Sina's (SINA) CEO Charles Chao on Q4 2016 Results - Earnings Call Transcript

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Sina Corporation (NASDAQ:SINA) Q4 2016 Earnings Conference Call February 22, 2017 9:10 PM ET

Executives

Sandra Zhang – Investor Relations

Charles Chao – Chairman and Chief Executive Officer

Bonnie Zhang – Chief Financial Officer

Analysts

Eddie Leung – Merrill Lynch

Wendy Huang – Macquarie

Alicia Yap – Citigroup

Tian Hou – TH Capital

Alex Yao – JPMorgan

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter of Fiscal Year 2016 SINA Corporation Earnings Conference Call. [Operator Instructions]

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

Sandra Zhang

Thanks, operator, and good morning everyone. Welcome to SINA's fourth quarter and fiscal year 2016 earnings conference call. Joining me today are our Chairman and CEO, Charles Chao, and our CFO, Bonnie Zhang. This call is also being broadcast on the Internet and is available through SINA's IR website at corp.sina.com.cn. Before the management 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 risks and uncertainties. A number of important factors could cause the actual results to differ materially from those contained in any forward-looking statement.

SINA assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding these and other risks is included in SINA' s annual report on Form 10-F for the year ended December 31, 2015 and its other filings 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 payments or that are non-recurring in nature or may not be indicative of our core operating results 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 of Weibo results, applying the same methodologies we use to calculate non-GAAP measures of SINA at the Group level. These numbers have not been audited and exclude certain items, including those used to derive non-GAAP measures, overhead allocations and inter-company transactions. Following management's prepared remarks, we'll 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 on this conference call for SINA Corporation for the fourth quarter and for fiscal year 2016. The year 2016 is a terrific year in the history of SINA as we finished the year with record revenues and profitability from operations. Our full-year net revenues exceeded $1 billion, an important milestone for us. Much of our success in 2016 was owed to the outstanding performance of Weibo, our social media platform.

There's no question that Weibo has returned to the center stage of Chinese Internet market as one of the leading social platforms, with significant growth in user base and monetization, demonstrating strong operating leverage from the platform network effect. Weibo has consistently beaten some of the most bullish expectations in major operating and financial metrics across the board during the year, and we take great pride in what our team has achieved. And in the meanwhile, our portal team has firmly implemented mobile strategy with significant growth of mobile user base from SINA news app and further elevated mobile monetization capability and efficiency in the year 2016.

Full-year 2016 net revenues for SINA grew by 17% year-over-year to $1.031 billion, while advertising revenues grew by 17% year-over-year to $871 million. The advertising revenues growth was led by Weibo which grew by 42% on an annual basis. Let me start with our Weibo business. The robust growth in user community and improved engagement is a consistent theme for Weibo in the past three years. Weibo's MAUs in December 2016 grew 33% on annual basis to $313 million and average DAUs in December 2016 grew 30% annual basis to $139 million. This represents a net addition of approximately $77 million MAUs and $33 million DAUs in 2016, higher than the annual growth of the number of users in 2015, of this robust growing community, 90% of MAUs and 93% of DAUs coming from mobile devices, which grew 43% and 78%, respectively, on annual basis.

What's driving the accelerated growth in users, engagement and time spent on Weibo is team's solid execution in optimizing information feeds, enhancing efficiency of content distribution and consumption, building and exploring effective channels for user acquisition. To optimize information feed and improve user experience, our team, our main social-based information feed or relation-based information feed has evolved from a time-based, timeline-based feed to a comprehensive one with consideration of multiple dimensions including content relevancy content quality, user interest, user engagement, intimacy of relations, as well as real-time feature. This has significantly improved user engagement and a content consumption in social-based information feed during the year.

In addition, we also wrote our personalized interest-based content feed in the content discovery section, which has increased the traffic and content consumption substantially in the second half of the year. In the past two years, we're very delighted to see the enormous progress Weibo has made in enriching the content ecosystem, which is the vital piece of our platform. As of the end of 2016, 20 vertical areas on Weibo have surpassed $10 billion monthly viewership, such as celebrity, media and fashion, compared to 11 verticals in 2015.

