Sina Corporation's (SINA) CEO Charles Chao on Q2 2016 Results - Earnings Call Transcript

| About: Sina Corporation (SINA)

Sina Corporation (NASDAQ:SINA)

Q2 2016 Earnings Conference Call

August 08, 2016 10:10 PM ET

Executives

Sandra Zhang - Investor Relations

Charles Chao - Chief Executive Officer

Bonnie Zhang - Chief Financial Officer

Analysts

Tian Hou - T H Capital

Eddie Leung - BofA Merrill Lynch

Alicia Yap - Citigroup

Evan Zhou - Credit Suisse

Chi Tsang - HSBC

Operator

Ladies and gentlemen, thank you for standing by and welcome to Sina's earnings conference call for the second quarter of 2016. [Operator Instructions] I would now like to hand the call over to Sandra. Please go ahead.

Sandra Zhang

Thanks, operator, and good morning everyone. Welcome to Sina's second quarter of 2016 earnings conference call. During today, our Chairman and CEO Charles Chao and our CFO Bonnie Zhang. This conference is also being broadcast on the internet and is available through the IR section of Sina's website.

Before the mentioning remarks, 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 fact, including statements about our beliefs and expectations.

Forward looking statements involve inherent risk and uncertainty, a number of important factors could cause actual results to differ materially from those contained in any forward looking statement. Sina assumes no obligation to update a forward looking statement in this conference call and elsewhere. Further information regarding this and other risk is included in Sina's Annual Report on Form 20 F for the year ended December 31, 2015, and is also filing with the SEC.

Additionally, I would like to remind you that our discussion today includes non-GAAP measures which exclude stock based compensation and certain other items. We use non-GAAP financial measures to gain a better understanding of Sina's comparative operating performance and future prospects.

Our non-GAAP measures exclude certain expenses, gains and losses and other items that are not expected to result in future cash payment or that are non-recurring in nature or may not be indicative of our core operating result and business outlook. Please refer to our press release for more information about our non-GAAP measures.

During the call we may discuss non-GAAP financial measures for Weibo which have not been audited and our best estimate on Weibo results applying the same methodologies we use to calculate non-GAAP measures for Sina at the Group level. These numbers have not been audited and exclude certain items, including those used to devise non-GAAP measures, overhead allocation and intercompany transactions.

Following the mentioned prepared remarks, we open the lines for a brief Q&A session. With this, I would like to turn the call over to our Chairman and CEO, Charles Chao.

Charles Chao

Thank you, Sandra and good morning everyone. Thank you for joining us for Sina Corporation's second quarter of 2016 earnings conference call. We have a strong quarter and a good start to first half of 2016. Weibo has further strengthened its value proposition as a social media platform with strong momentum on both user activities and the financial results. We attribute the continued robust growth of our user community and user engagement to Weibo's team's stellar execution and cooperation which focused on optimizing user experience, enhancing efficiency of content consumption and distribution, and building effective channel for user acquisition. We're also encouraged by the progresses that Weibo team made on new initiatives such as short video, live broadcasting and self media, KOL related friends marketing.

On the financial front, Weibo's monetization capability and operating leverage have been further elevated, with key accounts and SME customers growing 92% year over year and non-GAAP net margin reaching 24% this quarter. On the portal side, our performance is in line with our expectation as our portal team firmly executed the mobile strategy and delivered solid results and mobile monetization.

For the second quarter of 2016, total net revenues grew by 14% year-over-year to $244 million with advertising revenues growing by 16% to $205 million. Advertising revenues from Weibo were the major contributor for the growth, with accelerating annual growth rate of 45% while advertising revenues from portal have declined 11% or 6% on constant currency basis, primarily due to the reduction of Ali Baba's spending on portal. Let's start from Weibo business. The monthly active users in June 2016 grew 33% on an annual basis to 282 million, and average daily active users grew 36% to 126 million. Mobile MAUs grew 40% on an annual basis, accounting for 89% of the monthly active user base. We executed the accelerated user expansion to the strong channel marketing we have built along with major Chinese smartphone manufacturers, which effectively help our product penetrate into the lower tier cities of China. The growth of users and the user engagement was further fueled by increased consumptions in content delivered in video format, live broadcasting capacity we have enabled.

