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Good day, ladies and gentlemen, thank you for standing by. Welcome to the Kuaishou Technology Third Quarter 2021 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management's prepared remarks. [Operator Instructions] I will now turn the call over to Ms. Heather Diwu, Director of Investor Relations at Kuaishou Technology.
[Interpreted] Thank you, operator. Good evening, and good morning to everyone. Welcome to our third quarter 2021 financial results conference call. Joining us today are Mr. Su Hua, Co-Founder, Chairman, Executive Director of the Board of Kuaishou; Mr. Cheng Yixiao, Co-Founder, Executive Director, CEO and Chief Product Officer; Mr. Nicholas Chong, Chief Financial Officer; and Ms. [ Cynthia Wang ], VP of Capital Markets and FP&A. 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 any forward-looking information, except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to our results announcement for the third quarter report ended September 30, 2021, issued earlier today. For today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous English interpretation in the prepared remarks session and a consecutive interpretation during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statement in their original language will prevail. Now I would like to hand over the call to Mr. Su Hua, Co-Founder, Chairman, Executive Director of the Board of Kuaishou.
[Interpreted] Dear friends, hello, and welcome to Kuaishou Third Quarter 2021 Earnings Conference Call. We achieved encouraging results across the board in the third quarter of 2021 compared with the first 2 quarters this year. Kuaishou App has been accelerating the user growth. Average DAUs exceeded 320 million, up 17.9% year-over-year and 9.3% quarter-over-quarter, a highest quarter-over-quarter growth since the second quarter of 2020. Average MAUs reached 570 million, increasing 19.5% year-over-year and 13.2% quarter-over-quarter with 66.7 million MAUs added, marking the largest single quarter net increase since the second quarter of 2020. Average time spent per DAU was nearly 120 minutes, up nearly 35% year-over-year. And total traffic also increased by 6% year-over-year, as user engagement continues to enhance throughout the Kuaishou ecosystem. Meanwhile, our total revenues remained a healthy growth of 33.4% year-over-year to CNY 20.5 billion in third quarter. In addition to business development, we'll also leverage our advantages and resources to fulfill our corporate social responsibilities and make contributions to public society at large. During the flooding in Shanxi province, Kuaishou promptly donated to the disaster-stricken area for emergency relief and reconstruction. Also, we launched a landing page dedicated to the disaster and timely released the latest disaster news and rescue information. That's really important as societal support and mobilizing all available resources to provide the support to affected areas and local people. We have to actively contribute to China's new digital infrastructure and help drive a continuous development of digital service infrastructure in rural areas, with facility enrichment and the expansion of basic service via the digital application and consumption, [ live ] services, talk show and entertainment, and in an effort to bring convenience to digitalization of users. From [ 20th ] October, more than 420 million agricultural orders have been sent from rural areas to the rest of the countries via Kuaishou's live streaming service, nearly doubling from the same period last year, with the aim of making sure we are live streaming a new channel to help farmers for advancing standardization brand and e-commercialization of more [indiscernible] products. No I would like to invite Yixiao to provide more details on our business.
Hello, everyone. I'd like to share with you the achievements that we have made in traffic, content and efficiency improvement. We are pleased to report that the total traffic increased by almost 60% in the third quarter. First, we have continued to see strength in social trust and social attributes in our community, which is the hallmark of Kuaishou's platform by recommending more potential socially connected users on the single-column pages while facilitating mutual following relations as with building and reinforcing users' social mentality. The number of mutual followers on our platform reached over 14 billion pairs cumulatively by the end of third quarter 2021, up 59% year-over-year. Our enormous interactive network constantly strengthened the user stickiness on our platform. It also creates social value and by expansion, commercial value. Secondly, we have been constantly enriching our content, further optimizing content distribution strategy and strengthening the traffic and monetization support for our high-quality creators. Through continuously building unique flagship content verticals, we have constantly provided the high-quality content in public domain and attracted more users to consume. In the third quarter, the average DAUs of the distinctive Kuaishou Playlet reached 230 million, with more than 850 short plays viewed more than 100 million times each cumulatively. And ongoing production of premium short plays has strengthened the user stickiness while raising shares of short video views and time spent.
