SINA Q4 2006 Earnings Call Transcript

Executives

Chen Fu - Manager, Investor Relations

Charles Chao - President, Chief Executive Officer, Director

Herman Yu - Acting Chief Financial Officer, Vice President, Controller

Analysts

Jason Brueschke - Citigroup

Richard Ji - Morgan Stanley

Wallace Cheung - Credit Suisse

Safa Rashtchy - Piper Jaffray & Co

William Bao Bean - Deutsche Bank

Paul Keung - CIBC World Markets

Lin Chi - Lehman Brothers

George Chu - UBS

James Lee - WR Hambrecht

James Mitchell - Goldman Sachs

Ming Zhao - Susquehanna Financial Group

Chang Qiu - Forun Technology Research

TRANSCRIPT SPONSOR

SINA Corporation (SINA) Q4 2006 Earnings Call February 7, 2007 8:00 PM ET

Operator

Good day, ladies and gentlemen. Welcome to the SINA fourth quarter and full year 2006 earnings conference call. At this time, all participants are in a listen-only mode. We will however be facilitating a question-and-answer session towards the end of the conference.

I would now like to turn the presentation over to your host for today’s conference, Ms. Chen Fu, Investor Relations Manager. Please go ahead, Madam.

Chen Fu

Thank you. Good morning. Welcome to SINA's earnings release for the fourth quarter and full year 2006. Joining me today are our President and CEO, Charles Chao; and our acting Chief Financial Officer, Herman Yu.

This conference call is also being broadcast on the Internet and is available in the investor relations section of the SINA website.

Before the management presentation, I would like to read you the Safe Harbor statement in connection with today’s conference call.

During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.

Further information regarding these and other risks is included in SINA's annual report on Form 10-K for the year ended December 31, 2005, and in quarterly reports on Form 10-Q, as well as its other filings with the Securities and Exchange Commission.

Additionally, the non-GAAP and comparable GAAP information are contained in our earnings release, which can be found on our corporate website at http://corp.sina.com.

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

Now, let me turn the call over to our President and CEO, Charles Chao.

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Charles Chao

Thank you, and good morning, everyone, and welcome to our fourth quarter earnings conference call. I am very happy to report another strong quarter and an overall strong performance for the year 2006, despite a much more challenging operating environment for mobile business.

At the beginning of last year, we took clear steps to focus the company’s efforts on what we have been doing about the online media business with an emphasis on user-generated content and multimedia content. Our efforts were aiming at transforming SINA into a multimedia content platform with strong user participation and [inaudible] and directed communities. The results so far have been more than satisfactory.

In 2006, we experienced phenomenal growth of our blog service with 10 times user base and daily traffic growth. In the last week of January, our blog traffic hit 120 million page views per day, with 3.7 million daily unique visitors.

As many of you know, our blog service has a strong media success, as we have attracted a large number of celebrity bloggers. Today, as many as 10,000 celebrities or opinion leaders have opened blogs on SINA.

Our success in blogs is not only in logging more users and traffic for SINA but also makes SINA an important part of content sources for traditional media and other new media, which creates a huge impact in China.

Our achievement has been well-recognized in China as SINA Blogs received many awards presented by different organizations at the end of the year. According to the second annual survey report published by CNICC in January, SINA Blogs ranked number one in China with more than 32% reach, well ahead of the second place service provider.

Today, SINA Blogs has been thoroughly integrated into our different content channels and it has been utilized in many of our interactive marketing campaigns.

As the largest community for user-generated content in China, SINA Blogs is increasingly becoming an important part of our overall content strategies.

With the rapid growth of broadband adoption in China, video has become an important part of Internet applications in China. According to CNICC reports, broadband users have surpassed 100 million in January, 2007. In 2006, we made video content one of our top priorities. So far, we have established content partner relations with most third-tier TV stations or TV production houses, and many of them on an exclusive basis. In the fourth quarter alone, we signed exclusive content agreements with two heavyweights in this industry, Shanghai Online TV and Phoenix TV. In addition to content partnerships with television stations, we have aggressively stepped up our video content positions, especially in areas of major sports events and entertainment programs from Hong Kong and Taiwan.

