36Kr Holdings Inc. (KRKR) Earnings Call Transcript & Summary

Hello, ladies and gentlemen. Thank you for standing by, and welcome to 36Kr Holdings Inc. First Quarter 2022 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I'll now turn the call over to your host, Yang Li, IR Manager of the company. Please go ahead, Yang.

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings First Quarter 2022 Earnings Conference Call. The company's financial and operational results were released earlier today and have been made available online. You can also view the earnings press release by visiting the IR section of our website at ir.36kr.com. Participants on today's call will include our Co-Chairman and CEO, Mr. Dagang Feng; and our Chief Financial Officer, Ms. Lin Wei. Mr. Feng will start the call by providing an overview of company and performance highlights of the quarter in Chinese, followed by an English interpretation. Ms. Wei will then provide details on the company's financial results, before opening the call for your question. Before we continue, please note that today's discussion will contain forward-looking statements made under safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that 36Kr's earnings press release and this conference call includes discussion of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. 36Kr's earning press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. And please note that all amount numbers are in RMB. I will now turn the call over to our Co-Chairman and CEO, Mr. Dagang Feng. Feng, please go ahead.

[Foreign Language]

[Interpreted] Thank you to everyone. Thank you for joining our first quarter 2022 earnings conference call.

[Foreign Language]

[Interpreted] Despite the recent resurgence of the COVID-19 pandemic and ongoing macro headwinds, we achieved solid top line performance in the first quarter with double-digit revenue growth and a record high quarterly net income since our IPO. Notably, our advertising business and the enterprise value-added services both reported robust results and year-over-year growth. As a prominent brand and a pioneering platform dedicated to serving New Economy participants in China, we remain committed to establishing a high-quality service system to build a flywheel of growth with diversified business offerings.

[Foreign Language]

[Interpreted] I'd like to begin with an overview of our content initiatives. In the first quarter, we continued to upgrade our content offerings and create new programs and formats to expand our service boundaries. For example, we launched several official content accounts during the first quarter: KR Carbon, [ Wave ] and [ KR Bondas ] for more service coverage from the perfecting of China's new carbon policy, investment institutions and creative-development audiences. respectively. These programs quickly engage users and had all enjoyed high popularity thus far. Our content team also explored new content formats and strengthened our collaboration with WeChat video accounts and live streaming projects. The live streaming audiences attracted by our new program [indiscernible] digital and [indiscernible]. Going forward, we will roll out additional live streaming series focused on hot niche markets. This new video and live streaming projects fully mobilize 36Kr's content creation and editing capabilities as well as industry resources to deliver newer high-quality content, industry updates and expert opinions to our users. We are also meeting the content needs of more diversified user groups, which substantially broaden our user base.

[Foreign Language]

[Interpreted] Furthermore, for our public active market content side, our Warren Buffet Shareholder Meeting series that we jointly created with Tiger securities, also gained traction. Building on our content production capabilities, we conducted an in-depth analysis of the investment sales, target assets and investment [ transit ] costs at meetings, winning acclaim among institutional users with our high-quality content and innovative formats. After the meeting series, the Omaha Value Investment Education and Research Center reached out to 36Kr to explore future potential collaboration opportunities. Finally, alongside our efforts in short-video and live streaming, we also continued to make strides in audio content during the quarter. For example, we established a cooperation with [indiscernible] to showcase [ KR Finances ] rich content in audio scenarios, which effectively elevates our user experience.