It is also worth mentioning that one of the new $10 billion verticals in 2016 is sports. Sports is SINA's traditional strength in the PC world, and we believe our social media platform, Weibo, along with SINA media, could play a bigger role in shaping the online sports media industry. That's also one of our focuses in content strategy in 2017. A more important part of our content initiatives is video. Short video and live streaming has been one of our most important strategies since the second half of 2015. Our goal is to become the indispensable social video platform in China for people to create, share and consume short video and live video content.

Through team's effort in executing video strategy, we believe Weibo has already become a leading platform in short and live video creation consumption and distribution in China, which should help improve user engagement and time spent on Weibo platform. In 2017, video remains one of our top priorities. We will continue to invest in building short video and live content ecosystem, empower more verticals and influential users with video tools, and enrich short video and live experience for users to further increase our user engagement and time spent.

Let's briefly discuss monetization, which Bonnie will elaborate later. For the fourth quarter of 2016, Weibo advertising revenue grew by 45% on annual basis to $180 million, and full year 2016 advertising revenues grew by 42% annual basis to $571 million, despite a 60% decrease of ad spending from Alibaba in 2016. KA and SME customers in 2016 booked a triple-digit annual growth rate on constant currency basis, further accelerated from the annual growth in 2015.

More importantly, Weibo has demonstrated strong platform value with year operating margin on non-GAAP basis, reaching 27% in 2016. With advertising revenues from Alibaba becoming much less significant in 2016, we believe our overall advertising revenue growth in 2017 will further accelerate. And, of course, we'll see further operating margin expansion as well.

Let's move on to our non-Weibo business. Mobile is the highlight of SINA portal business in the past two years, with portal team's firm execution of mobile-first strategy, we're impressed to see the substantial growth of mobile traffic on SINA news app. Our average DAUs for SINA news app in December 2016 grew 264% year-over-year, the most rapid growth among leading players in news app sector, and our MAUs grew over 200% in December 2016 as well, and makes us one of the leading news app in the sector in terms of MAUs. With rapid growth of SINA news app with significant mobile traffic on SINA.cn, as well as the traffic synergy with Weibo, we believe we have a good stance in the mobile Internet media sector.

Leveraging mobile traffic growth and advanced advertising system, mobile monetization for portal has ramped up as well, with mobile advertising revenue in 2016 growing 77% year-over-year and representing 46% of the total advertising revenues. We expect this momentum will continue in 2017 as the traffic, time spent and engagement on mobile terminals continue to improve. We believe SINA portal business will have the opportunity to grow again in 2017.

With that, I'm turning the call over 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 fourth quarter and fiscal year 2016. Before the detailed financial review, I would like to remind you that, unless otherwise noted, my prepared remarks would focus on non-GAAP results, which mainly exclude share – stock-based compensation, impairment of goodwill, amortization of intangible assets, and a gain or loss on sales investments.

All of our comparisons are on a year-over-year basis unless otherwise noted. Q3 is a solid quarter and capped off a remarkable year of 2016. SINA's net revenue in the fourth quarter of 2016 was $310.8 million, up 23%, or 31% on a constant currency basis. On the earnings side, SINA's operating income grew 102%, or 115% on a constant currency basis, to $82.1 million. Net income attributable to SINA grew 94% to $48.2 million, and our diluted net income per share is $0.63.

Full year 2016 revenue was $1.2 billion up 70%, or 24% on constant currency basis, exceeding our adjusted annual guidance between $950 million and $1 billion. On the earnings side, SINA's operating income in 2016 grew 191%, or 202% on constant currency basis, to $178.7 million. Operating margin in 2016 was 18%, up from 7% in 2016. Full year 2016 net income attributable to SINA grew 94% to $109.1 million and our diluted net income per share is $1.44.

Now let's turn to key financial items. SINA's net advertising revenue for the fourth quarter of 2016 grew 21% to $269.6 million. Full year 2016 net advertising revenue grew 17% to $871.2 million. Portal advertising revenue for the fourth quarter was $81.8 million, down 13%, or 6% on constant currency basis. Full year total portal advertising revenue was $304.1 million, down 11%, or 5% on constant currency basis. The decline was mainly resulting from a 72% decrease in advertising revenue contributed by Alibaba in 2016 as we anticipated with the expiration of the sales framework contract between Ali, SINA and Weibo in early2016.

