Good day, ladies and gentlemen. Thank you for standing by. Welcome to Kuaishou Technology Third Quarter 2024 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management's prepared remarks. This English line will be in listen-only mode. I will now turn the call over to Mr. Matthew Zhao, VP of Capital Market and IR at Kuaishou Technology.
Thank you, operator. Good evening. Welcome to our third quarter 2024 financial results conference call. Joining us today are Mr. Cheng Yixiao, co-founder, chairman, and CEO, Mr. Jin Beng, chief financial officer. Before we start, please know that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ from those discussed.
The company does not undertake any obligation to update any forward-looking information except as required by law. For all important information about this call, including forward-looking statements, please refer to the company's public information or the third quarter 2024 results announcement and dated September 30th, 2024, issued earlier today. During today's call, management will also discuss certain non-IFRS financial measures. These are provided for additional information and should not replace IFRS-based financial results.
For a definition of non-IFRS financial measures, a reconciliation of IFRS to non-IFRS financial results and relative risk factors, please refer to our third quarter 2024 results announcement. For today's call, management will use Chinese as the main language. A third party interpreter will provide a simultaneous English interpretation in the prepared remarks session and a consecutive interpreter during the Q&A session. Please note that English interpretation is only for convenience purposes only.
In the case of any discrepancy, management's testimony in their original language will prevail. Lastly, unless otherwise stated, all currency units mentioned are in RMBL now. Hand the call over to Yixiao. Hello, everyone. Welcome to Quieshow's third quarter 2024 earnings conference call. In Q3, despite a challenging macro environment, we grew our user base and delivered solid financials by staying committed to our tech-driven, user-centric business philosophy.
We achieved a milestone of over 400 million DAUs and the total revenue grew by 11.4% a year over a year to 31.1 billion RMB. Revenue from our core commercial business including online marketing services and other services are primarily e-commerce increased by nearly 20% a year over a year.
Adjusted and added profit arose 24.4% a year over year to 3.9 billion RMB, showing our ability to increase profitability. We strengthened our content and commercial ecosystem by deeply integrating and applying large AMRs across content creation, understanding, and recommendation status. In Q3, daily spending with AIGC marketing materials peaked at 30 million. In September, we unveiled our
Latest video generation model upgrade, clean AI 1.5, setting new industry benchmarks for video quality with a video resolution of 110 ADP. Dynamic performance, manual responsiveness, and feature enhancements such as motion brush. Next, I'll discuss our key business developments in Q3. First, user growth and ecosystem construction. In Q3,
Average DAUs on the Kuaishou app reached 408 million, and MAUs reached 714 million, increasing 5.4% and 4.3% year over year, respectively. This further solidified our leading position as the third largest app in China. The average daily time spent per DAU on the Kuaishou app was 132.2 minutes, while total user time spent rose 7.8%.
3% year-over-year. Average daily live streaming and short video views reached nearly 110 billion. Executing our strategy of high-quality user growth, we enhanced our capabilities in leveraging marketing channels for user acquisition, optimized the product features, and integrated the user acquisition initiatives with commercial scenarios like e-commerce. As a result, we expanded our user base and drove more frequent user engagement.
We enhanced omni-domain traffic allocation efficiency by refining our content distribution mechanism, creating stronger alignment between content and revenue growth. To boost user retention, we optimized features to foster front-minute engagement and positive social atmosphere. For example, we enhanced private messaging across multiple scenarios, introduced creative features like the virtual pad, and refined the common rankings
We also focused on improving the overall experience of our platform's less active users. Algorithm enhancements also deepen our user retention by modeling diverse user interests, user-to-user relations, and key drivers for opening up our app. On the product side, upgrades like a redesigned sidebar enhance the user experiences to above the user satisfaction.
In terms of content operations, we built a unique multi-faceted ecosystem by developing specialized content verticals aligned with users' interests, supporting standout creators with our unique features, and expanding our reach with high-profile events. In the sports vertical as a rights-holding broadcaster of the Paris Olympics, we created extensive content lineup, including panoramic on-demand event coverage,
exclusive proprietary IP, interactive features, and diverse user-generated content to bring users an all-encompassing Olympic experience. Olympics-related content on Kuaishou garnered 310.6 billion impressions during VENT, with 640 million users tuning in and generating 15.89 billion interactions. To engage a young user to a live-streamed online concert featuring teens in time and
Hatsumiku in Q3, live streaming sessions from the two TNT concerts achieved a combined 950 million views. For our search business, we optimized the search results page to improve accuracy and user experience, significantly increasing user penetration in search. In Q3, average MAUs for the Kuaishou searches exceeded 500 million, average daily searches climbed by over 20% a year to over 700 million, and daily searches peaked at over
Users' search behavior also give us valuable insights into their needs, driving rapid growth in our revenue-generating business related to searches. Second, online marketing services. In Q3, revenue from online marketing services grew to 20% year-over-year to $17.6 billion RMB, achieving over 20% growth for the sixth consecutive quarter.
highlighting the segments of sustainable growth momentum. By continuously improving our data infrastructure, smart placement products, and algorithms, we delivered higher placement ROI for our clients, leading to increased bids. Additionally, our large AM auto systematic understanding of marketing content and merchandise features allow us to match users and merchandise more accurately for merchants, boosting marketing conversion efficiency. In Q3,
Revenue growth in our online marketing services was primarily driven by the external marketing services, with spending in social media information, e-commerce platforms, and local services industries outpacing the overall market growth year over year. For paid short place in media information, we offer high-quality content tailored to different age groups of targeted audiences, increasing user payment and conversion rate, and improving placement outcomes for clients through our smart subsidy strategies.