[Foreign Language]

[Interpreted] Content quality is always a top priority for 36Kr. As we remain committed to executing our content platform strategy, we still focus on PGC and UGC. We have consistently incorporated more high-quality content into 36Kr's ecosystem. The number of content pieces on our featured channels with pages views about 100,000 -- 200,000 continuously increased during the quarter. Notably, the topic [ Alternate Cars] streamed [ for ] primary school students of [ Pokomami ] we initiated recently has sparked animated discussion online, catapulting the topic to Weibo's hot searches list. Our focus on premium engaging content is paying off, leading to a remarkable 15th consecutive quarter of page review growth. To better reflect the 36Kr's content influence and user coverage, starting from this quarter, we will report the total number of our followers inside of our page views. This new matrix will provide investors with a more comprehensive perspective from which to assess 36Kr's performance across the entire network. As of the first quarter of 2022, the number of our followers exceeded 24 million, a year-over-year increase of 25%.

[Foreign Language]

As the number of our followers on Bilibili is well beyond 1 million in the beginning of 2022, 36Kr's short video also gained traction on other platforms such as Kuaishou and Douyin, demonstrated by the surging number of our followers. As of the end of the first quarter of 2022, our short-videos have attracted nearly 7 million followers in all, not only -- we gained over 180,000 new followers of our official corporate accounts on Kuaishou in just 1 day. Riding on the popularity of Bing Dwen Dwen, the mascot of the Beijing Winter Olympics, we created a short video, which was reviewed more than 30 million times, rising to #2 on Kuaishou's chart of top Winter Olympics-related searches.

[Foreign Language]

[Interpreted] The incremental building of premium brand requires not only innovation content and formats, but also an unwavering commitment to our mission of empowering New Economy participants to achieve more. We have consistently adhered to our philosophy of working closely with startups in helping them grow bigger and stronger. We applaud them for their progress and lend a helping hand in times of difficulty. As a companion -- a company and enabler of the industry, we hope to truly assist entrepreneurs during these exceptionally challenging times. To that end, in early May, we officially launched the [ Seeking the Life ] program to help business, particularly small- and medium-sized enterprises to maintain their brand share of voice despite the market downturn. This program, again, facilitated a seamless integration of information, capital, talent and technology.

[Foreign Language]

[Interpreted] Moving now to our ongoing business expansion efforts. Despite the recent COVID-19 resurgence, we did not slow down our expansion in the Greater Bay Area and overseas markets. We conducted a virtual live streaming session in our Junhao headquarters in South China for the first time during the quarter, generating new ideas for product launches against the backdrop of recurrent COVID-19 outbreak. On the international front, 36Kr Global, which specialize in overseas markets, continued to provide efficient connection services, helping various Chinese brands operating overseas network to [ flow to local ] agencies and investment institutions to explore business development opportunities in those markets.

[Foreign Language]

[Interpreted] New products and models have helped us build a closed-loop service framework and a diversified 3-dimensional ecosystem. Staying true to our vision of empowering New Economy participants to achieve more, we consistently strive to broaden our media service boundaries and refine our business model, which are also reflected in our commercialization performance. Next, let's look at our achievements on that front.

[Foreign Language]

[Interpreted] As our cash cow business, advertising business performed well in the first quarter, achieving an increase of 13% year-over-year. Even against the backdrop of COVID-19 resurgences and macroeconomic challenges, our advertising revenue derived mainly from brand marketing has experienced growth far above industry average, thanks to our relentless efforts to create innovative service formats and improve customer satisfaction levels.

[Foreign Language]

[Interpreted] Leveraging our short-video format, we achieved a new high in terms of contract size for our advertising services during the quarter. Notably, Intel continued to promote its new products through our short-video formats, with its contract size continuing to rise. Moreover, we launched an original program, [ AR Task ],to promote [indiscernible], resulting in a contract far larger than those of the traditional text and image-based marketing solutions. We also helped various well-known companies, including Panasonic, Changan Auto, Toyota, DYB, Dali Education and IFLYTEK promote their brand concept and create products and launch videos. The continuous stream of new customers and repeat orders of existing customers are a testament to the effectiveness of our short-video format, influencing marketing, targeting fee and consumers, while also, therefore, raising our average revenue per customer.