Excluding such factor, portal ad revenue was able to deliver a 4% year-over-year growth on constant currency basis in 2016, benefiting from SINA's brand equity, online media and the significant growth of mobile traffic on SINA news app, which delivered incremental supply for mobile inventory. Mobile monetization of portal has further improved with mobile ad revenue growing 77% in 2016 and representing 46% of the total portal ad revenue, up from 25% in 2016.

From industry sector perspective, although Internet service and FMCG were the top three industry sectors for portal, representing approximately 66% of the total portal advertising revenue in 2016. Leveraging significant user growth on SINA mobile app and the traffic synergy with Weibo platform, brand customers from Internet service sector selected SINA as one of the effective marketplaces for promotion, which deliver broader brand coverage as well as decent ROI, and outperformed all other industry with a growth rate of 35% in 2016.

Moving on to Weibo advertising business. Weibo's advertising and marketing revenue for the fourth quarter grew 45% or 55% on constant currency basis to $187.9 million. Full year advertising and marketing revenue grew 42%, or 58% on constant currency basis, to $571 million. Such growth rate was achieved through an increase of 98%, or 110% on constant currency basis, in non-Alibaba revenue, partially offset by 60% decrease in revenue contribution from the Alibaba in year 2016.

Key account customer segment has been the highlight of Weibo's remarkable performance in 2016, our revenue from KA customer grew 133% for the fourth quarter and has achieved annual growth rate of 98%, or 110% on constant currency basis. In prior quarter, we were prouder claim that 2016 is the year for Weibo to return to the center stage of Chinese Internet market as one of the leading social platforms. The recognition by brand advertisers further demonstrates the irreplaceable position that Weibo holds in the social advertising market in China. The significant growth of paid ad revenue can be explained in the following aspects.

Number one, the separate budget allocation by brand advertisers on the social sector indicates a more vital role that social platforms play in the mobile Internet space. Number two, massive mobile user scale. Improved engagement and better targeting capability on Weibo help to deliver higher CTR and a conversion rate, which is appealing to new brand customers as well as drives higher ad spend by existing customers. Number three, advanced marketing products and the measurement tool, help customers track their promotional campaigns and achieve higher marketing value on Weibo

Turning to SME customers, ad revenue from SME customers, including self-service ad revenue, grew 85% to $101.4 million in Q4. Full year SME ad revenue grew 98% or 110% on constant currency basis to $307.9 million, representing 54% of Weibo's ad revenue in 2016. Though we set a higher standard for new customer acquisition and a more stringent internal monitoring policy to respond to the new advertising regulation announced in Q3 last year. We are encouraged to see the continuing elevation of ad demand per customer on Weibo, which fosters

strong momentum of advertising revenue of SME sectors. With both KA and SME booking triple-digit growth on constant currency basis in 2016, we were delighted to see a more balanced customer mix and optimize the revenue structure for Weibo's sustainable revenue growth in the long run.

Turning to non-advertising revenue for the fourth quarter of 2016 non-advertising revenue grew 36% to $41.2 million. Weibo non-ad revenue grew 28% to $24.9 million, mainly attributable to the increase of membership revenue. Portal non-advertising revenue grew 50% year-over-year to $16.3 million due the growth of portal new business in the online finance area. Full year non-advertising revenue grew 18% to $149.3 million with portal non-ad revenue growing 25% to $64.5 million, and Weibo non-ad revenue growing 12% to $84.8 million.

Turning to gross margin for the fourth quarter and the fiscal year 2016, gross margin was 70% and 66%, respectively up from 65% and 62% respectively, in 2015. Advertising gross margin for the fourth quarter and full year was 72% and 68%, respectively. Non-advertising revenue gross margin for fourth quarter and fiscal year 2016 was 54% and 55%, respectively. The improvement of advertising gross margin was led by the increasing proportion of advertising revenue contributed by SME customers in both portal and Weibo business.

Now, moving on to operating expenses. For the fourth quarter, operating expenses totaled $133.2 million of 9% from same period last year. Full year operating expenses were 494.8 million, slightly up 3% from prior year. The stable level of operating expenses was achieved through portal team's effort to get better managed costs and expenses, and the operational efficiency delivered by Weibo with the 14% increase of operating expenses in 2016.

Operating income for the fourth quarter 2016 grew 102% to $82.1 million, with operating margin at 26%, operating income for the full year grew 191% to $178.7 million, up from $61.5 million in 2015. Operating margin in 2016 is 18%, up from 7% in prior year, the significant improvement in operating income and operating margin expansion was a result of the operating leverage generated from our Weibo platform and our efforts to disciplined costs and expenses for non-Weibo business spending in the past two years.

