Q3 2023 Bilibili Inc Earnings Call
Speaker 1: Today, I welcome to the billy billy third quarter 2023 financial results and business update conference call. The Disconference call is being recorded at this time. I would like to turn the conference over to Judith Young, Executive Director of Investor Relations. Thank you. Please go ahead.
Speaker 2: During this call, we'll discuss business outlook and make forward look.
Speaker 2: These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong stock...
Speaker 2: The non-GAAP initial measures we provide are for comparison purpose only.
Speaker 2: Definition of these measures and a reconciliation table are available in the news release we issued earlier today.
Speaker 2: As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at IR.bilibili.com.
Speaker 2: Joining us today from Billbillie's Intermanagement are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer.
Speaker 2: Ms. Kali Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Phan.
Speaker 2: And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Fan.
Speaker 3: Thank you, Julia. And thank you everyone for participating in our 2023 third quarter conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.
Speaker 3: The Rico High Community Growth we achieved in the third culture is the attachment to the power of our self-driven content ecosystem.
Speaker 3: that the continuously drawing in more users and keeping them highlighted in gate.
Speaker 3: Notably, our DEUs increased by 14% over year, surpassing the 100 million milestone and the landing at the 100 and 3 million in the third quarter. MAUs also grow to a record high of 341 million, and the DEUs to a million ratio in this quarter improved to 30.2%.
Speaker 3: Meanwhile, our user DailyTime Span also reached the historical high of 100 minutes.
Speaker 3: with total user time spent increasing by 19% year-over-year. We are encouraged by the strong user growth momentum and the direct correlation with our monetization.
Speaker 3: improving margins, narrowing losses and maintaining growth has been our key objective this year. In the third quarter, we leverage our expanding traffic more efficiently.
Speaker 3: integrating commercialization in nail rails and producing our content ecosystem to drive quality top-line growth.
Speaker 3: This is evident in our advertising and the vast bin.
Speaker 3: which grow by 21% and 70% over year respect.
Speaker 3: Furthermore, our growth profit increased by 38% over year, and our growth profit margin rose to 25% up from 18% in the same period.
Speaker 3: marking the fifth consultative culture of growth margin improvement.
Speaker 3: Our tight expense control measures reduce our total operating expenses by 12%.
Speaker 3: including a 19% decrease in sales marketing expenses and a percent decrease in GN expenses and a 6% decrease in R&D expenses.
Speaker 3: As a result, our justice for printing laws and a certain net laws both narrowed by 51% over year in the third court.
Speaker 3: notably we achieved an important milestone of generating positive operating cash flow in the third course.
Speaker 3: Demonstrating our business operations have entered a positive cycle and marking a step forward in our probability goal.
Speaker 3: 2023 has been a year with continued changes across industries and markets. To adapt to the new paradigm, we are increasing our focus on what co-bend is.
Speaker 3: in the fourth quarter. We have further stimuli our organization and the expense our total have come to be around 9,100 by the end of 2023.
Speaker 3: compared with 2011 at the end of 2022.
Speaker 3: Additionally, future project plans will continue to be our eye focus.
Speaker 3: We give measures, we will become NIMBER and the organization to better align ourselves with the new environment, setting the stage for...
Speaker 3: With that overview, let's look at our core pillars of content, community, and commercialization in more detail.
Speaker 3: The key matrix that represents the quality of our community continue to run.
Speaker 3: The number of daily active content creators on our platform increased by 21% in the and the number of daily active content creators on our platform increased by 21% in the
Speaker 3: and the monthly new content submissions was 21 million, of 37% both the over years.
Speaker 3: more content creators, and more wider fan base during the set.
Speaker 3: The number of content creators with over 10,000 followers grow by 36% year by year.
Speaker 3: Total daily video views increased by 26% year over year to 4.7 billion.
Speaker 3: Mound Witch story mode video views grow by 45% over year.
Speaker 3: the mentioned users are spending more time with us than ever.
Speaker 3: With UGA Daily Time Span reaching an all-time high of 100 minutes.
Speaker 3: Meanwhile, monthly infections among our users also increased by 18% over year, reaching 17 billion.
Speaker 3: We had 224 million official members who have taken and passed our community exam.
Speaker 3: 23% increased in over a year. At the day of 12 months retention rate remains strong at around 80%.
Speaker 3: Our content categories continue to expand, attracting more users and bringing new commercial opportunities for both content creators and the platform.