[Foreign Language]

[Interpreted] Our consistent innovation in text and graphics content also contributed to excellent commercialization performance. For example, [ OUS ] attracts increased attention from young user groups with service on young people's consumption trends, featuring well-funded reasoning and sense formats and garnered widespread acclaim by creating unique promotion matters for customers, including DingTalk, Huawei, HLA, Pinduoduo, Zhihu, Juhu and IQIYI. Given [ OUS'] advantages, in the first quarter, we were able to raise its record to a level considerably higher than that of similar official accounts. Going forward, we believe this program will propel the expansion of our service presence and raise our advertising revenue ceiling.

[Foreign Language]

[Interpreted] Turning now to our enterprise value-added services, which grew 35% year-over-year in the first quarter despite COVID-19 impact, thanks to our strategy adjustments and new service formats.

[Foreign Language]

[Interpreted] On the corporate story side, 36Kr jointly hosted the display of enterprise service program with DingTalk and collaborating with them to planned events agenda and content. Leveraging our knowledge of enterprise in enterprise services, we not only helped the participants -- enterprise service platforms better understand the latest industry updates and future development opportunities, but also assisted DingTalk in funding potential partners along the value chain.

[Foreign Language]

[Interpreted] In terms of institutional collaboration, 36Kr partnered with [ Orient ] Securities to organize the dual-carbon [ start ] sustainable innovation contest aimed at discovering innovative companies with potential in 4 major sectors: new energy, new materials, new technology and new business models. We hope to help companies gain a deeper understanding of the dual-carbon policy, better gauge market demands and connect with industrial capital.

[Foreign Language]

[Interpreted] Our regional expansion also achieved good results during the quarter. We entered into a partnership with additional government agencies, including Jianye district government in Nanjing, the China [indiscernible] of Information and Communications Technology affiliated with the Ministry of Industry & Information Technology and the high school -- Business School of Beijing Overseas Talent Association to integrate it with resources in innovative fields such as the Metaverse and industrial Internet, culture flow connections between local governments and enterprises in both the upstream and downstream of the industry chain to empower industry upgrades. In addition, we are also working to expand our enterprise [ line base ] as a new growth avenue. During the first quarter, the proportion of our enterprise client grew substantially, not only both the number of enterprise clients and value of contract execution increased significantly year-over-year. Moving forward, we will also focus on serving high-quality innovative local enterprises who are becoming new catalysts to our regional business growth.

[Foreign Language]

[Interpreted] Moving on to our subscription services. We continue to test the waters with new variations in the subscription services, including launch of innovations in business for training programs and other forms of institutional interactions. Supported by our continuous [indiscernible] and premium service [indiscernible], in the fourth quarter, revenue from institutional and corporate clients increased 57% year-over-year. The number of contracts signed by investment institutions nearly doubled compared with the same period in 2021, among which the repeat orders from existing customers currently accounted up to 70%.

[Foreign Language]

[Interpreted] Lastly, I'd like to share with you the latest upgrades on our enterprise service review platform. In terms of operating data, major matrix, all improved substantially year-over-year. Our monthly active users rose more than 25x year-over-year to nearly 900,000, up 49% sequentially. And the number of authentic reviews surged almost 50x to over 21,000, up 27% [ year-over-year ]. Meanwhile, as we continue to establish our platform service system and improve its reputation, we showcased nearly 6,000 pieces of mainstream software on the platform following the main enterprise service software of 16 industry and 200 industry segments, accounting for 80% of the entire market. 36Kr's enterprise service review platform now boasts complete coverage of leading brands as well as coverage of many mid-range brands and other widely known [ stat ] apps available in the market. Since merchant-oriented features were launched in September 2021, a total of nearly 700 merchants have set up presence on our platform compared with approximately 400 merchants a few months ago, nearly doubling our coverage of mainstream [ stat ] provider in just a short period of time.

