Phoenix New Media Limited (NYSE:FENG)
Q2 2016 Earnings Conference Call
August 09, 2016 09:00 PM ET
Matthew Zhao - Investor Relations
Shuang Liu - Chief Executive Officer
Betty Ho - Chief Financial Officer
Ya Li - President
Alex Yao - JP Morgan
Wendy Huang - Macquarie
Natalie Wu - CICC
Ray Zhao - Guotai Junan
Xin Wang - Citigroup
Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions].
I must advise you that this conference is being recorded today, Wednesday August 10, 2016. Iwould now like to hand the conference over to your first speaker today, the IR Director of Phoenix New Media, Mr. Matthew Zhao, thank you, please go ahead, sir.
Thank you operator and thank you and welcome to Phoenix New Media second quarter 2016earnings conference call. I’m joined here by our Chief Executive Officer, Mr. Shuang Liu, our President, Mr. Ya Li, and the Chief Financial Officer, Ms. Betty Ho. For today’s agenda,management will provide us with a review on quarter and also include a Q&A session after themanagement’s prepared remarks.The second quarter 2016 financial results and the webcast ofthis conference call are available at the investor relations section of www.Ifeng.com.
A replay ofthe call will be available on the website in a few hours.Before we continue, I referyou to our Safe Harbor Statement in our earnings press release, which applies to this call, as wewill make forward-looking statements. Finally, please note that, unless otherwise stated, allfigures mentioned during this conference call are in Renminbi.
With that, I would like to turn the call over to Mr. Liu Shuang, our CEO.
Thank you Matthew, good morning and good evening everyone. For the second quarter of 2016,we are pleased to report solid financial results which were primarily driven by the strongexecution of our mobile expansion strategy. Which demonstrates the progress we continue tomake in our evolution towards becoming one of China’s leading integrated mobile news andinformation databases.As many of you may have seen recently, we are excited to have takenanother major step forward in establishing Yidian as the leading news and media consumptionapp in China, through a strategic investment and cooperation agreement with OPPO Mobile, oneof the world’s top five mobile handset manufacturers.
Under the agreement, Yidian has issued shares to OPPO, in return for the pre-installation ofYidian Zixun on OPPO smartphones and the embedment of Yidian’s newsfeed directly insidethe OPPO browser. Related to that, most of our major competitors have decided on paid pre-instalments with manufacturers as their main channel to expand user numbers.By strategicallypartnering with handset manufacturers, we believe that we’ll create a more sustainable, solid andlong-term means of achieving continuous user growth. The OPPO partnership, in addition to ourexisting relationship with Xiaomi, creates a common incentive structure which will furtherpromote the acceleration of Yidian’s viewership growth, heading into the second half of 2016.We’re confident that these strategic partnerships with both OPPO and Xiaomi will significantlystrengthen Ifeng’s ability to capture the explosive growth opportunities associated with mobilecontent consumption in China.
Our mobile explorations continue to expand beyond the strategic investment with Yidian. Drivenby the significant amount of major news happening around the world, including Brexit, the U.S.presidential elections, terrorist attacks in France and Germany, as well as the South China Seasituations -- Ifeng's media reporting continued to drive record viewership across our platform, including the Ifeng news app. Viewers continue to search for and read in-depth analysis and insight, derived from our proprietary media resources. Additionally, with the rising popularity of live broadcasting in China, we recognize the value of such content and see this as an exciting opportunity going forward.
We believe that live broadcasting could further strengthen our current offerings and enhance user stickiness on our platform, but also understand that the immediacy of such news and content will continue to occasionally require the proper vetting and curation associated with our traditional reporting qualities.In order to further develop these sorts of opportunities and deepen our senior team's ranks and expertise, we continue to make strategic hires at a management level. Recently, we hired a seasoned tech media head, Yue JianXiong, as the new VP and the General Manager of our mobile business.
Many of you know Mr. Yue from his previous engagement in the internet industry, where he spent over 10 years in various management positions and was a fundamental part of building a ground-breaking mobile news product several years ago. He is also a passionate entrepreneur with deep expertise in funding and operating internet start-ups. His 15 years of experience in the internet industry have honed his strengths and expertise in product sales, channel development, as well as market expansion strategies.