We also accelerated our in-apps as a short play model, expanding our user base for free short plays and providing clients with more diverse revenue opportunities, leading to over 300 growth in short play marketing spending year over year. We introduced a differentiated universal AutoX UAX placement solutions, leveraging end-to-end smart capabilities
including infrastructure, creative generation targeting, and adjustments to enhance the stability of a client's marketing placement and increase budget allocation. As a result, total marketing spending through the U.S. accounted for around 50% of the external marketing spending in Q3. Closed-loop marketing services revenue grew in Q3, with monthly active merchants using marketing placements increasing by over 50% year-over-year.
Our automated marketing placement services helped small and medium-sized merchants expand GMV and improve retention rates. We focused on policy support, product iterations, and algorithm optimization to enhance the conversion of shorter video traffic to live streaming, increasing marketing spending in this area by nearly 20% year over year in Q3. Smart marketing placement is now crucial for merchants
sustainable operations on Kuaishou, with omni-platform marketing solutions or smart hosting products accounting for about 50% of closed-loop marketing spending. In brand marketing, we offered integrated solutions to drive brand awareness and sales conversion through marketing science, KOL recommendations, and customizing strategies. In Q3, we partnered with over 150
brands including China Mobile, FAW Volkswagen, leveraging the Paris Olympics to support rapid growth with our Sports Plus strategy and content ecosystem. Among these 60 were new brand clients. Beyond traditional methods like sponsorships and product placements, we also worked with the star magnet KOLs for product recommendations, boosting brand exposure through high quality content.
Aided by precise user profiles and data analysis, helped brand clients expand their reach and increase sales. Third, our e-commerce business. Our e-commerce business showed resilience in Q3, despite it being a slow season and facing consumer demand challenges. With a solid foundation in content-based e-commerce and a strategic focus on providing exceptional content and superior products, we maintain a strong market presence by emphasizing live streaming e-commerce
Unlocking the potential of a shorter video e-commerce and expanding pan-shelf based e-commerce, we're maximizing synergies across various scenarios. These efforts boosted e-commerce supply, enriched our ecosystem, and increased the user spending, resulting in a 15.1% year-over-year GMB increase to 334.2 billion RMB in Q3.
On the supply side, with an industry landscape where supply often outweighs demand, content has become more crucial in driving consumer demand, with more merchants seeking long-term growth on content-based e-commerce platform. Small and medium-sized merchants exceeded expectations, with the new merchants on Kuaishou increasing over 30% a year over year, and their average revenue per store up by more than 60%.
This growth was largely driven by initiatives like the Golden Bounty Initiative, Set Sail Initiative, and Uplift Initiative, which helped early-stage merchants increase traffic and reduce uncertainties. We leveraged our nationwide partner ecosystem to help new merchants develop their business, focusing on key products categories first.
Existing merchants, we offered refined operational methodologies to support their long-term business growth. In Q3, average monthly active merchants grew by over 40% year over year. Our merchants' healthy growth enriched our platform's merchandise ecosystem by expanding categories by over 20% year over year and
offering users a wider selection of high-quality products. To enhance content-based e-commerce, we customized operations for KOLs. For top-tier KOLs, we introduced marketing tools like exclusive mega group buy and mega crowd deals to incentivize live streaming and enhance content value. During the eight
18 Shopping Festival customers using exclusive Mega Group Buy placed 25% more orders per person than others, while other conversion efficiency for the same product category rose 55% after using Mega Crowd Deals. For small and medium-sized KOLs, we launched the Rising Star Initiative, offering cash incentives, traffic support, and exposure, while collaborating with regional service providers for local operations.
These helped them achieve strong growth, increasing their average daily GMV by over 40% quarter over quarter, and the average daily number of merchandises sold by over 25% quarter over quarter. The Blockbusters initiative provided subsidies for selected merchandise, offering users more affordable,
high-quality product. As a result, KOL's GMV increased by over 24% year-over-year during the 8-18 Shopping Festival, with the small and medium-sized KOL's GMV growing over 27% year-over-year. Short video e-commerce also grew rapidly, with the GMV rising over 40% year-over-year in Q3, driven by blockbuster products and live-streaming highlights.
In addition, we improved content quality and conversion efficiency, extending the product lifecycle through short video-embedded shopping links that drove traffic to live streaming rooms. By optimizing strategies like integrating commerce contents with marketing materials and joint modeling of short video traffic and
Simple live streaming rooms, which even nearly 40% quarter over quarter growth in GMV, driven by short videos directing traffic to live streaming rooms in Q3. While stabilizing and growing our content-based e-commerce, our pen-shelf-based e-commerce has increasingly complemented our e-commerce business. In Q3, pen-shelf-based e-commerce GMV accounted for 27% of our total e-commerce GMV.
