA business was relatively broad-based this quarter, with growth fueled by key sectors such as FMCG, automobile and luxury category, etc. As we said, entertainment, travel and real estate sectors remained on the negative growth trajectory, but we are seeing early signs of recovery following ease-up of restrictions on theaters and tourism.

Turning to SMEs. In the third quarter, Weibo's SME ad revenues reached $166.4 million, a decrease of 15% and an increase of 20% quarter-over-quarter. The descending trend of our SME business was mainly attributable to two factors. First, the recovery pace of offline merchants continued to lag behind the overall SME sector and weighed on the growth of the SME ad revenue. And second, as we mentioned the last quarter, our initiative to clear up low quality customers and add further [Phonetic] also negatively impacted our SME revenues. On offset, gaming and education sectors continued to book double-digit growth year-over-year, bolstered by further improvement around [Indecipherable] efficiency and performance. In September, we officially launched our revamped ad-leading system [Indecipherable] featuring a series of updates on optimized CPX, video and KOL ad offerings in the hope of driving ROI for customers through more rapid responsive features, better ad relevancy and higher ad placement efficiency.

Ad revenues from Alibaba for the third quarter increased 15.2% [Phonetic] to $29.2 million. The momentum of ad spend from Alibaba reflects our strengthened cooperation in driving value for brands and merchants to achieve branding plus performance offers [Phonetic] through integrated ad campaigns on both platforms. That said, ad spend from Alibaba highly correlated to its own business operations, especially its marketing strategies, which may change from time to time. As such, we cannot assure that such robust growth will be sustainable in the future.

Value added service, VAS, revenues decreased 11% to $49.1 million in the third quarter, primarily due to decrease of live streaming revenues, partially offset by an increase in membership revenue.

Turning to costs and expenses. Total costs and expenses for the third quarter increased 3% to $286.4 million. The increase was primarily due to the higher product acquisition and personnel related costs, partially offset by decreased marketing spend.

Our operating income in the third quarter was $179.4 million, representing an operating margin of 39% compared to 41% last year and 31% in the second quarter.

Turning to income tax. Under GAAP measure, income tax expense for the third quarter was $30 million compared to $31.4 million last year.

Net income attributable to Weibo in the third quarter was $152.9 million, representing a net margin of 33% compared to 38% last year and 30% in the second quarter.

Turning to our balance sheet and cash flow items. As of September 30, 2020, Weibo's cash, cash equivalents and short-term investments totaled $3.2 billion compared to $2.4 billion as of December 31, 2019, mainly due to nice proceeds of $714.3 million received from senior note offering in July 2020.

In the third quarter of 2020, cash provided by operating activities was $235.2 million. Capital expenditures totaled $10.7 million, and depreciation and amortization expenses amounted to $7.7 million.

Now let me turn to financial outlook. We anticipate our fourth quarter 2020 net revenues to increase by 1% to 3% year-over-year on a constant currency basis. This forecast includes revenue estimate of an interactive entertainment company which was acquired and consolidated to our Company in November 2020 and represents approximately 2% of our revenue estimate in this quarter. This forecast reflects Weibo's current and preliminary view and is subject to change.

With that, let me now turn the call over to the operator for the Q&A session.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Alicia Yap from Citigroup. Please go ahead.

Alicia Yap -- Citigroup -- Analyst

[Foreign Speech]

Good evening, management, and thanks for taking my questions. I have two questions related to advertising. Number one is related to the -- the overall ad budget sentiment and recovery trend in China. It seems China is on track for a decent recovery, but given the seriousness of the pandemic outbreak in other countries, do you -- have you seen or do you think it will affect the ad budget on to the worries of the -- the outbreak in other countries in terms of the ad sentiments?

And then second is related to the competition. It seems that management continue to mention the intensified competition from the short video companies in terms of their ad budget allocation. So not too sure this intense competition continue into next year? Or do you think, given Weibo's products is recovering -- improving, should we see the competitive landscape be actually moderate and improving over time? Thank you.

Gaofei Wang -- Chief Executive Officer

Okay.

[Foreign Speech]

So, let me give you the answer for the very first question. So let's talk about the data of Q3. Let's divide it into the brand and also SME. First of all, talking about the brand ads. You can see that because Weibo is a very large company, so I don't think the pandemic is impacting the ad revenue or budget of the brand so far. But talking about the SME, I think that in the first half of 2020, we really had a big impact because previously our SME budget previously focused on offline, primarily speaking, especially those kind of industries like O2O and also Finance. So I think that we made some changes on the SME side. So this year, we moved further to the online business and especially the online education, e-commerce and gaming, etc.

