Weibo Corporation (WB) Q3 2021 Earnings Call Transcript

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Weibo Corporation (WB 4.30%)
Q3 2021 Earnings Call
Nov 11, 2021, 6:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to Weibo Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]

And now, I'd like to turn the conference over to the management team of Weibo. Thank you. Please go ahead.

Unidentified Speaker

Thank you, operator. Welcome to Weibo's third quarter 2021 earnings conference call. Joining our call today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcast on the Internet, and is available through Weibo's IR website.

Before management remarks, I'd like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of 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.

We'll assume no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F, and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. We will assume no obligation 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 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 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 non-recurring in nature, or not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures.

Following management prepared remarks, we will open up 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 2021 earnings conference call. [Foreign Speech] On today's call, I will share with you highlights in Weibo's user product and monetization in the third quarter of 2021.

[Foreign Speech] On the user front, Weibo's MAUs reached 573 million and average DAUs reached 248 million in September 2021, adding approximately 62 million and 23 million users year-over-year respectively, which represented the highest net addition number among the recent six quarters. In September, 94% of Weibo's MAUs came from mobile.

[Foreign Speech] On the monetization front, leveraging further optimization in our competitive strategies and ad product offerings for key industries. Our total revenues reached $607.4 million in the third quarter, an increase of 30% year-over-year. Advertising and marketing revenues reached $537.6 million, an increase of 29% year-over-year. 93% of our ad revenues came from mobile. Our non-GAAP operating income in the third quarter reached $248.7 million.

[Foreign Speech] Now let me elaborate on our progress made in the areas of product and monetization in Q3. [Foreign Speech] In the third quarter, driven by seasonality effects of summer break and Olympics, Weibo's user scale and traffic both reached record high in July and August, post the spark seen during a pandemic outbreak in March last year. As for September, we will typically see a pullback in traffic naturally due to the back-to-school seasonality. While for this September, in light of rectifications on the entertainment sector, we have also stepped up our compliance efforts and revamped relevant product offerings accordingly. As a result, we saw a pullback in traffic from the July and August level as well as slowdown of user growth on a sequential basis.

In the meantime, we also revisited our product and operations to further conform to the regulatory requirement. To elaborate, we cooperated closely with our partners in the entertainment industry to highlight celebrities work, such as TV series and a variety of shows, as opposed to celebrities themselves, in the hope of fostering a healthier entertainment ecosystem. We also refined our hot trends mechanism so as to build out a more constructive ecosystem around hot events in the long run.

[Foreign Speech] On the channel front, with headwinds in certain verticals such as the crack down on education, the overall user acquisition price has been on descending trend due to less market competition coupled with Weibo's competitive edge in channels. Our channel cost per user has further decreased. Meanwhile, we are also pleased with better retention rate of user acquired through channels, leveraging improved synergy between channel investments and subsequent product usage.

To elaborate, we made progress in optimizing our targeting mechanisms, and thus acquired an incremental number of high-quality users. In meantime, we continuously improve subsequent content consumption experience and optimize user recall strategy, driving organic content consumption from channel users. In the third quarter, we step up cooperation with major channel partners such as handset manufactures and operators in the areas of social features and hot trends.

In September, the number of users acquired from channel investments increased substantially compared with June. We are well positioned to further enhance our competitive edge on user acquisition, leveraging gradual normalization of competition on the channel front, as well as steady improvements in engagement trend of users acquired through channels.

[Foreign Speech] On our product front, I would like to share with you our key initiatives on Weibo's information feeds and video. [Foreign Speech] On information feeds, our primary strategy in 2021 is to solidify the competitive edge of Weibo's key social features and core functionalities and thus drive users' business and interactions among Weibo's core user groups. In the third quarter, we further strengthened the data mining and distribution of quality social content in hot trends as well as step-up traffic support to quality accounts.

On product features, we focus on amplifying content distribution with fans and facilitating social relations build-out among users, so as to improve content consumption experience and social attributes. Taking Tokyo Olympic Games as an example, Weibo demonstrates its strong platform positioning in the combination of hot trends and social features, underpinned by our advantage in real-time on pick update[Phonetic], public discussion and viral distribution as well as strong engagement from athletes. Olympic Games-related topics generated over 400 total views and 117 million discussions on our platform, a phenomenal performance among domestic platforms. As a result, both our user and traffic reached a record high in July and August.