Aside from new leadership, we continue to streamline our content production and integrating resources on mobile apps, particularly our Ifeng news apps and mobile websites. By allowing our editorial and product development talents, who represent our core DNA, to operate more efficiently and collaborate more openly we'll be able to offer more stimulating, organized and comprehensive mobile content and better user experience to our loyal users across all devices. In addition, we are reorganizing our vertical channels across mobile and PC platforms and are focusing these combined vertical teams through high quality content, to better serve our brand advertisers with innovative and expanding native advertising solutions.
These new initiatives demonstrate our determination on the mobile side, as we further strengthen our ability to integrate our broad platforms media resources, of PC, video, industry verticals and mobile, as we expand as one of China's industry-leading media platforms.To conclude, we continue to make significant progress in evolving with increasing rapid technological trends, as well as our viewers' media consumption habits. As an integrated mobile news and information database for China, we remain focused on the strong execution of our mobile expansion strategy, by continuing to broaden our user footprint through preinstalls with our partners, strategic new hires, as well as further leveraging our core media DNA attributes.
This focus will enable us to remain well positioned to further improve our long term performance and capitalize on the growth opportunities that exist at the intersection of cutting edge mobile technology and high-quality journalism.
With this, I'd like to hand over to our CFO, Betty Ho.
Thank you Shuang and thank you all for joining our conference call today. As Shuang mentioned earlier, we are very glad to have another strong quarter. Ifeng total revenue for the second quarter came in at RMB350.1 million, driven by the mobile advertising sales growth. Non-GAAP net income attributable to Phoenix New Media for the second quarter was RMB3.5 million, or RMB0.05 non-GAAP net income per diluted ADS.
Now let me take you through our financial highlights for the second quarter of 2016 results. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP are non-operating items which are share-based compensation and loss from equity investments including impairments. Starting with revenues, net advertising revenues for the second quarter came in at RMB297.2 million, which represents a year-over-year decrease of 4.7%. The decrease was primarily due to the decline in PC advertising revenues and was partially offset by the strong growth in mobile advertising revenues. Paid service revenues for the second quarter was RMB52.8 million, which represents a year-over-year decrease of 62.4%, which was in line with our expectations.
Mobile value-added service revenues decreased by 64.9%, to RMB30.9 million, resulting from the decline in user demand. Games and other revenues decreased by 4.4%, to RMB21.9 million, primarily due to the decline in revenues generated from PC web-based games. Secondly, gross profit and margin, non-GAAP gross profit for the second quarter of 2016 was RMB170.4 million, compared to RMB205 million in the same period last year. Non-GAAP gross margin for the second quarter slightly increased to 48.7%, from 48.5% in the same period last year. The increase of gross margin was mainly due to the reduction of sales from low gross margin products in paid services.
In terms of cost of revenues, non-GAAP content and operational costs as a percentage of total revenues increased to 33.2%, from 23% in the same period last year. It was primarily due to the increase in content acquisition cost and general operating cost. Revenue sharing fees as a percentage of total revenues decreased to 5.5%, from 15.9%, mainly due to the decreased sales of mobile value-added services products. Bandwidth cost as a percentage of total revenues decreased to 4.4%, from 5% in the same period last year. Sales tax and surcharges increased to 8.2%, from 7.6% in the same period last year. Thirdly, non-GAAP operating expenses for the second quarter increased by 11.1%, to RMB183.1 million, from RMB164.8 million in the same period last year.
Non-GAAP operating loss for the quarter was RMB12.7 million, compared to a non-GAAP operating income of RMB40.2 million in the same period last year.Non-GAAP operating margin for the second quarter was negative 3.6% as compared to 9.5% in the same period last year. The decrease was mainly due to the increase in mobile traffic acquisition expenses and bad debt provision.
The increase of bad debt provision was mainly due to a few one-off specific bad debts due to the tightening of regulations from vertical industries in the second half of 2015, which was stated during the 2015 Q4 earnings announcement and the negotiation process with the relevant parties. These specific bad debts were provided for during a period from fourth quarter of 2015 to this quarter and were completely provided as bad debts as at second quarter 2016.
