Kuaishou Technology

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00:26 Thank you, [Amber] (ph). Good evening and good morning to everyone.

Welcome to our second quarter and Interim twenty twenty one Financial results conference Call. Joining us today, Mr.

Su Hua, Co founder, Chairman and CEO of Kuaishou; Mr. Cheng Yixiao, Co founder Executive Director and Chief Product Officer; Mr.

Nicholas Chong, our CFO. 00:51 Before we start, we would like to remind you that today's discussion may contain forward looking statements, which involve a number of risks and uncertainties.

Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update any forward looking information except as required by law.

01:14 During today's call, management will also discuss certain non IFRS financial measures for comparison purposes only for definition of non IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to our results announcement for second quarter and interim report ended June thirty, twenty twenty one issued earlier today/ 01:38 For today's call management will use Chinese as the main language, a third-party interpreter will provide English interpretation in the prepared remarks session and consecutive interpretation during Q and A session. Please note that English interpretation is for convenience purposes only.

In the case of any discrepancy, management statements in their original language will prevail. 01:59 I will now hand the call over to Mr.

Su Hua, Co-Founder, Chairman and CEO of Kuaishou.

02:08 Welcome, everyone to our second quarter earnings call as a newly listed company for just half a year, we are new comer to the capital market with a lot to learn. However, as an internet company we are already 10 years old, a young adult so to speak.

10 years ago, we pioneered the short video industry and today short video has become the mainstay for the new generation of Internet users. 02:30 While we currently rank second in the industry, our user base and the time spent by users on our platform both continue to grow, making us part of the lives of more than five hundred million users in China.

In addition to users, our number of business partners also continues to grow, having worked hand in hand with many over the years, they have contributed to the of ecosystem by creating high quality content for users and by providing a rich variety of products and services. Strengthening the win-win collaboration with our ecosystem partners and bringing benefits to a wider group of value creators is a value we have always upheld and will continue to reinforce in our next stage of developments.

03:07 Now, I'd like to share with you more about our operations. I will cover four areas today.

Our users, our traffic composition, the three business models to monetize out traffic and lastly our overseas business. 03:21 I will start with users and focus on two aspects we about DAUs and user stickiness.

In the second quarter, our DAUs reached two ninety three million dollars achieving year over year growth of twelve percent. Year over year growth accelerated in April, May, and June, reaching nearly fourteen percent in June.

The momentum continued after the second quarter as demonstrated by accelerating growth both on the year over year and month over month basis. 03:49 Our user stickiness is also strengthening as evidenced by in the second quarter, our MAUs reached five six million up six point seven percent year over year with DAUs to MAUs ratio expanding to fifty eight percent.

Daily average time spent per DAU reached one hundred and seven minutes, up twenty five percent year over year and seven point six percent quarter over quarter. 04:11 Now, let's turn to our traffic composition or the public and private domains people often refer to.

We began our operations in the private domain and it remains the bread and butter of our platform. There are strong emotional bonds between our streamers, and their followers built not in just a day or two, but over one year two years or even longer.

I myself have followed a number of streamers for years and witnessed to the different stages of their life, school, graduation, getting married and having children sharing their happiness and worries. 04:42 Our pool of high quality streamers continues to expand with one point nine million active streamers sharing their life every day in the second quarter.

These creators produced high quality content and at the same time reaped solid reward. In second quarter alone, total revenue sharing to creators exceeded RMB 10 billion, growing significantly year over year.

05:03 We firmly believe in the saying on Kuaishou. One shall have peace of mind when he processes a piece of land.

This year we launched private domain optimization project to put this concept into practice. Conscientious creators on our platform will prioritized long term success with positive influence to society and follower loyalty, will gain more traffic and development support.

Correspondingly [short-sighted] (ph) creator were negative influencers to society and hurt the interest of their followers will be corrected down and restricted. 05:30 In the short term, this project will slightly effect our monetization efficiency However, in the long run, we believe it will enhance Kuaishou’s overall user stickiness and commercial value.

Even with such a large user base, we're still growing benefiting from extraordinary vitality of our communities and the enhancing social attributes as evidenced by increasing number of mutual followers, which exceeded twelve point six billion on a cumulative basis a year-over-year boost of sixty percent. 05:54 To achieve incremental growth we have made many endeavors to optimize public domain.