And its growth continued to outperform overall GMV growth, driven by strong supply and demand. Average daily active merchants and paying users in our shopping mall grew by nearly 70% and over 60% year-over-year, respectively. Thanks to our efforts in integrating Blockbuster product and traffic resources, pen-shelf-based e-commerce GMV during the 818 Shopping Festival rose by 45% year-over-year. Moreover, through engaging Blockbuster product livestreams,
and strengthening customer mindshare product-driven branding. We have consistently driven more repeated purchases and reinforced customer mindshare in our penshelf-based scenarios. The ongoing expansion of our e-commerce supply and ecosystem, coupled with increased synergies across various e-commerce scenarios, has further stimulated user demand. In Q3, the number of e-commerce monthly active paying users grew 12.2% year-over-year to 133 million, building on the momentum from the Q2 peak season. Our diverse marketing strategies
which included targeted approaches for new, growing, and mature users, also supported discourse. Tools such as like coupons for live streaming rooms and order incentives have been instrumental in expanding our user base and improving conversion rate and transaction efficiency. Going forward, we will remain committed to our user-centric approach, leveraging integrated live streaming and short video content, along with our pan shelf e-commerce strategy, we'll continue to empower merchants and QLs to grow historically. Now, our...
live-streaming business. In Q3, live-streaming revenue was $9.3 billion RMB, with the year-over-year decline narrowing further. As a foundational part of our content ecosystem and a key reason users engage with Kuaishou, we remain focused on fostering a healthy, sustainable live-streaming ecosystem. On the supply side, we saw increasing professionalism and institutionalization among streamers.
and refined operational capabilities from partner talent agencies. Multi-host live streaming and other emerging product categories also continue to grow. By the end of Q3, our partner talent agencies grew by more than 40% a year over a year, and talent agency managed streamers increased by over 60%. We continue to expand the variety of high-quality content, building on rich entertainment and local cultural content.
We focus on niche areas and launch content from various IPs featuring talented streamers, such as the Grand Stage and the new episodes of National Arts live streaming programs. By integrating content IP with the local cultural and tourism resources, we help drive the growth of these industries to enhance our gaming live streaming ecosystem. We adopted a comprehensive content marketing strategy, including incubating new games, live streaming game distribution, and cultivating top tier influencers among others.
We also developed the gaming content with the unique casual features. In Q3, active gaming live streaming creators exceeded 30 million, boosting the appeal of our diverse top-notch content to live streaming users. Our live streaming plus services continue to empower traditional industries. For example, we advanced our recruitment real estate services, driving rapid growth in customer reach and transaction scale. In Q3,
Average number of resume submissions on quite higher nearly doubled year over year and the number of matches grew by over 200 percent for ideal housing daily lead generation surged over four fold compared with the same period last year. Finally on our overseas business progress
We have set deep roots in Brazil and built strong local market brands by deepening our local content operations. In Q3, we saw steady, high-quality user growth overseas, achieving breakthroughs by innovative user acquisition channels and improved user retention. DAUs in Brazil grew by 9.7% year-over-year.
In content operations, algorithm improvements helped highlight premium content across verticals like entertainment, news, and everyday life in sports. With the quiet and strong user base and growing brand influence, we optimized monetization mechanism for creators. We found a product flow to enhance their earning potential and motivation. Content subsidies also become more efficient, supporting creators' sustainable operations. User activity grows steadily.
with the average daily time spent per DAU in Brazil up 4.2% year-over-year and continue to grow quarter-over-quarter. In terms of monetization, we continue to enhance marketing clients' experience with improved traffic mechanism and efficiency while ensuring a healthy ecosystem. We also embedded new traffic scenarios to expand incremental marketing share, leading to year-over-year doubling of online marketing revenue.
Total overseas revenues reached 1.33 billion RMB, growing by 104.1% year-over-year. Along with this rapid growth, we kept our overseas operations highly efficient under ROI-driven approach, narrowing our operating loss from overseas business by 75.9% year-over-year to 153 million RMB in Q3.
Additionally, after more than a year of exploring e-commerce business models in Brazil, we made initial progress in terms of products, content services, and transaction efficiency, laying a solid foundation for accelerated growth in our Brazil e-commerce business. In summary, despite external challenges, we're confident that short video remains one of the best industries for growth given our current user revenue and profit growth, as well as its long-term potential. With a focus on tech innovation and putting users first,
We're expanding our business boundaries through ongoing technological advancements. At the same time, we're building a vibrant content and commercial system for our users and partners, powered by better products and high-quality content. That concludes my preparative remarks. Next, our CFO, Mr. Jinping, will discuss the company's financial performance for Q3. Thank you, Yixiao. In Q3 2024, our average DA
use surpassed 400 million, a significant milestone in our user ecosystem. Driven by our commitment to long-term value, we maintained user-centered, ROI-focused strategies that foster high-quality growth through AI empowerment. As Yixiao has mentioned, AI at Kuaishou has evolved beyond a tool for innovation, serving as a powerful engine driving productivity.
It is deeply embedded across our content and the commercial ecosystems, helping us to stay strong in user traffic, enhance operating efficiency, and strengthen diversified revenue streams. In line with this, we also supported sustained and steadfast investment in AI. In Q3, our total revenue reached 31.1 billion RMB, with revenue from our core business growing nearly 20% year over year. Our gross margin was
54.3% and adjusted net profit reached 3.9 billion RMB. These results underscore our core business's fundamental strength and resilience supported by our ongoing investment in this technology that it would drive our sustainable growth. Now,
Let's have a closer look at our Q3 financial performance. In Q3, our revenue grew 11.4% year over year to 31.1 billion RMB, mainly driven by growth in online marketing services and e-commerce business. In Q3, online marketing services revenue increased by 20% to 17.6 billion RMB from 14.7 billion in Q3 last year.
representing 56.6% of our total revenues. This growth was driven by our continuous advancement in data infrastructure, smart placement products, and algorithm optimization, which boosted ROI and stability in ad placement for our clients.