Fourthly, GAAP net loss attributable to Ifeng for the second quarter was RMB2.5 million as compared to net income of RMB22.5 million in the same period last year. Non-GAAP net income attributable to Ifeng for the second quarter was RMB3.5 million as compared to RMB40.7 million in the same period last year. Non-GAAP net income per diluted ADS for the second quarter was RMB0.05 compared to RMB0.56 in the same period last year. In terms of balance sheet items, as of June 30, 2016, Ifeng's cash and cash equivalents, term deposits and short-term investments and restricted cash were RMB1.15 billion or approximately $173.6 million.
Lastly, I'd like to provide a business outlook for the third quarter of 2016. We are forecasting total revenues to be between RMB342 million to RMB362 million, representing a decrease of 12.4% to 7.3% year-over-year.For net advertising revenues, we are forecasting between RMB301 million and RMB316 million, representing an increase of 0.3% to 5.3% year-over-year. For paid service revenues, we are forecasting between RMB41 million and RMB46 million, representing a decrease of 54.6% to 49.1%.
This concludes the written portion of our call. We are now ready for questions, please go ahead, operator.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] First question comes from the line of Alex Yao from JP Morgan, please go ahead.
Hi, good morning everyone, thanks for taking my question. I have two questions. Number one is regarding your investment and the cooperation with OPPO. Would you be able to share with us more color on the business operation and the monetization? For example, does the transaction allow you guys to reach out to the non-China market? And also in terms of the monetization, what is the arrangement and when you'll be able to seeing the revenue contribution from that partnership? The second question is regarding the advertising outlook for second half, particularly I’m wondering would you be able to share with us your mobile app monetization strategy over the next 6 to 12 months? Thank you.
Hi, good morning, Alex, this is Ya, thanks for the question. First regarding our deals with mobile, yes I have to say that we have certain confidential information and we have not disclosed publically. But in general, first this deal is a comprehensive deal between Yidian and OPPO. It governs the pre-installation of the app, Yidian apps, on OPPO handsets, and also the exclusive provision of newsfeeds in OPPO's handset browser, which has a very large user base. Recently all the handset manufacturers have grown their browser users at a very fast rate, and basic applications cannot be removed by the user. So by working with both the browser and also as an independent news app, we are expanding our positioning as a mobile content platform, because the browser market actually has a couple hundred million daily active users, compared to about the same for the mobile news apps.
In recent China’s internet statistics, the browser actually ranked at a higher penetration rate than news apps for the entire Chinese internet audience. So first I want to emphasize that we are enlarging our user base into a new category, not just news app but also the news feed in browsers. This deal actually not only works for OPPO but also for Xiaomi. We are expanding our readership with Xiaomi from the pre-installation of our app to include also Xiaomi browser, which has an even larger daily active user. Secondly, about the long China market. It’s also part of our deal with OPPO, because OPPO and Xiaomi, they all have aspirations for international markets, especially in South East Asia, and the South America markets. Our deal does include the additional pre-installation and other sources of cooperation for the international markets.
Thirdly, about the monetization. For both the pre-installation of Yidian's app in the handset and also the browser cooperation, we are the major or the larger beneficiary of the revenues generated by these cooperations. Understanding that the browser is a product of the handset, so it's, I think it's very encouraging to be able to have the handsets to select us as the news provider and also contributing significant revenues for us. Some of the detailed arrangements we cannot disclose publicly according to our internal agreements, but overall I think it demonstrated that our product innovation, our product's potential, that's why two of the major world-leading handset manufacturers selected us. That also strengthened our existing relationships.
So the second question regarding the second half mobile ad revenue outlook for Ifeng. I think we did mention that we were expecting a revenue decrease year-over-year for the second quarter. We guided a 4% to 7% year-over-year decrease and we did experience a 4.7% decrease. I think that was within range but at the higher end. We did mention that there are a couple of factors which will still affect the next six months at least. One is uncertain economic conditions. Secondly is the faster decrease on the PC revenue despite the rapid growth in mobile ad revenue. The third factor for the next I think three months still, it may have an impact, is the departure of our advertising executive. So those three factors actually affected our second quarter.