Looking ahead, we will further reinforce our hot trends plus social interactions playbook, which features the systematic operational approach that integrates media reports, celebrity and KOL discussion and distribution as well as social interaction among users. We will also beef up our product features and feed distribution and thereby further uplifting Weibo's competitive edge.

[Foreign Speech] Moving on to videos. In 2021, we focused on accelerating the content visualization for Weibo's content creators through our video accounts program, and thus increased video content generation and consumption. Meanwhile, we're emphasized on cultivating users' mindset of using Weibo for video consumption through constant operation in key verticals, leveraging ongoing progress made in our video accounts program. We are pleased to see the further visualization trend among content generators.

As of September, the number of registered video accounts surpassed the 20 million mark. This quarter, we focused on several key verticals such as fashion and beauty, gaming and sports to cultivate users' mindset toward video consumption. We also entice video content [Phonetic] generator in these key verticals through our incentive program, while optimizing the recommendation model under key scenarios to enable video content creators with right community wide to reach users more efficiently. Thanks to improving video ecosystem and Olympic effect, the quarterly average video views and time spent in Q3 continued to grow from Q2.

On live streaming, we leveraged our joint mic live streaming product to attract users with our real-time Olympic updates and build a highly engaged community wide. During the Olympic season, we're delighted to see over 50 athletes, hundreds of KOLs, and multiple top media outlets participate in our Joint Mic live, generating lots of hot topics or viral distribution and discussion. From the product perspective, we kept optimizing user experience and enhancing the social and consumption features of our live streaming products, laying solid foundation for the upcoming IP-based joint mic live streaming.

[Foreign Speech] Next, let me give you an update on the content verticals. In the third quarter, we witnessed a tightening regulatory environment for the overall entertainment sector. Notably, government authorities issued a serious rectification measures on film, TV series, and variety of shows as well as fan culture. In a short run, we would expect certain impact on traffic from the entertainment and news information verticals. That said, leveraging our continuous investment to enrich content verticals, we could mitigate such impact by fulfilling users' diversified consumption need on other content verticals. A good example would be the gaming and esports vertical.

Since last year, Weibo has beefed up its investments in various areas in the sector and strengthened partnership with game developers, esports tournaments, gaming KOLs and hosts as well as started our own esports team. The gaming vertical has now become one of the top content verticals besides news information and entertainment, benefiting from the strong social distribution and a large engaged Gen Z user groups. For instance, during the reasons League of Legends Season 11, relevant topics generated over 100 billion [Phonetic] views and 60 million discussions in total. As a result, our traffic also reached its peak since Tokyo Olympic Games on the final day of the Season 11 tournament.

Additionally, Weibo has also proactively enriched our offerings around esports sector, including investing and starting several esports team, organizing a series of esports tournaments of popular games in the market. With the investments in upstream and downstream around the gaming and esports sector, Weibo is well positioned to better reach young users and improve their engagement, which will boost the monetization for gaming sector in the long run.

[Foreign Speech] Now, let me share some color on our monetization strategies and the progress made this quarter. In 2021, we have further strengthened the competitive edge of our social ad products, solidified our industry-specific marketing capabilities and enhanced the potential and efficiency of traffic monetization, so as we improve Weibo's monetization scale and market competitiveness.

[Foreign Speech] From an industry perspective, our ad revenues increased 29% year-over-year in the third quarter, despite the deceleration or even cutback of ad spend from certain industries that's facing macro or regulatory headwinds. We're delighted to see resilient growth in key verticals, such as cosmetics and personal care, food and beverage and 3C products etc., benefiting from improvements in our service capabilities. Meanwhile, our strategic focus on sectors such as gaming and apparel also paid out, testified by decent growth seen in these sectors as we strengthen the synergy between our user and ad products to further enhance the monetization efficiency of our organic traffic and ad performance.

On flip side, a few sectors book a notable decline due to regulatory headwinds such as education and entertainment. Ad budget decline from entertainment industry could be temporary due to the cutback on the demand side amid pricing policies in the sector, which gradually come back following the normalization and gradual release of blockbuster shows. However, it will be a different story with the education sector, as the crack down on the industry's ad demand seems irreversible currently. In light of recent policies and the industry trends, we have proactively adapt our go-to-market strategies and adjust our sales structure. Looking ahead, we will beef up our efforts to reach and serve customers in those promising sectors, such as the new consumption economy, so as to fulfill their specific marketing needs in the longer term.