In the second quarter of 2016 we continue to observe the meaningful trend that video and live streaming experience has been transforming the way people trade, distribute and consume content on our platform. In the second quarter, daily video views increased approximately 14 times year-over-year and 235% quarter-over-quarter. We are dedicated to becoming the indispensable video platform in China for users to create, distribute and discover video content in the next few years. With this long term go-ahead, in near term we will provide more tools for video content generators to simplify the content creation process and at the same time enable those who contribute high quality, engaging content on our platform to monetize their content through revenue share, subscription service or tipping, by setting the following priorities. First, improving recommendation engine; second, enhancing video content distribution efficiency; and third, optimizing the video information feed. We believe we are well set to further enrich our user experience and bring video feed consumption to the next level.

We officially launched live streaming service in May which serves another important venue for Weibo to acquire new users and lead to more user activity and time span. Weibo itself is a live platform with live moments, live events, and live interactions rolling in the information feed 24x7. Weibo is also the right place to distribute and share live content to reach massive connected audience in real time. We currently adhere to the strategy that we serve as a live center to distribute all sorts of live content for broader user coverage and content consumption. In the second quarter of 2016 the total live broadcasting shows on Weibo and our strategic live streaming partner Yi Zhibo have increased by 116 times quarter-over-quarter and reached the 10 million mark with beta users who consume live content soaring.

Let's talk about, let's talk briefly about the progress we've made on KOLs, self-media and internet celebrities on Weibo, which we discussed in previous calls. As of the end of second quarter, we have partnered with over 200 professional agencies in vertical areas, including ecommerce, video IP-related and live broadcasting to better serve these KOLs drive social influence and commercial value on the platform and that cohesively build ecosystem from content commercial on Weibo.

On the monetization front, Weibo advertising revenues grew 45% on a year-over-year basis to $127.2 million in the second quarter. We are encouraged to see the accelerated growth of key accounts and SME advertising revenues in the second quarter, which increased by 92% on an annual basis, representing 90% of Weibo advertising revenue in the second quarter. The revenue growth of KA and SME ad revenues well demonstrate the capability of Weibo's advertising product in capturing the share of online advertising marketing dollars in the decentralized mobile world, as well as tapping into incremental share of brand budgets, including social and video.

In the second quarter of 2016, the performance of our KA customers beat our expectation, achieving a 73% annual growth rate despite the weak macro factor. We have observed increasing marketing demands from brand advertisers across the board on the rich variety of ad products we offer on Weibo platform.

To respond to the increased demand in video products, we have officially launched promoted video a solution to brand advertisers' community as well as selected SME customers in April. We have earned positive feedback from our customers. With video and live broadcasting becoming more important in content consumption for users, we believe we are well positioned to deliver value for business and customers to catch the wave in video marketing by equipping them with the right ad products.

SME customers, including self service customers, continue to be the leading driving force, which has expanded to nearly 906,000 in the second quarter, increasing 104% year-over-year and SME ad revenues grew 107% compared to the same period of last year. This is mainly attributable to the growth of user traffic and time span which increases advertising inventories for monetization and improved click-through rate and return on investment, which drives the recurring spending of our ad customers.

Despite the fast growing in the revenue, our Weibo team was able to counter the pace in expenditure increase. In the first half of 2016 we have seen considerable margin expansion of Weibo as a result of high operational leverage created, particularly in the expenses categories of personnel related costs. We've become increasingly more optimistic towards future profitability of Weibo as a platform with continuing incremental margin improvement as revenue grows.

Let's move on to our portal business. As we discussed previously, we will continue to strengthen our core business focusing on our mobile strategy and growing customer base such as SME customers. For the second quarter of 2016, we continued to see rapid growth of mobile traffic, mainly generally from Sina news app and H5 format for sina.cn. The daily active users of Sina news app growth have shown strong momentum on both annual and sequential basis as a result of the effort we pursued in the following three areas during the first half of 2016. First, we have optimized news feed interface to provide quality content in more compelling formats, such as video. Second, we have refined recommendation engines to deliver the personalized content to individual users. And third, we have leveraged Weibo to accelerate the user acquisition pace and to better utilize data across two platforms in targeting. Portal advertising revenues generated from mobile devices grew 117% year over year, accounting for 48% of the total portal ad revenue right now, which is up significantly from 20% last year. We're encouraged by the results indicating the narrowed gap in between mobile traffic percentile of total traffic and mobile revenue percentage of total revenue.

