Ladies and gentlemen, thank you for standing by and welcome to the Zhihu Inc. Second Quarter and Half Year Interim '22 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jingjing Du, Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Hello, everyone. Welcome to our second quarter 2022 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 purposes only. For a 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 call will be available on our website at ir.zhihu.com. I will now turn our call to Mr. Sun Wei, our CFO.

Okay. Thank you, Jingjing. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder and CEO of Zhihu. Thank you for joining Zhihu's second quarter 2022 earnings call. The recent COVID-19 pandemic situation and macroeconomic condition created challenging environment in the second quarter. Against this backdrop, we focused on retaining high-quality user growth in a sustainable and efficient manner. Confronting this uncertainties, we firmly executed our Community Ecosystem Comes First strategy and improved business efficiency with optimized organizational structure. In addition, we continue to expand our fulfilling content offerings, we have creators' experience and strengthen community culture. Together this efficiently draw quality growth in our user base, improve engagement and stickiness and better our bottom line performance. In Q2, our average MAU grew by 12.3% year-over-year to RMB105.9 million. And from January to June this year, the average time spent per our DAU increased more than 12%. We are delighted to see our content creator becoming more active and creative, contributing more high-quality fulfilling content to our library. In the quarter, the average DAU of our high ranking content creators increased by nearly 50% compared to the same period last year, with average creation volume per creator almost doubling. Its all of the efforts we’ve made to enhance our community ecosystem, we are delighted to see fruitful rewards not only in our community ecosystem centered around our user creators and content library, but also in our business results. In Q2, despite many uncertainties, our total revenue reached RMB836 million, growing 31% year-over-year, and 12.5% quarter-over-quarter. While our net loss narrowed by 24.4% from the first quarter of the year, as a percentage of the total revenue. Zhihu's diversified revenue structure was a critical force in achieving remarkable top line growth, and made adverse macro conditions. Paid…

[Operator Instructions] Our first question comes from Xueqing Zhang from CICC. Please go ahead.

And I will translate myself. Thanks, management for taking my question. And my question is related to paid membership earnings. We saw -- our membership revenue has achieved 75 percentage year-on-year growth in the second quarter, and became the largest revenue contributor as well. So just wondering, what's the driving factors behind this? And how does management think about the longer term growth rate of membership things? Thank you.

Hi. I am the CEO of the company. My name is Zhou Yuan. First of all, thank you for your interest in our membership business. Now our members were grown and born in our community and they come back and actually give us very positive feedback to the overall development of the community. And right now, we believe that their development has been very healthy. Now the penetration rate of our paid membership in the year was 7.98% in June, reaching 8.99 million. In July, it exceeded 10 million and it has continued to grow in the past 24 months. Currently, there is no signs of signaling slowing down of the growth momentum. Now the number of members continuing to grow not only help our existing users to consume some of the content, but also is a great traction to attract new users as well. Now the spillover effect of the page content of our members will continue to promote the increase in the number of page members, which played an important role in promoting the growth of Zhihu's community users. Now in order to understand a long-term development of our membership business, one first understand the organic growth of our members out from our community. Our Zhihu community is really the powerhouse of original content on the internet in China. The original UGC content is the engine of our very diverse content ecosystem in the community. With the help of content differences brought about by the continuous emergence mechanism of content creators, which is very unique to the Zhihu community we have incubated our membership business from the community making it one of the most efficient and effective monetization models in Zhihu and in our content ecosystem. Now the other thing is the scalability of our membership business. We…

The next question comes from Ashley Xu from Credit Suisse. Please go ahead.

Thanks, management for taking my question. I want to get more color about our Ecosystem First Strategy, which has been executed this quarter. Are there any operating metrics that could be shared to showcase the improvement in our community? And also, what's the timeline of this adjustment? And should we expect any impact on our user growth targets both for the year-end and also in the long-term? Thank you.

First of all, thank you for your questions. They're really multiple levels of questions to your statement, so I'm going to respond to them one by one. Now, regarding the first part of your question, actually, at the beginning of the year, we started our Ecosystem First Strategy which mainly revolves around our user experience, creator experience, content with a sense of fulfillment, a good community atmosphere and really matching commercialized matching the development of commercialization. Now first, let's look at the results for Q1 and Q2 ever since we adopted this new strategy. Now in terms of the content production, the average daily content volume increased significantly. And also ever since we highlighted the level of the quantity of high-level content creators we are able to observe actually an increasing activity rates of those creators and also the DAU of mid-level and high-level creators increased by 50% year-over-year and the average daily creation volume nearly doubled year-on-year as well. Now, last time I mentioned about launching the Haiyan selection 4.0 project, which involved a lot of resources allocation, and favorable support going to the high-level content creators. And now we're entering the second developmental stage of that project, which is more than just fewer updates. We are really pushing forward a new iteration of that projects, which means that the positive changes from that we observed from high-level content creators are beginning to spillover to our mid-level content creators as well, which also generated there positive outcome for the second quarter of the year. Now in terms of the toolkits [ph] that we provided for our content creators, first of all, the goal is to reduce the cost of content creation. And ever since the second quarter, we've received a lot of positive feedback regarding using those toolkits because…

[Operator Instructions] The next question comes from Daisy Chen [ph] from Haitong International. Please go ahead.

I'll translate myself. My question is about your traditional [indiscernible]. Can management [indiscernible] on the reasons behind revenue deceleration for [indiscernible] practices in the second quarter. For example, the performance of advertisers [indiscernible] that were affected by the pandemic resurgence. Also can management comment on the recovery training [indiscernible], including trains in June, July and August. And your expectations on the future performance -- anticipated in 6 months or in the third quarter into the second half? Thanks.

First of all, thank you for your question. I’m the CFO. Let me address -- respond to this question. Now for the second quarter of the year, the whole marketing industry has been struggling due to the macroeconomic effect and also the weakening demand side as well as the resurgence of the pandemic. And this is not just about incidents to our company, but for the whole marketing industry. But overall, our advertising and our CCS business still achieve positive growth. We also notice that our clients are actually paying more attention to pursuing higher ROI. At the same time they are paying more attention to gaining long-term value from the marketing activities as well. Now, from the user side, we also noticed that the consumption behavior has become more cautious and more pragmatic. So when making consumption decisions, it has become the norm to really obtain information from content platforms, and also from multiple other platforms as well. Now let me talk about the advertising and CCS business one-by-one. First of all, our CCS really has become a marketing product that bears that gained the trust from our users with our high-quality content. And it continues to gain market share as well with a year-over-year growth of over 15%. And the merchants and our customers that invested in our CCS continue to grow in Q2 this year. Also, in terms of the vertical that are active using our CCS include our IT, and 3C electronics, education and training, e-commerce, et cetera. And the average amount invested per customer also increased year-over-year, proving that we are actually still the go to platform for brands and business customers, even in a very harsh economic environment. Now in terms of our advertising business, which is also affected by the overall macro element…

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Jingjing for any closing remarks. End of Q&A:

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.