[Foreign Speech] On ad product front, we focused on mainly two things in the third quarter. First, we continued to reinforce Weibo's competitive edge in branding plus performance ad offerings, leveraging the compounding effect of our hot trends, celebrity KOL and treasure box ad offerings. We showcased strong ad performance to our customers during major events and their prime campaign windows. For instance, during the Tokyo Olympic Games, automobile company GAC leveraged athletes [Indecipherable] influence to build hype and relevant topic went viral on our platform, reaching nearly 200 million views and generated over 12 times traffic value compared with the traditional commercial placement.

Second, we'll continue to optimize our feed and offerings, notably on a full funnel conversion model from front to back end. Specifically for the gaming sector, we further reinforced the synergy between our ad offerings and the content vertical operation, leading to heated discussion on newly launched games and build out of social assets. We have successfully extended this industry-specific ad offerings to more gaming clients, which resonated greatly in the market. Taking the blockbuster IP game Harry Potter as an example, we leveraged its strong IP feature and created a series of trendy topics. These topics generated more than 6 billion views and 5 million discussions in total, enabling us to capture higher ad budget from the clients. Going forward, build upon success story with gaming industry, we will further explore and extend the model to the e-commerce sector, while beefing up our investment in ad technologies around such ad products with focus on the new consumption sector.

[Foreign Speech] In the second half of 2021, government authorities beef up the overall regulatory efforts on Internet platform and issued a couple of new policies, including rectifications on some culture and celebrity ranking chart, cyber security law and personal information protection laws, just to name a few. The new set of regulatory framework imposes higher compliance requirements across the industry in terms of product, operation and monetization. As such, Weibo also devoted significant R&D resource to the compliance front. Furthermore, we are in regular communication with relevant government departments to better understand the policies and the implementation guidelines, so as to adjust our product and operations in a prompt way.

For instance, talking about the recent fan culture rectification, Weibo has taken pre-emptive measures and issued guidelines to celebrity agencies and the fan groups actually half year before issuance of such policy. Upon implementation through a period of time, we have already seen fan interaction head toward a healthier path, allowing us to buffer and minimize the impact from the recent rectification. Similarly, on the hot trends product, since the end of last year, we have proactively taken steps to lower the percentage of entertainment-related trends, which has come down and stabilized at around 25% of total trends. With diversified hot trends, our hot trends product is well positioned to reach a wider user demographics.

[Foreign Speech] Lastly, let me reiterate on our positioning. Despite certain uncertainties and headwinds, we delivered solid progress and results in the areas of user traffic product as well as monetization in the third quarter. That said, we are indeed facing a year of change where we have to navigate through many external evolvements. However, what doesn't change is our core positioning as China's leading social media platform. We have always been steadfast in our mission to empower users to be heard publicly and connect with each other as well as our commitment to a better society.

We have demonstrated our indispensable value proposition in grateful events such as the recent flood in Jinjiang city and also during the evolving COVID-19 pandemic situation. We are proud to serve our users and society in recording and discovering what's happening in the world over the past 12 years. With further optimization in our user experience and core features, Weibo will continue to be the go-to platform for users who connect with each other, discover hot trends and for customers to market effectively.

[Foreign Speech] With that, let me turn the call over to Fei Cao for a financial review.

Fei Cao -- Chief Financial Officer

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's third quarter 2021 earnings conference call. Let's start with user metrics. In September 2021, Weibo's MAUs and average DAUs reached to 573 million and 248 million respectively, continuing to grow from prior quarter despite the back-to-school seasonality and the regulation headwinds. On an annual basis, we added approximately 52 million MAUs and 23 million DAUs, a solid net addition number, primarily driven by strong execution on channel and the video front. Looking ahead, we remain focused on executing against our user and the product strategies, while navigating through changes in the regulatory landscape, leveraging 12 years of experience as a social media platform as well as our indispensable role in serving public conversations.

Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results and all the comparisons on a year-over-year, unless otherwise noted. Now let me walk you through our financial highlights for the third quarter of 2021. Weibo's third quarter 2021 net revenues was $607.4 million, an increase of 30%. Operating income was $248.7 million, an increase of 39%, representing operating margin of 41%. Net income attributable to Weibo is $209.6 million, an increase of 37%, representing a net margin of 34%. Diluted EPS was $0.90, compared to $0.66 in the third quarter 2020.