Revenue from other services, including e-commerce, reached 4.2 billion RMB in Q3, up 17.5% from 3.5 billion RMB in the same period last year. This increase was mainly driven by growth in e-commerce GMV, which boosted e-commerce commission income. We achieved a notable year-over-year growth in the number of monthly active merchants
as we leveraged our strength in content-based e-commerce and strengthened synergies across all many domain operations while enhancing our KOL ecosystem and merchant operations. Optimizing the content-based e-commerce experience and expanding merchandise variety stimulated the user activity and a willingness to buy, driving continuous growth in the number of monthly active paying users. Our live streaming revenue was 9.3 billion RMB, declining 3.9% from 9.7 billion in Q3 last year,
We continue to build a healthy, sustainable live streaming ecosystem by promoting the professionalism and institutionalism of streamers, refining talent agency management, and diversifying content offerings to attract more users to our platform. In Q3, our cost of revenues went up by 5.4% to 14.2 billion RMB and accounted for 45.7% of total revenues.
mainly due to increased revenue sharing costs and related taxes in line with our revenue growth, as well as bandwidth expenses and server custody costs. In Q3, gross profit grew by 17% year-over-year to $16.9 billion RMB. Gross margin was 54.3%, an increase of 2.6 percentage points year-over-year. Moving to expenses,
SG selling and marketing expenses increased by 15.9% a year to 10.4 billion RMB, accounting for 33.3% of the total revenues. Growth was mainly due to increased spending on business promotions, including short plays in online marketing services and e-commerce business. R&D expenses were 3.1 billion, increasing
4.5% a year over year. R&D accounted for 10% of total revenues dropping from 10.6% in Q3 last year. Administrative expenses decreased by 11.4% a year over year to 800 million R&D accounting for 2.6% of total revenues down from 3.2% in the same period last year.
The reduction in R&D and administrative expenses was mainly due to lower employee benefit expenses, including related share-based compensation expenses. Group-level net profit for Q3 rose by 50% year over year to around 3.3 billion RMB. Group-level adjusted net profit rose 24.4% year over year to around 3.95 billion RMB, with an adjusted net margin of 12.7%.
a 1.3 percentage point improvement in year-over-year. Our balance sheet remains robust with cash and cash equivalents, time deposits, restricted cash, and wealth management products totaling 86.7 billion RMB as of September 30th. Through our enhanced monetization capabilities and efficient working capital management, we generated a positive operating net cash flow of 7.7 billion RMB in Q3.
Additionally, we actively implemented our shareholder return strategy during the nine months ending September 30, 2024. We repurchased approximately HK$3.98 billion worth of shares in aggregate, or around 91.11 million shares, accounting for about 2.1% of our total shares outstanding at the beginning of this year.
Looking ahead, we'll continue to prioritize user needs, deepen technology, business synergies, and actively explore diverse growth revenues. This initiative will strengthen our competitive edge in ever-changing market and create long-term value for our users, partners, and shareholders. This concludes our prepared remarks. Operator, please now open the call for questions.
We will now begin the question and answer session. To ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. Please ask your question in Chinese first and repeat your question again in English. We will now begin the Q&A session. The first question comes from Lincoln Kong of Goldman Sachs.
Thank you, Mr. Gwan, for accepting my question. Congratulations to the company for achieving good results in the third quarter. I would like to ask about the development of the company's AI. Can you please tell us more about the latest developments of the company in the field of AI models? Especially, is there any business or financial data that can be shared after Kerlin is launched? How should we think about the direction of future business development?
So, thank you, management, for taking my question, and congrats on a solid quarter. Could management share with us some latest progress of the AI large language model, especially regarding clean AI? Is there any business, operational, or financial data you can share, and what will be the direction of amortization going forward? Thank you.
Thank you for your question. In this quarter, we will continue to optimize the performance of the basic model while deepening the application of the big model in content understanding, content recommendation, content production, and user interaction. In the case of our basic model, we are developing a QUAE MOE model with a total parameter of only tens of billions of scale. In the pre-training stage of the model, multiple indicators exceeded QUAE 1750E.
the model has greatly reduced the cost of model training and processing, and it can better adapt to the existing business scenarios. And our Kerin large model has also undergone multiple iterations in a short period of time. The Kerin 1.5 model released in September supports native 1080p video, and can upgrade the lens control, hand position control, motion brush, mouth shape, and many other capabilities in terms of controllable production, and continue to keep the industry ahead.
Thank you for your question. In Q3, we further optimized the performance metrics of our foundation large models and deepened their application in content understanding, recommendation, production, and user interaction. We are advancing the QIE, LLM, MOE model, which uses a mixture of experts approach.
Despite having only tens of billions of parameters, it surpassed the QI-E model with 175 billion parameters across multiple pre-training metrics. This significantly reduced the cost of training and inference, while making the model better suited to Kuaishou's existing business scenarios. Kuling AI has also undergone numerous iterations in a short time. In September, we introduced the Kuling AI 1.5 model, which supports native 1080
pixel video, we also developed and upgraded a range of controllable generation capabilities, such as camera lens control, first and last frame control, motion brush, and lip syncing, solidifying our industry leadership. Regarding the application of large models, in terms of content understanding, we continue to promote large model technology in short videos, live broadcasts, comments, 3D graphics, and voice-over scenes. Many scenes have been landed.
which has made significant progress in terms of user-saving, third-party consumption, and e-commerce GNV. In the field of content recommendation, the recommended large-model technology after our upgrade has brought significant market growth for our big plate. In terms of content generation and interaction, the consumption of AI-based marketing materials in this quarter continues to increase. The daily consumption is more than 20 million, and the small pieces of AI are also included in the interactive assistant, including more scenarios such as Olympics, user messaging, and comment area interaction.
MAO峰值也突破了1800万 Regarding applying large models for content understanding, we consistently expanded their use across various scenarios, including short video, live streaming, comments, advertising, and e-commerce. These efforts drove improved user retention, marketing spending, and e-commerce GMV. In content recommendation,
Our upgraded large model technology notably increased overall user time spent on our platform. As for content creation and user interaction, spending with AIGC marketing materials continued to rise with average daily spending surpassing $20 million in Q3.