[Foreign Language]

[Interpreted] I'd like to highlight that through the joint efforts of our online and offline events as well as our newly launched feature, the 36 KR Enterprise Service Review Platform Automatic Report, we have effectively enhanced the platform's visibility and traffic. The number of leads has gone up significantly compared with the same period of last year with a steady conversion rate of 30%. The significant improvement in the number of leads and year conversion rate are key indicators of our capabilities to efficiently empower [ stat ] provider to acquire customers profitability by lowering their customer acquisition cost.

[Foreign Language]

[Interpreted] In the first quarter, our enterprise service review platform performed well in terms of commercialization. Up to now, we have signed contracts with [ Kindi ], [ Pasin ], [ Poly V ], [ Hikvision ] and [ EC SCRM ] that will empower these clients in customer acquisition, brand management and marketing services.

[Foreign Language]

[Interpreted] At the 2 sessions this year, the government's drive: The Strategic Importance of Digitalization, we will continue to improve our enterprise service review platform service system to contribute to the digital transformation of more enterprises and government agencies. To be more [indiscernible], this year, we will remain focused on growing our platform [indiscernible] evaluation standard and creating our own magic contract for China's enterprise service industry, seeking consistent breakthroughs in the areas of software product libraries, user review libraries, key person databases and knowledge graph libraries. Meanwhile, we are also accumulating typical collaborative cases to lay a solid foundation for commercialization and establish strategic partnership in the upstream and downstream of the industry chain. We believe that with our relentless efforts, our enterprise service review platform will have a promising future in commercialization.

[Foreign Language]

[Interpreted] In conclusion, I'm pleased to say that despite the COVID-19 resurgence and complicated internal and external economic conditions, we still achieved solid first quarter results. Notably, our new business initiative, 36 KR enterprise service review platform, continued its strong growth trajectory with major metrics improving substantially year-over-year. More excitingly, its commercialization [indiscernible] during the quarter clearly demonstrates that the enterprise service review platform is becoming 36Kr's second growth engine. We will capitalize on the growth prospects in the New Economy to still new heights as we start the next chapter of our development. Going forward, we will continue to be a torchbearer for the New Economy sector with expanding our user base and catapulting our network content and service ecosystem while also shouldering our corporate social responsibilities and empowering more industry participants to achieve greater success.

[Foreign Language]

[Interpreted] With that, I will now turn the call over to our CFO, Ms. Lin Wei, who will discuss our key financial results. Please go ahead, Lin.