The improvement of our public domain capabilities is the upstream of our private domain traffic strategy and our efforts of already produced good results. As mentioned, average daily time spent per DAU rose twenty five percent year over year.

There are a number of factors driving the growth in both DAUs and average daily time spent per DAU. 06:15 First we have leading AI technology.

We have continued to invest in this area, which provides us with more comprehensive and real time insights into our user’s long-term short-term interest. Thereby optimizing users content consumption experience, Secondly, we carried out many content upgrades achieving outstanding performance in short play sports and top news.

06:33 Take short plays for, by the end of the second quarter, over eight hundred short play series had received more than one hundred million views each. Thirdly, we have been exploring the of more user consumption cases.

For example, we use visualization to enrich our content offerings in cosmetic science and technology, finance and economics, education and real estate. This helped build a highly efficient and long-lasting collection between people and services and new value for users, as well as commercial value.

06:59 Now let’s move on to our three business models. We achieved total revenue of nineteen point one billion RMB in the second quarter, increasing forty nine percent year over per year, gross margin rose two point seven percentage points quarter over quarter to forty three point eight percent.

First online marketing services in Q2 is revenues increased one hundred and fifty six percent year over year to Ten billion RMB continuing to contribute more than fifty percent to total revenue. 07:22 Meanwhile proportion from brand advertising continue to go well.

As more advertisers recognize excellent results on our platform, they began to appreciate [indiscernible] strategic role in brand promotion. And two, some well known luxury brands placed advertisements [indiscernible] as well.

07:36 In addition, we launched Magnetic Taurus in the second quarter of twenty twenty one. Such [indiscernible] more closely resemble organic and provides better viewing experience with higher placement efficiency.

07:55 Of course, given the later stage start of our business there are still gaps to fill in our infrastructure and capabilities, which will continue to optimize. Live streaming is a relatively mature business model and a key component of Kuaishou’s content ecosystem contributing to both content and revenue.

Second quarter revenues from live streaming reached seven point two billion, essentially flat compared with the first quarter. 08:19 As private domain optimization project continues to unfold, we believe that revenue from live streaming will remain relatively stable and it will increase slightly quarter over quarter.

Our e-commerce and other services achieved growth of twenty one point three percent in – two thirteen percent in second quarter with revenue reaching two billion. This was primarily driven by e-commerce, which registered GMV of one hundred and forty five billion RMB, a one hundred percent with number of annual continuing to grow steadily in second quarter.

08:50 We also recorded rapid growth in new categories such as home textiles, home renovation and luxury goods, while maintaining dominant position in leading categories including women's apparel, jewelry and jade, beauty and cosmetics. As consumers are purchasing more products on Kuaishou, average value per order continues to increase.

Kuaishou’s enhanced functionality has attracted more merchants contributing to sustained improvement in the closed loop transaction ratio on our platform in the second quarter of 90 percent. With respect to merchandise supply Kuaishou’s selections single GMV exceeded 10 billion RMB.

09:23 Lastly, I'd like to give you an update on our overseas business which I know many of you are interested in hearing more about. Overseas business remains an investment priority.

Overseas short video and live streaming have relatively low user penetration and are right with opportunities for future growth and development. We believe that as a leading short video and live streaming platform in China, Kuaishou can also become a key player in the overseas market.

09:49 Our overseas business registered [indiscernible] since beginning of this year with MAUs surpassing one hundred eighteen million in June, by leveraging our inclusive and diverse low class content, we have made solid achievements in South America, Southeast Asia and Middle East. Apart business development, we also made social contributions by utilizing our technological advantage leveraging strength of our community.

10:09 For example, during [indiscernible] Kuaishou immediately opened up multiple mutual assistance channels and created a dedicated team on torrential [indiscernible], which mobilized resources to the greatest external assisted in the disaster relief from all quarters of society. 10:22 What is really touching to see streamers and merchants on our platform work in mobilizing material supply for systems as soon as arose as well as pass long warming strength during this time of great difficulty.

On June 6, Kuaishou celebrated tenth birthday. Every year over twenty million people earn an income on our platform over one hundred million are sharing their lives with rest of the world and more than five hundred million are entertained on Kuaishou.