Interactive Assistant AI QI has also been integrated into more scenarios, including Olympic medal prediction, user private messages, comment section interactions, with peak MAUs exceeding 18 million. Next, I would like to introduce you to the progress of Keling AI.
Since the launch in June this year, CleanAI has already had more than 5 million users, and has accumulated more than 51 million videos and more than 1.5 billion pictures. In September, the number of users of CleanAI exceeded 1.5 million. The user-to-user ratio of CleanAI has gradually improved. Recently, we also launched an independent app for users to use.
Next, I'd like to provide an update on KlingAI's progress. Since its launch in June, KlingAI has accumulated over 5 million users and generated more than 51 million videos and over 150 million pictures. In September, KlingAI's MAUs surpassed 1.5 million, and organic user retention improved steadily month over month.
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Currently, the commercialization progress of Kerlin-I meets our expectations. In March, the flow of water exceeded 10 million RMB. In the future, we will explore a more diversified ice system. We are confident that Kerlin's income scale will grow rapidly next year.
On the monetization front, at the end of July, we began gradually rolling out a subscription membership offering for Kling AI's domestic and international users, providing them with the model's more tailored performance capabilities. At the same time, we officially opened our API services at the end of September, covering modules such as video generation, image generation, and virtual try-on. So far, Kling AI's
Early commercialization has met our expectations, with monthly cash revenue exceeding 10 million RMB. We will explore more diverse monetization tools and models in the future, and we are confident Coin.ai will see rapid revenue growth next year. I still believe that the combination of the big AI models and the fast-growing existing business scenarios can produce great commercial value.
We firmly believe combining AI large models with Kuaishou's existing business scenarios will generate tremendous commercial value. Going forward, we plan to build our team's AI algorithm capabilities to achieve algorithm innovation and scenario application breakthroughs.
Thank you. Next question, please, operator. The next question comes from Thomas Chong of Jefferies. Good evening. Thank you for accepting my question. We see that in this quarter, the DAU has exceeded 400 million. And we also see that the single-user time has exceeded 130 minutes. How should we view the DAU and the trend and target of the market?
Thanks management for taking my questions and congratulations on a very solid set of results. In this quarter, Kuaishou has over 400 million in terms of DAU and the time spent per DAU exceeding 130 minutes. How should we think about the trend and target for DAU and user time spent going forward?
What measures does the company have in place to continue increasing the overall traffic? Thank you. Thank you for your question. In March 2022, we first proposed the mid-term goal of DAU breakthrough. Around this goal, we used an economic user growth strategy, high-quality multi-content supply, product and algorithm optimization, and other measures to keep user growth and maintenance costs relatively stable in each year.
Thank you for the question. In March 2022, we announced for the first time that our median term DAU target was to reach over 400 million. To get there, we refined our user growth strategies, provided high quality, diverse content, and consistently optimized and iterated our products and algorithms.
As a result, we achieved steady growth in our DAU and user time span metrics while maintaining total user growth and relatively stable retention costs each year, ultimately reaching our 400 million plus average DAU milestone.
Looking ahead to the next phase of our DAU growth plan,
will be more challenging as short video penetration rates continue to grow. That said, we can still do a lot to improve user retention and activity. Regarding time spent, we are focused on enriching content and enhancing the efficiency of our algorithm recommendations. We believe these efforts give users a greater sense of value, which matters more than merely increasing average daily time spent.
I would like to share three aspects about the specific strategy for traffic growth. First, in terms of traffic allocation strategy, we will continue to promote mechanism-based roll-out, promote the synchronization of commercial content and natural content, and achieve the maximization of integrated revenue. We will also support the promotion of quality content by reducing traffic, and promote the health development of the community. Second, in terms of product optimization,
We will consolidate Kuaishou's support in social media and the market, explore more innovative interaction methods, improve the community's interaction atmosphere, and optimize the user experience and search function through the comment area experience, and strengthen the user product mindset. Finally, in terms of content operation,
On specific strategies for traffic growth, I'd like to share three points.
First, in terms of our traffic allocation strategy, we will continue to upgrade our traffic distribution mechanism to align commercial and organic content, maximizing overall revenue. Traffic support for high quality content will also help foster healthy community development. Second,
On product optimization, we will strengthen our competitive edge by consolidating Kuaishou's modes in social networking and the private domain while exploring more innovative interactive features to increase the community's interactive atmosphere. At the same time, we will fortify users' product mindset through better common section experience and search functionality.
Lastly, for content operations, based on developing various reasons for users to open the app, we will produce exceptional vertical content that resonates with Kuaishou's users and support standout creators whose content represents Kuaishou's distinctive brand while leveraging influential major events to reach a broader audience.
In short, we are confident we will continue seeing steady traffic growth.
In the future, more importantly, we hope to create more product usage scenarios for users, provide higher quality content and services, and become an engaging and useful content platform for more users. Thank you. Next question, please, operator. Next question comes from Felix Liu of UBS.
Thank you for answering my question, and congratulations to our company for the third quarter. My question is about online marketing. I noticed that the short-term growth of our online marketing business has contributed significantly recently. I would like to ask the management team how to think about the sustainability of the short-term growth of advertising and our company's future growth strategy for online marketing business. Can you share more?
Thank you, Manjuma, for taking my question, and congratulations on the strong third quarter results. My question is on your online marketing business. We noticed that short play has recently contributed greatly to your online marketing services growth. How should we think about the sustainability from this new ad vertical? And could Manjuma share your latest growth strategies for online marketing going forward? Thank you.
