Ladies and gentlemen, thank you for standing by. And welcome to the Zhihu Inc. Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jingjing Du [ph] Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Hello, everyone. Welcome to our third quarter 2021 financial results conference call. Joining us today are Mr. Zhou Yuan, Chairman and CEO of Zhihu; and Mr. Sun Wei, our CFO. 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 this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference will be available on our website at ir.zhihu.com. I will now turn the call over to Mr. Sun Wei, our CFO.

Thank you, Jingjing. I am pleased to deliver today's opening remarks on behalf of Mr. Julian, founder and CEO of Zhihu. Thank you for joining Zhihu’s 2021 third quarter earnings conference call. As one of the largest online content communities in China, we have always been committed to the development of our content centric ecosystem through continuous community infrastructure enhancements, user base expansion, and monetization to the ability improvement. Our fast growing user base is primarily young and cross generational. It’s using our platform with Vitality, while our content centric monetization model differentiates us with sizable growth potential. Against the backdrop of rapidly changing macroeconomic conditions, our distinctive model, wider user community, and the continuous accumulation of high quality of content serves as not only a moat in the competitive pen entertainment arena, but as compounding driving forces propelling long term, sustainable growth of our user base and a monetization channel. In Q3, we delivered another solid set of financial and operating results, with our average MAUs reaching 101.2 million, up 40% year-over-year, and average monthly viewers growing to 542 million. As of the end of the third quarter, the cumulative pieces of content on our platform reached 458.9 million, including 398.4 million questions and answers, representing a year-over-year increase of 43% and 38%, respectively. Additionally, our average number of monthly active concentrators increased to 3.6 million, of which the average number of monthly video content creators increased 86% year-over-year. Meanwhile, our content centric monetization initiatives continued to gain traction, evidenced by a 115% year-over-year increase in revenue to RMB823.5 million and a 110% year-over-year increase the average monthly pay members to 5.5 million. During the second quarter, we upgraded our high quality content segments standard by introducing sense of fulfillment. We took further steps in Q3 to update the…

I will now review and provide more details of our financial performance for Q3 2021. As Zhou mentioned, we achieved another strong quarter, recording total revenue of RMB823.5 million, which represents a year-over-year increase of 115%. Our unique content centric business model is increasingly showing a strength and ability to attract to drive our business growth, keeping pace with our fast growing and vibrant user base. In the third quarter, content-commerce solutions and paid membership combined to contribute over 55% of the total revenue. Our commitment to our content-commerce solution strategy has continued to gain market awareness. In Q3, content-commerce solutions contributed RMB278.4 million to total revenue. This five-fold year-over-year increase costs content-commerce solutions as a percentage of total revenue to grow significantly. It is further underpinned by the continuous improvement of our commercial content ecosystem, as well as increasing reclamation and growing demand from our diverse business partners and merchants. The number of our CCS customers tripled in the third quarter compared to the same period in 2020 as we broaden our coverage to encompass over 20 industries. Moreover, we also saw a significant increase in content greater participation in this business line facilitated through our chief platform, which launched in late May this year. In the third quarter, the number of creators who have joined our chief platform and achieved commercial income exceeded 10,000. We believe this demonstrate that we are on the right track and helping our content creators reach their commercial goals. Advertising in the third quarter maintained its strong momentum, despite ad industry headwinds. In the quarter, advertising revenue was RMB321.1 million representing a 39% year-over-year increase underpinned by our advantage as a comprehensive content platform and increasingly wide range of advertisers now consider us as a marketing platform, due to our ability to continue…

Thank you. [Operator Instructions] Our first question today will come from [Indiscernible] of China Renaissance. Please go ahead.

Good evening management. Thanks for taking my question. I have two questions. First question is regarding our CC SPS [Ph]. We noticed there are a number of new products without [Indiscernible]. For example, we have to assume for top 100 list. Can you show more color than what we did during this top of your campaign. And a second is regarding Zhihu’s strategy, can you discuss in details from both supplier and labor consumption side, for example our supply side we have the choice and choice operated a program on our on the consumption side we notice that the video -- notice was on the homepage so can you discuss in more details? Thank you.

[Foreign Language]?