Moving into the second half of 2016, user growth and user retention for Sina news app and other vertical applications will still be the top priority for portal business and products. Other than leveraging our Weibo platform traffic, we will explore third party marketing channel, i.e. domestic from manufacturers to grow our app user base. The increasing scale of our app user community will be the determining factor that affects our capacity in mobile monetization and that warrant high price we can demand from our customers. Structuring a more balanced customer mix in a growing SME customer segment is another focus for portal to achieve steady growth of portal business in the long run. In the second quarter of 2016, portal's SME revenues grew 60% year over year, representing 33% of total portal advertising revenues. With increasing utilization of the self developed programmatic buying system, we're glad to see more SME customers have chosen Sina to fulfil their marketing needs at a reasonable price. In the second half of 2016, we aim to further strengthen the connection between different ad products across platforms and vertical channels to serve comprehensive marketing needs from advertisers and leveraging user data accumulated to enhance targeting capability and ad effectiveness on portal.

With that, I'm turning the call to Bonnie, our CFO, for a more detailed financial review.

Bonnie Zhang

Thank you Charles, and thank you all for joining our conference call today. Let me walk you through our financial highlights for the second quarter of 2016. Before diving into the detailed financial review, I would like to remind you that unless otherwise noted, my comments will focus on non-GAAP financial measures which mainly exclude stock based compensation and amortization of intangible assets, gain or loss on sale of investments and [Indiscernible] All of our comparisons are on a year over year basis unless otherwise noted.

Our financial results are good for the three months ended on June 30, 2016. Sina's net revenue grew 14% to $241.4 million, gross margin for the second quarter of 2016 is 64%, up from 60% last year. On the earnings side, we are able to deliver an operating income of $34.5 million, representing an operating margin of 14%, largely improved from 3% last year. Net income attributable to Sina is $19.9 million, our diluted net income per share is $0.27.

Now let's turn to key financial items. Sina's online ad advertising revenue for the second quarter of 2016 grew 16% to $205 million. Our portal ad advertising revenue for the second quarter of 2016 is $78.7 million, up 23% quarter-over-quarter but was down 11% or 6% on constant currency basis. The decline was primarily due to a $9.8 million reduction in revenue contributed by Ali Baba on portal, which was in line with our expectation under the ordinary course of cooperation with Ali Baba after the expiration of the three-year mass contract between Ali Baba and Weibo in January 2016. Excluding the impact from Ali Baba, portal ad advertising revenues are $76.7 million, flat or up 6% on constant currency basis, mainly attributable to the robust growth of SME revenues and the improvement on the mobile monetization.

In the second quarter of 2016 our portal SME revenue grew 60% to $26 million, contributing over 33% of portal ad advertising revenue. This growth in SME revenue was driven by the expansion of our customer base thanks to the distribution channel our portal team has built over the period and the programmatic buying system which considerably enhanced the efficiency for SME customers to purchase media inventories from our platform. As we mentioned in previous calls, growing mobile traffic and improved mobile monetization has been assigned as top priorities for our portal team in 2016. We have noted monetization capability in mobile continued to improve in the first half of the year due to the growth of mobile traffic generated from Sina news app and sina.cn, the mobile H5 format and the product offering that can address customer demands in both audience coverage and pay-for-performance.

In the second quarter of 2016, mobile ad revenue accounted for 48% of total portal ad advertising revenue, compared to 20% for the same period last year. Moving onto Weibo ad advertising revenue, in the second quarter of 2016 Weibo's ad revenue grew 45% to $127.2 million. Weibo's non Ali Baba ad advertising revenue has grown at a rate of 92% or 104% on a constant currency basis. SME continued to be the key driver for the robust growth of Weibo ad revenue. SME ad revenue, including sales service, grew 107% to $70.1 million, representing 55% of Weibo's ad revenues. The strong performance of SME customers are driven by the rapid expansion of our customer community which grew 104% to nearly 906,000 as of the end of the second quarter.

The performance of pay customer is a highlight of Weibo's financial outcome for the second quarter of 2016. Key accounts revenue grew 73% or 84% on a constant currency basis to 44.3 million in spite of the weak macro outlook. The demands from brand ad advertisers are strong across a wide range of vertical industries with internet service, including ecommerce, FMCG and auto being the top three revenue contributors.

Weibo user community, which reached the 282 million on a monthly basis with a high concentration of traffic on mobile, which reached 89% for monthly usage, it's well positioned to capture large ad advertisers expanding in brand awareness.