And also, we have focused on our investment in the sports content vertical since the end of last year. As the pioneer in short video and live streaming platform on broadcasting in the Olympics event, we took advantage of the real-time nature and extensive coverage of our platform that combine news and sport content interactive activities together as a new approach to sport broadcasting, which help us to further encourage interactions based on the English content. Video views on the Olympic-related contents and topics on our platform reached aggregate of 73 billion times, with the interaction on Kuaishou App total over 6 billion by August of 2021. As of today, Kuaishou covers more than 40 sports categories with total time spent on sports content in the third quarter up more than 150% year-over-year. Kuaishou has become a massive, industry-leading content platform and social metrics integrating diverse sports categories.
We have noted that user demand for short videos and live streaming is increasingly moving away from pure entertainment consumption toward diversified and interesting content. In addition to inviting knowledge influencers from their issues to share content on Kuaishou, we also rolled out our self-made pan-knowledge talk show in the third quarter to share expert opinions and academic concepts from -- with the broader user base. Pan-knowledge has become one of the fastest growing content categories in terms of video views this year. Now holding the principle of universal dissemination, we continue to provide traffic and revenue support to our content creators. We are the backbone of our products and platform. Over 50% of the video views in the third quarter were generated from a mid-tier content creators. On Kuaishou platform, creators have a clear path for growth and monetization. Our strength in private domain traffic also encourages the greatest privatized long-term success. In the third quarter, the number of high-quality content creators on our platform continued to rise over quarter-over-quarter. And also, in the coming quarters, we will further strengthen our support to content creators. Last but not least, we continue to iterate and optimize our product experience. At the end of August, we upgraded our main app with the discovery page, discovering double-column feeds while turning on the single-column layout after accessing content, allowing users to swipe up and down to provide more immersive consumer experience. This upgrade improved the -- both time spent and also the consumption activities and helped further optimize our understanding of users and recognition capability. In addition, with the single-column feeds, we enhanced content distribution with all our creators and also to improve user experience and efficiency. While making progress, also, we're securing the high-quality users and increased traffic. We are also prioritizing efficient optimization as more refined operation and management. [indiscernible] cost per DAU turned down month-by-month during the third quarter, and user acquisition per MAU also fell in the third quarter compared with the second quarter. Sales and marketing expenses as a percentage of total revenue dropped from 69% in the first quarter to 54% in the third quarter. Building on the continuous increase in the public and private domain traffic, our total revenues reached CNY 20.5 billion in the third quarter, increasing by 33.4% year-over-year. Now please give me opportunity to give you a more detailed update on various business lines and achievement. Despite the increasing challenges from the macroeconomic environment, our online marketing services maintained rapid growth in the third quarter with revenue reaching CNY 10.9 billion, up 26.9% year-over-year, accounting for increasing share of total revenue, 53.2%. And also to demonstrate the resilience of our business stemming from the increasing popularity of short video and live streaming app, our unique position as a content community has advantages of a closed-loop business ecosystem. The growth of our online marketing services was also driven by increased traffic, expanded advertising space on our platform, constant -- the consistent optimization of advertising system and growing core advertisers. As the short video and broadcasting partner for the 2020 Summer Olympics, we conducted special marketing campaigns with the industry-leading and fast-moving consumer goods, automobiles, e-commerce, beauty and household appliances and sportswear, among others. The campaign helped advertisers to gain all-around improvement in brand recognition, favorability and sales conversion, demonstrating Kuaishou's potential and capabilities in marketing to more branded consumers and also advertisers. In addition, we have improved professional competencies in areas such as planning operations with our direct sales teams, especially our key account teams, empowering them to buy advertisers with more professional and timely services. Boosted by these efforts, brand advertisers on our platform have recorded a high double-digit growth year-over-year in the third quarter. So for advertisers, our public domain has a breadth to reach massive and diverse user groups, while we also have a highly active and engaged users' ability to connect brands and users in greater depth. Recently, the series of advertising products upgrade and integration have enabled advertisers to manage operation indicators, more dynamic and achieved a compounded effect of brand promotion and performance advertising. At