Weibo Corporation Q2 FY2025 earnings call

• User growth and engagement: Focused on integrating social products and upgrading recommendation systems. Homepage information feed evolved from time-line-based to recommendation-based distribution. Upgraded algorithm in 2016 and introduced new feed structures in 2018. In 2025, initiated strategic revamp of homepage information feed, making interest-based feed primary interface, integrating recommendation mechanisms and enhancing user feedback. Leveraged large language models to improve recommended content quality.
• Content ecosystem competitiveness: Interest-based feed became primary for content distribution. Completed transition of content operation from influencer-based to vertical content-based model. Over 50% of interest-based content from key verticals generated by cross vertical KOLs. Vertical content consumption accounted for 60% of interest-based feed consumption. New interest-based feed optimized content quality, increasing traffic share for KOLs.
• Monetization: Ad product and sales strategy focused on expanding and solidifying customers' choice of Weibo for content marketing. Backed by consumption stimulus policies, e-commerce platforms and related sectors increased ad spend. Leveraged Weibo's strengths in trending topics, celebrity resources, etc. for industry reach. Maintained investment in performance-based ad products. FMCG sector seeing shifts in marketing strategies, with advertisers reallocating budget to celebrity product launch, etc. AI integrated on monetization front to streamline ad creation, accelerate review, and improve ad targeting, driving higher eCPM for real-time business feed ads in Q2.

In the second quarter of 2025, Weibo's total revenues reached $444.8 million, up 2% year-over-year. Total ad revenues were $383.4 million, up 2% year-over-year. Value-added service revenues were $61.4 million, down 2%. The top 3 ad verticals were FMCG, e-commerce, and 3P products. E-commerce, Internet services, and automobile were key growth contributors. E-commerce advertisers increased spending during the June 18 shopping festival. The automobile sector sustained growth. FMCG showed a year-over-year decline but had early signs of gradual recovery. Ad product category promoted feed ads was the largest contributor, followed by social display ad and topic and search placement.

• Third quarter faces tough year-over-year comparison due to high base from last year's Olympics. Advertisers from consumption-related industries conservative in ad budget allocation. Will step up sales efforts to capture engagement opportunities in sectors like e-commerce, automobile, and healthcare. Long-term aim to further integrate AI capabilities to drive improvement in ad inventory availability and eCPM.

• Macro uncertainty and geopolitical outlook may impact advertisers' budget allocation. Intense industry competition could affect market share. AI application in brand ads faces challenges due to constraints in ad placement process. Uncertainty in business model for search ads.

Q: Congratulations on the strong second quarter results. Management earlier mentioned about your progress on Weibo Smart Search. Could management elaborate a bit more on your product strategy and the future plan for commercialization? And furthermore, on AI, could management share more progress on how AI is helping the overall monetization and commercialization for the Weibo platform?

A: In Q2, the intelligent search product was in the process of perfection and finally stable by end of Q2. June MAU of intelligent search over 50 million, query improved by 60%, DAU and user query growth even faster. For AI in monetization, in Q2, AI ad creative platform [Linchong] launched, over 10% of consumed assets from AI. Information feed ads eCPM grew less than 10% in Q2. Brand ads tested with specific customers, click rate increased, interaction doubled, but brand clients face ad placement process restraints. Expect end of year over 10% of brand customers to start using AI ad system.

Q: My question is regarding the advertising revenue growth outlook. Can management share what is your expectation for the ad revenue growth into the third quarter and second half of this year? And specifically, which industries may show a stronger revenue growth? And from a format perspective, just wondering what is the difference in terms of growth rate between search ads, displayed ads, recommendation feeds ads, et cetera? And specifically, as management already mentioned the applications of AI in information ads, just wondering, given the very rapid usage of the AI search functions on Weibo, what is the implications for the search ad growth?

A: Latter half of the year, e-commerce and automotive industries can still maintain good growth. FMCG faces pressure due to Olympics base. Cell phone and gaming industries uncertain. Information feed ads growth rate highest. Displayed ads not future focus, more customers moving to performance-based ads. Search ads lack clear business model now, focus on building customer base and increasing traffic. Will increase budget for intelligent search in computing power and external cooperation to grow user base.