On top of that rich variety of ad products, including social display ads, promoted topics, promoted feeds, as well as the recently launched auto play video ads have set the stage for Weibo to meet a full spectrum of marketing objectives from our key customers.

Turning to non-advertising revenue. For the second quarter of 2016, non-advertising revenue grew 5% to $36.3 million. Portal non-advertising revenue grew 13% to 16.7 million, largely due to the increase in revenue stream of new businesses. Weibo non-ad revenue was slightly down by 1% or up 4% on a constant currency basis to 19.7 million, attributable to the increase of membership revenue which offsets the decline in game revenues.

Turning to gross margin, for the second quarter of 2016 gross margin was 64%, up from 60% last year. Ad advertising gross margin for the second quarter of 2016 was 65%, up from 62% a year ago. The growing revenue proportion contributed by SME customers in both portal and Weibo business is the key factor that resulted in a high gross margin for our ad advertising business. Non-advertising revenue gross margin was 56%, up from 51%, mainly attributable to the increase in revenue contributed by high margin business such as Weibo's membership services.

Now moving on to operating expenses. For the second quarter of 2016, operating expenses totaled 119.7 million, at a similar level for the same period last year. Weibo's operating expenses for second quarter of 2016 grew 11% to 72.1 million, resulting from the increase in marketing expenses and high personnel related costs. Excluding Weibo related expenses, operating expenses for non-Weibo business was down 14% to 47.6 million, attributable to the well-controlled sales and marketing expenses and the further enhanced operating efficiency.

Operating income for the second quarter 2016 was 34.5 million, representing a 14% gross, operating margin, significantly up from 3% operating margin last year. The improved operating income was a result of continued operating leverage achieved by Weibo platform, the stabilized non Weibo business and our efforts to discipline our non essential business spending.

Turning to non operating items. Under a GAAP measure, non operating income for the second quarter of 2016 was 35 million, comparing to an income of 22.8 million last year. Non operating income for the second quarter of 2016 mainly composed of the following items. One, a 34.9 million net gain on sale and impairment of investments which is excluded under non GAAP measure, and two, a 6.2 million loss pick up from equity method investments mainly resulted from E House, and it was reported one quarter in arrears. Non operating income for the second quarter 2015 mainly included, number one, a 90 million gain mainly from sell off marketable securities, which is excluded under non GAAP measures, and two, a 2.7 million loss from equity method investments in a number of our equity investees which was reported one quarter in arrears.

Turning to taxes, under GAAP measure, income tax for the second quarter of 2016 was 2.7 million compared to 3 million last year. Turning to net income, net income attributable to Sina for the second quarter of 2016 was 19.9 million, compared to 4 million last year. Diluted net income per share for the second quarter of 2016 was $0.27 compared to $0.06 last year.

Now I will turn to the balance sheet and the cash flow items. As of June 30, 2016, SINA's cash, cash equivalents and short term investments totaled 2.1 billion, compared to 2.2 billion as of December 31, 2015. Out of 2.1 billion cash and short term investment balance, 396.5 million relates to Weibo's cash and short term investments. For the second quarter 2016, net cash provided by operating activities was 76.6 million, capital expenditures totaled 4.9 million, and depreciation and amortization expenses amounted to 7 million.

Before I conclude my remark, I would like to share with you the updates on business outlook. For the year 2016, we currently estimate that our non GAAP net revenues are between 950 million and 1 billion, which is revised up from the range of 850 million to 950 million that we reported earlier this year. This annual guidance represents a 9% to 15% year over year increase over the year from the year 2015 and excludes the recognition of 10.4 million in deferred license revenues from E House. Our estimate assumes RMB depreciates to U.S. dollar at an average rate of 5% in 2016. This forecast reflects our current and preliminary view, which is subject to change.

With that, we would like to take your questions. Operator, can you please pool for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Tian Hou from T.H. Capital. Please go ahead.

Tian Hou

I have some questions related to Weibo. Certainly Weibo finally take off to show the audience how powerful this platform is. And the question related to that is, the whole China's advertising environment actually is not that great. And Weibo now the short video, live broadcasting, advertising platform is taking off. So I wonder whose budget you're taking the market share from? And I don't see a lot of some portal but so who are you taking the market share from? That's the question.