Turning to non-operating items, under GAAP measure, non-operating income for the fourth quarter was $28.8 million, compared to a non-operating loss of $2.1 million for the same period last year. Non-operating income for the fourth quarter mainly included, $148.6 million net gain making on sale of an impairment on investments, and two, a $25.8 million loss in the fair value change of the Company's option liability related to E-House, these items are excluded under the non-GAAP measure.

Full year non-operating income was $231.3 million, compared to $33.9 million in 2015. Non-operating income in the full year included item $245.3 million net gain on sale and impairment on investments, which is excluded under non-GAAP, and $28.8 million loss on change in fair value of Company's option liability related to E-House, which is also excluded under the non-GAAP measure.

Turning to taxes, under GAAP measure, income tax expenses for the fourth quarter of 2016 was $5.4 million, at a similar level for the same period last year. Income tax expense for the full year totaled $27.2 million, compared to $10.4 million in 2015. The increase in income tax expenses was to accrue China withholding tax liabilities associated with the sale of certain investments in the prior quarter.

Turning to net income, net income attributable to SINA for the fourth quarter of 2016 was $48.2 million compared to $24.8 million for the same period last year. Diluted earnings per share for the quarter was $0.63 compared to $0.35 per share for the same period last year. Net income attributable to SINA for 2016 was $109.1 million, compared to $56.2 million in the prior year. Diluted earnings per share for the full year was $1.44, compared to $0.89 per share for the prior year.

Now I would turn to the balance sheet and cash flow items. As of December 31, 2016, SINA's cash, cash equivalents and short-term investments totaled $1.8 billion compared to $2.2 billion as of December 2016. Out of $1.8 billion cash and short-term investment balance, $396 million relates to Weibo's cash and short-term investments. The decrease in cash, cash equivalents and short-term investments was due to repayment of convertible debt principal of $646.9 million upon the put option exercised by the bondholders in the fourth quarter, partially offset by the operating cash inflow and the proceeds generated from disposal of certain investments.

Full year 2016 cash provided by operating activity was $443.6 million. Capital expenditures totaled $36.7 million. And depreciation and amortization expenses amounted to $28.5 million. As of December 31, 2016, we have $153.1 million convertible senior notes outstanding which have a maturity date of December 1, 2018.

Before turning to the outlook for 2017, I would like to update you with an item at the corporate level. Based on a shareholder agreement made in August 2016 among SINA, E-House Holdings and certain other shareholders of E-House, the newly-established holding company of E-House repurchased all of the equity interests that SINA held with the consideration of 30% of then outstanding ownership of Leju Holdings Limited and approximately $129 million cash consideration. As a result, we disposed of our entire beneficial ownership in E-House and became a principal shareholder of Leju, holding approximately 31.1% of the total outstanding ordinary shares of Leju as of December 31, 2016.

Let me now turn to the outlook of 2017. For fiscal year 2017, we are targeting non-GAAP net revenue between RMB9 billion and RMB10 billion, or $1.3 billion and $1.44 billion. Our revenue guidance assumed the exchange rate of RMB to USD at an average rate of RMB6.9448 in 2017, which is the closing exchange rate at December 31, 2016. Excludes the expected recognition of $10.4 million in deferred license revenue related to SINA's equity investment in Leju, a subsidiary of E-House. With that, we would like to take your questions. Operator, can you please poll for questions?

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the Question-and-Answer Session. [Operator Instructions] Your first question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.

Eddie Leung

Good morning. Thank you for taking my questions. I have two questions. The first one is more about the advertising industry. Because SINA runs a news app, you guys also have a portal, as well as a leading social media. Wondering how you think about the development of a news app and impact for the industry. Do you see, is being more a competitor for performance-based advertising such as social media, or is actually affecting more the traditional content-based portal and vertical business? Thanks.

Charles Chao

Okay. Eddie, this is Charles. I think this is a very good question. It really depends on what your definition of news app right now, because traditional news app, news applications on the mobile and offered by portals like us, like SINA, Tencent, NetEase, Sohu and Phoenix, et cetera, et cetera. But now I think this – actually the scope of that has expanded to a lot of what we call information feed, content and delivery feed – I mean, apps like [indiscernible] like Baidu, like you see offered by Alibaba, and also by, you know, some of the apps introduced by Tencent, in addition to its news app. So it's a very broad market.