the same time, Kuaishou features a more complete closed-loop business ecosystem which could help the advertisers improve the overall conversion ratio, accumulate the product operating data and optimize the market decisions. And related to our [ captured ] market share, our online market business, penetration is still low. Looking ahead, we will continue to increase our online market share through further enhancing our [ traffic ] management efficiency, advertising system as well as sales. Our e-commerce GMV reached CNY 175.8 billion in the third quarter, representing 86% year-over-year increase. Kuaishou Shop (sic) [ Kwai Shop ], the closed-loop model of our e-commerce business, increased in the contribution of total e-commerce GMV to 91% from the third quarter of 2021, as we boosted investment in the online infrastructure, enhanced kind of supply optimized management efficiency and user experience and expanded the e-commerce exposure. In the third quarter, we continued to enrich the merchandising offerings with a wider range of categories. We're bringing more branded merchandise to Kuaishou Selection, our official platform for e-commerce product selection, to refine matching with efficient optimization. This initially further helped improve the selection to GMV contribution in the third quarter. We also continued to increase the investment in branded e-commerce with the GMV of the [ brand-led ] segment leading the overall platform as we demonstrate success cases in key industries such as apparel, FMCG, electronics, home appliances, jewelry and jade and increasing number of brands joining our platform. The establishment of the service platform is also one of Kuaishou's priorities in the e-commerce development. Since the beginning of the third quarter, we have devoted efforts, aggressively developed brands and based on strategy -- strategic service partners and promotion of GMV from merchant service by Kuaishou's service partners that [indiscernible], which help merchants to prove their [ professional's ] many operation capabilities. [ Professional ] operations, combined with the Kuaishou's trust-based e-commerce ecosystem, has brought us the certainty to growth and also in the long run. And also, in addition, we increased investment in trust-based e-commerce, introducing the matters to protect the user experience and also strengthen the platform governance. In September, our e-commerce repeat purchase rate increased to over 70%, and monthly ARPPU continue to grow. In the third quarter, we gradually improved the DAU penetration rate of our e-commerce live streaming, increasing our e-commerce content exposure in public domain and a cumulative additional data and feedback to optimize the recognition system with the goal of online e-commerce distribution efficiency and sales conversion. As the pillar of our platform and our deeply engaged user of ecosystem and community, our live streaming ecosystem content and also introduced the more streamers in different content vertical to maintain a high-level of live streaming activity as measured by streaming frequency and duration. We also distributed additional live streaming content in public domains, helping more high-quality and professional live leaning content to reach a broader user base. These efforts resulted in a gradual expansion of our live streaming DAU penetration rate to 78% in the third quarter from 66% in the first quarter of 2021. Our enriched content supply and efficient platform distribution is by a rebound in content consumption that is demonstrated by a live streaming revenue which rose by 7.4% quarter-over-quarter to CNY 7.72 billion. Actually average MPU for live streaming in the third quarter of 2021 were 46.1 million, growing 3.6% quarter-over-quarter. Monthly ARPPU for live streaming on our Kuaishou App also expanded 8.8% year-over-year and 3.7% quarter-over-quarter to CNY 55.9. And also with respect to the content governance, Kuaishou has taken active in the [Foreign Language] campaign of the CAC launched to [ rectify ] the sector. Multiple officially -- certified [indiscernible] government accounts are now stationing Kuaishou platform, making for the tools such as short-video live streaming [indiscernible] of government affairs' policy interactions and also policy communication therefore, expanding entry for information dissemination through the short-video platform. Today, over 15,000 government accounts has the stations in Kuaishou's platform. Now finally, please allow me to share with you some on the overseas business. On the stellar user growth in the first half of the year, we adjusted overseas strategy in the second quarter -- or half of the year, focusing on the key markets and turning on product optimization and content enrichment as our key priority. Our efforts paid off. And also, you can see us making a quarter-over-quarter improvement of our MAU, DAU-to-MAU ratio, user time spent and the retention rate, and in contrast, a quarter-over-quarter reduction in overseas marketing and sales expenses. Furthermore, we implemented an organizational consolidation in our overseas business and showed by our units by integrating different regional product operation and middle office teams, with the aim of optimizing overseas business collaboration and resource utilization. We also began to test the water via monetization in overseas market as we target to build a monetization model through the live streaming and advertising in the near term. Now I'd like to pass to Nick to share the financials.