Charles Chao

You're right, I think the entire ad market in China is not doing great because of the macro factors. Everybody knows that, right? But if you look at the landscape of the entire advertising market, as users move more to the new media, and in the new-media area more move to the mobile and the video and social, these [indiscernible] segments, three segments are taking market share away from the traditional media and also from more traditional new business probably. And so actually Weibo is probably the major, I would say, beneficiary platform in taking these new trends from advertising dollar spending in the market. Weibo is probably 90% mobile, in terms of usage, right? And we are adding video into Weibo which become more and more popular. And that actually helped us -- the mobile probably it's very simple to explain because everybody is moving to mobile and more marketing budget are moving to mobile.

But the video side, this is something that is new for us, but then this is nothing new in the market, because video is taking share away in -- I'm talking online video -- taking share from traditional media, especially TV, in terms of advertising especially for the brand advertisers in FMCG categories. And this is the biggest segment for advertising spend in the traditional media area. And also, as social media and social network like Weibo and WeChat becoming more and more popular, we are seeing more brand advertisers allocating budget into social segment. So all these three elements together. I cannot really quantify exactly how much we are taking from where, each segment. But overall Weibo is the major platform that taking shares away in all these three categories, which helped to drive the growth of Weibo advertising in general. That actually looks -- so obviously I think the trend is quite strong and is continuing right now.

And, on the other hand, given that Weibo is a major social mobile platform, we're seeing a lot of new demand coming from -- on this particular platform, meaning, for example, that mobile app is one of the very important driving force in terms of ad spending on mobile social platform right now. And this is actually one of the forces behind the growth of SME customers in the promoted feed advertising format.

And this is also true for our portal in terms of mobile advertising. This is one, this is a quite strong force. And also as the app market becomes more mature, we're seeing new demand here in terms of people want to, not only for the new app download, but also for the existing apps you want to activate, re-activate existing users for your existing app which will actually create more demand for advertising on the social platform.

On Weibo, for example, we talked about deep link, right, in terms of our new format here. This is something that is very useful, very effective in terms of re-activate some of the existing app users for a lot of apps. So there are a lot of things going on for the driving of the advertising Weibo. And I think this trend is quite strong.

Tian Hou

So Charles, one of the follow-up is, with the TV stations certainly in terms of advertising format, it's actually similar to Weibo's short video live broadcasting. So what's the relationship between Weibo and TV station?

Charles Chao

I don't think there is a direct relationship. Of course, the live broadcasting is something become very, very popular these days, with more adoption of mobile and smartphones. And I think that you always had live broadcasting in the Internet world for a long time right? And, but this trend, the difference is that, with the social platform, it allows everybody have the capability to do live broadcasting; that's one, because everybody have a smartphone, everybody has a camera and everybody is connected. So everybody have the capability to do the live broadcasting. That's one thing that's a very powerful trend. And secondly, it is something that the current live broadcasting allows user and the broadcaster to do the interaction live-ly, on, during the, in the broadcasting process. This is another new trend here.

So all these trends allows more and more people, whether they're individual people, whether they're movie stars, entertainment stars and, or the media companies, everybody can have the capability to do live broadcasting on social platform. And Weibo has a very unique advantage, because it already has all these people and accounts on Weibo, which have a lot of fans already in their account. And so it enabled everybody to do the live broadcasting and create more user activities, viewership and time spent on our Weibo platform basically.

And this is a very important part of our social media going forward, because this is something that we're taking away the usage and time spent on traditional, I would say, TV programs, as well as from other video platforms basically. And so it's not something that you can establish direct relationship here, but this is a new format and will have a lot of content creators and will create a lot of traffic usage, as well as time spent by users. And of course, there will be monetization associated with that going forward.

Operator

Thank you. Our next question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.

Eddie Leung

Sure. Good morning guys. Thank you for taking my questions. Just have two questions. The first one is perhaps a bit more high level. As we have more and more SME advertisers on both our portal and Weibo, could you share some color on how you manage the risk of perhaps some of the lower quality advertisers in order to avoid any reputational issue or regulational issue, as we have seen on some of the other media companies? And then secondly, just for housekeeping, I'm wondering if you could share with us the percentage of traffic coming from mobile for your media portal. Thank you.