Thank you for your question. As you said, with the rapid development of the short-term industry, the growth of the short-term business budget has also become an important driving force for the growth of our fast online marketing business. In the third quarter, the consumption of fast short-term marketing increased by more than 300%, and the proportion of external circulation consumption to large-scale sales has also reached a double digit. In recent days, the consumption peak has also exceeded 40 million.
This is mainly due to the continuous optimization of the self-managed chain to enhance the user experience and to increase the payment scale through automated subsidies. In addition, we have accelerated the expansion of the short-term interest group in the normal IAA mode this quarter, and the rapid growth in the marketing consumption of both IP and IAA mode.
Thank you for the question. As you said, associated marketing budgets expanded with the thriving short play industry. This has also become an important driver for the overall growth of Kuaishou's online marketing business. In Q3, short-place marketing spending on Kuaishou grew by over 300% year-over-year, accounting for a double-digit share of overall external marketing spending. Peak daily marketing spending also
recently surpassed 40 million. This is mainly due to the optimized user experience, thanks to our refined native sales funnel and increased paying users from smart subsidies. In addition, we accelerated the use of the IAA model in Q3.
and rapidly expanded the demographic interested in short plays, fueling a high-speed growth in short plays marketing spending through IAP and IAA models.
We are concerned that according to third-party data prediction, the short-term market size is expected to exceed 1 trillion yuan by 2027. With the gradual enrichment of the short-term supply ecosystem, there is still room for further commercialization with more than 500 million short-term users, and there is still room for the penetration rate of short-term users to increase. And for Kuaishou, we not only have a rich short-term supply ecosystem, but also a short-term user base of more than 300 million,
As for the sustainability of the short play business, we are optimistic about its prospects for steady growth in the medium term. According to third-party data forecasts, the short play market could exceed 100 billion RMB by 2027.
As the short-play supply ecosystem continues to expand, there is potential for further commercialization among the over 50, 500 million existing short-play users with room to increase the short-play penetration rate. For Kuaishou, we already have a rich short-play supply ecosystem and a short-play user base of more than 300 million. With these advantages plus the support of our continuous enhancements to products and algorithms,
We expect to quash our short-place marketing spending through both the IAP and IAA models to sustain rapid growth. Next, I will briefly share with you the main growth strategies for our online marketing business. In terms of internal circulation, we will focus on improving the compatibility and response of content, products, and users. By making solid model estimates and improving the conversion effect of content and e-commerce materials,
and lead merchants to do long-term operations from short videos to live broadcasts. In terms of external circulation, we will focus on the original content-type ads, including short films, fast-forwarders, and novels, and provide users with an in-depth experience to enhance the user's love for the platform's consistency and marketing clients. In terms of brands, we will rely on marketing science to give users a precise understanding
Next, I'd like to briefly talk about the main growth strategies for our online marketing business. In terms of closed-loop marketing services, we are working to better match content and merchandise with users.
With the meticulous refinements to our model predictions, we can enhance the conversion of content-based e-commerce materials and guide merchants to engage in sustained operations from short video to live streaming. As for external marketing services, our focus is on native content advertising, including short plays, question mini games, and online literature.
Our goal is to give users a compelling experience, enhance users' stickiness, and maximize ROI for marketing clients' ad placements. On the brand side, we will leverage our deep understanding of users grounded in marketing science to help marketing clients identify and reach their target audiences.
We will also offer clients brand marketing solutions that integrate brand awareness and sales conversion through KOL recommendations and customized strategies to attract clients. Finally, we have more room for improvement in the field of smart marketing products and algorithm optimization. At the same time, we have also gradually seen large model applications
to bring better ROI to our customers. In addition, we are also very confident in the online marketing service revenue and continue to gain market share.
Lastly, we still have a lot of room for improvement in refined industry operations, smart marketing products, and algorithm optimization. Meanwhile, we are seeing the increasing benefits of applying large models to marketing recommendation scenarios, driving better ROI for clients. As such, we're confident that we can continue to gain market share and grow our online marketing services revenue. Thank you. Next question, please, operator.
The next question comes from Brian Gong of Citi. Your next question comes from Brian Gong of Citi. Thank you for accepting my question. First of all, congratulations on a very good performance. My question is to ask about the situation of the e-commerce double 11. Can you share with us the overall performance of the double 11 and what is our main strategy? Thank you.
Thank you for taking my questions and congratulations on the decent results. My question is regarding e-commerce. Could management share the overall performance during the Double 11 sales promotion and the company's main strategies? Thank you. Thank you for your question.
We are quite satisfied with the performance of the Double-10 event this year. We rely on the content industry to fully expand the industry in the field of digital artists. Our e-commerce Double-10 Shopping Festival GNV is growing rapidly. We have provided more than 200 million traffic subsidies, 200 million users' red envelopes, and 100 million product subsidies. We can't allow more businesses to achieve better and faster growth on the fast hand.
This year, the number of merchants who signed up to participate in the Kuaishou 241 shopping festival exceeded 3 million for the first time, a record high. The number of new users of e-commerce has exceeded 7 million.