Effectively, I mean, it means that there's a trend towards people obtaining information from the mobile application that's based on recommendation of the content, it's more on algorithm-based recommendation for content distribution. This is a very broad market and totally there are a lot of competitors, a lot of data users in this market. And I think this is the trend for people to obtain content in the mobile terminals right now and going forward, because the more people use that, the more efficient and effective the content distribution becomes.

And I think a lot of ad will be – advertising dollar will be associated with these kind of applications, including the KAs and including the performance-based, and a lot of ads will be in the form more like native ads, just like content, right? And so I think over the years, over the period, it's going to absorb a lot of budget, and also it could be a multimedia-based in advertising through the text- based, picture-based or video-based, three multiple formats basically. And so it's a very competitive market, and so put it in this way, I mean they're going to grab a lot of budget from KAs, from SMEs, and also from local merchants, et cetera and et cetera. And so what we're looking at, I mean, is a combination of those in this market.

And we obviously have Weibo, which is social-based, and we just talked about that topic in Weibo's conference call, that we are introducing interest-based information feed in the – within the mobile app of Weibo as well to satisfy the demand for our users and to offer more usage and time spent by users. So there's a trend towards that. We're also going to offer this kind of offer this kind of content in different apps, in addition to our news app. And so our purpose is the same, is to grab more a budget for advertisers, I mean in both KA and SME market. And so I think it's a very complicated situation, but over I think the market is growing very fast, and we're also growing very fast, in this market basically.

Eddie Leung

Got that, and then just a follow-up question on mobile. Could you share some colour on the proportion of mobile making up of your non-Weibo traffic, including both app and HTML5? Thanks.

Charles Chao

Well, I think, on combined basis, app plus H5, and our mobile traffic has already surpassed probably two sets of traffic right now. And that percentage is also increasing every year basically, and the trend is not going to stop. So you're going to see more transfer on the mobile and less from PC going forward.

And that's the current situation. And in terms of monetization, I think mobile is still lagging behind versus its percentage of traffic. And in the year of 2016 we probably have about 46% advertising revenue from mobile. I think this year, 2017, the mobile revenue in terms of advertising, in terms of total percentage, will increase.

And so the trend has been, we increase the mobile, there is a drop, I mean from PC side, and hopefully in this year the increase will be more than the decline in the PC so that overall basis we can have growth again.

Eddie Leung

Got that very helpful Thanks

Charles Chao

Thank you.

Operator

Your next question comes for the line of Wendy Huang from Macquarie. Please ask your question.

Wendy Huang

Thank you, management. Congratulations on the solid results and also guidance. So, for your 2017, for your revenue guidance, does that imply the non-Weibo or portal business in the US dollar term will stabilize or maybe also increase slightly? And also, how should we expect the non-Weibo margin to change in Q1 and also in 2017? Thank you.

Bonnie Zhang

Hey Wendy, this is Bonnie. I think the way we look at our portal business is, like a indicating in the script, in the last two quarters, if you pick out the impact of Alibaba, we did see a small a very much stabilized portal advertising business. That trend probably will continue into year 2017 as the factor from the impact from Alibaba diminishes.

But in terms of the operating margin, we don't expect there will be significant changes in terms of the non-Weibo pieces. I think, again, we're talking about a very mature business and with potentially single-digit growth rate in revenue. And on the cost side, I think you realize in the last two years that we have done a lot of work in terms to cut down the non- essential expenditures, but meanwhile with to further fuel the growth of our app and advance the monetization capabilities, we will continue to invest in the marketing and also in the technology part to ensure that the traffic, we can retain the traffic growth and further to improve our algorithm or other CAD machine learning capability to have a more advanced advertising system, which truthfully that's a very important competitive sort of foundation for the marketing in the long run.

Wendy Huang

Thank you, Bonnie.

Bonnie Zhang

Thank you

Operator

Your next question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Alicia Yap

Hi, good morning Bonnie and Charles. Thanks for taking my questions. Just quickly on the follow-up, in terms of any updates on the use of cash and also return to shareholder. And then just briefly Charles, if you can also comment overall advertising environment sentiment for China currently. Thank you.