Charles Chao

Let me take the first one first. I think the percentage of traffic from media portal we have two mobile platform. One is our news app, right and the other is our h5 based sina.cn we call mobile portal basically. And as our video app news app is more independent, it really cannot compare to our traditional PC portal. But in terms of our mobile portal, in the form of h5, I think it accounts more than to 60% of our total traffic right now; now it's getting to two thirds of it, I think, in terms of total traffic. If you're taking our portal traffic as a whole, PC plus mobile, the mobile portion is about two thirds, okay?

And in terms of the controlling of SME customers' quality, I don't know what do you mean by low quality customers. And I think for us, we always follow strictly in terms of regulations in China, in terms of what we can do, what we cannot do in terms of advertising here. And, for example, we do not really take any healthcare, medicine customers for either of the platform. We believe these areas have a lot of risk here.

And in terms of our screening the customers, we have strict policy in terms of what we can do, we cannot do. We follow our channels and also we have our direct sale base in terms of reaching these customers. But overall we have a very strict policy in terms of what kind of customer we take. We do our filtering ourselves and with our channels, so that we keep our customers basically will be in line or in, I think, accordance with any advertising regulations in China basically.

Operator

Thank you. Our next question comes from the line of Alicia Yap from Citigroup. Please go ahead.

Alicia Yap

Hi. Good morning Charles and Bonnie. Thanks for taking my questions. I have two very quick questions. Number one, could you remind us again on the key advertising verticals that are attracted to your mobile news app inventory and the breakdown of mobile revenues among the key accounts and the SME. And then second Charles could you update us on the verticalization strategies. Are you still pursuing for a deeper penetration into the financials and sports verticals? So any update in terms of how you plan to re-strategize those verticals.

Charles Chao

Maybe I will take the second first. I will leave the first one to Bonnie to give you some detailed color in terms of mobile revenues. And in terms of verticalization strategies, we are still pursuing that strategy especially in the financial areas. But there's a lot of tightening in terms of government policy in this area and in terms of what Internet company can do in this specific area. And a lot of times it has relate to the licensing, license for the Internet financing business you can carry in China market. And so we are still focusing on this area, but we will be more slowing down a little bit in terms of forming our new organization and try to apply for different licenses in the different areas, so that we can carry out these business in more legitimate way for the long run. And we are in the process of doing that and we probably can update you more in the second half of the year. And in terms of sports area, it's more complicated, because you know this is a very competitive market, in my view.

There's a lot of bubble in this market right now in China. And it's very difficult to read, why people are doing this and doing that and doing this investment at this cost, and doing that kind of purchase of copyrights at a very, very high cost. So this is an area we probably will wait a little bit and our focus right now is still going to be working our media sector in terms of enhancing our content and attract users. And we will try to attract more users into -- on different mobile terminals for sports area. But in terms of actual vertical business in sports, we're still going to be more patient to see how this market will evolve basically. And so this is to give you some color here. And on overall basis in the vertical areas, based on our historical experience and experiment we have done here, we probably will mostly focus on new business based on investment and with synergies to our portal, so that we can have different kind of teams, more focused on the different types of business going forward. So with that, maybe I would pass on to Bonnie to answer your first question.

Bonnie Zhang

Yes. Alicia, I think you have two questions within the first question. The first is the industry breakdown for portal. The largest industry segment for portal continued to be auto, which takes about 33% of total revenue for KA -- 33% of KA revenue. The second and the third industry segment being the Internet services, including e-commerce, and FMCG industry, with financial continuing to be relatively strong for the quarter close to 10%. And your second question relating to the mobile versus PC breakdown in-between KA customer and SME customers, I think in our script we indicated the overall mobile percentage of total portal revenue is about 48%. And our KA number actually came in pretty close with KA mobile number takes about 51%. SME mobile percentage is about 65%. I hope that answers your question.

Operator

Our next question comes from the line of Evan Zhou, from Credit Suisse. Please go ahead.

Evan Zhou

Hi, good morning Charles and Bonnie. Thanks for taking my questions. I've got two questions. One is related to our news app. Maybe could you give us some of the operating metrics for our SINA news app, like MAU, DAU or any updates on the ad load we have? How much of room that you see that we can further monetize this app down the road.

And second question is regarding the, overall top-down question regarding the how advertiser are allocating their budget. So I think previously there was some argument about when people look at SINA plus Weibo as a whole, there's still some thoughts regarding looking at it as a whole, moving budgets between them, rather than just looking at it separately. Do we see that has been changing a little bit, with Weibo actually ramping up pretty meaningfully, or still you see that some of the KAs are still using this rationale to move their budget. Thank you.