[Foreign Speech]

So, second of all, I would like to say that in terms of our strategy focusing on the brand customers, currently speaking, our brand revenue or our ad revenue from the brand customers is relatively small compared with the other big companies. So, because previously and also as of now, we pretty much focus on the top companies and also top brands. So you can see that, of course, we have a very steady growth of our number of customers, especially brand customers. And also in 2021, we had some kind of changes and also adjustment over our strategy. For example, now we are going to enlarge and extend the maintenance of those brand customers, especially focusing on the inclusion of regional brand and also those national fashionable brand as well. So you can see that in the next one, two years, we are going to see that more revenues or we are going to see more revenue is coming from those middle and brand customers.

[Foreign Speech]

And also, next I would like to say that, talking about the SME part -- so, because I think that SME is really a kind of a sector in our business that is heavily impacted by the pandemic because previously we pretty much focused on the O2O business and also there is a wedding dress and photographing and also e-commerce or financial industry. So you can see that the O2O, because of the pandemic impact, this was heavily like dropped and declined. And also, second of all, we willingly dropped out some of the customers, for example, in the financial industry or cosmetic surgery industries. So the SME side, we have a strategy that we are going to leverage the ability of the existing team to focus more online, especially online education and also gaming as well. So that is the reason why we are seeing a very good result of growth.

And also next year, our focus will be using the same SME team to further optimize the online business and also to prioritize our services provided to those online brands and customers and especially focusing on the network service, apps downloading service, for example, and also because that this year we had big growth on the gaming industry. So that's why we are now pretty much more focused on the provision of services to those app downloading and other relevant areas.

[Foreign Speech]

So, second, talking about the impacts on the competition landscape of the short video. So you can see that we have, first of all, the indirect impact from this particular competition for the brand customers in specific -- or brand ad, if you like. So if you're talking about this competition, we are talking about the indirect competition, first of all, from the long video side. But you can see that this year, because of this pandemic and also the lowered-down investment going to the entertainment sector, we can see that those brands are now preferring to invest their money into making videos on the Weibo BDBD or RED [Phonetic] instead of those traditional platforms, so making long videos. So I think that is a favorable trend toward this.

[Foreign Speech]

And also I want to say that in the SME sector, we still feel a little bit stressful confronting the competition from the short video platform because comparing with the tax and also image like Weibo, we do see the advantages maintaining in the short video platform, but also what we have to do is that we want to focus on the service provision as well as the optimization of our algorithm for the ad as well. So you can see that this year, we are doing very good job on gaming, especially Q3, so you can see that it is helpful for us to get more budget from those brands and also customers. Also next year, we're going to focus on getting more budget from the other famous customers in those cosmetic surgery area or e-commerce or Internet service, etc. so that it is very much hopeful for us to get more budget from those short video platforms as well. But overall speaking, in the short run, I still believe that short video platform is very much advantageous in terms of making ads over the text and image oriented platform like Weibo.

[Foreign Speech]

So, and also I have to say that -- I'm talking about the specific competition with the short video platform on the SME side. First of all, we are going to further invest into making more high quality short videos on our side. So you can see that we have been always focusing on investment on this area. So this year, we are also building up more inventories of advertisements as well at the same time based on short videos. And second of all, not only we are trying to focus on the content, but also we would like to focus more on the customers' conversion rate by pulling that budget over our platform, so you can see on the education side, we're pretty much focusing on our own -- doing ad but also making the conversion rate increase to them. So this is actually a kind of a hybrid way for us to contact for us to overcome the challenges from the short video platforms.

Alicia Yap -- Citigroup -- Analyst

Okay.

[Foreign Speech]

Sandra Zhang -- Investor Relations Officer & Senior Financial Analyst

Thank you.

Operator

Thank you. Next question comes from the line of Tian Hou from TH Capital. Please ask your question.

Tian Hou -- TH Capital -- Analyst

[Foreign Speech]

So first [Phonetic] question continues on the short video. The Company has made great progress on the short video. The last quarter, we mentioned that the Company had about half million offers already opened their short video accounts. So I wonder how many of them opened accounts by the end of Q3. And in 2021, what is the Company's goal in terms of how many accounts do we plan or work on to open? And for the advertising revenues generated by short video, what's the percentage of total does the Company expect that to be? That's my question. Thank you.

Gaofei Wang -- Chief Executive Officer

[Foreign Speech]

So first of all, in our previous presentation, I mentioned a little bit about it. So let's just recap from it. So first of all, overall speaking, we have over 700,000 accounts already opened on the video account. And also talking about those account having over 1 million followers, we have 13,000 of them already. So the growth rate is very good and glad. So of course, that -- and having said that, that is still relatively very smaller comparing with the number of we-media that we have or self-media that we have on Weibo.

[Foreign Speech]

So given the fact that creating the content of video is way more difficult than that of creating a text and image like we traditionally did in Weibo, so in the future, I think the number of video accounts will be still remain relatively small against the total number of accounts that we have.