Our video broadcasting in both live and video-on-demand basis for [inaudible] have been well received by Chinese sports fans and helped to set new records for our sports channel traffic.

Our investment in video content has helped to further enhance our leadership position in broadband video traffic and user-base in China, with [page view] increasing by five times in 2006.

In December, we formally launched our podcasting platform on the back of the success in blogs and the video platforms. It is a YouTube type of video upload and sharing platform thoroughly integrated with our blog service, our blog and video channel, as well as our other content channels.

This new service became an immediate hit in the market. In a matter of one month, this platform has consistently been receiving approximately 15,000 video uploads on a daily basis and there are about 5 million videos being viewed each day.

By any measurement, it is already one of the largest video sharing platforms in China. We see great potential for this product and believe that it will be an important traffic driver for us in the year 2007 and an important ad revenue growth driver beyond.

We intend to invest heavily on this video platform with adequate equipment and bandwidth, which could be costly and which could negatively impact our gross margin in the near term, given video advertising will largely come in terms picking up the volume. However, we believe such an investment will prove to be worthwhile over the longer term as we have a much better chance to build a large-scale online video platform in China, given our user base and brand power.

In addition to our focus on the blogs and the videos, we have never stopped pursing excellence of our key content verticals, especially in the areas of news, sports, finance, entertainment, technology, and automobile. We have maintained our leadership positions in all these verticals, with a strong media influence and great commercial values. We saw significant traffic and user growth in all of these channels in 2006.

Take the finance channel, for example. The page views have increased by more than five times in 2006 thanks to the great run of the Chinese Stock Market. Our finance channel is the web partner of choice for the majority of business and financial events in China. Recently, we have signed exclusive multi-year content agreements with the majority of first-tier financial newspapers in China, which will greatly increase the competitive edge of our finance channel going forward.

We are also launching a new stock quote system to better serve an ever-increasing number of stock market buyers. We believe our investment in the finance vertical will generate great returns as financial service is becoming an increasingly important sector for online advertising in China, with many new opportunities and SINA is in the best position to take these opportunities, given our high end-user base and strong media power. In the fourth quarter, we saw our ad revenues from financial service more than double from the previous quarter.

Another example is our sports channel. We have always been a dominant player of online sports offering in China. During 2006, we managed to increase the gap between us and our major competitors through great execution and the best content offerings.

In the fourth quarter, we broke the record for our sports channel traffic with daily page views surpassing the record we set during the World Cup in June. Given a much more competitive environment in the online sports area, we are certainly very proud of what we have achieved in 2006.

One more vertical worth mentioning is our auto channel. We are ranked number one in auto verticals in terms of reach, with a 15% lead over the second place in China, according to the recent CNICC reports. Auto is a channel of great commercial value and high stickiness. Our strong position in the auto vertical and our overall auto strength has made SINA one of the most powerful auto advertising platforms among all media companies in China.

In fact, the largest contribution of the ad revenue growth in the fourth quarter came from the auto sector. With China becoming the second-largest auto market in the world, we see great potential for online advertising growth in the next few years, and SINA is obviously in a very good position here to grab more market share.

Our great efforts in making SINA the best online media company with all the achievements I just talked about have generated impressive results for overall traffic and user growth in 2006 for our China website. Our page views, our total website page views grew by 66% during 2006, and this is faster than the previous two years combined.

The number of unique visitors to our front page has also risen by a similar percentage for the year.

A recent CNICC report again confirms SINA's number one standing in terms of reach. It is another testament of the success of our growth strategy. As I mentioned before, SINA is becoming the best media platform to reach a nationwide, high-end user in China. Obviously this created a good foundation for the strong growth of our branded advertising revenues for the year 2006.

As we enter the year 2007, we will continue the same strategies we adopted in 2006 to grow our traffic and user base. We will continue to be the best multimedia content platform in China by enhancing our cooperation with traditional media companies and by further investment in SINA Blogs and SINA podcasting and, to a lesser extent, by enhancing our own content production capabilities.