Thank you. Now please let me to have a look at the financial performance of third quarter 2021. Our revenues for the third quarter of 2021 increased by 33.4% year-over-year to CNY 20.5 billion. The increase was primarily due to the high contributions from online marketing services and other services, including e-commerce business. Our cost of revenues increased by 37.1% year-over-year to CNY 12 billion for the third quarter 2021. The year-over-year increase was primarily the result of three factors. The first one is increased revenue sharing costs and related taxes in line with our revenue growth; second, increased bandwidth expenses and service capacity costs as well as the higher depreciation and amortization cost of assets, driven by the increased traffic; and third, increased employee headcount to support the business growth, which led to higher share-based compensation expenses. Our gross profit for third quarter of 2021 reached CNY 8.5 billion, growing 28.6% year-over-year, with a gross profit margin of 41.5%. Our selling and marketing expenses decreased by 2.2% quarter-over-quarter to CNY 11 billion for the third quarter 2021. And as a percentage of the total revenues, it dropped from 53.8% from 58.9% for the second quarter of 2021. This was due to tightening spending in the overseas business development and increased sales and marketing expenses efficiency in domestic market. Administrative expenses for third quarter of 2021 increased by 5.7% quarter-over-quarter to CNY 913.1 million, representing 4.5% of total revenues. This was primarily due to an expansion of the headcount to support the business growth as well as the related increase in share-based compensation expenses. Research and development expenses for the third quarter of 2021 increased by 7.8% quarter-over-quarter to CNY 4.2 billion, representing 20.6% of the total revenue. This increase was primarily driven by expanded R&D headcount in the quarter. And also, we continue to increase our investment in big data and other advanced technologies and related share-based compensation expenses. Our loss attributable to equity shareholder -- equity holder of the company was CNY 7.1 billion for the third quarter of 2021, and adjusted net loss for the third quarter of 2021 was CNY 4.8 billion. We maintain a very strong balance sheet positioning in the third quarter with cash and cash equivalents, time deposits and restricted cash and wealth management products of CNY 52.4 billion as of September 30, 2021. Now please allow me to hand over to Su Hua.
[Interpreted] Our achievements in the past quarter were very encouraging. This June marked the 10th anniversary of Kuaishou's founding. Over the past decade, we have continuously expanded the scale of our organization along with the creation of a derivative business lines as well as the overall development of capacity and also scale up our each business. We are also constantly review and iterate internally. Over the past few months, each are now reflected intensively on Kuaishou's [indiscernible] development as well as organizational restructuring and efficient optimization. [indiscernible] decisions have been receiving support from the Board. At the end of June of 2021, we took the lead in the consolidating report of lines of user growth and product department, integrating online user data, product data and budget management, a realignment product, notable kind of results as evidenced by enhanced user acquisition and also the retention efficiency. At the end of September, we went a further step with the restructuring by merchant operation, user growth and product development to optimize growth efficiency. We essentially transformed our business from assumption-based to a business unit-based one. We moved some departments that were previously mid-office to -- from [ one ] and also making part of a closed-loop system. Meanwhile, we received and also reviewed the reorganizing of various function line at the back end to strengthen business development support. The restructuring has clarified each business unit's right and responsibilities and also enable more efficient resource utilization and internal coordination. Following the restructuring, mine and also Yixiao's management roles will change while we continue to work together on the same boat. As [indiscernible], our focus on companies over strategic plan and development with more strategic and also availability to inform new directions. Yixiao, as CEO, will focus on managing the company day-to-day operations and business development. We're confident that we will achieve our long-term business goals with a leaner organization and stronger organizational capability. At the same time, we wish to elevate everybody's unique sense of happiness as we contribute to initial [ digital ] innovation and overall development. This is the end of the prepared remarks. We'll now open it to Q&A.