Charles Chao

Okay. The news app, we actually have not really disclosed any operational metrics on news app. I think mainly because there is a lot of third-party reports in the market that will give you very conflicting numbers and that actually will confuse the market in a lot of ways, especially our advertising customer market.

So we rather choose not to really talk about that until this portion becomes a very significant part of our business here. But I still can tell you that we have made, in the news app area we are a latecomer in the market; we have been doing a catching up in terms of user base and user activities. And so, as we mentioned in our opening remarks, we have made very significant progress in this area. Basically in the second quarter our number of daily users of our news app doubled from the first quarter which is very amazing, given a very crowded market in China for news app. You probably know the market; there are a lot of competitors here. And so we still project we're going to increase our daily active users most, very significantly in the second half of the year. We believe we have found a way to really doing more effectively, as our product becomes much better and also channel becomes more effective.

And so overall we are very positive in terms of user growth in this area. We believe that this part will become very significant for us, quite significant for us in terms of monetization, starting next year. And so we'll probably give you more update and details in the future as we, this portion becomes much more significant and meaningful.

And secondly, regarding your question on the budget allocation among our customers between portal and Weibo, actually ever since our IPO of Weibo two years ago, more than two years ago, we have two separate teams running the key accounts sales for advertising customers. The one exception is in auto area; we're still doing a lot of co-op in terms of selling effort between two platforms.

So basically these two are separate sales teams and separate budgets for advertising customers. And we're continuing going to see separation in the future. But in our intention however, we actually try to utilize the two platforms more closely in terms of creating synergies among our customers. So, in our app product we probably will work more closely in terms of sharing data, sharing customers, so that we can target more higher budget, on a total basis, for our customers, especially for our information feed product for news app and for the Weibo promotion promoted fee product. And also, in the areas of video, we probably will see more co operations going forward. So, in terms of market itself, customers see us more separate. But, for us, we'll probably work more closely in the future, actually, to create the synergies between the two platforms.

So, I hope that answered your question.

Evan Zhou

Yes, very well. Thanks for the color Charles.

Charles Chao

Okay. We will take one more question and we will cut it there.

Operator

Thank you. Our next question comes from Chi Tsang from HSBC. Please go ahead.

Chi Tsang

Great. Thank you very much for taking my questions. Congratulations on also a very nice set of results. I have two questions. Firstly, I was wondering if you can comment on the positive revision to your annual guidance. So you're increasing it by about 100 million at the low end. Can you walk us through some of the key drivers for the higher guidance, because it looks like your annualizing right now at about 880 million. And secondly, this is probably more for Charles, your stock is very cheap on some of the parts basis. If you look at when you back out the Weibo value per share, as well as net cash, the market is essentially assigning a negative value for everything else. And you have the verticalization strategy slowing down a little bit. What plans do you have to unlock value for shareholders? Thank you very much.

Charles Chao

Well, yes, I think in terms of the guidance, it's obvious, if you look at our previous guidance, it's a bit, annual basis historically advertising business and you will see the advertising revenue will grow seasonality wise. And also natural growth, we're going to see gradual increase from first quarter to the fourth quarter. And if you look at the performance of our two first half of the year I think, especially for Weibo, we beat the guidance. We beat our initial plan in quite a big margin. And so the increase, on annual basis, the guidance is mainly from actually the out performance of the Weibo advertising business, basically. And so I think we feel very confident and comfortable with the new range we just put in here. But it's mainly I think the main contributor will be from Weibo, especially from the Weibo advertising business. And so you're going to see more pick up in the second half basically.

In terms of the value of SINA stock, you're right. I think the current SINA stock is traded at probably SINA's investment value in Weibo basically. If you look at Weibo's market cap today, at the closing end probably it's getting close to 8 billion. And so our SINA's value in Weibo is, based on this basically, this market value of Weibo is at about 4.3 billion. So this is roughly our actually more than SINA's market value, given SINA still have a lot of cash and investment, without actually looking into the value of portal, and it's everything is, like you said, is negative. So I think it's really up to the market to see the value of SINA and also for analysts to see how you actually structure the model, more based on some of the parts valuation model here. And on the SINA side, we're also looking into the different areas to increase or unlock the value for our shareholders. We will look into this area very closely in the near future.

Okay. I think now we'll conclude the call for today. Thanks for joining us. We'll see you next quarter.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

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