Speaker 3: invatible. Our users and conicreters enter new life stages and new completed with new form.
Speaker 3: such as home decoration, relationship, baby maternity, and the auto mode.
Speaker 3: For example, new content submissions in home decoration and appearance genre grow by nearly 90% year over year in the third quarter.
Speaker 3: Content Quay 13 this category and their earnings as well as of Titan RAM news generated from the same category have all been in for late in POOL.
Speaker 3: Meanwhile, we have created more direct monetization opportunities for our content creators.
Speaker 3: Total of 1.68 million content creators generated income on Bilibili in the third quarter, up 34% from the
Speaker 3: the adaption of video and live commerce and also brought additional channels for more creators to realize commercial value.
Speaker 3: Additionally, this summer, our two signature offline events, Bilibili World and Bilibili Microlink, attracted a gathering of over 200,000 young people in Shanghai to experience our unique community culture.
Speaker 3: The remarkable attendance underscores Bilibili's influence among the young generation and brought us more brand advertisers with incremental budget allocations.
Speaker 3: Lastly, I'd like to talk about commercialization.
Speaker 3: Total RAM new for the third quarter, what R&B 5.8 billion. Flat over year.
Speaker 3: Advertising revenues and vast revenues increased by 21% and 17% year-over-year, while offset by 33% year-over-year decrease in game revenue.
Speaker 3: We are encouraged by the progress in our ads and best bids.
Speaker 3: where the RAMU grows potential and the direct correlation with the AU growth.
Speaker 3: Meanwhile, we have taken a closer look at our game business and made certain adjustments to better align ourselves with the new industry landscape.
Speaker 3: our growing and engaging community is the foundation of mutualization.
Speaker 3: As people spend more time and engaging more community activities, they are more willing to pay for billy-billy content and services. Looking.
Speaker 3: VastGravNU for the peer rate increased by 17% over year to 2.6 billion. Mainly led by our live broadcasting bin.
Speaker 3: The ongoing interaction of lipocasting into a video universe continues to yield results.
Speaker 3: More content creators are stepping into live broadcasting as hosts.
Speaker 3: further enriching our live broadcasting offerings and enabling them to earn income.
Speaker 3: By the end of September , our premium members grow to 21.1 million with over 80% on annual subscription or auto renewal package.
Speaker 3: Undescoring the trust and the royalty we have built with our breath.
Speaker 3: In the third quarter, we launched the highly anticipated self-produced anime, Link Click at season two of The Time of World History, the boom of an Asian inspired god the
Speaker 3: which was well received by many new and old fans.
Speaker 3: September . We announced 68 new Chinese anime titles at our six made by Billy Billy, Billy, Chinese anime, press your back.
Speaker 3: Both of these titles will be released in the next few years.
Speaker 3: ensuring a continuous stream of beloved content of our premium members.
Speaker 3: we further integrate self-conversion to within our ad products across an area.
Speaker 3: We are no more effectively converting our high-quality traffic into substantial and ram-new growth.
Speaker 3: Total advertising revenues grow by 21% over year, reaching RMB 1.6 billion, mainly led by performance-based ads.
Speaker 3: Notably, our strong and revenue growth contributed to meaningful growth of the growth. With higher revenue contribution from our performance-based app.
Speaker 3: For the third quarter, our top five added verticals were games, digital products and home appliance e-commerce.
Speaker 3: despite the third culture traditionally being an off-pixilum for e-commerce advertising.
Speaker 3: our strengthened advertising solutions enabled us to secure greater share of advertising budgets in this competitive industry.
Speaker 3: during the W11 shopping festival in the fourth course.
Speaker 3: We further strengthened our data collaboration with e-commerce platforms and upgrading our video and large commerce and products.
Speaker 3: The total GMV from our videos and live commerce products increased by over 250% of a year for the W11 shopping season.
Speaker 3: Total RAM news was R&B 992 million, representing an increase of 11% cost over quarter, and a decrease of 33% over year.
Speaker 3: The reason for the year-over-year decrease was due to a high base from the 2022 summer release of Space 103, as well as weaker than expected new game performance in the SESC quarter this year.
Speaker 3: our laxic amph, azuna line and FGO, remained stable during the period.
Speaker 3: On August 30, 2023, we launched our exclusive license, the ACG title, Pretty Dump.
Speaker 3: September 8, 2023. The game was temporary removed from the app store for content refine.
Speaker 3: and we are working diligently to resume download access as soon as...