[Foreign Language] Crédit Suisse, Kenneth Fong.
[Foreign Language] Congrats on the very strong set of results. I have 2 questions. First, we saw that the traffic for third quarter have been very strong. May I ask what are the drivers behind? What are the road map to reach the 400 million of DAU target with a continued strengthening user engagement? And my second question is the regulatory headwind and slower macro have hurt the China advertising demand, yet we have delivered very strong advertising revenue growth for third quarter. Can you share with us the drivers behind and your growth outlook?
[Foreign Language] [Interpreted] First of all, thank you very much for your question. And please allow me to address the question related to traffic. First of all, we are firmly optimistic on the short video sector. We believe the long-term DAUs in China can potentially reach 1.1 billion. Traffic on Kuaishou also has the potential to continue to increase as short video and live streaming become widely used infrastructure in our society and further empower diverse industries, such as public welfare, education, e-commerce and local services and so on. So the excellent user growth in the third quarter gives us even more confident that we can achieve our mid- to long-term use target of 400 million DAUs. So the increases in user base and also user time spent were mainly due to our continuous enriched content, merchandise and services. On the content side, the pan-knowledge vertical has enjoyed a rapid growth in the user time spent. And we also launched a novel format such as the debate contests, which were quite popular among the users. Our other examples are sport and short plays, both of which have seen increased numbers in views and user time spent. In terms of merchandise, we actually continue to bring in new categories and branded products to our platform, providing more choices to our users. With respect to services, we are exploring visualization opportunities for more user and usage scenarios. Meanwhile, taking into account of the different characteristics of public and private domains, we continue to improve the distribution efficiency to better match the value of content with users and improve the experience and happiness of our users. Recently, we've gradually increased exposure of content from followed creators in our swipe up and down, single-column feed, which not only increases the recommendation of interested content for users but also improves the traffic conversion between our public and private domains. Overall, the pace of the growth in our user traffic has exceeded our initial expectation. Going forward, we will prioritize the user demand more dynamically and continuously iterate our ecosystem development strategy. And second of all, please allow me to address the question relating to the advertisements. Like our peers, we did feel the pressure from recent regulatory and macroeconomic environment. So some advertisers pulled back and adjusted their budgets, which resulted in a weaker bidding environment across the ad industry. However, looking at ourselves, our ad business growth has been faster than the industry, and we have been constantly gaining market share. Let me provide with more colors. First of all, for the overall industry, the video-based ads in the form of short video and live stream have become increasingly popular among the advertisers, and our unique position as a social platform and content community as well as our featured combination of private and public domain traffic have won us a growing share in a budget allocation.
In the third quarter, our traffic also maintained a very strong growth momentum, contributed to the continuous rapid development of our business despite the challenging macro environment. With the optimization of our advertising materials and recommendation capabilities, our ad load in the third quarter increased slightly as we planned, and we also opened up new ad space. And secondly, our advertising system and products are constantly iterating. For example, we connected Xiaodiantong and Kuaishou's fan headlines to build Magnetic Taurus, allowing consumers to advertise in both public and private domains at the same time and allocate budgets dynamically to improve decision-making efficiency, which not only optimizes the customer ROI but also releases more ad spaces based on the same traffic. Thirdly, we continued to improve our sales and services capabilities and quality, proactively expanding industry coverage and optimize direct sales and agent channel management. With these, we were able to achieve growth in both number of advertisers as well as the ARPPU. For brand ads, we have become increasingly recognized by advertisers given the success of our benchmark cases in many industries. Recently, we began to work on marketing campaign initiatives with several well-known brands in different industries, including not only emerging brands, well-known market brands but also upscale luxury brands. Lastly, thanks to another highlight of Kuaishou, we provided native closed-loop system to our advertisers for e-commerce transactions. Our large-scale e-commerce GMV has enabled us to maintain our own growth phase while facing a challenging macro environment. And of course, we remain cautious, and we'll continue to closely monitor the short-term fluctuations in the advertising industry. In the long run, we are confident to the continuous growth of our advertising business, as we believe, compared to our traffic market share. Our online marketing business penetration still has huge potential to grow. Looking ahead, along with the improvement of our ecosystem and advertising system, we will continue to optimize user experience, empower advertisers and enhance our own monetization capabilities.