[Foreign Language]

Okay, I'll just answer the first question in Chinese and Zhou Yuan will take number two. [Foreign Language]

Okay, so, see if I suggest the first question. As we explained in the remarks, the CCS has improved a lot continues to increase a lot especially in this quarter. We had a year-over-year increase of over 500 times and a quarter-on-quarter increase of over 30% And this is basically due to all constant construction of a good eco system for high quality content on Zhihu and also we are playing and more and more profound influence over people's buying decisions and they are more brands and merchants and you know unit so for commercial commercials joining our platform and you see that we have a much better and ever improving reputations in the market year-over-year.

[Foreign Language]

For this double specifically we have when we have launched activities such as top 100 list to promote and make recommendations on our community to help our users to make buying decisions and purchase the goods they want. And we are working together with e-commerce platforms such as jd.com and Alibaba that covers a number of sectors, including clothes, food, traveling and living. And also our users are able to enjoy a sense of fulfillment during their decision making process. The GMV we had for the third quarter is RMB4.97 billion, which we represented a year-on-year growth of 92%. And our daily order number in Q3 increased by 31% and also at the same time what is worth noting is that Zhihu’s tick rate has increased by over 200%.

[Foreign Language]

At the same time, we continue to explore and develop our business models in terms of e-commerce. We will continue to have a further business integrations with regards to goods recommendations and brand building and all content homeless face marketing activities by the merchants so as to make the monetization more efficient. And also we're exploring ways to have a closed loop e-commerce platform within our communities. And to further build on all the self-branded businesses and brand building activities inside about Zhihu platform.

[Foreign Language]

So this is from CEO Zhou Yuan. We are very happy that you have noticed a difference in our product actually, this is not the final version that is just a great version or a better version that we just launched.

[Foreign Language]

Just as I said this is just a version for exploration for new practices. And it's not just for videos, it's more than video. So we want to launch those to improve our monitoring on the users on our community to try to understand their attention, their behaviors as well as their profit traffic, profit domain traffic and to understand their interactions and engagement on our community. And second, as you rightly pointed out, that is that we have the video tab on our home page. And third thing I want to you know just keep it secret for the time being because you know after we officially launched it in December, we will give you more details in due time. So all of those efforts are to try to make our user experience more simplified and more interesting.

[Foreign Language]

So since we're testing that we saw very nice feedbacks so they're both from the consumer side from the consumer from the consumption of the videos you see that we have very nice TV. Very nice metrics including very nice TV and the retention rate as well as time spent and car shows they all have displayed very nice potentials. And we keep heating the users where they have feedbacks and we have very quick updates and iterations of offers a better version that we have.

[Foreign Language]

From the content creation side of the story, you see that our daily uploads of videos increased by nearly 300 percentage points. And our monthly active video content creators increased by 86%. And after we have pushed forward the standard for a sense of fulfillment for making video content, we have received very good support from the content creators, especially those who have high sense of creativity and great imaginations, who actively join us as a content creator for videos in the ecosystem.

[Foreign Language]

I want to say something more about joint creation. As you know that on the content creation part, we have very nice video makers together with very nice users who have nice views and ideas. So they went together through sharing copyrights. They delivered very nice video content. So we believe that it is not only a new product, but it's also a new format of generation of content and constant consumption of content. And I also want to share two numbers with you that is the consumption of videos on our on our community keeps increasing the video consumption penetration rate in DAU for this quarter was 37% versus 30% in the last quarter.

Our next question today will come from Ashley Xie of Credit Suisse. Please go ahead with your question.

[Foreign Language] Thanks management for taking my question. It's mainly related to our lower tier CD penetration. Just want to understand how is our utilization helping us in these regions. And how is the user behavior different between higher and lower tier cities? And if you look forward what's our plan and strategy to expand our penetration in lower tier cities? Thank you.

[Foreign Language]

So, the focus of our video is to focus on getting more videos with sense of fulfillment on our community, especially on the supply and consumption of such videos. We believe that this is a sound strategy that we will stick to for the longer term to differentiate ourselves so to build our core competitiveness.

[Foreign Language]

So for fulfillment as a new standard that we propose for video content has been very well received and very well recognized by our users as proved by our surveys recently.