10:43 Over the past decade we have always adhered to philosophy equally weighted with efficiency and fairness. The risk philosophy has underpinned our development over the past ten years and will further motivate us during the coming decades.

We hope that Kuaishou’s future development and growth will continue to inspire users and use society and create new opportunities for more people. 11:00 Now, let me go through our financial performance.

For second quarter of twenty twenty one, our revenue for second quarter increased by forty eight point eight percent year over year, and twelve point five percent quarter over quarter to nineteen point one billion RMB. 11:14 The increase was primarily driven by the growth of online marketing services and other services including e-commerce business.

As a percentage of revenues online marketing services contributed fifty two point one percent while live streaming contributed thirty seven point six percent. The remaining ten point three percent was from other services.

Our cost of revenues increased by twenty seven point six percent per year to 10.8 billion RMB for second quarter of twenty twenty one. 11:45 The year over year increasingly came as a result of two factors, first increases in bandwidth expenses.

Server custody costs, depreciation and amortization of assets, which were in line with our increase in user traffic attributable to the enlarged user base and the growth of our business including overseas. 12:05 Second we increased employee headcounts to support business growth hence employee benefit expenses and share based compensation expenses increased accordingly.

Cost of revenues increased seven point two percent quarter over quarter, which is primarily attributable to increase in revenue sharing costs and related taxes as our revenue grew. In addition, employee benefits and share based compensation expenses increased as a result of increased headcount to support our business growth.

12:35 As a result of the foregoing, our gross profit for the second quarter of twenty twenty one reached 8.4 billion RMB, growing eighty nine percent year-over-year and twenty percent quarter over quarter. Our gross profit margin for second quarter of twenty twenty one was forty three point eight percent compared to forty one point one percent in first quarter of twenty twenty one and thirty four point five percent in the second quarter of twenty twenty.

13:02 These progressive increases were due to the expansion and growth of higher gross margin business lines, which includes online marketing services and other services including e-commerce business. Our selling and marketing expenses increased by one hundred point eight percent year-over-year to eleven point three billion RMB for second quarter of twenty twenty one.

13:27 As a percentage of total revenues our selling and marketing expenses increased to fifty eight point nine percent in second quarter of twenty twenty one from forty three point six percent for same period of twenty twenty. The increase was primarily due to higher promotion and advertising expenses as we ramped up investment in overseas market expansion, product promotion and brand marketing campaigns.

13:51 However, when compared with the first quarter of twenty twenty one, the selling and marketing expenses in the second quarter of twenty twenty one decreased in absolute terms by three point three percent and dropped to fifty point nine percent from sixty eight point five percent as a proportion of total revenues. 14:10 This was due to one off Chinese New year related to promotion expenses in the first quarter of twenty one and the improved cost efficiency partially offset by increased investment in overseas market expansion in the second quarter of twenty twenty one.

14:27 Our administrative expenses for second quarter of twenty twenty one increased by one hundred fourteen nine point four percent year over year and twenty point nine percent quarter over quarter to Million. As percentage of total revenue it increased to four point five percent in the second quarter of twenty twenty one from two point seven percent for the same period of twenty twenty.

This was primarily due to an expansion in headcount to support business growth as well as a related increase in share based compensation expenses. 15:00 If the impact of share compensation expenses is excluded then administration expense as a percentage of total revenues were three percent two point seven percent and two point three percent for the second quarter of twenty twenty one.

First quarter of twenty twenty one and second quarter of twenty twenty respectively. 15:21 Our research and development expenses for the second quarter of twenty twenty one increased by one hundred and ninety eight point one percent per year-over-year to three point nine billion RMB.

As percentage of total revenues, our research and development expenses increased to twenty point four percent in second quarter of twenty twenty one from ten point two percent in the same period last year. This increase was primarily driven by significantly higher headcount count as we intensified investment in big data and expanding our advanced technology capabilities.