[Foreign Language] Bank of America, Eddie Leung.
[Foreign Language] So my question is about your sales and marketing efficiency. It seems like the user growth in the third quarter, pretty decent, while sales and marketing cost actually dipped sequentially. So just wondering how you guys balance expenses and user revenue/growth? And what could be the sales and marketing trend in upcoming couple of quarters? Any difference in terms of the planning versus, let's say, couple of quarters go before the restructuring?
[Foreign Language] [Interpreted] All right. Thank you very much for your question. Internally, we are determined to reduce the costs and enhance efficiencies and started to take actions in the third quarter. As mentioned earlier, we saw noticeable effectiveness of our user retention rate optimization after merging user growth department and product department at the end of June. Through integrating the user and product data and accuracy and relevance of our content recommendations and user experiences were further enhanced. Also, the DAU retention rates across the next-day, 7-day and 30-day periods were all improved. With respect to the user acquisition, we conducted systematic and refined channel of efficiency and assessments and proactively eliminated search inefficient channels while exploring new ones. We further merged the operational team into the user growth and product department at the end of September. To strengthen the collaboration among our content, community operations and user growth, we aim to more effectively elevate the user activeness and engagement and further increase the traffic growth contribution from the organic channels. The optimization of retention rate and user acquisition channels also contributed to a sequential improvement in CAC per user in the third quarter. And with respect to maintenance, we adopted a more refined approach to manage a subsidy. And after this adjustment, our customized incentives targeting different user groups showed more significant results. In the third quarter, the maintenance cost per DAU decreased month-by-month. Meanwhile, as the short video industry moves into the next development stage, the growth has been increasingly driven by organic and differentiated supplies and operations. With respect to our organization structure, in September, we completed the adjustment of our business unit base organization. This, along with our efforts to strengthen management financial report of each business lines over the past few months, allow us to more clearly see revenues and also expenditures at each business line, helping us optimize efficiency more effectively. And in the overseas market, we also adjusted our strategy to make more efficient regional investments and improve the level of user activeness through optimized products, content and algorithms. In the long run, we believe revenues were driven by the dual drivers of average DAUs and per DAU monetization efficiency, and we still have considerable upside in revenue per DAU. As for gross margin, we also see substantial room for further improvement driven by increasing revenue contributions from our higher-margin advertising and e-commerce businesses. With respect to our sales and marketing expenses domestically, we expect to lower the maintenance cost per DAU by enhancing advertising efficiency and improving retention rates as well as refining operation management. Our sales and marketing expenses as a percentage of the total revenues will also decrease as our revenue per DAU increases. This is one of our key goals for next year's business planning. And we have also made clear plans to reduce the costs and expenses and also improve efficiency in areas such as bandwidth usage and server deployment and so on, targeting to be in line with the industrial peers. While our total traffic grew 22% quarter-over-quarter in the third quarter, our operating costs only increased 3.8% comparing with the second quarter, demonstrating our improvement in operating efficiency. On the other hand, investments in assets, such as the server at the front loaded, meaning our user time spent and unit time spent monetization efficiency normalize over time. We expect our operating costs as a percentage of revenue to decrease significantly. In terms of the staff-related expenses, and in fact, this year, we have shored up sufficient human capital, and there is no plan to increase headcount significantly next year.
[Foreign Language] Jefferies, Thomas Chong.
[Foreign Language] I have 2 questions. The first question is about the live streaming business that we are seeing the MPU and ARPPU are improving on a quarter-on-quarter basis. Just want to get a sense about how we should think about the live streaming business going forward and our expectations in coming quarters? And the second question is more about the regulation side. Just want to get a sense about how PIPL and also the Data Security Law, how that would impact our operations, if any?
