Kuaishou Technology

HKEX:1024

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Kuaishou Technology First Quarter 2021 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded.

At this time, I would like to turn the conference over to Heather Diwu, Director of Investor Relations. Please go ahead, ma'am.

[Heather Diwu, executive]

Thank you, operator. Good evening, good morning, ladies and gentlemen. Welcome to our first quarter 2021 financial results conference call. Joining us today are Mr. Su Hua, Co-Founder, Chairman and CEO of Kuaishou; and Mr. Nicholas Chong, 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-IFRS financial measures for comparison purpose only. For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of the results for the quarter ended March 31, 2021, issued earlier today.

In addition, during the Q&A session, we'll take questions in both English and Chinese. A third-party translator will provide consecutive translation. All translations are for convenience purpose only. In the case of any discrepancy, management's statement in the original language will prevail.

As a reminder, the conference is being recorded. In addition, a webcast replay of this conference call will be available on our website at ir.kuaishou.com.

And now I'm pleased to turn over the call to Nicholas.

[Yik Kay Chong, executive]

Thank you, Heather. Hello, everyone. Thank you for joining our earnings call for the first quarter of 2021 today. I'm pleased to deliver today's opening remarks on behalf of Su Hua.

From the start of 2021, we have been upholding the principle that one shall have peace of mind when he possesses a piece of land and one possesses a piece of land when he has peace of mind. In Chinese, it's [Foreign Language].

We achieved a solid set of results in the first 3 months of 2021 through careful coordinated management and improvement of our ecosystem as well as the services and system that allows it to flourish. In the first quarter of 2021, we continue to invest in technology, and we enhanced and upgraded our product and services, diversified and enriched our content and further intensified our dedication to traffic allocation, efficiency and equilibrium. In addition, we held an innovative and effective Chinese New Year campaign. These efforts have amplified the energy and creativity within our content community, while leading to increases in both user base and user engagement, delivering a real shot in the arm for our platform's overall vitality.

We broke record after record for our key operating metrics on Kuaishou App in the first quarter of 2021, with average DAUs and average MAUs reaching 295.3 million and 519.8 million, respectively, in China. The DAU-to-MAU ratio, an important metric for evaluating community activeness, reached 56.8% in the quarter, after having increased continuously from 48.6% in 2018 to 53% and 55.1% in 2019 and 2020, respectively.

Average daily time spent per DAU on Kuaishou App hit 99.3 minutes in the quarter, representing a year-over-year increase of 16.5% and a quarter-over-quarter increase of 10.5%. Furthermore, in the first quarter of 2021, average DAUs on our apps and mini program in China reached 339.2 million, representing a year-over-year increase of 26.4% and a quarter-over-quarter increase of 20%. These new users came from various communities, evidence that our user base as well as demographic and geographic diversity have continued to strengthen, which is something we are really delighted to see.

Our massive number of user interactions, vibrant content creation and strong community trust really enhanced the monetization potential of our ecosystem and in turn attract more advertisers, merchants and other business partners to our platform. In the first quarter of 2021, we continued our run of strong year-to-year top line growth with revenue reaching RMB 17 billion, representing a year-over-year increase of 36.6%. Despite the first quarter of the year usually being perceived as a low season in the advertising industry, our revenue from online marketing services grew by 161.5% year-over-year to RMB 8.6 billion, with its contribution to total quarterly revenue exceeding 50% for the first time.

Revenue from other services, including e-commerce, showed explosive growth, reaching RMB 1.2 billion, a year-over-year increase of 589.1%. Our total e-commerce GMV in the first quarter of 2021, which was equally impressive, amounted to RMB 118.6 billion, representing a year-over-year increase of 219.8%. Our gross margin improved to 41.1% in the first quarter of 2021 from 34.2% in the same period of 2020, benefiting from strong performance in online marketing and e-commerce and its positive impact on our revenue mix.