Going into the next six months, that's probably the only visibility we have. We think we are going to experience a stability of process, especially given the recent hiring of a new mobile business general manager, which will help us grow our mobile user base and our Ifeng news products. Also the further application of our native marketing, native advertising solutions to keep our PC revenue market share. Certainly of course we are also providing programmable apps, the DSP app sales, to sales that are on-sold ad inventories on both PC and also video inventories. With all these efforts, we are expecting a stabilization process for our revenue growth, and we hope that by the end of this year or the first quarter of next year, we are going to see a healthier revenue growth again. In terms of the actual advertising growth rate for our mobile, we are maintaining our outlook of in-line growth rate with the industry average, which is about 55% to 65%, according to the research.
Thank you for your questions. I’ll move forward to the next question from the line of Natalie, I beg your pardon. The next question is from Wendy Huang from Macquarie. Please go ahead.
Thank you, management. First, can you comment on the recent various regulatory changes on the advertising front, and how would that actually affect Phoenix New Media’s operations? Secondly, in terms of your revenue share with OPPO, it seems very aggressive in the generous term. Can you give us more color as to the thinking behind this? Also can you comment on the competitive landscape for the Yidian at the moment? Thank you.
First about the advertising regulatory change. Yes there has been, I think, a lot of concern and a lot of interest regarding this regulatory change. We have noticed the huge impact on some of the bigger platforms, especially with those with big exposure for health care industry, for financial service industry, and also in terms of the forms of advertising. However, for iPhone, I think the impact will be relatively small. Nevertheless I think it’s also going to affect our mobile advertising revenue, because overall there are some regulatory changes that will affect overall users’ click through rates of the [indiscernible] apps. So there will be, the advertising forms, certain advertising forms will be less effective as measured by the CPC. However with industry-wide, because we have very little health care related advertising clients, and also we have a very, I think a valuable user base.
That user base is actually what some of the offline banking and financial service sectors are looking for. So we will, I think, be partly compensated by the change or the new trend of advertisers looking for real ROIs beyond the click through rate. So they will measure the actual sale contributions from the clients we obtain. For example, recently we had a group buy-in event, and also competing against one of the major vertical auto portals. We generated hundreds of actual auto sales from that event, actually beating the vertical portal. I think it's all because of the purchasing power of our audience. Ifeng has relatively, not the largest user coverage or user base, however our user has the highest education and consumption power.
That’s why when the regulatory change from the advertising governing body I think will help us to, I think, generate a better measure of ROI against some other competitors' other key metrics. So that's from the positive side to look at there, the impact. Overall I think it's going to be slightly negative in the short-term, but not a material impact. Separately about the arrangement with OPPO, in the OPPO deal. At first we recognize that user acquisition is an enormous cost factor for all the news app providers. Also because the users change their handsets almost every 18 months. Also there is very little differentiation among the different news feed or news app providers, like those from the five quarters and also including the Hainan news or the [indiscernible] Hainan news. The lack of differentiation and the high frequency of handset change keeps user acquisition costs at a very high level. Our competitors mostly choose to pay for the pre-installation or from other means to acquire those users.However, this investment indicates those means are vastly becoming ineffective or inefficient. That's why I think we choose to acquire users first [indiscernible] based on the innovative differentiated factors of our handsets. It creates a solid user base for us and on top of that, I think we are going to leverage on our innovative features to acquire other users, like especially for the iOS sectors.
So I think if we choose a different strategy based on different competitors, I think a resource or cash level and also the development stage, I think we are fortunate to have two of the top five world's leading handsets to choose us. Of course some of the players with big pockets, they will be able to pay for installation of some other handsets.However, there are only a handful of major handset manufacturers in China. So, I think the marketing will consolidate, you know, the leading three providers of news apps will command larger market share, while maybe the rest of the news app providers have to differentiate. Otherwise they will not be able to keep up with the user acquisition and also the limited channels which are the key points for user acquisition.
Thanks. I just want to, yes, thank you. I want to follow up on your comment about the regulations. I think besides the one that you just mentioned, recently we have also seen the tightening regulations on the serious content creation by the internet platforms. Phoenix New Media is well known for producing the serious journalism among the internet platforms. So how will this affect your business? Also I think there has been a more stricter application of the 3% additional VAT also. So can you confirm if Phoenix New Media has always been paid that, i.e. we should not expect an incremental impact on Phoenix New Media effective September 1? Thank you.