15:53 Share based compensation expenses also increased in-line with our higher research and development headcount. When compared with the first quarter of twenty twenty one second quarter twenty twenty one research and development expenses saw more modest increases growing thirty nine point one percent in absolute terms and increasing to twenty point four percent from sixteen point five percent as the proportion of total revenues if the impact of share based compensation expenses is excluded the research and development expenses as a percentage of revenues were twelve point five percent ten point eight percent and eight point six percent for the second quarter of twenty twenty one first quarter of twenty twenty one second quarter of twenty twenty respectively.

16:36 Our fair value changes of convertible redeemable preferred shares in the second quarter of twenty twenty one were nil compared to negative thirty five point four billion RMB in the second quarter of twenty twenty. This is a result of completing our initial public offering in February twenty twenty one.

Our loss attributable to equity holders of the company was seven billion RMB for second quarter of twenty twenty one, compared to fifty seven point eight billion RMB for first quarter of twenty twenty one. 17:12 Adjusted net loss for the second quarter of twenty twenty one was RMB four point eight billion compared to a loss of RMB 4.9 billion for the first quarter of twenty twenty one.

Adjusted EBITDA for the reporting quarter was negative RMB billion improving from negative RMB four point two billion in the first quarter of twenty twenty one. 17:36 Our net cash used in operating activities was RMB two point seven billion in the second quarter of twenty twenty one.

We maintained a strong balance sheet positioned in the second quarter with cash and cash equivalents, bank deposits, restricted cash and wealth management products of RMB billion as of June thirty, twenty twenty one. 18:02 So, this concludes our management's presentation.

We will now have Q and A session. Thank you.

18:37 [Foreign Language] 19:27 So I have two questions. The investment is about our user growth.

We heard from Mr. Su about the continuous user growth into the third quarter.

So just wondering if there is any target for the full-year either domestically of for the overseas user base. And then secondly, wondering if the recent development in the regulation [indiscernible] would have any impact to our operations?

For example, recent policy, data security and data privacy? Thank you.

20:14 [Foreign Language] 22:11 The customer obsession is always our core value. And DAU has been a business indicator we care very much about indeed there was a slight fluctuation within one percentage point in Q2 but we believe this fluctuation was a normal range.

22:26 As Mr. Su mentioned earlier, the year over year growth in April, May and June, shows an accelerating trend with year over year growth rates in June reaching approximately fourteen percent.

The growth momentum continued after the second quarter, accelerating in both quarter over quarter and year over year basis every month. As such, we are quite confident towards our annual growth target as well as our medium to long term target of four hundred million DAUs.

22:54 Let me further explain the fluctuation in Q2. First, our campaigns during the Chinese New Year in Q1 delivered good results and helped us acquire a large number of users, which created a high base of users in Q1.

Second, there are many young users on our platform, and their activeness depends or tends to be affected more by holidays and weekends. They are more active during weekends and less so on days due to the Chinese New Year and winter holiday, the work day effect was weaker in the first quarter, which to some extent contributed to our high base of DAU in the first quarter.

23:30 Furthermore, I want to emphasize that we have an industry leading user retention rate while there is still room for improvements in the new user retention from certain user acquisition channels as such we have implemented various measures to support user growth in the second quarter. For example, we merge reporting lines of our user growth division and product divisions connecting the underlying data of user growth with product plan and develop new channels through social efficient and search engine optimization and so on.

24:08 [Foreign Language] 24:58 We are the pioneer of short video. Definitely, this sector today looks quite different from ten years ago apart from serving as the content community we are able to accommodate more content and services that is serving users more a diverse and in-depth needs.

Therefore, although user penetration rates of short video is already quite high, we can still see our DAU continues to grow while our user activeness and engagement also have high growth potential. So, to answer your questions asked just now, for the medium to long term, we are still keeping this target of four hundred million DAU and we have confidence in achieving it.

Thank you.

25:49 [Foreign Language] 26:27 At present our society has entered a new stage of development with attention on both efficiency and fairness. As an enterprise Kuaishou has upheld the belief of fairness and inclusivity since its day one, sharing the fruits and benefits of technological advancements with all members of society as one of our core values.

From this perspective, Kuaishou’s mission is consistent with the current mainstream of social development. 26:53 We have maintained active and smooth communications with regulatory authorities and have carried out compliance preparations very early in response to the bottom line and red line requirements related to business operations, including those relevant to data securities.