[Foreign Language]

As we are cracking down low quality video with them give more focus and priority to high quality videos you see that we have since improved popularity of high quality videos especially those who has that has a sense of fulfilment. As we improved our discover and distribution mechanisms for those videos, they are those videos has had been saved for more times, shared for more times, and has also helped us to improve the retention rates of users. Especially you see the second month retention rate for users have improved one percentage point this quarter.

[Foreign Language]

So the supply side of the video content we have those joint creation mechanism as well as answers by videos. So all this are the upgrades to the product side and towards the side to help people provide more video content. So right now our joint creations are increasing very quickly. We now have over 1.8 million authorizations of text and images for video making that helps us to translate more and more highly voted answers and texts and images to highly voted videos. By way of example, the cooperation between visual monitoring and [Indiscernible]. They delivered a 4 million viewed video by jointly by creating based on a how we voted and so with over 410 up votes. So that is a very good example of how joint creation has been effectively working for us and the supply side of the content.

[Foreign Language]

On the consumption side of the video content, well, actually, the consumers of videos are pretty much the same, as the general users that we have, in terms of the profiling of uses except that they are younger. Well, they have three percentage higher in terms of those who are under 30 years old, for video consumption versus the general users. So on that, I believe that does actually means that our video content is pretty much in line with those who are with the demands of those on our community, especially if we had been able to cover more uses and satisfy their demands with our video content creation.

Thank you. And our next question today will come from Piyush Mubayi of Goldman Sachs. Please go ahead.

Thank you for taking my question. First, on the third quarter, when I combine advertising and GPS you grew 117% despite the pressures on the advertising market in general. Could you take us through the verticals that has come through very nicely for you for the quarter? And in looking at your guidance for the fourth quarter for almost 100% growth? Can you give us the building blocks of that both in terms of MAU as well as how strong you expect advertising to grow in the fourth quarter? And while this is very early, could we also look forward to 2022, I realize it's very preliminary but nonetheless, can give us a feel for the pace of growth you would expect on a preliminary basis if possible? Thank you very much.

[Foreign Language]

Thank you very much for your question. In terms of -- in terms of advertisement and advertisement verticals. Well, for Q3 you see that the most affected factors such as K-12 education and insurance well they used to have a very small percentage points in our advertisement contribution, therefore, the impact is very minimal to our business.

[Foreign Language]

If you look at the breakdown of advertisement verticals by sector you see that e-commerce, consumer goods, Internet services IP&CC, so there are many sectors that we have advertisements from and they all had very stable and nice growth of 80% year-on-year. And I think we benefit those, we've benefited a lot because our, our merchant client the advertisement clients are switching their marketing expenses from traditional media platforms to some platforms like us which we can produce very nice contents and deliver nice and – state content-commerce solution.

[Foreign Language]

For other models in housing financials we had a very nice and innovative benefits and registered double digit growth in those two sectors, and more.

[Foreign Language]

The above mentioned factors put together accounted for over 60% of all advertisements.

[Foreign Language]

And I believe by going into the fourth quarter, we will continue to have very nice growth coming out of e-commerce FMCG, CG, CCLG and etcetera. And reasons as I explained before that we as a content community are able to provide good platforms where people to you know build their brands to deliver very nice and quality content for their marketing efforts and to have a diversified advantages in helping the advertisers to market themselves.

[Foreign Language]

Going into 2022, we believe that our total revenue will continue to grow at a fast pace and the percentage points as contributed from CCS and advertisement will again account for about 70% to 75% of the total revenue we make.

[Foreign Language]

Sorry, the percentage points actually means the number for Q4 not for 2022. Sorry.

Okay, thank you.

Our next question today will come from Natalie Wu of Haitong International. Please go ahead.

[Foreign Language] Thanks for taking my question. And I have two questions here. The first one is a follow up to the last question. So just wondering for your current fourth quarter outlook, almost double digit goals. Can you help us break down among each business life? That's exactly for the rest of to like membership and e-commerce and other business lines, revenue goals for the support for the fourth quarter. And secondly, for the e-commerce business, we notice that you have ramped up your run to business recently. We're just wondering for your e-commerce GMV in the third quarter, how much comes down your business which initiated like I think December. Also just curious how should we sync up the strategic position for your one PMC [Ph] business going forward? And also futures lead score for GMB goals? Thank you.