Now let me give you more color on revenues. Weibo's advertising and the marketing revenues for the third quarter 2021 increased 29% to $537.6 million. Mobile ad revenues were $500.4 million[Phonetic], contributing approximately 93% of total ad revenues, up from 90% last year. Weibo delivered a solid ad revenue growth underpinned by robust engagement trend during Olympics, strong sales execution and ongoing ad optimization. We are delighted to see advertiser recognize Weibo as the go-to platform to build [Indecipherable] with our industry-specific ad playbook during major events. In terms of revenue contribution, our Top 3 verticals were FMCG, 3C products and e-commerce.

Weibo has gradually become the cornerstone of many advertisers in these consumption sectors by enabling them to connect with Generation Z users and fulfilling their integrated branding plus performance needs. In terms of growth, FMCG and 3C products continued to outperform whereas entertainment and education verticals underperformed, mainly due to the regulatory headwinds.

From ad product perspective, revenue contribution by product category remained fairly stable with promoted feeds being the largest part, followed by social display ads and other ad offerings such as promoted trends and topics. Amidst industrywide rectification on large screen ads and the celebrity chart, our teams stressed[Phonetic] to mitigate that impact by revamping ad offerings as well improving monetization efficiency, which resulted increase in growth for each of the broad product category.

Also we continued to see good traction with video ad and [Indecipherable] to further drive its penetration, positioning us well for long run rate of growth. As we headed into Q4, we are committed to leverage our unique value proposition in the market and strong execution track record over the years to capture a commercial rate share of wallet even though the fact that the overall advertising market could be challenging in many ways. Despite short-term macro and regulatory headwinds facing the whole advertising industry, we're committed to driving value for our customers in the long run by leveraging Weibo's full spectrum of social advertising products.

Ad revenues from Alibaba for the third quarter decreased 29% to $20.8 million, mainly due to Alibaba's own conservative market strategies this quarter, as well as our progressive opening up of ad inventories to other e-commerce platforms. That said, our cooperation with Alibaba positions us well to capitalize our ongoing digitalization trend and the general value for brands and merchants on both platforms. Value-added service (VATs) revenues were $69.8 million in the third quarter, an increase of 42%, primarily attributable to the revenue derived from the interactive entertainment company acquired in November 2020, while partially offset by decrease of revenue from live streaming business.

Turning to costs and expenses. Total costs and expenses for the third quarter were $358.7 million, an increase of 25%. The increase was primarily due to step up in marketing spend and higher personnel related to cost. Operating income in the third quarter increased 39% to $248.7 million. Operating margin was 41%, up from 39% last year, exceeding our expectations. We are pleased with further operating leverage achieved this quarter as we continued to balance well between investment for growth and the margin performance.

Turning to income tax under GAAP measure. Income tax expense for the third quarter was $31.4 million, compared with $30 million last year. Net income attributable to Weibo in the third quarter was $209.6 million, representing a net margin of 34% compared to 33% last year.

Turning to our balance sheet and cash flow items. As of September 30, 2021, Weibo's cash, cash equivalent and short-term investments totaled a $2.7 billion compared to $3.5 billion as of December 31, 2020. The decrease was primarily resulted from investment activities we made and was partially offset by cash provided by operating activities. In the third quarter of 2021, cash provided by operating activities was $226 million. Capital expenditures totaled $8.3 million and depreciation and amortization expenses amounted to $14.1 million.

Lastly, let's talk about our financial outlook. We anticipate our fourth quarter of 2021 revenues to increase by 15% to 20% year-over-year on a constant-currency basis. This forecast also reflects Weibo's current and preliminary review 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] Our first question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Alicia Yap -- Citigroup -- Analyst

Hi. Thank you. [Foreign Speech] Thank you management for taking my question. Our first question is, curious if management can share if there is any change of the Weibo behavior ever since the effectiveness of the Personal Information Protection Law starting in November 1? Second question is, overall advertising industry actually is facing macro and also regulatory challenges and yet Weibo has been able to maintain double-digit growth in the online ad revenue. So can management share with us the performance and growth rates for different industry verticals and how big is the macro impact and how big is the regulatory impact on each industry verticals? Thank you.

Gaofei Wang -- Chief Executive Officer

[Foreign Speech] So thank you very much for your question. First of all, let me address the question related to the implementation of the Personal Information Protection law. So, overall speaking, this is actually a megatrend not only happening and impacting China, but also the rest of the world as well. Because after the implementation of the Personal Information Protection Law, we've been also having challenges in terms of our algorithms and also the fair competition as well as the performances of our CSR as well and also to the other companies. So that is to say that we need to emphasize more on the operation as well as the compliance as well.