27:11 [Foreign Language] 27:33 The entire Internet industry and for us as a company must proactively shoulder responsibilities and social responsibilities, we believe a positive interaction between enterprises and regulators is conducive to developing the digital economy better and faster. In the short term, our revenues will be affected as we adapt and adjust to various policies.

On this point, we are basically in line with the industry.

28:12 [Foreign Language] 28:59 I have two questions. My first question is about the online shopping on e-commerce business, we are seeing wide streaming online shopping has a lot of room to grow but also competition is also very intense, may I ask management about how we should think about our e-commerce strategies are going forward, in particular for the branding side?

How we can attract more brand merchants and how or empower them to improve or drive their business performance? And my second question is about advertising.

Given that we are seeing Q2 advertising is undergoing a strong growth momentum Just want to get a sense in particular on the brand advertising side. Can management share about the latest progress?

On the other hand, we are also seeing macro uncertainties at these days and is there any impact to our online and marketing business? Thank you.

30:08 [Foreign Language] 31:11 Thank you very much. Let me answer your question about e-commerce.

During Q2, our e-commerce GMV doubled to more than one forty five billion, of which Kuaishou the closed loop mode of our e-commerce business accounted for over ninety percent comparing with sixty six percent in the same period of twenty twenty. We also continue to strengthen our e-commerce infrastructure helping further expand and strengthen our closed loop e-commerce model.

31:40 We have three key strategies first, is to develop trust-based e-commerce. We hope that we can protect the experience for both buyers and sellers, enhance the trust between them through operations and guidance on our platform.

Building on the trusted relationship, we are able to enter categories that traditional e-commerce cannot penetrate. In addition, enhanced trust can also help increase our repeat purchase rate.

0:32:11 [Foreign Language] 33:34 Second, we will keep strengthening our branded e-commerce strategy as DAU and time spend increase, we are gaining more public domain traffic compared with non-branded products, branded products can more easily draw public domain traffic through their own private domain to facilitate the rapid development of branded e-commerce, we have such up a brand operation center to empower brand merchants with assistance in traffic, budgeting, services, tools and policies. 34:09 We have also created a proprietary operation about methodology for brand merchants on our platform.

Many brands have achieved good results by working with us. For example, a domestic men’s wear brand started live streaming on Kuaishou and gained one hundred thousand followers on one day starting from zero and its monthly GMV reached more than ten million.

34:37 Besides we continued to build-out Kuaishou’s selection, our official platform of e-commerce product selection. In the second quarter, we introduced more branded merchandise to Kuaishou’s selection, contributing to its GMV growth of more than ninety percent quarter over quarter, while further improving user experience and platform efficiency.

35:06 [Foreign Language] 35:33 Third, we will strengthen our capabilities on developing service providers system. Unlike traditional e-commerce platforms, Kuaishou’s e-commerce ecosystem is a dual-way supplier’s driven model, which is driven by both the supply of merchandise and the supply of streamers.

This model requires more service providers on the platform to help merchants and streamers provide better services to consumers. 0:36:07 [Foreign Language] 37:10 Let me now answer your question about advertising.

In the second quarter, our revenues from online marketing services amounted to RMB billion, up one hundred and fifty odd percent year over year. As our infrastructure improves continuously and our sales team growth, more and more advertisers have realized the value of the Kuaishou platform and our users.

Thus, the number of active advertisers continued is fast growing trend in the second quarter. 37:45 We had some preliminary achievements with our brand advertisement strategy made at the beginning of the year.

We have established a closed loop solution for brand advertisers helping them produce customized short videos, build live streaming rooms, manage private domain traffic, as well as monetize through e-commerce. 38:09 As a result, the share of revenue from brand advertisement has been increasing.

And the number of brand advertisers in the quarter increased by nearly four times compared with the same period last year. Our closed loop advertisement that connects the public and private domain traffic also maintained steady growth.

38:35 [Foreign Language] 39:18 Our advertising business still has many growth drivers. The first is to enhance the connection with e-commerce, and continue to promote the growth of advertisement from e-commerce clients within our closed loop system.

39:34 The second is to continuously improve our fundamental capabilities in algorithms, products and operations to enhance our value proposition to customers. The third is to focus on the key industries making breakthrough to increase our market share.