Thank you, Feng, and hello, everyone. Our first quarter results kicked off the year with a solid start despite multiple headwinds, including COVID-19 resurgences and macroeconomic challenges. We achieved growth of 14% year-over-year in our total revenues and a record high quarterly net income since our IPO of RMB 33 million, marking our second consecutive quarter of profitability. Notably, not only did our advertising business maintain its strong growth trajectory with a year-over-year increase of 13%, our enterprise value-added services also recorded remarkable growth of 35% year-over-year. In addition, thanks to our disciplined cost control measures, strengthened efforts in accounts receivable collections as well as our strategic refocus on core business and disposal of certain lingering assets, our profitability improved significantly during the quarter. Looking ahead, we will continue to solidify our industry presence in China's New Economy space, cultivating our diverse ecosystem of business communities along with our user base to empower more enterprises while also expanding our monetization approaches to deliver sustainable growth. Now I'd like to walk you through more details of our first quarter 2022 financial results. Total revenues were RMB 49.6 million in the first quarter of 2022, an increase of 14% compared to RMB 43.5 million in the same period of last year. Online advertising services revenue increased 13% year-over-year to RMB 37.6 million in the first quarter of 2022. The increase was primarily attributable to more innovative marketing solutions we provided to our customers. The number of advertising customers and the average revenue per advertising customer both increased in the first quarter of 2022. Enterprise value-added services revenue increased 35% to RMB 9.3 million in the first quarter of 2022 compared to RMB 6.9 million in the same period of last year. Subscription services revenue were RMB 2.7 million in the first quarter of 2022 compared to RMB 3.4 million in the same period of last year. The decrease was primarily attributable to the decrease in revenues from individual subscriptions as some of our off-line training programs were canceled or delayed due to the resurgence of COVID-19. However, on the institution side, our institutional subscription revenues increased by 57% year-over-year, mainly driven by the growth in the number of institutional subscribers. Cost of revenues was RMB 23.9 million in the first quarter of 2022 compared to RMB 20.2 million in the same period of last year. This increase was generally in line with the company's revenue growth. Gross profit increased 10% year-over-year to RMB 25.7 million in the first quarter of 2022 compared to RMB 23.4 million in the same period of last year. Gross profit margin was 51.8% in the first quarter of 2022 compared to 53.7% in the same period of last year. The slight fluctuation of GP margin was because enterprise value-added services accounted for a higher mix of total revenues this quarter than a year ago, while its margin was a bit lower than that of our advertising business. Operating expenses were RMB 33.4 million in the first quarter of 2022 compared to RMB 64.8 million in the same period of last year. Sales and marketing expenses were RMB 29.7 million in the first quarter of 2022 compared to RMB 35.7 million in the same period of last year. The decrease was primarily attributable to the decrease in payroll-related expenses and marketing expenses. G&A expenses were a negative RMB 10 million in the first quarter of 2022 compared to RMB 20.2 million in the same period of last year. The fluctuation was primarily attributable to the release of the allowance for credit losses of RMB 32.9 million, partially offset by the increase in the payroll-related expenses. The release of allowance for credit losses was mainly due to the collection of RMB 36.6 million of long-aged accounts receivable during the quarter as we continuously increase our efforts in accounts receivable collection. Research and development expenses were RMB 13.8 million in the first quarter of 2022 compared to RMB 9 million in the same period of last year. The increase was primarily attributable to the increase in payroll-related expenses as we bolstered our research and development capabilities, especially for our enterprise review platform. Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses as well as G&A expenses totaled RMB 4.1 million in the first quarter of 2022 compared to RMB 2.7 million in the same period of last year. The increase was primarily due to the growth of new share options. Other income was RMB 40.3 million in the first quarter of 2022 compared to RMB 1 million in the same period of last year. As we previously announced through our 6-K filing, in March 2022, the company as one of the investors in the round B financing of Hangzhou Jialin Information Technology Co., Ltd. acquired its 7.3% equity interest by transferring the 100% equity interest the company held in Beijing Dianqier Creative Interactive Media Culture Co., Ltd. to Hangzhou Jialin, which is a fresh produce supply chain solution provider in China. The subscription price is the same for the company and other independent investors in this financing round. The fair value of equity interest the company acquired is RMB 40 million. The company recognized approximately RMB 38 million of gain arising from such investment and disposal in the first quarter of 2022. Net income was RMB 32.6 million in the first quarter of 2022 compared to net loss of RMB 40.5 million in the same period of last year. Non-GAAP adjusted net income was RMB 36.7 million in the first quarter of 2022 compared to net loss of RMB 37.8 million in the same period of last year. Non-GAAP -- net income attributable to 36Kr Holdings ordinary shareholders was RMB 33 million in the first quarter of 2022 compared to net loss of RMB 39.5 million in the same period of last year. Basic and diluted net income per ADS were both RB 0.8 in the first quarter of 2022 compared to basic and diluted net loss per share -- or net loss per ADS of RMB 0.9 in the same period of last year. As of March 31, 2022, the company had cash, cash equivalents and short-term investments of RMB 171.1 million compared to RMB 216.1 million as of December 31, 2021. This was mainly attributable to payment of year-end employee bonuses and benefits as well as small-sized long-term investments we made in several New Economy start-up companies during the first quarter of 2022. This concludes all of our prepared remarks today. We will now open the call for questions. Operator, please go ahead.

And our first question coming from the line of [ Jing Chen ] from CICC.