[Foreign Language] [Interpreted] Thank you very much for the question. First of all, let me answer the question relating to the live stream. Our various business lines add different value to Kuaishou's ecosystem. Live streaming is a hallmark of our community and a place of the streamers and users to interact and build trust as well as a destination for content. So through live streaming, we have also seen the user needs for physical goods and services. When these needs are effectively matched, the trust-based interactive relationship between the streamers and users is further reinforced, while our monetization model broadens at the same time. And therefore, live streaming plays a crucial role in promoting user activeness in our ecosystem. In the third quarter, we incorporated with more diverse streamers, maintaining a high level of activeness on the supply side. Because of the high-quality content and traffic distribution support in the public domain, more users have been attracted to the live streaming, raising the live streaming DAU penetration rate to 78%. This has led to a consumption rebound with MPUs rising quarter-over-quarter and ARPPU improvements both quarter-over-quarter and year-over-year. Going forward, we will adhere to the value proposition of our live streaming business and ensure an active live streaming ecosystem by further optimizing content supply. Now I would like to answer the question relating to regulation. We constantly attach great importance to data security and personal information protection-related work. We have been attractively and orderly advancing various compliance measures within the framework of laws and regulations and in accordance with the guidance and opinions of the relevant authorities while continuously optimizing the product functions. And as for the quantified impact, we are still evaluating like the rest of the industry. And also, as a comprehensive platform, we believe that we are well positioned to provide more efficient online marketing solutions to advertisers given our sizable user base, technological expertise, business potential as well as our understanding towards the user and community and our closed-loop commercialization capabilities. In the long run, despite the combined impact from macro environment and economy, we hope to continuously create more value for users and advertisers.
[Foreign Language] China Renaissance, Liu Zhangxiang.
[Foreign Language] So the first question is regarding our e-commerce business. In Q3, we noticed that in e-commerce accelerate -- it surpassed our expectation, and also the brand e-commerce is also going very well. Can you discuss in more details on our future development strategy? And secondly, on the overseas business, in your prepared remarks, you mentioned there was organization upgrade. Can you discuss how is overseas business trending? And what's our -- what kind of adjustment we made to the development strategy?
[Foreign Language] [Interpreted] And thank you for your questions. Let me address the first one related to the e-commerce. And as a new content format and channel, live streaming e-commerce has shown great advantages for both consumers and supply side. Our strategy is mainly in 4 areas. The first one is we will continue to reinforce our trust-based e-commerce model. Kuaishou's live streaming e-commerce is to build upon the trust between users and platform as well as the users and streamers, resulting in a high repeat purchase rate on the basis. So from a platform perspective, we will further strengthen the rules for quality control and order fulfillment assessments, introduce more user rights and protection measures such as 9x compensation for any counterfeit sold, no hassle 7-day return policy, launch stricter protection and compensation policies for special categories such as the centralized warehouse for authenticating jewelry and jade, and official verification and quality assurance for secondhand mobile phone, et cetera. We also make user evaluation and input into the traffic distribution algorithm introducing valuation indicators like the product cost effective measures to continue to optimize the trust-based purchase experience. With these ongoing efforts, our e-commerce monthly repeat repurchase rate increased to over 70% in September, while the monthly ARPPU expanded further as well. And second, our traffic -- on traffic and merchant, through our user insights, we can provide users with products that better meet their needs and interests, consequently improve conversion efficiency for streamers and merchants. By means of high conversion rate of private domain traffic and distribution support from our public domain traffic, we aim to fully leverage the traffic on our platform and continue to drive e-commerce user penetration and expand paying ratio. And third, we continue to build out our ecosystem infrastructure, including introducing more merchandise suppliers, expanding to the origin of the supply chain, diversifying the number of product categories and SKUs, and strengthening cooperation with service partners. In the third quarter, we aggressively developed the brand industrial base and strategic service partners and on broader -- onboarded the hundreds of them. So these service partners have assisted the merchants in training and recruiting streamers as well as provided the traffic operations, supply chain and logistics and after service -- aftersales service, all aimed to help the merchants to grow and improve their operational efficiency. The GMV contribution of the merchants served by service partners have increased constantly. So e-commerce is a business with long and deep industry development chain. Looking ahead with a longer time horizon, we need to develop more time and resources