Hi, this is Shuang. Let me get back to you on this. [Foreign Language] probably content construction fee, something like that. Maybe my colleague will answer you on that. But I haven’t heard of that actually. As to the regulatory tightening on the market, actually as a law abiding player in China, Phoenix TV has been in China for 20 years, and Phoenix New Media has been in this market for 10 years. We have experienced the market ups and downs in the last 10 years, over a decade, so there, the [indiscernible] market tightens, and I think we did pretty well. One thing I want to emphasize is that original programming doesn’t represent a significant part of our content at all; comparing against other competitors, our original programming is minimal. I don’t think this tightening will have serious impact upon us.
Actually this tightening will help to eradicate some irresponsible players in this market, to eradicate some rumor-makers in this market. That’s an opportunity for the player who believes in serious journalism, who strives for the excellent reporting standards in this market. So I don’t think this will have a major impact upon our operations in China, upon our reporting quality. Maybe Betty can add some color on [Foreign Language] construction.
Yes, can we get back to you on that later?
Yes, Wendy, we will get back to you at our call later.
Okay, sure. I have also one last housekeeping question on the financials. I think this quarter actually bottom line kind of came as a positive surprise. The loss is actually less than what we forecasted. So does that mean we finally should expect certain operating leverage from here onwards? If I look at the sales and marketing cost dollar amount, it was actually down year-over-year, but on the other hand the general cost actually expanded on both quarter-on-quarter and year-over-year basis. So how should we expect the operating leverage and also the margin change in the second half? In particular I think for Q3, the other internet portals, they kind of mentioned that Q3’s Olympic related content and also the sales and marketing costs, campaign costs, will be at a seasonal high. So if you can provide some color on that, that will be helpful. Thank you.
Thanks Wendy for your question. Actually for the second quarter, yes, we did experience a negative operating income. But for, looking at full year, in terms of top-line we are still looking at a very strong growth in terms of mobile advertising revenue, which Ya just mentioned, that we are expecting that it will grow in line with industry expectations. According to researchers' reports, we are expecting it will grow at about 55% to 65%. However for PC advertising revenue, it is a declining business. However, our decrease, you can see from other reports that we are actually decreasing at a slower rate than other competitors. So net-net, we are still looking at about a flattish, net advertising revenue for the full year 2016, despite the fact that we are still expecting the paid services will be decreasing at a rate between 45% to 55%.
In terms of operating margin, because of the increasing traffic acquisition cost, it has almost increased by 40% year-on-year basis. So despite of this, we actually in terms of sales and marketing, although you don't see a significant increase, that's because the acquisition cost did increase a lot. However we did save a lot, we did have a very tight control on other costs, other expenses. That's why in total sales and marketing expenses, you didn't see a significant increase. We have a very tight control on our own expenses. As a result, because of the major item is the traffic acquisition cost, so in the full year we are expecting a flattish or negative operating margin as well.
Thank you for the questions. Next question is from the line of Natalie Wu from CICC. Please go ahead.
Hi, good morning Management, thank you for taking my question. I have several questions here. The first is regarding your advertising business. I first want to update what the current mobile contribution of your advertising revenue and can management share some color with us about the top five verticals in terms of advertising dollar spending in the second quarter? Have you noticed any suggestion of weakness in specific industries among your advertisers? You mentioned medical impact, just wondering how should we measure the impact and what else actual suggestion of weakness coming from other advertisers?
The second one is about your paid service revenues. So in terms of your guidance in the third quarter, there is actually a sequential decline in the third quarter but you have managed to just maintain the paid service revenue very well in the first quarter and second quarter. So just wondering what is the cause behind the sequential decline in that part of revenue? The last question is about Yidian. So can management update us about some Yidian operation data, including the latest DAU? You mentioned that the browser transition is higher than app for the news app in China. So could management also update us both web DAU and app DAU for Yidian? Also current monetization, current interested advertisers, any color on these fronts would be helpful. Thank you.