Hello, hello is the speaker line open? I'm not able to hear you.

[Foreign Language]

Thank you for your question. Well, as I mentioned in Q4, our revenue outlook will be 70% to 75% coming from CCS and advertisement together and 20% for membership and for the others education, e-commerce and others coming together will be five percentage points. So further more on our e-commerce business, we believe that our e-commerce development will continue to center around good content, because we believe good content is good business. And we believe that one question is one street and one answer is a good shop. We keep, we continue to help the consumers and users to identify those foods that are worth buying, buy our voting systems to select the most reliable answers and then continue to help them with the transaction. And we believe that those two are going to deliver very well and to then to bring benefits to those concentrators, merchants as well as the community as a whole. And as I mentioned, the GMV we have for the third quarter is RMB4.97 billion and with the daily weather increased on a daily basis of 31 percentage points and our take rate also increased by more than 100%. And all of those efforts are helping us to improve the monetization efficiency and for our 1P business, we are trying out in helping the brands and also to help them to create content based marketing and promotion. And this is so by far the final version of 1P e-commerce that we have been revolutionising the models as we going forward, and we believe that those will deliver better and better results going forward in the future.

Yes, thank you.

Our next question will come from Alex Yao of JPMorgan. Please go ahead.

[Foreign Language] So my first question is about the strategy to attract the content contributors. On the video content sites, are we doing anything different compared to the content strategy? The picture in the text sites, particularly, China's video marketing is predominantly driven by entertainment or any content? So on the video content side; are we using this opportunity to broaden the content jar and the coverage into entertainment or into the content supply? Or are we sticking to our core platform in the community attributes and to focus in on the knowledge base the content drive? And then second question is about the implementation of PNTR which took place on first of November? Are you guys seeing any difference before and after the implementation of PNTR? And how should we think about the impact of oppression and monetization? Thank you.

[Foreign Language]

And so from CEO Zhou Yuan. So first question, video is not the result. Video is not what we want to do by choice isn't a natural result of our strategy of running the community. We believe that video is indispensable part and parcel of our community and by building a nice ecosystem we are able to let the video content organically grow out of our good community.

[Foreign Language]

Our video content creators, we believe that they are versatile. Let us just call them a full stack of video content creator. They are very good at making videos; they are very good at answering questions, so they can also do live streaming. And by utilizing different formats also content, they're able to deliver the best possible results and attract the most attention from the community.

[Foreign Language]

As far as the time being you see a lot of upgrades in terms of the tools that we give to concentrators and operational transformation that gives more attention to the video content. Actually answer by video is not just something new. We believe that video is just a more suitable format of people giving answers and does just grow very fast naturally. Second is the joint creation. We believe that it is by no means using videos to replace text and images. We believe that by putting them all together we could deliver one plus one is more than two kind of result in our community.

[Foreign Language]

On the topics and discussions, discussions you see on our community covers all kinds of sectors and with an umbrella principle that there is a sense of fulfillment. So by asking and encouraging content creators to make videos that can bring sense of fulfillment you see very nice engagement and very nice growth.

[Foreign Language]

Now with regard to new regulations PAPL [Ph] we believe got the purpose of having the businesses like us to be compliant as for the better grades of the entire industry to make it healthy, to make it more sustainable for the longer term.

[Foreign Language]

In terms of our own compliance efforts, we keep talking very, very frequently with regulators and I think this is a long term thing and our own internal audit practices or operations we keep trying out good solutions for user experience and testing out the data etcetera. We believe that this will actually become a new normal, and we are, we have always been a proactive in cooperating with the regulators and make sure that we are coping with all the requirements.

Thank you. And ladies and gentlemen, at this time, we will conclude our question and answer session. I'd like to turn the conference back over the Jingjing for any additional or closing remarks.

Thank you once again for joining us today. And if you have any further questions, please contact our IR team directly or TPG Investor Relations. Thank you all. Bye.

At this time the conference has now concluded. And we thank you for attending today's presentation. You may now disconnect your line.