Changes in the advertising market certainly impacts our business to some extent. On this point, we are in line with the industry.

But overall, for the full year, our advertising business is still growing rapidly.

40:26 [Foreign Language] 40:59 So, I have two questions. The first the one is relating to live streaming, we noticed that that the entire live streaming industry has showed some slowness recently, just wonder what is Kuaishou’s live streaming businesses currently status?

And could you also discuss outlook? The second question is as one of the top short video platform how do you view the competitive landscape and your competitive advantage at a current stage?

Thank you.

41:41 [Foreign Language] 41:56 Let me first answer your question about live streaming. Kuaishou is still leading the industry on the number of active streamers and the depth and breadth of content.

In the second quarter, the number of our daily active streamers remained around one point nine million. The penetration rate of our streaming users also stayed high, reflecting that live streaming as a content format one wide recognition among users.

42:47 [Foreign Language] 43:14 Last year, our optimization and exploration in the public domain mainly focused on short videos, and it has been endorsed by our users and the markets. This resulted in strong growth in user time spent, user activeness and advertising revenues.

The improvement of our public domain capabilities serves as the upstream part of our private domain traffic strategy only. This year, we have started to optimize our live streaming business in the public domain to help streamers gain more followers and viewers.

43:59 [Foreign Language] 44:42 We will increase investment in the optimization of private domain traffic. We will provide traffic support to our streamers who have been investing and growing on our platform for the long term while to those who seek quick profits being to the public their followers, the platform and the merchants we will resolute crack down and educate them on these behaviors.

This work will take lots of time. We believe that in the long run, these efforts will help us solidify our scale advantages in private domain traffic.

And on the number of streamers, which will then reflect on our streaming revenue improvement. 45:33 [Foreign Language] 46:20 Now, let me talk about competition.

Competitive landscape is relatively stable at present. On one hand, although our public domain products look similar in formats, but there are three key factors in short video industry supply, demand and algorithms that interplay with each other and create differentiation in use.

That's why there are many users on both platforms. 46:47 As short videos have a low creation threshold, the supply cannot be monopolized.

In addition, demand for short videos is [scatters] (ph) and non-convergence and algorithms matching supply and demand also have their own characteristics due to long term accumulation of data. Previously, we had a gap in average time spent per DAU previously, but now, we have caught up in that regard.

And the average time spent per DAU of those using both platforms are also at quite similar levels. 47:28 [Foreign Language] 47:52 Secondly, our core based private domain is very stable.

As mentioned earlier, the interaction and social data and trends of our users have been very good. We are in the process to convert public domain traffic to private domain traffic.

This conversion process also takes time. 48:15 In addition, compared with those in higher tier cities, users in mid-to-lower tier cities relatively more socially active.

In these cities, we have a good ecosystem and [social searching] (ph) for location based, semi-acquaintance socialization.

48:48 [Foreign Language] 49:28 I have two questions. First one is about Kuaishou has the integrated business model.

So, how do you balance different business in the ecosystem? And my second question is, you also mentioned in your results announcement that you have continuously amended traffic adjustments.

So what are your latest strategies on the traffic distribution and what advantages do you have? Thank you.

50:01 [Foreign Language] 50:52 First in response to the ecosystem balancing questions, there are two aspects. One is the balance between ad and e-commerce.

The other is the balance between live streaming and e-commerce. In terms of ads and e-commerce, currently, the closed loop ads accounts for more than thirty percent of revenue from online marketing services, involving mainly revenues generated through [indiscernible] Kuaishou fans headline services, and Magnetic Taurus.

51:27 In the future, as the ties between e-commerce and advertising tighten; we expect advertisements generated by e-commerce clients on our platform to maintain rapid growth. In terms of advertisement from participants externally, we will improve sales team’s capabilities and iterate products continuously to attract more advertisers on the platforms.

51:56 [Foreign Language] 52:25 Regarding live streaming and e-commerce, we will not intentionally distribute traffic between these two businesses. The main task for Kuaishou is to offer highly efficient production tools to our streamers, which in turn attracts more streamers on our platform.

Outstanding e-commerce streamers are no different from entertainment streamers. They can create good content, and experiences generate traffic rather than waste it.