Hi Natalie, quite a few questions. Yes, I may need to ask again some of the, I didn’t hear you clearly. The first about the mobile contribution for the second quarter is 40%. It’s grown from about 20-something% a year ago, with mid-double digit growth and I think the first half overall, I think it’s about 60%, 70% growth from a year ago. For the top five sectors, we have in auto about 30% and e-commerce 15%. Internet service which is mostly this O2O or sharing economy like Uber, BD, Shenzhou, that's 8%, financial service 8% and communications, 8% which includes both operators and also the handset manufacturers. I think overall the economic condition does have an impact, I think, on these top five sectors.
First on the auto sector, I think in addition to the uncertainty, economic uncertainty but also some restrictions on auto purchasing in certain cities also affected the market and the manufacturers’ competition actually affected their spending. They wanted more sales leads, sales results, and that's why I did mention that we had experience in group buying activities in addition to the traditional just brand advertising as a way to provide both brands and also the performance for our clients. I think for the internet services, I think we see it as a major contributor from growing from a year ago. The results are a factor from the DSP, the programmable ads. That’s brought us quite a few new SME clients which tend to be new economy, the internet services, performance driven clients.
So we will expect to see a steady growth from the DSC sales, however it’s going to be limited to less than, I think overall less than 20% of our sales. We are, we still have a higher priority for brand advertising, so DSC is mostly for our unsold inventory, so also for the, enlarge our user base to include more SME clients. I think the economic condition also affects more from the regulatory policies, continue to affect the sectors, like financial service, like the telecom operators and also like the white wine sectors. Because a lot of our clients are the large scale state owned advertisers. Their marketing budget is affected by the government’s various policies about state owned large enterprises and also their policies are what we call frugal policy. I think the paid revenue Betty can answer.
So with respect to the pay services, actually we are expecting the, on a full year basis, it will decrease at somewhere between about 50%. So actually for this quarter, we have declined by 52.4% and looking forward, it will be at about 50%. So for the full year, it's about 50% as well. So it's actually in line with our expectation, although the revenue has been increased by about half, but actually we have gotten rid of a lot of high, low margin items. So for operating margin, actually we are able to remain about the same as previous, so it will not materially affect our bottom line even though the revenue has been decreased by 50%.
Yes, just one last follow up here. Actually I'm asking about the sequential decline not just the year-on-year decline because if you see that actually since the first quarter, you have already declined half of the revenue for the paid service revenue, but actually for the first two quarters of this year, you have managed well the paid service revenue above…
Natalie, sorry. Could you just speak a little bit louder? Thank you.
Yes. Can you hear me clearly this time?
Yes, thank you.
Okay. So my question is just that for the first quarter of this year, your paid service revenue is well above RMB50 million. So just wondering what is the cause that you guided like RMB41 million to RMB46 million revenue for the third quarter? So what's the decline here among paid service revenue? Is it in loss or is it game and others?
Well actually, game and others has been quite stable. It declined about 4%, 5% only and one of the items in pay services which is mobile digital reading, we have been doing very good on that. The revenue has been doubled. We're seeing this. I think the factor you're concerned is about the traditional service provider items is called SMS and MMS. This part is the traditional service providing business which has declined at a very significant rate. I think that's your wild factor.
So that is the factor that caused the sequential decline about RMB5 million?
Right. Thank you. So I still, the last question on Yidian?
Yes can you repeat that? I didn't hear…
Sure, of course. Of course. Last question is on the Yidian operation data update. So about the latest DAU and the breakdown between web and app,also the current monetization level and current interested advertisers, any color on this would be helpful.
Yes. On Yidian, I think right now we only publicly disclose the, some of the numbers you ask. DAU as at the end of last month, it's close to 30 million, it's about 30 million DAUs. It includes bothapp and also the, what do you call it, the embedded browser newsfeed DAUs, but we are starting. We are just at the starting stage for our cooperation with OPPO.
The contract actually starts from July 1. So we are looking at a high expectation for the next 18 months, next 24 months, to accelerate overall user growth. Our monetization actually is going as we planned, as we expected and also I think, because we did continue to enhance our advertising platform, the Ling Xi ad platform and also we have expanded our local penetration to 25 different provincial provinces and municipals in China and also the brand advertising, sales team actually is also growing very fast and we’re participating in all the major clients I think, marketing activity and we are also expecting the acceleration of our advertising revenue as we grow our DAU in the next 24 months. But regarding the detailed numbers, we haven't decided to disclose this publicly.