Thanks for your question. We are pretty satisfied with our performance during this year's Double 11 sales promotion, especially given the ongoing consumer demand challenges. By capitalizing on the momentum of our economy-based scenarios and pan-shop-based e-commerce scenarios, we achieved strong year-over-year growth in e-commerce GMB during the event, setting a new record high. We provided over 20 billion video views in traffic subsidies, 2 billion RMB in user subsidies, and 1 billion RMB in merchandise subsidies.
empowering more merchants to realize better and faster growth on KuaiXiu. During the event, the number of merchants and KOL sign-ups for our Double 11 sales exceeded 3 million for the first time, and we acquired more than 7 million new e-commerce users during the event. During this year's Double 11, our large-scale subsidies and operating mechanisms have returned to the content field and the live broadcast room.
bringing a significant increase in the number of live broadcasts by 10,000 fans. There are more than 2,500 live broadcasts that have been sold by GNAV for over a million yuan, and the number of postings of short videos has increased tenfold. At the same time, we pay more attention to marketing and gameplay construction in the content field. Specifically, for the top merchants and experts, we mainly focus on fan appeal and crowdfunding.
The focus is on fan group play to improve the interactivity and consistency of fans and the motherland. For the central ministry officials and merchants, we have provided the play of sky-falling red envelopes to assist in the big break during the big break. In addition, we provide more traffic and resource subsidies for goods-based merchants. Use mission incentives and business strategy to secure good products and get better profits.
During the W11 sales promotion, our promotion of subsidies and operational mechanisms focused on content-based scenarios and live streaming rooms. This drove a notable increase in the live streaming penetration rate among streamers with over 10,000 followers. It also propelled the number of live streaming rooms with GMV exceeding 1 million to more than 2,500 and led to a tenfold year-over-year increase in the release of short videos with embedded shopping links.
We also placed more emphasis on marketing features in content-based narratives. Specifically, for top-tier merchants in KOLs, we prioritized the follower engagement and product recommendations, introducing macro group buys to boost followers' interactions with streamers and build loyalty. For small and medium-sized merchants in KOLs, we provided surprise subsidies and other features to facilitate sales breakthroughs in large-scale promotional events. Additionally, we offered more traffic and resource subsidies for shelf-based
merchants, ensuring quality product to receive better returns through task incentives and merchant engagement strategies.
as well as the top-of-the-line products of all brands. Among them, the top-of-the-line products include tea, wine, health, jewelry, jade, and other non-standard products, as well as the high-end products such as store-bought houses. This year, our e-commerce platform Double11 covers more than 2,200 hot-selling brands and more than 2,500 hot-selling products.
On the merchandise side, we integrated a subsidy budget across the platform to ensure the products in our content-based scenarios had equivalent price advantages. Meanwhile, we categorized the platform's key promotional products, including newly launched products during the season, preferred products during the promotional period, and core blockbuster products online, as well as top-performing products from various brands.
Notably, we excelled in non-standard products such as tea, liquor, health-related merchandise, and jewelry and gemstones, as well as a standard product like consumer electronics and household items. During this year's sales promotion, our e-commerce big brand, big subsidy initiative covered more than 2,200 self-selling brands and over 2,500 high-demand product categories.
In the second half of this year, the country's implementation of the home appliance industry has increased. We believe that Kuaishou will have a greater advantage in terms of the diversity of new customers and the multi-level demand platform. During the Double 11 this year, under the national subsidy, consumers' demand for home appliances has been fully stimulated.
We quickly caught the red power of the policy end to promote the addition of electricity in more cities to save renewable subsidies. At the same time, we strengthen the platform to optimize the chain and transfer orders. During this year's Double C, the number of fast-starting e-commerce national supplement users exceeded 1.46 million, which led to a significant increase in the sale of e-commerce household items.
With the national trade-in and trade-out policy for the home appliances industry gaining more attraction in the second half of the year, we believe platforms like Chrysler have a greater advantage as we cater to diverse customers and their multi-level demands. During this year's promotion, national subsidies helped to stimulate consumer demand for upgrading old home appliances for new ones.
We quickly ceased this policy and promoted home appliances trade-in and trade-up subsidies on Kuaishou in more cities in China. We also optimized the sales funnels for acquiring coupons and order placement conversion. Kuaishou users redeemed over 1.46 million national subsidy e-commerce coupons during the promotion, driving substantial growth in sales across consumer electronics and household categories.
The performance of Double 11 is relatively above expectations, which makes us more determined to return to the live broadcast room and break through the short video and steadily build the e-commerce development strategy of third-party companies. Looking forward to the future, although there are still challenges in the consumption demand softening and market competition, we believe in the cohesion of content e-commerce resources and the correctness of the core strategy of sticking to good content and good products.
Our robust performance during the Double 11 sales promotion demonstrated the merits of our development strategy, which calls for refocusing on live streaming e-commerce, tapping into the potential of short video e-commerce, and steadily expanding our pen-shelf-based e-commerce.
Looking ahead, we remain confident despite the challenges of ongoing weak consumer demand and increasing market competition. By leveraging our resources in content-driven e-commerce and focusing on delivering exceptional content and superior products, we believe we can continue to expand our e-commerce supply and ecosystem. This will also help merchants and KOLs realize omni-domain growth.
These strategy units support of national subsidies and other policies will help us drive consumption upgrades across our platforms, 700 million MAUs on our platform. Thank you. Next question, please, operator. Next question comes from Lei Zhang of Bank of America. Your next question comes from Lei Zhang of Bank of America.
Thank you, management, for taking my question. My question is mainly regarding local services.
Since we do have a steadfast investment here, how does management evaluate the process of this business? And do we have any need to long-term goals here? Thank you. Thank you for your question. We have been trying to do local business since 2022. We are gradually exploring and verifying our users' needs for local life.