In the first quarter of 2021, we enhanced trust between content creators and their followers through better integration of our platforms, private and public domain traffic. Such integration further increased the value of our content creators' private domains, entrenching the success of our unique, warm and trustworthy online community. Our experience shows that private domain traffic encourages more in-depth interactions and stronger network effects, helping content creators to nurture their followings and strengthen their monetization capabilities. As a result, we expect this can eventually add a great deal of value to our ecosystem as a whole.

In the first quarter of 2021, we helped even greater number of premium content creators to increase traffic to their premium content and retain traffic in their private domains, enabling them to further grow their follower basis. At the same time, we have witnessed increasing social trust between our users and content creators. As of March 31, 2021, we had over 11 billion pairs of mutual follows cumulatively, defined as 2 users that follow each other on Kuaishou App, on top of enhancing social trust.

Increased private domain traffic also brings a significant amount of monetization value for our content creators and our platform. This is evidenced by the fact that in the first quarter of 2021 most of our live streaming revenues and total e-commerce GMV came from private domain contribution. As a result, we are confident that a greater focus on the private domain traffic will bring sizable long-term value to our platform.

Our policy of allocating more traffic to high-quality content has not only encouraged greater user interaction and social trust, but also further strengthened the virtuous cycle of content creation and content consumption on our platform. Kuaishou Search, in Chinese, is [Foreign Language], is another core channel for us to allocate more exposure to premium content.

In the first quarter of 2021, an average of over 250 million users on Kuaishou App use Kuaishou Search each month. Kuaishou Search is a very effective tool in helping content creator better understand and provide solution to their users' inquiries. By doing so, it empowers creators to enlarge their follower bases and convert random traffic to loyal fans through the creation of premium and relevant content.

In each month of the first quarter of 2021, over 10 million users began their journey as content creators on our platform. In the 12 months ended March 31, 2021, we have nearly 24 million users earn money in certain form on Kuaishou App.

In the first quarter of 2021, we also continued our efforts and initiatives on new content diversification and content quality improvements. On content format, we continue our expansion. Since the launch of Kuaishou Playlet, in Chinese, it's [Foreign Language], it has become increasingly popular among our users.

We further enriched our content offerings. We launched Project Astral, in Chinese is [Foreign Language], in December 2020 to attract and incentivize more semiprofessional content creators to produce short plays covering a broad range of teams. To date, we have attracted over 60,000 content creators to Kuaishou Playlet, among whom over 8,000 have gained over 100,000 followers.

In March 2021, we attracted more than 200 million users on average to watch short plays on Kuaishou Playlet on a daily basis. We also established partnerships with leading online literature platforms and acquired copyright for premium literature works, enabling our content creators to produce short play based on works better known to their audiences.

Two of the key drivers behind our increasingly diversified and growing user base, our vertical expansion of content and operations to refine content. As a highly active social platform, we have observed an increasing demand from different user groups for more diversified and refined content. We make concerted efforts accordingly to expand into new content categories such as local services and sports. Due to the richness of our content and high level of social trust provided by ecosystem, we're able to provide much more than information that just covers daily lives.

Our high social trust enable our platform to convey actionable information on more personal services or decisions that may have bigger impacts on our user lives, including areas such as travel, real estate and vehicle purchases. There are many talented people in our vibrant content community with professional expertise, skills and knowledge in a wide range of subjects, leveraging the rich private domain traffic on a broad-spec platform. The subject matters experts amongst our content creators are able to showcase their expertise and provide solution to serve user needs. Taking advantage of short video and live streaming has the effective infrastructure.

By the end of the first quarter of 2021, there were over 15 segments on our local services channel, generating closed-loop transactions on our platform. It's clear that our commercialized content ecosystem with participation from users, merchants and content creators is already taking shape.

Since 2020, ten of millions of videos are uploaded to our platform every day on average. And every month, hundred of millions of live streaming sessions are hosted on a platform on average. We continue through various avenues to make content creation more convenient and enjoyable for our creators while also encouraging them to create content that is more expressive and invigorating for our users.