We will continue to increase our web stickiness by building best interactive community with blog and podcasting as the foundation, and by further integration of interactive community with all of our vertical content channels. We will also continue to invest in content verticals with great advertising potential.

We believe our strategy will continue to work in China, given our strong media brand and interdependent relations between us and traditional media companies, the conditions that do not exist in other more developed countries. We further believe our strategy will lead to significant growth in our web traffic and user base.

As we discussed before, the online advertising market has truly reached a critical mass in 2006 with accelerated adoption of advertisers in various industries. We obviously executed very well in the brand advertising business in 2006, with China advertising revenue growing by 44% year over year.

With China’s economy continuing to grow strongly and with the 2008 Olympic Games as a catalyst, we are optimistic about the general advertising market in China. In 2007 and beyond, online media will continue to take a share of media consumption from traditional media and online media advertising will no doubt grow faster than general advertising markets.

We have full confidence in our advertising sales team and the advertising sales channel, which are widely regarded as the best in the industry. As long as we can continue to grow our web traffic and user base, we will do well in the brand advertising market in China.

Based on our current estimates, the growth rate for our brand advertising business in 2007 will be between 30% to 35%.

Before I move to the mobile business, I would like to make a few comments about our search strategy. We remain committed to our iAsk search platform and believe it is strategically important for our future. Over the past quarter, we managed to significantly improve the search quality of our iAsk search and our search traffic has started to grow again. We expect that our search revenue will bottom in the first-half of 2007 and will start to grow again afterwards, although we do not believe it will be significant as a percentage of total revenues in the near-term.

Now, let me talk about the mobile business. Needless to say, it has been a very challenging business for us right now. We are now seeing signs of improvement of the operating environment for the mobile business. On the other hand, competition for promoting channels has been further intensified, which will result in lower returns for marketing campaigns. Currently, we do not have enough visibility for the numbers beyond the first quarter and it is hard to predict the results for future quarters.

On the positive side, we did not see further declines in revenue volume in January compared to December, which can be one indication that the timing is slowing down.

Meanwhile, we continue to explore new mobile unit models. I am happy to report that we have grown the traffic of our free WAP portal by over 300% in 2006, and our free WAP portal is ranked among the top players in the China market. We have started to experiment an advertising service on the WAP portal and the results have been encouraging.

Assuming no changes to the free WAP operating policy by mobile operators, we expect to see significant growth in our free WAP portal traffic this year, as more and more people begin to adopt the free WAP service.

SINA has a natural advantage over most other free WAP service providers, due to our Internet portal experience and our rich content offerings. We view mobile advertising as a business with great potential and we will continue to purse it in that direction.

Before I give the floor to Herman for the financial review, I would like to take this opportunity to congratulate Mr. Tong Chen, our Senior Vice President and Chief Editor, on his promotion to Executive Vice President and Chief Editor; and Mrs. Hong Du, our VP of Sales and Marketing, for her promotion to Senior Vice President of Sales and Marketing. These two are largely responsible for the great achievements we have made in the areas of online media and branded advertising. I have full confidence that they will help me bring SINA to the next level.

With that, I now turn to Herman for some financial highlights.

Herman Yu

Thank you, Charles, and thank you all for joining our conference call today. Let me briefly discuss the key financials for the fourth quarter and fiscal year 2006. As Charles pointed out, we are pleased to report another quarter of solid growth, with total revenues reaching $56.4 million, exceeding the high-end of our financial guidance. Our Q4 results translate to a 9% year over year and 1% quarter over quarter revenue growth.

For fiscal 2006, total revenues were $212.9 million, which represents a 10% growth from 2005. We managed a double-digit revenue growth in 2006 despite a challenging operating environment in the mass sector in China.

Our online advertising business, which excludes search, reached an all-time high of $35.7 million in the fourth quarter, exceeding our financial guidance between $34 million and $35 million. This represents a growth of 43% year over year and 9% quarter over quarter.