Charles Chao

In terms of use of cash, I don't think there is so much change at this point, because we actually returned about more than $600 million cash to the bounce CD holders last November, so that our total cash at a decreased. And so, actually at the current level, I think our cash is okay, and we do not have a very specific plan, other than invest in new businesses and maybe for affiliation purpose.

And we don't have any specific target, but that will be the major use of cash for now and in terms of the advertising market and I think in terms of entire brand advertising market, I the way we look at it, it's kind of stable and we don't see there much change from last year in terms of overall in the budget and these types of things.

And maybe it's for different industry we will see different trends, but overall I think it's very similar to what we have seen at the beginning of last year. But we do see obviously as we always say that there will be more you will see more budget actually allocate I mean to the mobile, and to the social and to the video, especially for mobile video will be the trend.

So I think we were actually in a very good position to take a lot of share of the brand advertising budget shift to mobile and to video and also to social. But for the product side, a news app and also our H5 mobile portal and we are also seeing more budget allocation from brand advertising. But that's not as obvious as what we have seen the trend in the Weibo side, probably because the scale of the Weibo already reached that point than actually attracted a lot more customers.

At this point, it's more diversified in terms of satisfying the brand advertising needs for all types of products. From information feed, from in at the courage and type of advertising and through social advertising through KOLs and many, many means, Weibo can satisfy brand advertising needs whereas in the portal side, I think it's less diversified. But then the overall trend in advertising for KA mobile is very positive.

But if you look at the other market and I always said in Internet market, a lot of advertising demand actually from Internet service and product itself and meaning that look at app downloads, activations, look at e-commerce, look at gaming and these actually are still growing very nicely in the market and with the across board in the time that positive trend in this market for the demand from these kind of advertising demands. And for Weibo, the unique portion probably we talked about that in the other conference call that the KOLs and the demand for influencers for doing organic ads to increase their financial – sorry social aspect.

And their influence on the social platform is a very important trend. On the social platform itself, we believe that organic demand is also increasing and which is very healthy for the ecosystem for the Weibo. So, this is probably a broad overview. It's very difficult to get more precise because the market has changed so quickly, and becomes more complicated in Internet advertising, overall market these days. So, we can talk about it offline if you are interested, but this is a brief kind of broad observation we have right now.

Alicia Yap

Very helpful. Thanks Charles.

Charles Chao

Thank you

Operator

Your next question comes from the line of Tian Hou from TH Capital. Please ask your question.

Tian Hou

The question is related to the short review where [indiscernible] platform. So, there are – several of them are quite well known, like YTL Inc. YY, Momo and also Yi Zhibo. So, what are the trends between Weibo, Weibo Yi Zhibo and others? That's the question.

Charles Chao

Well, I think if you talk about Yi Zhibo is more similar to the ones you just mentioned in terms of the vertical kind of broadcasting, like broadcasting platform. We are obviously a significant

Shareholder of Yi Zhibo and we have strategic relationship. So, Weibo itself has a lot of synergy with Yi Zhibo in terms of driving traffic to Yi Zhibo and also to have to – at Weibo we're getting more content from Yi Zhibo. Overall, it's a good match in terms of synergies. I mean so we're getting more content and they get more users, okay.

But on overall basis on Weibo itself, we have a different strategy, a different view about broadcasting. We basically view this as – essentially as a very important part of our content. And that's the way for us to increase the use, stickiness, time spent. And since you mentioned about short video, same thing. I mean the more video we have, the more [videoship] we have, that means more sticky in terms of users. And also that will increase the number of users, user stickiness and it has been our platform. So, that actually is a very essential part of our objective in terms of have more video content, whether short video or live video, maybe in the future we have long form video also. I mean, the objective is then to increase the user stickiness and time spent. And with more people use our platform, more time spent on platform, then we can do more advertising with more user data, more content relevancy kind of advertising to these users.

Whether these advertising is in the form of video, is not very important. But in the future, we're going to see more advertising from videos, because these video advertising actually – first of all there are lot of demand for that; secondly it will create higher ECPM for our advertising inventory. And on an overall base, it’s good for our overall advertising growth. That’s the way we look at it. And I think we are not really competing directly with any of these live broadcasting platform verticals.

Tian Hou

Sure. The second question is, what is our investment plan for 2017? Which are the areas that we plan to invest our capital and how much are we planning to invest?