Speaker 3: The gaming industry has changed dramatically in the past two years. At the beginning of the fourth quarter.
Speaker 3: and closely reviewed our in-house game development projects.
Speaker 3: Before the streaming line, our in-house development team and this continued projects, that did not meet our standards.
Speaker 3: consolidating these operations will help reduce our future and expense.
Speaker 3: That said, as a video community for the young generation.
Speaker 3: We process natural advantages in the game.
Speaker 3: We aim to further leverage our growing advertising capabilities to strengthen our game distance.
Speaker 3: as well as selectively invest in our in-house development to bring high-quality games to our users.
Speaker 3: We are dedicated to regional financial goal of growth, poverty, improvement and the lost reduction.
Speaker 3: We have delivered on this goal with a 30% increase in growth policy.
Speaker 3: and 51% reduction of both adjusted operating laws and adjusting net laws in the third quarter. And we will continue on.
Speaker 3: strongly believe in the power of good content and community.
Speaker 3: 100 million DAUs is a trust another beginning for us to build up.
Speaker 3: We will stay true for a mission and continue to re-read the everyday lives of the young generation in China.
Speaker 3: This concludes Mr. Chancellor Marks. I will now provide a brief overview of our financial results for the third quarter of 2020.
Speaker 3: and mentioned in Mr. Chancellor Marx, our financial profile has significantly improved. We continue to gain operating leverage. One.
Speaker 3: We have increased our growth-spot margin and narrowed our jet in their loss for five consecutive a
Speaker 3: Total net revenues for this quarter would be 5.8 billion. On top, we
Speaker 3: Our total net RAM news, written down by RAM News Cream, will, unfortunately, 45% vast, 28% of TIE-LIN, 17% mobile games, and 10% from our IP narratives and other business.
Speaker 3: Our cost of RAM news decreased by 8% year-over-year to an B4.4 building. Driving our cross-party to an B1.5 building, up 38% year-over-year. Our cross-party margin reached 20
Speaker 3: We expect our growth-popping margin to continue to improve in the fourth.
Speaker 3: Our total operating expenses were down 12% over year to be 2.6 billion.
Speaker 3: In the third quarter, we cut our sales marketing expenses by 19% over year to have been 992 million. While our DAU's
Speaker 3: Sales and marketing spend says was 70% of total RAM news compared with 31% in the same period.
Speaker 3: Even on GMIT's sponsors when I'm $400,99 Ma???
Speaker 3: And the expenses will be 1.1 billion down 6% yield.
Speaker 3: that result, we narrowed our adjusted operating loss and adjusted net loss, both by 51% over
Speaker 3: our jacket and loss ratio in the third quarter were 15%. Improving from 30% was...
Speaker 3: Notable, we generate a positive operating card flow in the third
Speaker 3: demonstrating our business operation has entered into a positive cycle.
Speaker 3: 2023, we have cash and cash equipment, time deposits, and a shortening investments of RMB 14.5 billion or US dollar 2.0.
Speaker 3: In the third quarter, we repurchased an aggregate principle amount of US$14.5 million December 2026 notes with an aggregate cash consideration of US$13.
Speaker 3: As of September 30, 2023, the aggregate of standing principal amount of April 2026 notes, 2027 notes, and the December 2026 notes was US$860.
Speaker 3: We believe our expedition is sufficient to cover all of our remaining convertible bounds.
Speaker 3: We now expect our 2023 for-year round news to be at the lower end of R&B 22.5 Billing to R&B 23.5 Billing Red.
Speaker 3: Thank you for your attention. We will now look to open the call to your questions. Operator.
Speaker 1: We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for a name to be announced. For the benefit of all participants on to this call, if you wish to ask your questions to management in Chinese, please immediately repeat your questions in English. The company will provide consecutive integration for management statements during the Q&A session. Please note that in English interpretation, English interpretation is for convenience purposes.
Speaker 1: In the case of any discrepancy, the management statement is in their original language.
Speaker 1: Please meet your questions to one at a time. If you wish to have a follow-up question, please rejoin the cube.
Speaker 1: Our first questions comes from the line of Changsue Qin from CICC. Please go ahead.
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Speaker 4: So what's your views on the growth potential and recently in media parties that the company has internally proposed that go up doubling their yield? So comment, share the past and the time table for retrieving this goal, that it requires increased the expense in your acquisition. Thank you.