Recently, we launched Kuaishou Cloud editing platform, in Chinese [Foreign Language], Kuaishou Cloud Live Studio, in Chinese is [Foreign Language], to aim at improving the productivity of our professional creators. Kuaishou Cloud editing platforms allow us for online video editing with multiuser collaboration and also has functionalities like automatic speech recognition based on subtitling and intelligent video, cropping and et cetera. While Kuaishou Cloud live Studio provides easy live streaming management, which includes live stream and adoption of a broader set of devices as well as other intelligent tools. This enabled users to produce content more easily have a more immersive content consumption experience through refined and expressive content.

Moving to our core business stream. Let us begin with online marketing services, which we saw very impressive growth in the first quarter of 2021, despite Q1 being traditionally being known as a quiet period for advertising. Our revenue from online marketing services increased by 161.5% in the first quarter of 2021 on a year-over-year basis and 0.5% on a quarter-over-quarter basis to RMB 8.6 billion. This success can be attributed to first investment in experienced accumulation and ad system refinement, which we have been making continuously since launching our online marketing services segment in 2017. Our constantly optimized algorithm has been able to offer advertisers improved distribution precision.

Second, our continuous improvement in the quality of ad material and ad content, combined with expanded partnership with content creators, have enabled our content creators to create customized content for advertisers and contributed to the further effectiveness and efficiency of our advertising platform. This has been a triple win for our advertisers, content creators and our platform.

As of today, our partnership with content creators on our Star Magnet, in Chinese is called [Foreign Language], and collaboration platform has more than doubled from the end of 2020. The video views for ad content produced by incorporating content creators also increased by over 100% quarter-on-quarter in the first quarter of 2021.

Brand advertisement was one of our key areas in online marketing services during the first quarter of 2021. Brand advertisers increased their advertising volume proactively during this year's Chinese New Year season in order to associate their ads with the numerous user activities hosted on our platform. This drove significant growth for our brand ads. To make the most use of our advantages as a leading online community, we aim to provide a full suite of brand and solution by integrating branding campaigns and performance advertising with our digital promotion programs, supported by our refined algorithm and system. And together with our innovative ad formats, the effectiveness of our brand ads has continuously improved.

Another string to our bow is our broad coverage in China, enabling us to help brand advertisers expand their reach beyond their traditional regions. Our confidence, technology's precise and comprehensive marketing capabilities, in-depth user insights as well has brought users, which are increasingly well recognized by the advertising industry, making our platform a more compelling proposition to advertisers than ever before.

Kuaishou Union, or in Chinese, we call it [Foreign Language], was another important driver of the solid quarterly growth in our online marketing segment. To differentiate ourselves from other market players, we created a refreshing ad union product, our offering of a three-in-one integrated package, including distribution of advertisement as well as content and e-commerce products, set it apart in terms of value and distinctiveness from a competitor's offerings which are near for ad unions.

Through Kuaishou Union, we have been able to empower developers via abundant high-quality content, products and creative ad formats. We have also been able to provide more exposures and greater benefits for our content creators and e-commerce merchants. Kuaishou Union has been -- has become increasingly influential to the sector since its launch, with its developer and user coverage continuously expanding.

Our live streaming ecosystem continued to serve as our foundation and cornerstone driving the prosperity of our wider platform. In the first quarter of 2021, we continue our expansion into new [ scene ] and our efforts to increase the depth and breadth of our content library. Together with our increasing number of innovative formats, we have made our offering more comprehensive than ever before.

Throughout the full month of February 2021, we launched an official 26-day nonstop live streaming series called Super Live, in Chinese [Foreign Language]. Super Live was the celebration of our best live streaming content, showcasing numerous categories and formats, such as celebrities, talk show, online concerts, ACG performances and Chinese New Year Gala, et cetera. Within this 26-day run, we attracted more than 1.5 billion viewership, and Super Live become one of the super IPs on our platform. The success of Super Live demonstrates both the power of our platform and the great impact we can make through innovative content concepts and campaign.