Great. That’s very helpful, thank you.
Thank you, Natalie.
Thank you for the question. Next question comes from the line of Ray Zhao from Guotai Junan. Please go ahead.
Hi, can you hear me?
Thanks for taking my questions. I have two questions. The first is, how is the, what’s the DAU of the Ifeng in both the app and the web? The second question is, can you disclose some details about the deal with the OPPO in the Yidian use, so we sold some shares to the OPPO and our shares in the Yidian Zixun was diluted. Is that right? Two questions.
Okay. Yes let me answer exactly those two questions. Firstly we did mention that our DAU for Ifeng is 35 million, more than 35 million and it includes both app and the mobile app. So the OPPO deal, we did issue about 10% of our Yidian shares to OPPO as, I don’t know if that will answer your questions?
Okay. Here’s one thing I want to emphasize, that certainly by bringing a strategic partner like OPPO and also Xiaomi, that we have the option to further in the future to consolidate Yidian Zixun’s financial status. Yes, but it’s up to the user traffic expansion. We have set the milestone, that I think in the foreseeable future we can achieve that.
Okay, thank you.
Thank you for the questions. Our last question comes from the line of Xin Wang from Citigroup. Please go ahead.
Hi, management. Thank you for taking my questions. My questions are regarding your Phoenix News app. So what’s the MAU now and the growth momentum? Like year-over-year and Q-on-Q, how do you see the current competition landscape in news app market in China and how to gain market share like the content strategy, partnership with manufacturers or by Yidian and how these strategies differentiate compared with Yidian? Thank you.
Yes. Well, from, this is Shuang, let me answer your question. As to MAU from a competitive point of view we normally don't disclose this. As to the strategy for Ifeng news,actually right now it's media-driven apps. The goal is to address the high quality current affair and news needs of high end users, but with the new hire of Yue JianXiong, we get a major product and strategy with that. Our goal is to bring in the search and push related techniques to these news apps. So give the individual users more options to search for the news and their needs and even better, personalize the information consumption [indiscernible]. As the title news future lies in further strengthening cooperation withYidian and also our PC fronts.
Our PC fronts has more than five hundred editors. I think that lays a solid foundation for providing better self-media related content development opportunities. So in the next coming months, we're going to have a major business event. We're going to really streamline our internal structure to let our mobile app better channelize our abundant journalist team to make our content even richer.
Secondly, I think there is lots of synergy between Ifeng News and YidianZixun. Ifeng News and YidianZixunha’s cutting edge technology in terms of the interest-engine driven search. They are way ahead of the game. So we can better leverage on the strength in this regard. Also in terms of the channel development, we can make coordinated efforts to better penetrate the mobile handset makers. We have different targets, Yidian target the Xiaomi and OPPO. So we are already two of the top five mobile handset makers has already partnered with us and Yidian has Ifeng News partnered with Huawei and other players.
So we think there's lots of synergy in terms of the pre-endorse and market penetration. I want to emphasize, Yidian, Ifeng News, they're definitely different products. Ifeng News is more media driven, targets at the higher end users and in more products with proprietary content. And YidianZixun is more our interest search engine driven, targeted at more grassroots people and aimed to become the gateway of choice for online information entertainment and lifestyle-related services. These two apps are complementary to each other. For an omni-reader, I constantly use both apps to address different needs of myself. If I want to get quick access to high quality current affair-driven news, Ifeng News is definitely the best choice. If I want to kill my time to experiencing value reading, so-called, [Foreign Language] Yidian Zixun is definitely another good option. So these two apps will complement to each other, will further strengthen our goal to become the mobile statement of choice, mobile gateway in the arena of information, entertainment and lifestyle-related information. Does that answer your question?
Thank you very much.
Thank you. There are no further questions at this time. I would like to hand the call back to Investor Relations Director, Mr. Matthew Zhao. Please.
Thank you Operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us on this call. Have a good day.
Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect the line.
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