Advertising revenues from China reached $35 million for the quarter, which translates to a growth of 45% year over year and 10% quarter over quarter. Online advertising revenues this quarter contributed to 63% of our total revenue mix.

On a year-over-year basis, the growth of online advertising revenues was widespread. For example, we saw healthy growth from automobile to real estate to IT to fast-moving consumer goods to financial sector. Although Q4 historically has been the strongest performing quarter, this quarter was also bolstered by events like the Beijing Auto Show, as well as the momentum carried forward from the World Cup.

On the latter, we are seeing lasting benefits generating from such highly publicized sports events. For example, we saw the total number of advertisers in China increase by 54% this quarter compared to the same period last quarter, many of whom began to advertise with us during the World Cup event and continued to do so since then.

While these new customers pull down the average advertising revenue per customer by approximately 6% from Q4 2005, we believe once these new customers experience the benefits of Internet advertising as opposed to traditional media, they will serve as opportunities for growth in the future for our online advertising business.

For fiscal 2006, our total advertising revenues grew 41% year over year to $120.1 million. Advertising revenues in China grew 44% in 2006 to $115.9 million.

Turning to non-advertising, for the fourth quarter of 2006, our non-advertising revenues reached $20.7 million, meeting our guidance between $19 million and $21 million. Our MVAS revenues for the quarter totaled $19.3 million, representing a quarter over quarter decline of 11%.

Let me give you some numbers for the major product line. On a sequential basis, SMS declined 13% to $10.8 million. IVR declined 10% to $5.1 million. WAP declined 20% to a little over a $1 million, and RBT grew 37% to about $1 million.

Our Q4 MVAS results do not reflect the full impact of the changes in operator policies, as some of these changes were not implemented at the provincial level until part-way through the quarter. Therefore, we believe we will continue to experience further revenue decline in our mobile business in the first quarter of 2007.

Turning to other non-advertising, our other non-advertising revenues, which mainly include search and other fee-based revenues, declined 36% year over year and 12% quarter over quarter to $1.4 million. The revenue decline was mainly due to the phasing out of customer agreements with our old search platform. We are currently promoting our new search platform, iAsk, and plan to begin monetization in 2007.

Turning to gross margin, pursuant to FAS-123R, we began to include stock option compensation in our cost of revenues and operating expenses starting January 1, 2006. Today’s discussion includes non-GAAP measures, which excludes stock-based compensation as well as other items. We use non-GAAP measures to exclude certain items that are not expected to result in future cash payments that are non-recurring, or that may not be indicative of our core operating results and business outlook. Non-GAAP measures are used in our financial and operating decision making because we believe they reflect the company’s ongoing business in a manner that allows meaningful period-to-period comparisons.

For further explanation of our non-GAAP measures, please refer to our earnings release.

Our overall non-GAAP gross margin for the fourth quarter of 2006 was 64% compared to 65% last quarter and 66% last year. Our non-GAAP gross margin for online advertising for the quarter was 66% compared to 69% last year and 67% last quarter. The gradual decline in our online advertising gross margin mainly reflects our increased investments in content and transmission costs. For 2006, our non-GAAP advertising gross margin was 66% compared to 67% in 2005. We expect similar trends to continue into 2007.

Non-GAAP gross margin for our wireless business was 61% in the fourth quarter compared to 62% last year and last quarter. For fiscal 2006, non-GAAP wireless margin was 60% compared to 66% in 2005. The year-over-year decrease in mobile gross margin was mainly due to increased operator and content costs. We expect this trend to also continue into 2007.

As mentioned previously, the mobile business consists mostly of variable costs. While staying in the mobile sector is crucial to maintaining our leadership position in China’s online media, we are closely monitoring spending in our mobile business.

Turning to operating expenses, our non-GAAP operating expenses for the quarter was $22.4 million compared to $22.8 million last year and $23 million last quarter. On a year-over-year basis, the 2% decrease in operating expenses was mainly due to lower marketing expenses. On a sequential basis, operating expenses decreased 3%, primarily due to lower bad debt expenses.