The increased popularity of short video and live streaming and the abundant supply of short video and live streaming content have required us to not only provide more premium content, but also refine and categorize content into various vertical subdivision, so as to better satisfy the interest of our various and different communities. In the first quarter of 2021, we became the official live streaming and short video platform of the China Basketball Association, or CBA, the top men's professional basketball in China. Users on our platform can now watch live stream CBA events in high definition and enjoy a rich set of interactive features.

Meanwhile, our recreation copyright to content from CBA events allow us to operate differently from other traditional formats of live sports broadcasting. Both professional sports competitors and commentators and our regular users can open their own live streaming rooms and share their unique style of sport commentary with their followers. The introduction of high-quality IP assets such as the CBA has been effective in growing user activeness in our live streaming content creations and social ecosystem. The number of live streaming users in our sports vertical has increased by over 200% in late April 2021 since the launch of CBA live broadcasting on our platform.

In the first quarter of 2021, the numbers of daily active live streaming hosts and daily active live streaming users both achieved double-digit growth rate on a quarterly -- quarter-over-quarter basis, showing the powerful flywheel effect of content creation and content consumption on our platform. The average MPU for live streaming on Kuaishou App was 52.4 million, increasing by 3.1% from 50.8 million in the fourth quarter of 2020. While the first quarter of 2020 set a high record for live streaming due to the COVID-19 quarantine, our monthly ARPPU for live streaming on Kuaishou App still grew by 2.9% to RMB 46.1 in the first quarter from RMB 44.8 in the same quarter of 2020. We believe that as user ad and content creators interact more, their mutual levels of understanding and trust will grow further, enabling our vibrant live streaming ecosystem to thrive.

Within this closed-loop model, as content creators nurture their following, they can increase traffic to their private domain and generate income through a greater varieties of channels, including advertisement and e-commerce. The rapid growth of other services continued in the first quarter of 2021, driven by our e-commerce business, with revenue increasing by 589.1% to RMB 1.2 billion, compared with the same period in 2020. Our total e-commerce GMV achieved an impressive year-over-year increase of 219.8%, reaching RMB 118.6 billion in the first quarter of 2021.

Our platform with this massive number of content creators has huge creation potential. By directing such creativity towards e-commerce, we have been able to develop e-commerce-related content into an important category serving as one of the key attractions and differentiators for our e-commerce business. We encourage our merchants to produce premium content in partnership with content creators. This content, together with creator's [indiscernible] can help attract targeted users to the creators' private domains, where the traffic can be retained and monetized. We believe this, together with our efforts on improving product quality, will drive significant improvements in our transaction conversion rates.

We are already seeing more positive feedback with e-commerce live streaming, capturing a higher percentage of average daily time spent per DAU on Kuaishou App in the first quarter of 2021 than it did in the first quarter of 2020. Our greater focus on private domain value compared with our dedication to content improvements has provided a framework around which a trust-based e-commerce ecosystem has been able to grow and flourish.

The relationship that creators are able to develop in the private domains and the trust that comes from those relationships is what naturally gave rise to increased transactions between buyers and their trusted merchants. This has also drive merchants to deliver better product in service creating a positive feedback loop that in turn, improved overall user experience and so on, adding a great deal of long-term value to our dynamic ecosystem.

In the first quarter of 2021, private domains contribution to total e-commerce GMV overtook that of public domain, showing that our positive cycle is already in full swing. To enhance our operating efficiency and continuously elevate our network effects, we have continued to invest in e-commerce infrastructure. This has included introducing more tools and services or Kuaishou, in Chinese [Foreign Language]. This has been extremely well received by merchants. The contribution from Kuaishou App to total e-commerce GMV for the first quarter of 2021 increased to 85%, compared with 53% in the same period of 2020.