to establishing a solid infrastructure. The pace of our investments and development is also similar to that of other mature e-commerce platforms. And lastly, we will further strengthen, then scale up the brand e-commerce through attracting more brands to our platform, launching more support plans and increasing the proportion of brand self-operated live streaming. Our e-commerce and ad business provide a closed-loop platform and foundational support for brands that unite brand promotion with performance-based ads. We are pleased that the proportions of brand merchants and branded GMV on our platform grow constantly, which help drive the increasing number of active e-commerce buyers and higher value per order. Especially, we set up an SKA team to better serve brands and brand customers and providing them with one-on-one business services, detailed platform operating rules as well as operating methodology of successful cases to empower business to grow. Our SKA team also helps the businesses integrate marketing resources spanning traffic products and platform, providing support and business review, problem diagnosis, commercialized product tie-ins and marketing tie-ins. We also leveraged our advantages and characteristics to empower brand merchants in many aspects, including, but not limited to, the establishment of a brand persona for self-operated live streaming, operations of public domain traffic, precise targeting of KOLs for distribution, refined a guidance to accumulate customer assets in private domain to improve repeat repurchase and so on. And now please allow me to answer the question relating to the overseas business. We are firmly optimistic about the potential of overseas short video market and confidence in Kuaishou's core competencies. Following the remarkable user growth we achieved in the first half of the year, we have further optimized and adjusted our overseas strategy in the second half. And first, in terms of organization, in parallel with the group, our overseas teams that supported different regions were consolidated into integrated products, operations and mid-office teams in order to optimize overseas business collaboration and resource utilization. On the market side, we are more focused on development in key regions to improve the single-market efficiency. We have also decreased our investments in markets with low returns. And our priorities have shifted from user growth to building a positive flywheel products, content and algorithms. Our goal is to break through the cold start stage, improve user quality and solidify the user stickiness as well as accumulate the valuable experience for a broader overseas strategy in the future. After the adjustment, key metrics such as the average MAUs, DAUs-to-MAUs ratio, the user retention rate and user time spent all improved in the overseas market in the third quarter. At the same time, we started the trials in monetization. Going forward, we will make paced progress in implementing our long-term overseas strategies.
[Foreign Language] CICC, Xiao Yanyan.
[Foreign Language] We have seen that recently, Kuaishou has invested in and published several special content genres, such as short-form genres, sports and the knowledge. So we are wondering that what is your future plan for the content ecosystem?
[Foreign Language] [Interpreted] Thank you for your question. We have always operated our content community on the core values of authentic, diverse, beautiful and beneficial, aiming to help our users discover a world of content where they can expand their life experiences and interest. Our investments in content are tailored to user needs. As we provide more diversified content catering to evolving needs, we aspire to be a consistent source of fun and value to our users. Pan-knowledge is a great example. We noticed that the user demand is shifting from pure entertainment consumption to hosting content with values. After launch, pan-knowledge content gained stronger popularity among our users. We're also aware that content operations are equally important as content itself as it can be better help unlock the content value, enhance the user engagement and further expand user base. For example, we started to introduce numerous sports content to our platform from the end of last year, and we attached great importance to attention -- attaining rights for derivative work as well as developing a related user interactive activities. Our systematic content operations contributed to a noticeable growth in both the penetration and consumption of sports content and activeness of content creation, which in turn benefited our content supply. And generally speaking, UGC is the dominant form of content of Kuaishou. As a platform, we will continue to optimize the creation experience and empower creators to maintain high productivity, providing them with social value, economic value and traffic as well as monetization support. With respect to emerging content verticals, we will take a modularized approach to look into their overall supply chain. For example, for PGC that requires investments in copyright, we will evaluate the returns comprehensively and invest selectively. Over a longer time frame, ongoing improvement in content depth, breadth, quality and level of differentiation will help us achieve more organic growth and a higher level of user engagement. And as such, we will continue to value the content and remain committed to its investment.
[Foreign Language]
[Foreign Language] [Interpreted] Thank you very much, everyone, for your participation. And if you have any further questions, please feel free to contact Ms. [ Cynthia Wang ], VP of Capital Market and FP&A, and also the IR team of Kuaishou. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]