53:00 [Foreign Language] 53:49 In terms of traffic policy, we need to improve our traffic distribution efficiency in public domain. In order to improve content efficiency, we prioritize the display of contents being more worthy of consumption to enhance viewer’s sense of gain and happiness.

This will in-turn significantly enhance user stickiness and interactions. 54:15 Besides, we also need to improve monetization efficiency.

We will provide traffic towards content creators who have stronger capabilities of merchandise promotion, virtual gifting, attention capture and followers gain. Thus ensuring that our traffic growth effectively leads to commercial value gains.

54:44 [Foreign Language] 55:08 With respect to the private domain, we will start more work on optimization to truly realize that one shall have a piece of land when he has peace of mind thereby enhancing the distinctive value of our private domain. In addition, we have cultivated strong traffic in public domain.

We will further direct and divert those traffic to private’s domain.

55:45 [Foreign Language] 55:54 In the second quarter [indiscernible] and marketing expenses were relatively high, we saw significant decrease quarter-over-quarter, can you split the domestic and overseas expenses and what are the change going forward? And how do the management team manage the growth and limitation of user in the domestic market and the related expenses in the future?

Thank you.

56:57 [Foreign Language] 57:48 Thank you for your questions. In the second quarter overseas business accounted for about one-third of our sales and marketing expenses.

There were two main reasons for the increase on overseas spending First, we have achieved very good user growth momentum in the past few months, which proved that our capabilities and experience accumulated in China can also be applied to overseas markets and bring us good results. 58:21 Second, based on what we have learned from our domestic experience, we can acquire users at a relatively lower cost when competition is not intense, laying a solid foundation for future commercialization.

Therefore, in overseas markets, we need to accelerate our progress and capture market share in more regions as quickly as possible. 58:52 [Foreign Language] 59:55 In the domestic market, we have started focusing on improving the efficiency of user acquisition and maintenance.

In the second quarter, domestic sales and marketing expenses declined, and those related to Kuaishou apps user growth and user retention also trended down. 60:16 At the end of the second quarter, we adjusted our organizational structure merging the reporting lines of the user growth division and the product division.

This change was aimed as connecting the underlying data of the two businesses, so as to better optimize the efficiency of acquiring and retaining new users. In addition, efforts to enrich and [gift-ups] (ph) to our content verticals can help us provide content that satisfies the needs of new users.

60:50 To date, these initiatives brought apparent improvements. Coming into the third quarter, new user retention and user acquisition efficiency on Kuaishou app, both improved notably.

However, we must acknowledge that we are indeed not very operationally efficient, and we see plenty of room for improvement in this regard.

61:17 Last question.

61:27 [Foreign Language] 61:51 I will translate myself. Noticed oversea MAU recorded strong growth and what decisions your overseas product from competitive and about the product portfolio in different margin?

Second question is regarding oversea deal expansion plan and the growth strategies, how should we look into the MAU chain into the second half of the year and by the end of the two thousand and twenty two? Thanks.

62:21 [Foreign Language] 63:00 Our experience in China approved that the short video industry even in a highly competitive region has enough room for multiple platforms to coexist and develop. In overseas markets, penetration rates of short video products is still far behind that in China.

63:18 Hence, we expect an incremental of [billions] (ph) in user growth. There is also ample room for differentiation in user demand and content supply.

In the short term, our competition strategy is to leverage distinctive content supply to attract those who have yet to be converted to short video users. Now, we will put our efforts on carrying out this strategy.

63:46 [Foreign Language] 64:16 When choosing a target market, we will focus on areas with high population density, high acceptance of short video products and high monetization potential regarding our growth strategy in addition to actively promoting growth and attracting new users we also encourage creation of localized content to help faster growth and penetration of such contents. More local content will help increase user activeness and user retention in the corresponding local, forming a virtuous cycle driven by the growth of content and user community.

64:58 [Foreign Language] 65:22 In addition to encouraging users to create content, we will also actively explore local PGC as a supplement to local UGC. So far Kuaishou has performed well in South America, Southeast Asia, and the Middle East.

We hope to gain as much market share as possible in various key markets before competition within existing markets only begins.

66:16 [Foreign Language] 66:24 Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or TPG Investor Relations through the contact information on our website.

Thank you.