For 2006, non-GAAP operating expenses were $89 million compared to $85.8 million in 2005, representing a year-over-year increase of 4%. The operating expense increase was primarily due to higher payroll related expenses and bad debt, partially offset by a decline in marketing expenses.

Turning to net income, non-GAAP net income for the quarter, which excludes stock-based compensation and other items, was $16.2 million, an increase of 23% from last year and an increase of 4% from last quarter. Non-GAAP diluted EPS for the quarter was 26% compared to 21% last year and 25% last quarter. Non-GAAP net income for 2006 was $51.6 million, an increase of 11% from 2005. Non-GAAP diluted EPS for 2006 was $0.88 compared to $0.79 for 2005.

Lastly, turning to balance sheet and cash flow, as of December 31, 2006, our cash, cash equivalents and investments in marketable securities was $362.8 million compared to $300.7 million at the end of last year and $345.3 million last quarter.

Also as of December 31, 2006, our current liabilities include $100 million in convertible notes that are due on July 15, 2023. In accordance with FAS-78, classification obligation that are callable by the creditor, we are required to classify such convertible notes as current liabilities as the holders of the notes have the option to require the company to repurchase the notes as the principal amount on July 15, 2007, which is within a year of the balance sheet date. Based on the circumstances at year-end, we do not believe it is likely that the notes will be called this coming July.

Cash flow from operations for the quarter totaled $14.9 million compared to $14.4 million last year. For 2006, cash flow from operations was $63.1 million compared to $58.3 million from the prior year.

Our guidance for first quarter of 2007 was included in our press release. Let me quickly highlight a few numbers. For Q1 2007, we are targeting total revenues between $48 million and $50 million. For our advertising business, we are targeting between $31 million and $32 million, and for our non-advertising business, we are targeting between $17 million and $18 million.

This concludes the written portion of our call. We are now ready for questions. Operator, could you please limit one question to each caller? Operator?

Chen Fu

Operator, we are ready to begin the Q&A session.

Question-and-Answer Session

Operator

(Operator Instructions)

Our first question comes from the line of Jason Brueschke with Citigroup. Please go ahead.

Jason Brueschke - Citigroup

Thank you. First of all, let me congratulate you, Charles and Herman, on a great quarter. Let me ask three quick questions. First of all, regarding your Web 2.0 properties, your blogs, the videos, et cetera. Could you give us some more color on your plans as to when you will aggressively monetize these? On the last conference call, you indicated that you are going to try to build your traffic first before monetization. I just want know if that has changed.

Secondly, regarding brand advertising, traditionally the bulk of your brand advertising web business has been on your home page and your sports page. It looks like you are not having success with the financial and the auto channels. Is that an indication that advertisers in China are becoming more willing to put their advertising spend on some of your other content areas, and is that a trend that expect to see going forward?

Finally, you guys now have a pretty hefty cash balance at about $362 million. Do you guys have any plans to use that cash either with respect to M&A or any share buy-backs? Thanks.

Charles Chao

Regarding your first question for Web 2.0 products, we mentioned that at the current stage, our major objective is to build the traffic and the scale of our platform before we try to monetize. I think that we still have the same view at this point, although I think we may expedite the time for trying to monetize our blog service quicker. We already have developed some plans and tried to monetize the blog service directly.

As you recall, I mentioned in the previous conference calls that we already have started to monetize the blog indirectly through a lot of interactive marketing campaigns, and our current plan is to try to monetize some of these directly, probably starting in Q2 of this year. We will see how we do in this area. There are a lot of plans, but we have to experiment whether they will be working effectively in this market.

In terms of podcasting, I think we just started, so it is thought that we have -- our primary goal is to build a large scale platform first before we think about monetization, but my belief is that podcasting target will be easier to be monetized, given that there is a more concrete model, that we get advertising in terms of technology and product is premature at this stage, and as long as we can do the traffic, we probably will start to monetize in the latter part of this year.