Speaker 5: Now, I think we are sobre an videos project
Speaker 5: As long as you do it well, in this period of time, its users should be getting bigger and bigger. So I think when we talk about user growth in the company, the main method we use is to do the product well, not to increase customer input.
Speaker 2: I think in the big movement of visualization as a very natural process for a good video product to grow bigger and bigger by itself. That's why when we are talking about user growth strategy internally, we've been emphasizing on improving the content quality, improving the user experience, not mainly through the user acquisition.
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Speaker 2: That's why, starting from second quarter last year, we have been emphasizing the ROI of our user acquisition strategy as we are spending less in self-im Marketing, we are actually growing more and more DAU.
Speaker 5: Yes, we mainly improve our product capabilities, improve our operation efficiency, and make more use of the advantages of our community to pursue higher quality DAU growth and commercialize the same user base.
Speaker 2: That is why we have been focusing on improving the operating efficiency, improving our product capability, and pursue simultaneous commercialization as well as the user growth virtuous cycles.
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Speaker 2: In the third quarter, our DAU has surpassed 100 million milestone, and we also reached a record high of MAU members. And this is a strong evident that we have succeeded in our user growth strategy in the past year, and this is just a new beginning for us.
Speaker 5: Maybe the investors will ask why we are still using the same system as before and why we are still using the same system as before and why we are still using the same system as before The reason is simple, there are two reasons First, I think that all the products of the Internet are a core of the Internet because you have more Internet that you can also sell our products for a more powerful investors
Speaker 5: You can also have a better lighting
Speaker 2: The reason why we have been focusing on user growth is I think for all the internet product, the user base will be one of the key competitive strengths, the larger user base we get, the more content creator, as well as the commercialization we'll come with.
Speaker 5: Secondly, you just make a regular product and product, as part of the product industry. We have met very important or rather should be closely related
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Speaker 2: And for Internet product user-based, it's also the foundation for our commercialization. You can see from Billbillie's commercialization model, advertising and live broadcasting has, its revenue growth has direct coronation with DAU.
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Speaker 2: In the third quarter, our ad revenue and VAS revenue grew by 21% and 17% respectively on year. And as you can see, we have already come to a strategy or form a virtuous cycle between our traffic growth.
Speaker 2: our revenue growth in advertising and the vast specificity like broadcasting. At the same time,
Speaker 2: The revenue that grew from this two sector has also converted to a certain part of that also converted to our content creators income and also will generate more content creation on a platform. So from a content ecosystem perspective, it has also been very positive to our overall content.
Speaker 5: and now I think that s telling a lot of the prettier guys when I was doing shots in the service I found that a lotcher can tear off their clothing
Speaker 5: because we have a good reputation, so he came here to use Bilibili. After using Bilibili, he will recommend us to his friends. In the past year, although the number of users has increased rapidly, we can see that our group of app owners, including the richness of our content, including our community indicators, are still very healthy and positive. In fact, this also shows that we have a very obvious upward trend, an upward trend.
Speaker 2: At this point, we still see great growth potential for our user scale. When I do the user research, I discover that for Bilibili users, there's a great word-of-mouth effect. People feel good about the product, it will naturally spread words and introduce new users.
Speaker 2: And if you look at the past year's data, not only we have achieved very strong user growth, we have also exceeded in many matrix in terms of.
Speaker 2: community growth, video views and content creators numbers. That means that we have achieved a...
Speaker 4: a virtual cycle in between the content user as well as the community.
Speaker 5: I think if we can continue to make the content more prosperous, we should be able to get more users. I always think that the vast majority of people should become Bilibili users, because good content and content related to their own interests are a very universal need.
Speaker 4: I believe as our content ecosystem continues to prosper, billi-billy should be able to attract more and more users. Because it's a, we think it's a very natural desire for all human beings to find good content and find friends who share the same image.
Speaker 5: So in the future, we will continue to focus on the natural growth of users in the way of making good products and making good content, and then we will also focus on the natural growth of users in the process of marketing.
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Speaker 4: Going forward, we'll still largely rely on the product improvement, content expansion to drive our user growth.
Speaker 4: and pair with ROI-focused self-marketing and only invest in user acquisition when the ROI makes sense. That means.
Speaker 4: only to a far user when we are making money by investing in that user acquisition strategy. That is a mid to long term user close strategy.