To better improve our closed-loop ecosystem, we have started to integrate the means of resources on the supply chain side through Kuaishou Selection, in Chinese [Foreign Language]. By doing so, we are able to provide -- to promote high-quality officially-selected products. We have also been able to facilitate partnerships between merchants with strong supply chain capabilities and KOLs with sticky following. Our digital tools in Kuaishou Selection can help merchants analyze precisely the performance of various products and the behavior of their followings, helping them to optimize product selections, which in turn reinforcing the overall efficiency of our ecosystem.

For the first quarter of 2021, the contribution of Kuaishou Selection to total e-commerce GMV doubled on a quarter-over-quarter basis. While China leads the world in terms of the size of its short video and live streaming industry, overseas markets also have a great -- also have great potential. In the first quarter of 2021, we moved forward with our overseas strategy, particularly in South America and Southeast Asia.

Based on previous experience, we believe that the local content is a key factor to retaining users for a longer period. We have, therefore, invested in user acquisition and content localization for our targeted markets. We were more than delighted to see our overseas market business outperformance -- outperform expectations with average monthly active users exceeding 100 million in the first quarter of 2021 and further increasing to over 150 million in April 2021.

We are still at an early stage for our developing overseas business. But through these preliminary steps, we are thrilled to see real potential for our business model and ecosystem outside of our domestic market. It's after all, from tiny acorns that mighty oak trees grow.

The momentum we have built up in the first quarter of 2021, combined with our ongoing investment in areas such as traffic allocations and equilibrium, content expansions and operations, services and product diversification as well as quality improvement, has put us in a great position going forward to both strengthen and protect our warm and trustworthy online community. Throughout the rest of 2021, as our business further expands, we will continue our focus on user and customer experience and keep true to our mission to be the most customer-obsessed company in the world.

This concludes Su Hua's remark. I will now provide a brief overview of our results -- financial results for the first quarter of 2021. Let us now start our financial performance, financial performance for the first quarter of 2021.

Our revenue for the first quarter of 2021 increased by 36.6% to RMB 17 billion from RMB 12.5 billion for the same period of 2020. The increase was primarily attributable to our online marketing services and other services, including e-commerce business. As a percentage of revenue, online marketing services contributed to 50.3%, while live streaming contributed 42.6% and the remaining 7.1% was from other services.

Our cost of revenue increased by 22.3% to RMB 10 billion for the first quarter of 2021 from RMB 8.2 billion for the same period of 2020. Gross profit increased by 64.1% to RMB 7 billion for the first quarter of 2021 from RMB 4.3 billion for the same period of 2020.

Our gross profit margin for the first quarter of 2021 increased to 41.1% from 34.2% in the first quarter of 2020, benefiting from the change of revenue mix. Our sales and marketing services increased by 44% to RMB 11.7 billion for the first quarter of 2021 from RMB 8.1 billion for the same period of 2020.

As a percentage of our total revenues, our selling and marketing services increased from 65% in the first quarter of 2020 to 68.5% for the same period of 2021. The increase was primarily due to the increase in promotion and advertising expenses such as the promotion for Kuaishou Express and other apps and other brand market campaign activities, which in line with our strategic decision to invest more on selling and marketing efforts to continue to grow our user base and user engagement, enhance our brand recognition and develop our overall ecosystem.

Our administrative expenses increased by 128.2% to RMB 703.4 million for the first quarter from RMB 308.2 million for the same period of 2020 and increased to 4.1% from 2.5% as a percentage of total -- of our total revenues. The increase was primarily due to an increase in headcount to support our business growth and increased share-based compensation expenses.

Our research and development expenses increased by 199.2% to RMB 2.8 billion for the first quarter of 2021 from RMB 939.5 million for the same period of 2020 and increased to 16.5% from 7.5% as a percentage of total revenues. The increase was primarily due to higher headcount expenses as we continue to invest in AI, big data and other advanced technologies as well as increased share-based compensation expenses. Excluding the impact of share-based compensation expenses, research and development expenses as a percentage of revenue were 10.8% and 6.4%, respectively, for the first quarter of 2021 and that of 2020.