[Foreign Language]

[Interpreted] Congratulations on the first quarter financial performance. I have 2 questions. The first is how is the impact of COVID-19 on the company's business in the second quarter? Are there any corresponding adjustments to mitigate the negative impact? And my second question is, cost and expense control has become a key trend this year and the company's net profit is also increasing. Can you provide some guidance in terms of cost reduction in the year? And how should we look ahead to the profitability of the company?

[Foreign Language]

[Interpreted] We have seen this change since March in this year. And from April when the pandemic started in Shanghai, in May, when Beijing also implemented strict control measures, COVID-19 has impacted us in both Q1 and second quarter -- first quarter and second quarter. The delivery of our enterprise value-added services, especially offline activities was impended, resulting in project suspensions or delays. It also affected our advertising business. Pandemic-related control measures posed challenges to the macro economy, reducing customer willingness to place advertisements.

[Foreign Language]

[Interpreted] We have maintained a positive attitude towards addressing these challenges, which is, if your offline delivery wasn't possible, we provided other options such as online solutions like live streaming and short video. In addition for our advertising business, we launched a winter initiative to provide favorable price for customers [indiscernible] to help them who were working in the pandemic period.

[Foreign Language]

As the lockdowns in Shanghai and Beijing will gradually lift, we believe our business will finally return to normal. And we will take steps to ensure smooth business operation and delivery. We have great and positive expectations for the second half of the year. For the advertising business, we hope to continue the upward momentum and make breakthroughs in the form of advertising ARPU and the number of customers. As an important component of enterprise value-added services, we hope our enterprise service review platform to make a big breakthrough in its commercialization this year. Re-polished subscription products such as business school will also be gradually launched in the second half of the year, injecting new vitality into the company's business.

[Foreign Language]

[Interpreted] Since the beginning of 2022, there has been a stream of news about employee optimizations in other companies. So far, 36Kr does not have any plans to cut head count. Our cost reductions and efficiency enhancements focus more on the strict control of business costs, which already reflect in the first Q financial statements. For example, while maintaining double-digit revenue growth, we have achieved a steady growth profit margin benefiting from the year-over-year decline in sales and marketing expenses and improved accounts receivable collections, [ contributing ] to over RMB 30 million of net income in Q1.

[Foreign Language]

[Interpreted] We think 36Kr's business fundamentals remain positive. As the pandemic eases, our business will return to normal. We will work hard to increase revenue and improve operating efficiency. From our perspective, good performance plus strict cost and expense control are the right ways to cost reductions and efficiency improvements.

[Foreign Language]

[Interpreted] Regarding profitability, we talked about the full year profitability in last quarter. And we [ cut ] profitability in this quarter. Given the impact of COVID-19 in the second quarter, we are cautious but still anticipate the overall profitability in the first half of the year. Looking to the second half of the year, we are positive about the recovery of China macroeconomic story driving our business. Meanwhile, as the third quarter and fourth quarter is the big season for us, profitability in the second half of the year should also be achieved. So in general, as long as the pandemic does not recur on a large scale, we maintain our outlook on full year profitability, cautiously optimistic. Okay. So do you have any other questions?

Our next question coming from the line of Peipei Qiu from Industrial Securities.

[Foreign Language] I will translate my question. So given the difficult macroeconomic environment, how do you consider the commercialization pace of your enterprise service review, the [indiscernible] business?

[Foreign Language]

[Interpreted] So under the customer sense of the pandemic, so we think the [ stat ] provider will have more difficulty in acquiring the customer from online. So the 36Kr enterprise service review platform will benefit from this situation. So our KPIs for the enterprise service review platform are to focus on developing the platform and refining our products, primarily covering operating metrics such as the number of authentic reviews, DAUs as well as product and [indiscernible] on the platform. I'd like to share with you some operating data. So at the end of the March 2022, DAUs on our enterprise service review platform rose 25x year-over-year to 900,000 and the number of reviews surged almost 50x to over 21,000. Up to now, our enterprise service review platform has broadcasted nearly 6,000 pieces of mainstream software on the platform. So the number of leads on our enterprise services review platform has increased dramatically on [ interface ]. So with a steady conversion rate of over 30%, these metrics will continue to improve.