Speaker 5: Yes, I remember at the end of last year, I also mentioned to everyone that I am now talking to the company inside is nine words We have to do these three things at the same time. We will not say that we will sacrifice the first two points to increase the number of users
Speaker 3: And the last year I have raised the three key objectives for the company, which is in margin improvement, loss narrowing, and maintain growth. We want to achieve this three target at the same time, not by secondizing the first two target to achieve the last one. Thank you so much. Thank you. Thank you. I'll put our next question, please. One moment for the next question.
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Speaker 6: What are the main driving forces of the advertising business in this quarter, especially in terms of effective advertising? And I would like to ask, during the Double 11, you just talked about the rapid growth of GMV. I would like to ask, how is the advertising side doing?
Speaker 6: Also, I'd like to ask about the progress of our video and live advertising business. And finally, what are your thoughts on the 2024 advertising business development? Thank you.
Speaker 6: So can management help elaborate on the key drivers for the ad business, especially DRS?
Speaker 6: and how the performance giving the W-11 promotion of campaign in addition can update on your progress on live streaming e-commerce and show video e-commerce.
Speaker 6: And lastly, how should we expect the second world for 2024? Thanks.
Speaker 7: The third level of the B-ZAN policy is the same growth of B-ZAN. The B-ZAN growth of B-ZAN is more than 38% of the B-ZAN. The B-ZAN growth of B-ZAN is more than 38% of the B-ZAN growth of the B-ZAN.
Speaker 4: In the third quarter, our advertising revenue grew by 21% year over year. Revenue as percentage of total revenue has grown from 23% the same period last year to 28% in the third quarter this year. And also it has drove the growth profit improvement on a company level.
Speaker 7: Correspondingly, the core drive has also been fully introduced in the first two quarters. In fact, it is the deepening of the vertical solution plan of the seven industries in Zhongxiang and the improvement of horizontal China-Taiwan capability, which is still the core drive.
Speaker 2: We've introduced our key strategy and the driving force of our ad business in the past two quarter comprehensively, which has been the one horizontal industry solutions as well as the middle platform power improved.
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Speaker 4: From an industry vertical perspective, game and e-commerce have been very strong. Despite Q3 being a traditional slow season, ad revenue from e-commerce still grew by 90%.
Speaker 2: young years. Additionally, we have been actively exploring other integrated solutions with other industries.
Speaker 2: for example we've seen positive performance from automotive and healthcare industry which also grew by 20% quarter over quarter going forward we continue to strengthen those industries performance.
Speaker 7: In terms of platform technology, we have deepened the commercial value of low-end scenarios. In terms of Q3, the effect type of advertising has increased by more than 40%, which has become the main driving force of this stage of advertising business.
Speaker 2: We have also improved our ad efficiency on a platform level, unleashing more a conversion that value across different scenarios. In particularly performance based ads, grew by 40% year over year in the third quarter, which has become the main growth driver of our ad.
Speaker 7: This year, the performance of Double 11 is still above expectations, mainly due to the growth of e-commerce advertising revenue in the same ratio, more than 80%.
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Speaker 4: In terms of the double 11 shopping festival performances, we think the overall experience of overall performances has exceeded our expectations.
Speaker 2: Ad revenue from the main e-commerce platforms grew by over 80% year over year. We'll continue to adhere to the open loop strategy and continue to deepen our data collaboration with the top e-commerce platforms.
Speaker 4: For example, as revenue generated by the Ali Baba Shinwil project grew over 160% compared with the June 18th shopping festival this year. We've worked with more than 70 brands advertisers to bring new users to those work to the advertisers.
Speaker 4: Over 50% of the traffic converted to Alibaba were new users to those friend owners. And this ratio even reached 89% for baby and maternity.
Speaker 7: Why did I mention the Starfire project here? Because the start of the Starfire project and its realization fully prove the conversion value of Bilibili's after-sales advertisement. So in addition to Ali, Bilibili and other platforms, including JD, will also launch the Starfire project recently.
Speaker 4: The incremental ad budget brought by Alibaba's Xinhua project has actually proven the conversion value of Bilibili's performance ads. That's why in addition to Alibaba's Xinhua project, we launched Jinghua project, a collaboration program with Jingdong Racing.
Speaker 7: In that time, the whole data earlier reviewed 21(?)uttering below 200 Siege
Speaker 7: The atmosphere of Bilibili's consumption and transactions is as expected, and it's getting thicker and thicker. During the big tree period, the number of Bilibili's delivery videos increased by more than 230%. The length of delivery live broadcasts also increased by more than 100%.