[Foreign Speech] And also in terms of Weibo, I'd like to give you two points. The first one is that Weibo has always been a public social media platform. So actually during the past, if any user has any questions or any suggestions, they were really feeling free to actually providing the feedback to us. And, of course, that we will always being very much refrained from making the public the personal privacies and also the other information, so with a very good protection. So that because of this impact, we are going to postpone or not thinking about going online for the features of the function of feedback and also the other relevant functions.

[Foreign Speech] And also second point is that Weibo has been operational in China for 12 years already. And during the past decades, we've been keeping a very close communication and collaboration with the government as well in terms of all kinds of different details. So, as you all know that in this particular industry, Wiebo is really a kind of a more compliant company versus the other peers as well. And also this is a normal business operational environment for us to be really regulated pretty much and also we emphasized a lot on the self-discipline in terms of the data collected and also the other businesses operated.

[Foreign Speech] And also before the implementation of this Personal Information Protection Law, we received already the guidance and also the trainings from the government to actually have the optimization, overall algorithm and also the Personal Information Protection as well as the data securities as well. So, we already had a very good communication with the government even before the implementation of this law. And also, of course, after the going live of this Personal Information Protection Law, of course, that we are going to face a further optimization and adjustment as well. However, I believe that such a tight and stringent regulation sustainably is going to benefit not only Weibo, but also the whole industry.

[Foreign Speech] And also in terms of your second question, it is indeed correctly mentioned by you during the question that the whole industry and also not only Weibo, but also the externalists were facing lot of challenges since the second half of this year. Of course, having said that, Weibo still had a double-digit growth in the ad industry. And, of course, that was pretty much due to two reasons. The first one is a very optimized ad sector and vertical structure and as well as a very good and diversified coverage. And second was because of the nature of Weibo's ads, which was social media oriented.

[Foreign Speech] And also, I would like to actually talk about the three major industries that have been regulated pretty seriously during the past, so they were education and insurance as well as the entertainment industry, if you like. So first of all, talking about the education, so education vertical action accounted for very minor proportion of our total revenue, which was lower than 2%. But, of course, if you're talking about K-12 relevant education, this was even lower. And of course, second of all, talking about finance, especially insurance industry. So, we had a pilot run of this particular collaboration with the insurance industry for the ad replacement -- placement in April in Q2 actually. However, because of the poor user experience and also the other reasons, we gave up on this particular industry.

And third of all, talking about the entertainment industry, so this is of course a very big contributor to our total revenue. However, in the past, we were pretty much having a collaborative model based on the content instead of regarding those entertainment customers as our customers. So that is to say that even if we had a stringent regulation on the entertainment industry, this hardly impacted our revenue and also this particular challenge wasn't as big as the other peers as well.

[Foreign Speech] And also second of all, talking about those verticals that have been badly and also worsely impacted by this particular tight regulation, so they were automotive industry as well as gaming. So first of all, talking about the automotives and, of course, that we all know that the whole industry of automotive was declining naturally by itself. However, talking about the ad types that we provided to those customers in the automotive industry, this was a pretty much on the brand plus performance oriented.

So, of course, that we are still maintaining a very good positioning in the budget pool of our customers in this industry. And also as I have already stated in the opening remarks that Weibo has grossed with the opportunity very well and precisely especially the trend that more and more ICE vehicles are turning to the electric vehicles and penetration of EV has becoming higher, so that we got a lot of the budget of the new EV launch for our customers. So we kept a flat performance in Q3 in this area.

However, in the future, while the chip shortage issue has been resolved, we're going to see a very good recovery of our leading position in this industry vertical. And of course, lastly, talking about the gaming, of course, that we had the regulation of non-adults in this area. However, as I have stated, we successfully got the trend of the popular esport games and also catched a lot of opportunities for the launch of many new popular games. So, we really gain a highly recognition from the gaming industry in terms of our ability of doing business with them. And also, you can see that the percentage of this particular part of the new business has been increasing over time.