In the first quarter of 2021, our fair value changes of convertible redeemable preferred share were negative RMB 51.3 billion, compared to negative RMB 25.9 billion for the same period of 2020, primarily due to changes in the valuation of our company, which was determined by the offering price of the company's shares in our initial public offering.

Our loss attributable to the equity shareholders -- equity holders of the company was RMB 57.8 billion for the first quarter of 2021, compared to RMB 30.5 billion for the first quarter of 2020. Adjusted net loss for the first quarter of 2021 was RMB 4.9 billion compared to a loss of RMB 4.3 billion for the same period 2020. Adjusted EBITDA for the reporting quarter was negative RMB 4.2 billion, compared to negative RMB 3.7 billion in 2020.

But as of end of first quarter of 2021, we had cash and cash equivalents, short-term time deposits and restricted cash of RMB 58.2 billion as of March 31, 2021, compared to RMB 23.1 billion as of December 31, 2020.

This concludes our prepared remarks. We would like to now -- we would like now to open the call to your questions. Operator, let's go to the Q&A session. Thank you.

[Operator]

[Operator Instructions] Today's first question comes from Eddie Leung with Bank of America Merrill Lynch.

[Eddie Leung, analyst]

Pretty strong performance in advertising and e-commerce. So could you let us know the key advertising industry and the major e-commerce product categories in the quarter? And are we seeing any change in trends in these major advertising industries and product categories in the near term?

And then just a quick question on live streaming. It seems like the revenue sharing cost as a percentage of our live streaming revenue went up quite a bit. So wondering a little about that because of Super Live content and CBA. And if so, how should we think about the -- kind of like the operating leverage in revenue sharing costs going forward?

[Yik Kay Chong, executive]

Eddie, I think we can't catch all your questions. Could you repeat it?

[Eddie Leung, analyst]

Sure. My first...

[Yik Kay Chong, executive]

Could you speak in Mandarin as well? Yes.

[Eddie Leung, analyst]

[Foreign Language]

[Yik Kay Chong, executive]

[Foreign Language]

[Eddie Leung, analyst]

[Foreign Language]

[Unknown Executive]

Do you mind if I just translate the first part of the answer?

So just now the answer is that the main categories are 20% media-related, 20% gaming, 20% Kuaishou, 10% e-commerce. As regards categories of brands, well, they include mainly e-commerce retail, fast-moving consumer goods and also food and beverages.

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] I think we need to wait and see for a longer period of time because, usually, the first quarter is the low season.

[Yik Kay Chong, executive]

Eddie? Hello?

[Eddie Leung, analyst]

Yes. And the revenues question about live streaming.

[Yik Kay Chong, executive]

So sorry. Could you repeat the question on the live streaming? Because the reception is not clear because there's a lot of echo.

[Eddie Leung, analyst]

[Foreign Language]

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] Basically, our 2 main components of our profit sharing is -- the first part will be live streaming. The second part is advertising business -- profit sharing. For live streaming, while the share related to the unions is relatively smaller, it is only like 10% to 20%. So that's how the composition looks like.

[Operator]

Our next question today comes from Thomas Chong at Jefferies.

[Thomas Chong, analyst]

[Foreign Language] Congratulations on a very strong advertising and e-commerce. My question is about the online advertising side. Given that we have a couple -- a number of advertisers, brand advertising undergoing very fast growth and also the Star Magnet attracting collaborators, partnering with advertisers. Can you comment about the space, about the contribution from the brand advertisers in Q1?

And also, can you comment about our strategies in maintaining such a fast revenue growth in advertising in the next couple of years?

[Foreign Language] And then my second question is about the key operating metrics, such as the MAU, DAU and the time spent, which we have seen the time spent is doing very well in Q1. So I just want to get some thoughts about the long-term trend that we should be anticipating.

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] Concerning our brand advertising, we started this only last year. The trend in the first quarter is really good. That's why we have revised our target upwards. So we are looking at mid- to high digit growth. And also for the advertising union, we started that last year as well. Again, we think that we are going to see a mid- to high digit growth figure.