Speaker 7: Among them, the accumulated payment amount of Bilibili's upstream, Midnight, live delivery is actually up to 1.6 billion yuan, which is actually more than 400%. The above data can show that our trading atmosphere and the increase in the subsequent income of advertising should be able to continue to reflect.
Speaker 4: During the Double Eleven Shopping Festival, the GNV generated from our video and live e-commerce increased more than 260% year over a year.
Speaker 4: And we have gradually built up our consumption and trading atmosphere within our content community. During the shopping season, the number of video e-commerce related video increased by over 230%.
Speaker 2: and the number of live e-commerce sessions has also grew by 100%.
Speaker 4: Bilibili's content creator, Mr. Meadom, his live e-commerce, GMV, has reached 1.68 billion, which increased by over 400%.
Speaker 4: from the trading atmosphere as well as the revenue growth, we're confident we can continue to build on this momentum and continue to grow our e-commerce related advertising.
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Speaker 2: As for the fourth quarter and 2024's advertising revenue growth projectory, we remain confident. Here are some ways we are hoping to continue to enhance and improve. First of all is that we all know a billy-billies content can deeply influence users mindset and the brand perception.
Speaker 4: We will be very focused and continue to build our brand ad capability. The SPARQL platform will be the lever, and performance-based ads will be our accelerator.
Speaker 7: At the same time, we will also upgrade the overall advertising model. In the previous Q&A, I have repeatedly mentioned that the methodology of integrated marketing is the most suitable for Bilibili's investment efficiency. The advantage is that Bilibili can attract users at the same time in multi-platform, and thus gain more revenue. In 2024, we will try to build the content and brand assets of customers in Bilibili, as well as establish a measurable long-term monetization model within the station.
Speaker 4: And secondly, as we will continue to upgrade our advertising model, we've been emphasizing that the integrated marketing solutions will be visibility strong advantage. The reason why is that we can reach user from multiple media and scenario and achieve multiple ad revenue.
Speaker 4: And in 2024, we'll continue to upgrade and help our clients to build their brand equity with the ambivalent content community and help them to build a sustainable and measurable growth model.
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Speaker 2: Thirdly, is to improve the effectiveness and efficiency of our traditional ad scenarios. And find new scenarios that are suitable for different advertising strategy. Going forward, we'll continue to find a way to better collaborate between natural traffic and commercial traffic to improve our overall ad efficiency.
Speaker 7: because we've explored the 4 major needs.
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Speaker 7: The second one is Parallel Networks, because Bilibili is a video content community where young people gather together. The third one is transaction conversion. The fourth one is large-scale marketing. Bilibili will combine the four major needs of customers to build an effective scene in Bilibili.
Speaker 7: In piano cell-channel cases, he ??(?) would also be able tocan a big growth stages of quality.
Speaker 4: Lastly is that we'll play close attention to the four key needs of our brand of our ad customers. Number one, new product launch. Number two, fear of aging. Number three, transaction-based at needs.
Speaker 4: Lastly is the seasonal marketing campaigns. We will build on this four key needs and to continue to build very effective advertising solution. That's why I'm still very confident of our advertising revenue growth in the fourth quarter and a year forward. We aim to continue to expand our market share going forward.
Speaker 1: Our next question comes from the line of Felix Liu from UBS.
Speaker 8: Thank you, Manager Teng, for accepting my question. My question is about our game business. We noticed that some of our peers have recently launched their game business. The domestic gaming environment is really competitive year after year. So, first of all, I would like to see how the progress of our self-developed games is going. What are our future strategies for game business? Any changes or updates?
Speaker 8: especially for the average gearbox my?l?
Speaker 8: Let me translate myself, so we noticed that, my question is on the game business, we noticed the game competitive landscape remain, continue to be intense and one of our peer recently exited their game business, so may I get your thought on your own in-house game R&D progress, how you think of the game business from here and any update on our game Pretty Derby, thank
Speaker 4: Firstly, I'll talk about the Pre-Adurbi. We really value this game and at the same time, we value user experience. So that's why we'll conduct minor content refinement and technical upgrade as soon as possible and bring the game back to the apps.
Speaker 4: And one thing I want to add is that for users who already download the game, their feedback and experience, the feedback has been very positive.
Speaker 5: Let's talk about the game industry. You said that the domestic gaming market is very competitive. I think this year's gaming market is not just competitive. I think the main reason is that it has entered a different stage from the past. Because...
Speaker 5: The popularity of the new users of the game has declined, and it has entered a stage of standard storage competition, so some of the competition rules in the market have changed.