[Foreign Speech] So owning more -- and also lastly, I would like to comment on the other verticals that were not impacted by this regulatory and also the macro headwinds, especially FMCG and also the consumer electronics etc., they were keeping a very good growth. So, of course, that Weibo always emphasize on the strategy of having brand plus the performance ad as well as providing a differentiated strength by leveraging a lot on the KOLs and also celebrities as well. So you can see that these kinds of FMCG and consumer electronics industries were not impacted at all and also maintain a very robust growth. So overall speaking, because of this optimized overall structure of our customers and verticals and also part of the industries have been impacted by the macro environment and also the regulatory environment, however, still we had a very positive trend in Q3 and also quite optimistic about continuing this trend to Q4.

Operator

Thank you. Next question comes from Ashley Xu from Credit Suisse. Please ask your question.

Ashley Xu -- Credit Suisse -- Analyst

[Foreign Speech] Thanks management for taking my question. My question is related to the regulation in the entertainment sector, especially about the rectification about fan culture. Could management share more color about the impact on our user engagement and monetization? At the same time, you mentioned that we are investing in the esports and gaming related contents. Could management share more color on our progress and future plans? Thank you.

Gaofei Wang -- Chief Executive Officer

[Foreign Speech] So first of all, talking about the fan culture. So as I have stated in the previous answer, so we had a very good communication and also the relationship with the government even before the implementation of any regulation. So actually before the implementation of the policy, we are going to have a better understanding of the details of the implementation as well as the enforcement of the certain regulations. And also, accordingly adjust our behavior and also performance and also operation.

[Foreign Speech] And also second of all, one or two years ago, actually, we already witnessed a negative impact of this fan culture to the whole ecosystem of Weibo and also the whole industry, so that we have adjusted quite actively the announcement of the community in the first half. If you've noticed that in the adjusted announcement -- community announcement, we already said that we have forbidden all kinds of the release for the third-party information and also the relevant call for and supportive messages sent by the fans as well.

And also, these kinds of measures that we proactively take -- or took had a very good buffering effect on this times regulatory change, so that we have been reducing the impact to our traffic to the minimum level because of this preparation. And also in Q3, we see the real implementation of the detailed rules and, of course, for example, we have been changing actively the kind of management over the celebrity agencies as well as the fan groups and also trying to manage more tightly in terms of those contents of television and movies etc. And also, we had a very good adjustment over these super topics and also the ranking of celebrities etc.

[Foreign Speech] And also, I would like to say that in recent years, we've been seeing the development of the entertainment industry more toward the top-notch phenomenon, which was pretty much focused on those top celebrities and also the top shows and also the programs. However, Weibo still by its nature is a social media instead of a pure media. So if we follow this particular trend, this is going to be detrimental to our diversification of our content and also going to harm the environment of the interaction between the fans as well as the celebrities and also between the movie lovers and also the programs as well. So that is to say that, in recent years, we can see that it is already very obvious trend that the entertainment-related topics are just trying to rely on a very limited number of variety shows and also a few celebrities on the top ranking.

So in the past several years, we've been already noticing that and also try to diversify the contents related to all kinds of different programs and variety shows and also creating a very diversified and rich discussion and also the interaction as well. So as I have already said, of course, the whole industry is taking measure, for example, by collaborating with the video content platform as well as the TV and radio stations in the next several years or next year. We're going to try to launch more contents related to all kinds of different movie and also the other programs, variety shows as well and also the TV station is going to do that as well. So, we are going to emphasize on the collaborations with those entities more and also try to build a very good and healthy environment for the interactions.

[Foreign Speech] And also, lastly, talking about the esports, so as we have already said during the opening remarks that we had a huge investment into the gaming industry and, of course, that making this gaming vertical one of the biggest verticals in Q3 against the others, for example, entertainment and also traditionally strong vertical in Weibo. So, of course, that you already see a very beautiful figure on the number of reads on the topic of League of Legends Season 11's final. And also, of course, that we are heavily investing into building teams and also organizing the tournaments of the esport of popular games. So you've been seeing a very good data and also figure in terms of the development because of the investment that we have conducted. But, of course, like the entertainment, gaming industry is very complicated and also very big industry, big take[Phonetic]. So actually, we are still in the infant phase of -- still continuing our investment.

So, of course, like the other industries, of course, our strategy for the gaming industry is to collaborate with the famous IPs and also collaborate with the famous tournament and also esports event and also try to cooperate with those celebrity team members and also those famous teams as well. So, I really believe that we're going to have a much better operational model and operational efficiency compared with our peers. So, at the end of the day, we're going to try to diversify the content that Weibo really provides to attract more high value users.