We have begun exploring the local services business in 2022 and have gradually validated our users' local services needs
operations to grow GMV and expand our user base. This year, we strove to increase monetization efficiency. Going forward, we aim to achieve breakeven at the individual city level, and we have made solid, steady progress each step of the way.
to increase users' reasons and reviews for opening the app. We continue to support users' body policy to guide the production of high-quality content. At the same time, we insist on providing a better experience for users by supporting hunting, optimizing traffic distribution mechanisms. Our users pay more attention to cost-effectiveness, so this year, we will focus on more high-quality core products, build comparative capabilities, enrich app scenarios that are more cost-effective,
Local services represent high-frequency business scenarios where we increase the reasons and frequency for users to open our app by offering high-quality local content and high value-for-money products and services. We continue
iterated our KOL rating measure to promote high quality content products while optimizing our traffic distribution mechanism to direct traffic to superior content and enhance user experience. Given our users' emphasis on value for money services, this year we built a price comparison model for a higher quality core product, enriching our comparison engine's application scenarios and leading to an ongoing increase in the number of paying users.
In Q3, the number of daily active paying users rose by 28%, and GMB maintained a high growth rate of 26%, both on a quarter-over-quarter basis. In terms of borderline, we are making more advertising investments by using the industry-economized Doremu exploration and more incentive methods for local business owners.
In the third quarter, the income of local businesses increased by more than 2.5 times, and the return increased by 36%. In order to continue to improve the efficiency of the platform and its operation, the income and cost-benefit gap are gradually narrowing. Therefore, considering the overall value of the platform,
On the monetization front, we boosted local operation-based merchants' advertising spending by exploring multiple industry-specific categories and various incentives. For lead-based merchants, we persistently increased their incremental budget allocations through new advertising products.
In Q3, revenue from local services increased more than 2.5 times year over year and grew 36% a quarter over quarter. The gap between revenue and expenses is gradually narrowing due to our efforts to improve our subsidy and operational efficiencies. So, considering the overall value of the platform, we believe local services is a business that needs long-term investment. We also see a consistent trend of ROI improvement.
In the medium term, we will firmly focus on meeting the needs of our users, and at the same time, based on our users' needs, we can't increase the growth time. Under the premise of maintaining the user ecosystem, we will focus on the value of the platform and the increase in revenue value brought to the company.
In the medium to long term, we are committed to meeting users' needs while leveraging our user base to empower merchants to grow. We will focus on platform value and the incremental revenue value that the business brings to the company while maintaining a good user ecosystem. Thank you. The last question, please, our speaker. Your next question comes from Xueqin Zhang of CICC.
Thank you,管理层,接受我的提问,想请教炳哥关于OPEX的问题,我们有注意到公司第三季度的销售费用是同环比都增长的,那想了解主要的原因是什么?然后展望四季度的话,我们OPEX的趋势会怎么样? Thank you. Thanks management for taking my question. My question regards on OPEX. The company's sales and marketing expense in Q3 increased both year on year and Q on Q. What are the main reasons?
Looking ahead to the first quarter, what's the trend of OPEX? Thank you. Thank you for your question. This year, the sales and marketing expenses have improved compared to the same period last year, mainly because we have increased the investment in online marketing services and e-commerce business, and the overall level of user growth and maintenance costs has remained stable. The investment in online marketing services is mainly related to the payment of short-term user subsidies. We use RY as a precondition for subsidy investment.
while increasing the size of the short-term payment users, it has triggered a several-fold increase in the customer marketing investment budget for user subsidies. We expect that with the short-term payment of users and the optimization of the smart subsidy plan, ROI will continue to improve. E-commerce investment is mainly related to user subsidies. Of course, we still maintain a relatively cautious investment. Therefore, although our e-commerce subsidy amount is definitely only slightly increased, the proportion of subsidies accounting for GNV
Thank you for your question. In Q3, selling and marketing expenses rose year over year as we increased our investment in online marketing services and the e-commerce business. The overall cost for user growth and retention remained stable. Our investments in online marketing services mainly related to user subsidies for paid short plays, with ROI as the guiding principle for subsidy
We not only expended a paid short place in user scale, but also drove marketing budget allocations from clients that were several times higher than the subsidies we provided. We expected that our ROI will further improve as users develop a mindset for paying short place, supported by our optimized smart subsidy plans. The investment in e-commerce is also primarily related to user subsidies. We maintain a cautious approach
So even with the increase in our e-commerce subsidies, their proportion to GMV remains relatively low compared to industry standards. And our subsidy efficiency has continued to improve.
Therefore, the sales and marketing expenses in the fourth quarter will be the same as in previous years, and it is expected to increase seasonally. In terms of R&D expenses, our investment in AI models will bring an increase in the cost of relevant R&D personnel, and the R&D expenses will also increase. However, sales and marketing expenses and R&D expenses account for the proportion of revenue, and the R&D expenses will decrease.
We believe that as we continue to deepen the system, the group's overall profitability will be able to further improve and create value for shareholders. Regarding selling and marketing expenses, as we enter Q4 and prepare for the major e-commerce promotion season, we expect an increase in user subsidies in e-commerce and a slight increase in our investment in online marketing services both on a quarter-over-quarter basis.
So as in previous years, selling and marketing expenses are expected to grow quarter to quarter in Q4 due to seasonality. In terms of R&D expenses, our increased investment in AI and large models will lead to higher costs for related R&D personnel.
resulting in quarter-over-quarter growth in overall R&D expenses. However, both selling and marketing expenses and R&D expenses as a share of a revenue will decline quarter-over-quarter. As we fortify our quality and efficiency improvements in the future, we expect our overall profitability to further improve as well, creating value for shareholders. At the end of Q&A session, please get back to me or Peter. Thank you.
Thank you once again for joining us today. If you have any further questions, please contact our capital market and IR team at any time. Thank you.