Qutoutiao Inc (NASDAQ:QTT) Q2 2020 Earnings Conference Call - Final Transcript

Sep 21, 2020 • 09:00 pm ET

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Qutoutiao Inc (NASDAQ:QTT) Q2 2020 Earnings Conference Call - Final Transcript

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Executive
Sai Chi Du

better picture of what we need to drive better growth for the business longer term and prioritize strengthening different segments of our capabilities accordingly.

To achieve our long-term objectives, we will continue to focus on content and technology. Since we started to directly sign up writers for Midu Novels, we have been increasingly seeing this strategy paying off as their share of the most popular novels keeps increasing and most recently reached 50%. That has been an important part of our content strategy as we integrate vertically. We will be able to extract much more value from the same IPs. Most recently, our Midu Novels also formed a strategic cooperation with Kuaishou in short video series, which will leverage Midu's content and Kuaishou's user traffic. This will raise the profile of Midu Novels original content and create a much stronger basis for the longer term harvesting of derivative IP value. Coupled with continued improvement in our recommendation engine, we see enhanced monetization efficiency, which has allowed us to drive down user engagement costs while increasing ARPU.

We feel encouraged by the strategic progress we have been making, especially with respect to content and technology and we expect them to be the key pillars supporting our future development. Our financial performance is also trending in the right direction, which gives us further confidence that we are taking the right steps. On July 16, 2020, China Central Television reported in its Annual Consumer Rights Show that certain advertisements placed by third-party advertising agents on Qutoutiao exaggerated the health benefits of certain food and diet products and promoted activities that may involve online-gambling. In response to the issues raised by the Report, the Company has promptly taken appropriate measures such as immediate suspension of all employees involved in these advertisements, including the person in-charge of advertising operations, stricter management of all third-party advertising agents, enhancement of content management capabilities in identifying misleading or inappropriate advertisements, and the launch of an easy-to-use and easy-to-find complaint channel on the home screen of Qutoutiao, so that users can file their complaints with us about any advertisement placed on our app. The Qutoutiao app was temporarily removed from several major Android-based app stores in China after the CCTV Report, but was reinstated on July 31, 2020.

It is our commitment to bring real value to our users, and it is against our ethos that less than 100% compliant content should appear. The ad industry itself comes with some inherent risks every player has to manage and which we are also fully aware of. We have always closely followed the rules and regulations of the industry and the country. We aim to build the best content ecosystem for every stakeholder on our platform. We would like to use this incident as a chance for us to further build on the content ecosystem on our advertising platform, which is part of our core strategy to establish a solid foundation for driving long-term growth and strengthening our competitive advantages. We