Speaker 4: As you mentioned, there has been a very competitive landscape in a game market. I think it's more than that. We think that our game business or game industry has turned into a new space where it's very hard to gain new users and it has become more saturated markets.
Speaker 5: When there are new users, the market is friendly to new products, as long as the quality of the game is good, you can make money, and when it comes to the storage stage, even if the quality of the game is good, you may not be able to make a lot of money.
Speaker 5: You either do your best, or you have to do it very differently from others.
Speaker 4: In the past year where we're still seeing our incremental growth of gamers in the market.
Speaker 4: the secret to success is to bring a good quality gain. But in the market, where is a saturated market?
Speaker 4: Only quality is not enough unless you have those.
Speaker 4: top of the top game quality and the right timing.
Speaker 5: We can see that because of the year, we can see that this year The game of new development is not going to be available In fact, we see these games, we will find that their quality is pretty good But
Speaker 5: They didn't do what I just said, which is either the best or very different. Because they all set up three years ago. When they set up, the game market had new users. Then they just need to think about how to do this product well. And you don't have to think about positioning.
Speaker 4: It's come to an end of this year with notice that we would find that most of the unique launch this year has not met their original expectation but the quality of those games has been good.
Speaker 2: The reason why is that the game was set up three years, probably three years ago where there was still incremental gamer growth.
Speaker 4: Their target is to build a good game. Not necessarily has to be the top game or the most unique game. And three years later, the time has changed.
Speaker 5: So, in the years of the user's perspective, although there were many games, but these games were a bit of a different style. And then, the difference was that my score was 80. And your score was 85. And then, his score was 87. But, actually, he was in a bit of a...
Speaker 5: cjthere is a major whole check a pink book down. Your good, you other, what you're eating. Your to water cyour you may C you o GA.
Speaker 4: From the user perspective, they would notice that for this year, there's a lot of new games, but they all look kind of the same, probably with different artistic designs. And for those game developers, they have turned into a rat race of the minor details.
Speaker 4: Those rat race wouldn't necessarily mean new users and new income and new profits.
Speaker 4: For users, they don't necessarily have to try out this new game. Who'll lose the thing with others.
Speaker 4: they already have a game they are being devoted in.
Speaker 5: So I don't think the gaming market is getting smaller or not as active as it used to be. What we observe is that the gaming users are still very active. Because the users of Bilibili who watch gaming videos are getting more and more active. And the DAU of our gaming videos are getting higher and higher. They are very passionate about gaming. They are also very interested in gaming.
Speaker 5: So it's not that the user doesn't want to play the new game, it's just that he doesn't need to play the rule-based game because he already has some games in his hands. If you want him to accept the new game or give up the game in his hands, he needs a reason. The reason is that this game is very different, or this game is new to him.
Speaker 4: So that means not necessarily the game market is shrinking or less active. On the contrary, we still see the gamer has been very active from Billy Billy's state of perspective.
Speaker 2: the viewers in our game content vertical.
Speaker 2: There, the DAU and their time spend are actually increasing a lot.
Speaker 2: They also pay close attention to new games.
Speaker 4: But the new game which can convert real new users needs to be very unique. Very different from what the market is already offered.
Speaker 5: So, in the new market environment, I think the standard of the game has changed. As I mentioned before, I think the new game has to meet three standards in the new stage. The first one is the long-term operation. The second one is that you have to be at least a hammerhead.
Speaker 4: all kinds of heads, super heads, or hammer heads. Thirdly, you have to have a reasonable cost, otherwise you can't make money even if the cost is too high. In the past, I used to follow the trend, or I used to make differences with others through introspection. I did art better than you did. I just couldn't figure out how to do it in the past. Given said that,
Speaker 4: The standards to invest in new games have changed now. We think there are three key criterias for a new game to succeed. One is long-term operation.
Speaker 4: Second is to be the top of a niche market, or be a super top title in the market. And lastly is focus.
Speaker 2: And in the past, the copycass type of...
Speaker 4: the project set up or the rat race type of R&D investment does not.
Speaker 5: This year, we have been following this standard and sorting out our resource projects. There are rumors out there that we have stopped some projects. The reason why we stopped these projects is what I just said. When we cut off some of our past projects,
Speaker 5: and one of my others. The way Ji Caogrunting wrote is because
Speaker 5: If I don't adjust, when he comes to the top, he can't be able to recover the current market requirements, he can't be normal. So if it's like this, then I still don't go into the market to adjust.