Regarding your second question, brand advertising, historically yes, we generate a large percentage of brand advertising from our front page, from our newsprint page and so on and so forth. Actually, over the last two years, we have gradually started to push more and more advertising to our different content channels, and auto and finance historically actually have a pretty good portion of our total advertising.

I think now the trend is that we can actually push more and more advertising to these channels. As you can see, our traffic in these verticals has grown very nicely and so they have the scale to attract a lot of advertisers. Secondly, these verticals, to sell, a target into a specific industry and very, very attractive to the advertisers in those industries. So as long as we continue to do well, we will be able to I think push more of our advertising into these verticals.

I gave you the example that for the auto channel, for example, we are very, very big in terms of auto advertising, online advertising in China and our auto channel itself can absorb probably 40% of total auto advertising, and that is a figure for fourth quarter, I believe. That is already a very, very big percentage and we are very happy about that.

The third question regarding cash, obviously we have a healthy cash balance at this stage. We do not have a very specific plan to utilize that cash in the very near-term. My view has always been that we want to reserve some cash for future acquisitions if the opportunity comes, so that will still be our take at this point. I think that is something that we believe is very important for the future growth of the company. Thank you.

Jason Brueschke - Citigroup

Thanks, and congratulations.

Chen Fu

Again, I would like to remind all the callers to limit their questions to just one so that everyone has a chance to ask. Thank you.

Operator

Our next question comes from the line of Richard Ji with Morgan Stanley. Go ahead.

Richard Ji - Morgan Stanley

Hi, Charles and Herman, and congratulations on the quarter. Just a quick question regarding potential ramp-up related to the Olympics. When do you expect some material contribution of Olympics-related revenue?

Charles Chao

I think it is hard to say what is Olympics-related, what is not Olympics-related. My view is that in general, Olympics advertising demand, will have to boost the entire advertising market in general in China, starting from 2007. We already see some heat here, but I think maybe monetization directly to the Olympics Game should be in the year 2008.

The reason I say it is hard to say is because a lot of Olympics, going into Olympic Games, are you talking about a sponsor’s advertising or a general advertising market for all advertisers in the market? If you are talking about sponsors, I think most of these Olympic sponsors, I would probably say 90-something percent have always been our big advertisers and they will spend money anyway, whether this is for a particular Olympics related event or for their general marketing purpose. It is hard to tell.

There is a specific budget allocated Olympic event for some of these advertisers. I think that portion will closely follow with the advertisers and try to get an Olympic share of their spending in 2007 and 2008.

My understanding is that most of these advertisers have not really fixed their budget plans for the Olympic event at this point and they are still discussing the specific event and specific budget. But overall, I believe that it could be very helpful for the general advertising market for us. But it is hard to comment exactly how much impact that will have, but I think I am more inclined to say that that will help to boost the entire market and it will help us to grow our revenue overall in 2007.

Operator

Our next question comes from the line of Wallace Cheung with Credit Suisse. Please go ahead.

Wallace Cheung - Credit Suisse

Hi, congratulations, Charles, Herman and Chen. One question regarding the brand advertising costs, the brand advertising gross margin. If I look at it from one perspective from the cost of revenue growth, in 2006 on a per-quarter basis, you were adding around $1.2 million. As we have seen, SINA is adding more video-related content. Should we expect the cost of revenue growing faster on an absolute basis in 2007 than in 2006? Thank you.

Charles Chao

I think in terms of an absolute dollar basis, 2007 will be higher than 2006 gross. Bandwidth is probably one of the most important factors. I mentioned briefly in my script just now that because we launched the podcasting platform in December and we launched with a very large scale with a large network capacity, our goal is to try to generate something very big in a short period. We have a lot of capacity for that, so it will definitely make our gross margin in 2007, because of this launch, but I also mentioned that this is something we are willing to invest because we see great potential for this application and a great potential for video advertising going forward in China. Video advertising probably will start to pick up, in my view, in early 2008, so this is a year for investment.