Operator

Thank you. Our next question comes from Alex Ko from Morgan Stanley. Please go ahead.

Alex Ko -- Morgan Stanley -- Analyst

[Foreign Speech] So, thank you management for taking my question and congrats on the solid results. So, you mentioned regulations on advertising industry last quarter, including the launch screen ads, IDFA policy implementation. So, can management share the latest observation in third quarter and fourth quarter, help us quantify the impact on Weibo ads and the measures we have taken to navigate the impact? Thanks.

Gaofei Wang -- Chief Executive Officer

[Foreign Speech] And also, first of all, definitely speaking, I think that in Q3 and also Q4, we had a very good momentum for this ad particular business, not only because of our very optimized structure of our customers, but also because of very good portfolio of our product as well as the nature of Weibo as a social ad platform. So first of all, of course, talking about the open screen ad or the splash ad. Actually in the first half, definitely speaking, we had a more stringent regulation over the apps -- launching the splash ad and that did impact the whole industry. But, of course, seen from the data and also statistics, you can see that in Q3, this particular revenue actually slowed down its growth rate and the month-to-month growth rates was only single digital, which was a lower than the industry -- the whole kind of ad revenue growth. And, of course, that was majorly due to the lower down click rate on this particular splash ad and also that did impact part of our performance-oriented kind of ad customers.

While, of course, having said that still because of the very good ability of Weibo in terms of our customer and the brand access, those budgets from those impacted customers never leave Weibo, meaning that we successfully transfer their budget from the splash ad to other areas like utilizing the feed -- information feed and also the hot trend search and also the other relevant products as well. And also, especially during the Double 11 festival, we've launched several new products and also tried to increase the click rate by several folds and that really increased the demand from our customers.

[Foreign Speech] And also second of all related to IDFA, of course, that since the launch of iOS 15 in Q3, IDFA related details have all been implemented and also landed. Of course, that did impact a lot of the peers in this advertisement industry. However, talking about Weibo, we did not have that large impact in Q3. That was because I'm talking about our customers, the reason for them to collaborate with us on their ad placement was not only because of a higher position, but, of course, more focusing on the marketing effectiveness as well as the information dissemination.

So, for example, for many kinds of game developers, they try to collaborate with Weibo while they launched new games not only because of higher and better position, but of course, tried to disseminate this particular information of the new game as far as possible. So that is to say, of course, in Q2, we already started to support to the Apple official SKAdNetwork attrition strategy. So, that was very good effectiveness that improved the final results of this particular business and also tried very well to enlarge our market share at the end.

[Foreign Speech] So lastly, in conclusion, of course, that we did see and witnessed such a bad impact on the whole advertisement industry, so because of this regulation over the IDFA as well as the open up screen related ads. But, of course, that these kind of two regulations really not had serious impact on those apps that dependent a lot on the splash ad or dependent a lot on the position marketing strategy. But, of course, that Weibo is a social media platform that emphasized a lot on the social nature of advertisement placement. So, of course, that we really cover the whole chain from the exposure in the first time all the way till the final conversion and transfer of the customers.

And also really we emphasized a lot on the brand plus performance strategy. So such kind of a single directional crash on certain type of a product will never impact very heavily on our overall business and also thus as a result make some of the customers leaving our Company or stop the collaboration or giving the budget to us. And also yesterday, as the interim result -- I mean, the Q3 result announcement made by Tencent also talk a lot about this particular point which is a social ad platform. So, of course, that we do provide all kinds of other products to our customers and also help them to really boost the consumer access because of the other innovative products. Of course, having said that, still we need to invest a lot into a more product R&D fashion and also cost of goods sold as well. So, of course, in a conclusion, definitely speaking, we are going to further leverage our advantage as a social media platform to really enhance more of the collaborations with our customers.

Operator

All right. Thank you. We have reached the end of the question-and-answer session. I'll hand the call back to the management team for the closing remarks.

Unidentified Speaker

Yes. Thank you for joining us today. See you next quarter.

Operator

[Operator Closing Remarks]

Duration: 79 minutes

Call participants:

Unidentified Speaker

Gaofei Wang -- Chief Executive Officer

Fei Cao -- Chief Financial Officer

Alicia Yap -- Citigroup -- Analyst

Ashley Xu -- Credit Suisse -- Analyst

Alex Ko -- Morgan Stanley -- Analyst

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