[Foreign Language]

[Interpreted] So last quarter, we said we will start our commercialization this quarter. And our enterprise service review platform commercialization will focus on generating sales leads, product promotion and research reports. So this year, we launched our commercialization pallets featuring the -- simultaneously brand marketing and leads-related products. And we already see some results. We have reached service agreements with several enterprises, including signing contracts with [ Kindi ], [ Hikvision ], [ EC SCRM ] and [ Pasin ]. We will continue to provide them with service regarding customer acquisition, brand management and marketing services.

[Foreign Language]

[Interpreted] So we believe as we refine our product and advance commercialization smoothly, the enterprise service review platform role in boosting 36Kr's overall fundamentals will be more significant, and it will become the second growth part of the company. And we want that to become as -- fully as possible and materially change the market production of [indiscernible] valuation logic. So maybe in the future quarters, the portion from 36Kr enterprise service review platform [Audio Gap ] revenue and will be increased significantly.

And our next question coming from the line of [indiscernible] with SWS Research.

[Foreign Language] Congrats with the solid results. And my first question is how is the recovery effort in each business progressing with the gradual easing of COVID in Shanghai and around the country? Which business segment can recoup lost sales in the following 6 months? Is the firm's full year breakeven goal being revised? And my second question is, with the current downward pressure on the economy, what steps will the firm take to maintain the resilience of the advertising business segment? And my third question is what is the progress of the enterprise service review platform commercialization? And how does the company expand the user base and cultivate the consumer mindset? That's my question.

This is Lin. I will answer your first question regarding the pandemic impact on the business and outlook for this year's profitability. And Mr. Feng will answer the other 2 questions for you. Yes. Just as Mr. Feng just mentioned, the COVID-19 and the macro challenges did have some impact on our later Q1 and first half of Q2's business. Especially, on some of our enterprise value-added services, there are some off-line events involved where we could see some impact. However, we have taken several measures to mitigate that impact. For example, we hold online plus offline forums and we utilize the online live streaming forum as well as the short-video format to host the forums and the conference for our customers. That's for our enterprise value-added services. Actually, that revenue segment grew 35% year-over-year in Q1, even outgrow the total revenue. That's a very significant growth during Q1. And regarding the advertising business, obviously, that's a major component of our total revenue. That again also increased 13% year-over-year. And if you look at the industry average, if you look at those companies who already reported their Q1 results, and if you look into their online advertising, I would say it's easy to say that most of them have booked an active year-on-year growth, while we have a double-digit year-on-year growth. And I think that's thanks to our -- 36Kr's content strength and brand image that the SMEs as well as big companies, the Fortune 500 companies, all comes to us to pursue brand image as well as performance-based ads. With that said, our advertising business is less reliant on the macro economy and more resilient to the cycles. So that's why we think we have a very good result in Q1. And looking into the Q2 and the rest of the year, first of all, with the pandemic is -- the control is lifted, our off-line events, our enterprise value-added services will come back. And with the macro economy gradually recover, the advertising spending will also come back. And we have a lot of initiatives. For example, the adjustment to the rate card and some more innovative marketing solutions, especially our short-form video is picking up really, really, very quickly. So that gives us confidence that in the second half or in the remaining of the year, we can catch up what's left in the first half, is actually in Q2. So we are still -- as Mr. Feng mentioned, we are still very cautiously optimistic about the full year, and we would maintain our forecast for the full year basis profitability. Hope that answers the question, [ Ling Yee ].