Another factor is probably the content and the content is getting more costly in China, especially related to a specific video content related to the sports events and the premium entertainment content and that. So we are very cautious of how to invest that, but nevertheless it will increase our total cost for advertising in 2007, and I think the extra dollar amount will be higher than the increase of 2006.

Wallace Cheung - Credit Suisse

If you do not mind, can I have just one follow-up, quick question? So as in more like content, bandwidth, servers and even labor costs, so which part is actually rising the fastest in 2007?

Charles Chao

Which part is what? I’m sorry.

Wallace Cheung - Credit Suisse

Which area, in terms of absolute dollar basis, content, labor cost, bandwidth, servers, is increasing the most in 2007?

Charles Chao

Well, I think bandwidth and content probably the most important factors in terms of dollar amount of increase. They are very similar.

Operator

Our next question comes from the line of Safa Rashtchy with Piper Jaffray. Please go ahead.

Safa Rashtchy - Piper Jaffray & Co.

Just a couple of quick questions on advertising. Your guidance for Q1 is similar I believe to how you did last year. The new year, of course, is a little bit -- was there any impact from the new year on your guidance? If so, are we going to see maybe a faster growth rate in Q2?

Related to that, you have been growing at over 40% for a few quarters now. Should we consider that is a sustainable rate in the near future for fiscal ’07? Thanks.

Charles Chao

I think we experienced a similar pattern in this Q1 compared to the previous year. Q1 is always a very light quarter in terms of seasonality for us. In this year particularly, as the Chinese New Year starts on February 18th, which is right in the middle of the quarter, which makes it even harder, so that is being reflected in our guidance. I think it is pretty natural and normal.

In terms of the growth for the second quarter, I think if you look at the numbers in the previous two or three years, you always see a big pick-up in Q2 from our Q1 number. I think that trend will follow this year, except I want to caution you that last year, because of the World Cup in Q2, that the pick-up in Q2 compared to Q1 last year was very, very significant. You probably will not see the same level of pick-up in Q2. that is why, if you look at the guidance in Q1, it is pretty high in terms of year-to-year growth. In Q2, I do not think we have enough visibility to say that it is going to have similar growth year to year.

Most likely, because of the World Cup effect in Q2 and Q3 in 2006, which created a very high base for comparison vis-à-vis 2007, so you just have to factor in that particular element in your forecast, basically.

Operator

Our next question comes from the line of William Bean with Deutsche Bank. Go ahead.

William Bao Bean - Deutsche Bank

You gave the year-over-year numbers. Could you just give quarter-over-quarter numbers, percentage growth maybe for blogs, rich media and video, in terms of users and traffic?

Then, I don’t know whether you can talk at all about the pricing for video ads.

Charles Chao

Yes, in terms of quarter to quarter, our blogs actually grew by 25%, I believe. We had some network capacity problems in South China, experienced at the end of the year, so we are fixing that. I think it is getting better right now, so I think we are still going to see strong growth in blogs this year, although it is already a very high rate.

In terms of video, it is hard to compare because the major platform for podcasting was launched in December and before it was mainly our video broadband channel, which incorporates all this content from different media companies and also from other sources. So it is a separate video platform.

I think on -- I do not have the figure in front of me, but on year-to-year, it was very, very significant. So we will debut more video figures going forward, as we are making progress on this podcasting platform.

In terms of pricing for video, there is a definite charge video on a CPM basis, given the nature of advertising. That is very, very similar to TV, actually, but I cannot really talk about these rates at this point we are now really launching that in big scale. We will take a look at the market first. So far I think the pricing could be -- some of these experiments we already had proved that it similarly can be pretty good in the future, basically.

William Bao Bean - Deutsche Bank

You said 5 million per day of use and the average length of viewer?

Charles Chao

Five million video items viewed by the visitors, basically.

William Bao Bean - Deutsche Bank

Okay, not in terms of time.

Charles Chao

Five million video views.

Operator

Our next question comes from the line of Paul Keung with CIBC World Markets. Go ahead.