Charles Chao

I do not have a budget plan in terms of how much we're going to invest, we obviously want to invest. Historically we always invest in the business or in the companies that actually is relevant to our own business expansion and for the future of our business and the products. So, it's more like investing in the Company and the technology and the business that's within our ecosystem basically. That's like in the content business, in the advertising business, in the technology related content distribution, related to advertising systems, so on so forth. And in the vertical areas, we're also looking but the focus this year will still be in Internet and finance area.

We believe that’s – our strengths will be and that is opportunities we have in the future. And so, these are kind of directions, but I cannot tell you too much specifics and there are lot of things going on, but nothing very significant. So, I will update you if we have anything that's more significant.

Tian Hou

Very helpful and thank you so much. Congratulations on a good quarter.

Charles Chao

Thank you

Operator

Your next question comes from the line of Alex Yao from JPMorgan. Please ask your question.

Alex Yao

Good morning everyone. Congrats on a good quarter and thank you for taking my question. Two quick ones. The first is regarding the mobile non-portal news revenues. What percentage of those mobile revenue is performance as that leads to sales leads, traffic or downloads? What portion is brand ads, which is to help building the brand awareness or large campaigns et cetera. And over the next few quarters, which part do you expect to see faster growth? And then second one is regarding the brand advertising budget. We've been seeing a lot of the brand ads budget in the sectors such as auto, FMCG, moving to the new feeds applications such as the [indiscernible], et cetera. How do you see the industry outlook, the overall trends in those verticals over the next few years? And how would SINA position your portal apps to gain more market share in this market? Thank you.

Charles Chao

Okay. Maybe I'll take the second question first and regarding the brand advertising budget especially in areas auto and FMCG moving towards these kind of newsfeed applications. And that is the trend, there's no question about that, as I said. I mean there's more budget allocated to the mobile, especially in the newsfeed area. And to be honest with – Weibo is also a major beneficiary of this trend and so we're getting more advertising. Weibo fundamentally is mobile based, right, 90% of traffic is mobile. And so, we're seeing generally increase in terms of demand from auto industry and FMCG. And on the portal side, I think traditionally we are very strong in auto areas, and we're so-so in terms of our percentage in FMCG areas.

But right now, we think auto industry is first auto and FMCG, we are I guess less competitive from portal side, but again much more competitive in the Weibo side. So, we are actually pretty – we try to creating more synergies between Weibo and SINA News, portal news app and to try to get more budget on overall basis and by creating a packaging deal for our customers in those two industries. But overall I think they are increasing their budget as you said, in the news app area and the newsfeed area in the mobile. And I think on an overall basis we will benefit. It's a matter of how much they can allocate between Weibo and on the portal side. And the first question, in terms of the brand advertising versus home based app.

Bonnie Zhang

Yes, I just want to clarify, if your question is non-Weibo versus non-portal, what we heard is you asked the question on the non-portal numbers, so I just want to make sure I'm giving sets of the right figures.

Alex Yao

Hey Bonnie, what I'm is for the portal side of the business, including new apps and...

Bonnie Zhang

Sure yes. Certain times compliments with its brands right.

Alex Yao

Yes.

Bonnie Zhang

We have a rough calculation, depends on the products we sold through our – the cut is some of our like half and half, half of those are brand based coverage and large audience coverage requirement versus the rest are being more performance driven. You know, you do have a specific requirement for sales lead registration or a particular action to be taken by a customer.

Alex Yao

And which one is growing faster?

Bonnie Zhang

Which one – definitely the performance. SINA used to be an advertising platform, literally it's dominated by brand advertising. So, in the last couple of years, I think we have been developing advertising systems to meet the market demands that where we see the opportunity in the performance driven sector. And also, we noted that even with the large [indiscernible] hidden fees today, they've be using trading desks to connect with different ad exchange just so that they could deliver performance based app to their large advertiser, traditional brand advertisers as well. So, that's why you see there is a natural product sort of change and direction change that you will see the performance driven app will grow much faster than your brand apps.

Alex Yao

Got it. Very helpful. Thank you very much.

Operator

Due to time constraints, I will now hand the conference back to today's presenters for closing comments.

Bonnie Zhang

Thank you for coming to this conference call. We'll see you next quarter.

Operator

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

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