[Foreign Speech]

And second of all, let's talk about our strategy, which is very clear already in our group. So first of all, in terms of production. First, of course, we are going to emphasize more on encouraging those capable authors to create more high quality videos on our site. So, by those capable authors, I mean the media or KOLs or those food or delicious food accounts and also those fashionable brands or fashionable accounts or those cosmetic KOLs as well. So not only they can get the traffic from the video itself, but also they can gain an extensive traffic or speed from the Weibo self from those text and image users. And second of all, the strategy is that we are going to attract more external account or external creators to join Weibo to publish their short videos at the same time. For example, we're going to want to attract those people from BDBD or watermelon [Phonetic] or TikTok, etc. So at the same time, not only they can generate videos on Weibo video account, but also they can actually at the same time publish some text and image to show their attitude and sometimes interact with their followers by commenting, etc. So you can see that this particular part, the hybrid model, is the one that we enjoy the most growth or the biggest growth this year.

[Foreign Speech]

So, also talking about the consumption side. The first thing is that for those creators of videos, not only they are publishing their videos, but also at the same time text and images as well. So, if we're talking about the followers of those KOLs, you can see that the average time spending is like two times higher than that of the time spent on text and image only. So this kind of average time spending can help us to improve our activities. And also, second thing is that we can see that in Weibo we can create such kind of independent space for the advertisements and also for the video based consumption behavior as well. So this is very helpful for us to gain more budget and gain more revenue from the ad part, and also, we can build up a very good inventory of high-quality video and also advertisements as well.

[Foreign Speech]

And finally, let's talk about the objective that we have. Of course, in the short run, we're going to focus on the investment-driven strategy which is to say that we are not saying -- we are not saying that all the creators of the videos should actually give us more consumption payback higher than our investment, not necessarily speaking. So that is to say, it's pretty much the case that in the short run, we're going to invest more than the revenue coming from those creators. So we have actually, of course, two aims. The first is that we are going to encourage more text and image creators to convert to the high-quality video creators. And second of all, we are going to attract more external creators from other platforms to arrive on the Weibo account -- video account to create more videos and at the same time interactive content based on images and text. So that is a very good strategy for us to further differentiate Weibo from other platforms and also give us a sustainable revenue contribution from the ad part and video side as well.

Tian Hou -- TH Capital -- Analyst

[Foreign Speech]

Sandra Zhang -- Investor Relations Officer & Senior Financial Analyst

Thank you.

Operator

Thank you. Your last question comes from the line of Miranda Zhuang from Bank of America. Please ask your question.

Miranda Zhuang -- Bank of America -- Analyst

Thank you, operator. Good evening, management. Thanks for taking my questions. Can you please share with us your preliminary outlook for the advertising business next year, in particular, the ad spend sentiment of your advertisers in various industries? Thank you.

[Foreign Speech]

Gaofei Wang -- Chief Executive Officer

[Foreign Speech]

So overall speaking, talking about the industry outlook, so -- and continuously, we are not going to only focus on Kas, but also SME at the same time. And also, we are now trying to focus more on each different verticals, and also, second, combine the brands together with the effectiveness and conversion of that particular ad. So this is a very comprehensive and holistic strategy for this business.

[Foreign Speech]

So you can see that in the future, we can see that by doing that, we are going to improve increase the branding and also increase the SME side as well or effectiveness as well. So you can see that we are going to focus more on the verticals like automotives, gaming and also FMCG as well. So, for example, gaming. This year, we pretty much focus on those new games published this year and also they can -- they have a huge demand of getting a very good effectiveness of more gamers and also high-quality contents of games as well.

[Foreign Speech]

Also, let's talk about the industry of gaming, for example. So because of that now, we are trying to focus on the quality or the quality oriented customers. So that is to say on the gaming side, now we can see that we are primarily very much, very well collaborated with [Indecipherable] for example, and they are making high quality games at the same time. So they are pretty much gaining more traffic from Weibo. But if you are continuously making some of the games like the webpage game, etc., which does not necessarily need to build up the brand, but only focusing on the effectiveness kind of advertisement, I don't think that they are going to get up further traffic from Weibo. So that it to say that we are going to see very good growth on those concentrated verticals, especially those top brands concentrated areas, but not that distributed or like scattered area.

[Foreign Speech]

So overall speaking, while we finish our monetization strategy implementation, we're going to see that in the future, we are going to continuously focusing on those customers that are investing more into the -- their high quality area. So, especially in the future, if the brand -- not only the brand customers but also SME, if they have more budget focusing on the online advertisement, we are going to collaborate and also attract those ads.

Sandra Zhang -- Investor Relations Officer & Senior Financial Analyst

Thank you.

[Foreign Speech]

Operator

[Operator Closing Remarks]

Duration: 72 minutes

Call participants:

Sandra Zhang -- Investor Relations Officer & Senior Financial Analyst

Gaofei Wang -- Chief Executive Officer

Fei Cao -- Vice President, Finance

Alicia Yap -- Citigroup -- Analyst

Tian Hou -- TH Capital -- Analyst

Miranda Zhuang -- Bank of America -- Analyst

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