Speaker 4: That's exactly the why we have been reviewing and adjusting in house-to-fellown projects, because some of the projects were established based on the old standards and based on the new market and new standards, those projects are very likely to be lost maintain when the game came online. That's why we are doing those adjustments and streamline our projects.
Speaker 5: After our break we didn't know that any of the members suggested a short skate friendship,
Speaker 5: We will focus our resources on these projects in the future.
Speaker 2: After this adjustment of our in-house development game, we still kept few titles that we think will remain competitive in the current market. We will be very paying close attention to the money invested in, and focus our limited resource on the very selective titles who can meet those new standards.
Speaker 5: Would you like to see that? Some'm sure the eaggo TH art here mayga. What help being put a J?
Speaker 5: paren had that ptoographer no it on the high he said to that.
Speaker 5: I actually think that this situation is not necessarily a bad thing for the gaming industry. Because it indicates that the gaming industry is returning to its original nature. That is...
Speaker 5: tarish. So E to jum the T hand who time told you ING the leving?
Speaker 2: We think the thing that we're doing with our project adjustment is correct.
Speaker 2: This movement is not only done by business and it's actually across the industry and it's not necessarily a bad thing. We have returned to the fundamental of game developing, which for this industry the key competitiveness is innovation. And who can really...
Speaker 2: succeeded in this industry is the one with the most brilliant idea. The one with the most innovative game mating can prevent.
Speaker 5: Lastly, I want to say that a lot of young and active players are active on Bilibili every day. Bilibili is still the most popular gaming platform for young Chinese players. So I always think that Bilibili has a natural advantage on the gaming scene. Our team also has a natural sensitivity. I think what we need to do is to turn this advantage into reality.
Speaker 4: Lastly, I want to emphasize that on vividly platform, their large amount of young users, as young gamers, has been very, very active on our platforms. And so we do the most popular game-bidoo content platform in China with a very high condensity of young generation.
Speaker 4: And also for our game development team, they also have the sense and understanding of Chinese gamers. What we need to do is realize those advantages and translate that into game developing. Thank you. I'll point to our next.
Speaker 1: This question comes from the line of Zhang Lei from Bank of America.
Speaker 4: Hi, Guan Licheng, good evening. Thank you for accepting my question. My question is mainly about finance. I have seen that the trend of interest rates in the past few quarters is quite good. Can you help us to look at the situation of interest rate of 4Q and the goal of this year's annual loss reduction, has there been any change? And then, the company has mentioned before that the goal of balance of loss in 2024, can it be achieved? And can you share the path of achievement? Thank you, I will translate it myself. Since management is asking my question mainly regarding margin, see, notice that we have a pretty decent improvement in growth margin. And can you give us some outlook for Q4? And how should we look at your full year loss control target you made previously? And any change to our break-even target by 2024? Thank you.
Speaker 3: Okay, this is Sam, our detective question. In Q3, our growth policy grew by 38% year over year, and our GPM improved five conservative culture to 25%.
Speaker 3: We expect our growth profit margin can continue to improve the quench-or-late in the Q4 as there is more revenue contribution from at the revenue.
Speaker 3: At the same time, we narrowed our non-gap operating laws by 51% in Q3, and we expect we can narrow our non-gap operating laws even more in Q4 compared with Q3. That will help us to achieve our initial target that to reduce our non-gap operating laws by R&B 3 billing in 2023. So we still keep our initial financial goal and check.
Speaker 3: Notepoli. Our operating cash flow has turned positive in Q3 and indicating the business operation has entered a positive cycle.
Speaker 3: We expect we can continue to generate positive operating cash flow in Q4. Looking in 2024, we will continue our path of growth profit improvement and loss narrowing. In one hand, we have confidence in the growth of our high margin business, like ad revenue, which will continue to contribute the growth profit growth.
Speaker 3: and that will be the main driver to narrow the loss. On the other hand, with some recent structured adjustments, we expect operating expenses, including R&D expenses, to further decline in 2024.
Speaker 3: Together, I think we will continue to work toward the goal of the event. Thank you.
Speaker 1: Thank you for the questions. And that concludes the question and answer session. Thank you once again for joining Spelibili's third quarter 2023 financial results and business update conference.
Speaker 1: If you have any further questions, please contact Julie Young, Billy Brie's Executive IR Director, or Big Day Financial Communication.
Speaker 1: Contact information for IR in both China and the U.S. can be found on today's press release.