[Yik Kay Chong, executive]

Your second question is regarding the operating metrics, right?

[Thomas Chong, analyst]

[Foreign Language]

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] Regarding our DAU and MAU, we believe that these numbers will both rise. In the first quarter, time spent per DAU is 99.3 minutes. It will continue to go up, we believe. And as regards to DAU during the Chinese New Year, and that is February, well, that is a kind of rise. But then in March, it's weakened a bit very naturally. And then April will be higher than March. And then we believe that May will also be higher than April.

And when you look at DAU divided by MAU, right now, we are at 57%. We believe that it will continue to rise as well. For the mid- to long term, DAU divided by MAU will reach 60%. So we have already given this estimate in our last communication. So I think this estimate will not change.

Now concerning the ways as to how we are going to improve DAU, MAU and time spent, I think the work is reflected in our financial results as well as in our announcements and plan of work. So first of all, we are going to continue to enrich our content. We will bring in more products and services. So I think this kind of work is already stated in our earnings release.

[Operator]

Our next question today comes from Alex Poon with Morgan Stanley.

[Chun Poon, analyst]

[Foreign Language] My first question is related to the balance between private domain and public domain as we have already achieved 85% GMV coming from Kuaishou Store. But from an advertising point of view, would the allocation of more private traffic affects the long-term advertising revenue per MAU? Because, for example, in private domain, there will be less feed advertising.

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] Let me clarify one point concerning the split or the balance between public and private domain traffic. Well, this is not something that we can take the initiative to allocate. In fact, it is determined by the actual or active choice of the users. So the users will decide on how much time they would like to spend in public domain or in personal pages when they consume content. As regards to our team, there is a division of labor between public and private domain. So our team members, our employees spend time on optimizing and enhancing the user experience. So when it comes to private domain, I think the effect or the outcome related to e-commerce is better. And for public domain, advertising will be the dominant play. However, the split or the balance between the 2 is mainly determined by users' active choice.

[Chun Poon, analyst]

[Foreign Language] My second question is regarding our Search advertising. We have -- sorry, Search users. We've mentioned we have 250 million users on a monthly basis using Search. So I want to understand, are we monetizing the Search traffic? And in the longer term, how big is Search?

[Yik Kay Chong, executive]

[Foreign Language]

[Unknown Attendee]

[Interpreted] I think our coverage of users in the video search has been quite good. In fact, there is a growth and rise in number for video search users and creators are also enhancing their content. At the moment, we have not emphasized the monetization of video search business. However, when short video contents are getting richer and richer with fuller, more complete coverage, I think users will be able to more easily find good-quality short videos to satisfy their needs in their lives and also their needs for work, for education as well as for entertainment. But then still, we are only at the initial stage in this particular segment.

[Operator]

Our next question today comes from Ella Ji with China Renaissance.

[Diying Ji, analyst]

Congratulations on strong quarter. [Foreign Language]

[Yik Kay Chong, executive]

[Foreign Language]

[Diying Ji, analyst]

[Foreign Language]

[Yik Kay Chong, executive]

[Foreign Language]

[Interpreted] So okay, when it comes to e-commerce live streaming monetization, I think those are related more to entertainment as well as those with products being connected to the live streaming will be higher in the result of monetization. The ROI is usually higher. Besides, when it comes to the market live streaming, I think the overall volume is actually 2x that of e-commerce live streaming. However, there are also some requirements in relation to order placement. And for the merchants live streaming, the GMV is actually 70% of the total. So when we do this breakdown, we also look at the source of channels or the actual channels from which the business comes in.

[Operator]

And thank you, ladies and gentlemen. Due to time constraints, this does conclude today's question-and-answer session. I'd like to turn the conference back over to Heather for any additional or closing comments.

[Heather Diwu, executive]

Thank you once again for joining us today. If you have any further questions, please contact our IR team or TPG Investor Relations. Thank you.

[Operator]

Thank you. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]