[Foreign Language]

[Interpreted] So far as the resilience of the online advertising services, we think maintaining our influential and maintaining the quality is the most important thing for 36Kr. And we will continue to -- reach content offerings and consistently provide high-quality content. Also, we will continue to diversify our distribution channels so that to strengthen the influence of 36Kr.

[Foreign Language]

[Interpreted] So next, through improved product delivery, quality and advertising effect, we'll continue to optimize our products and provide customers with more options from text images to short-form video and live streaming. So this strategy will strengthen customers' stickiness to 36Kr.

[Foreign Language]

[Interpreted] So for this [ pure ] rate measure, we launched a warm winter initiative to provide variable price for customers in difficulty to help tide them over during the pandemic period. So when there's COVID-19's end of control, we will adjust our pricing strategy, flexible according to the demand.

[Foreign Language]

[Interpreted] So we think the content ability is our advantage for 36Kr enterprise service review platform. And for our user to expansion, we'll remain focused on growing our platform's influence, building a set of industry evaluation standards and creating our own magic contract for China's enterprise service industry. So seeking consistent breakthroughs in the areas of software product libraries, user review libraries, key person databases and knowledge graph libraries to build 36Kr enterprise service review platform to become China's largest, most authoritative and most convenient enterprise service software selection platform.

[Foreign Language]

[Interpreted] So for the commercialization process, as we said in last quarter, we will start the commercialization this quarter, but we still will improve our operating data and efficiencies. So for the commercialization part, we will -- we feel positive. And we have already progressed with [ Pasin], [ Kindi ] and some famous brands. So in the future, we think this will become the second growth engine for the company and we'll have much more potential in -- regarding to the commercialization.

And our next question coming from the line of [indiscernible] with TH Capital.

Hello, [indiscernible].

[Foreign Language] Congratulations on the strong results. My question is regarding advertising business. As mentioned, along with the impact of the ongoing COVID-19 in China in the first and second quarter and weak macro environment recently, we still achieved a strong growth year-over-year in advertising business that outpaces other industries. So can management share what's the driver for this performance?

This is Lin. I will answer your question. Yes, our advertising performed quite well in Q1. I think it's mostly driven by both our -- the number of advertising customers as well as the ARPU. Our number of advertising customers increased 2% compared to the same period of last year, while our ARPU increased 11% compared to the same period of last year. And talking about the advertising ARPU, I think there are several factors. First of all, at very beginning of the year, we will adjust our rate card based on the supply and demand. Because our resources -- our advertising inventory is really very highly sought after, so we adjusted upwards our rate card. That's number one. And number two is, we have launched several initiatives, including our short-form video content as well as a lot of content columns that are specifically targeting at C-end users, for example, the [ OUS' ] -- in Chinese the [Foreign Language], and some KR tests, [indiscernible]. And those columns are really expanding the customer base as well as increasing the contract size, which translate into the higher ARPU for us. And that's number one from the technical point, the number-wise, how we calculate the increase of our advertising revenue. And secondly, in terms of qualitative analysis, our advertising is mostly brand advertising. Thus, it's less vulnerable to economic cycles -- because either in uptimes and downtimes companies always need to build their brand image. That's why our brand advertising is less reliant on macro economy and more resilient to the cycles. That's number two. And I think given that side, our advertising is a major component. But remember that the 36Kr enterprise review platform is picking up as well. That -- commercialization of that product will be much more performance-based, which is a very good and perfect supplemental flavor to add into our overall product offerings. Because 36Kr's enterprise review platform, that commercialization will be based on sales leads that's mostly performance-based as well as some research reports and some marketing resources. That's a very good combination in the future. So I think that's a good balance between brand and performance-based business. That's very good for the future growth for the company. Hope this answers your question, [indiscernible].

Thank you. As there are no further questions, I'd now like to turn the call back over to the company for closing remarks.

Well, thank you once again for joining us today. If you have further questions, please feel free to contact 36Kr's Investor Relations through the contact information provided on our website -- in our [ offsite ].

Thank you.