Q2 2014 Leju Holdings Ltd Earnings Conference Call
Aug 20, 2014 AM EDT
LEJU - Leju Holdings Ltd
Q2 2014 Leju Holdings Ltd Earnings Conference Call
Aug 20, 2014 / 11:00AM GMT
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Corporate Participants
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* Melody Liu
Leju Holdings Ltd. - IR Director
* Geoffrey He
Leju Holdings Ltd. - CEO
* Min Chen
Leju Holdings Ltd. - CFO
* Xin Zhou
Leju Holdings Ltd. - Executive Chairman
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Conference Call Participants
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* Jinsong Du
Credit Suisse - Analyst
* Sisi Lu
China Renaissance - Analyst
* Alex Yao
JPMorgan - Analyst
* Jiong Shao
Macquarie - Analyst
* Eddie Leung
Merrill Lynch - Analyst
* Gregory Chow
Barclays - Analyst
* Wendy Wong
Standard Chartered - Analyst
* Tian Hou
T.H .Capital - Analyst
* Eric Wen
China Renaissance Security - Analyst
* Ella Ji
Oppenheimer - Analyst
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Presentation
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Operator [1]
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Hello, and thank you for standing by for Leju's Second Quarter 2014 Earnings conference call. At this time, all participants are in listen-only mode.
After management's prepared remarks, there'll be a question-and-answer session.
Please note that today's conference is being recorded. If you have any objections, you may disconnect at this time.
I would now like to turn the meeting over to your host for today's conference, Ms. Melody Liu, Leju's Investor Relations Director. Please go ahead, ma'am.
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Melody Liu, Leju Holdings Ltd. - IR Director [2]
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Thank you. Hello everyone, and welcome to Leju's second quarter 2014 earnings conference call.
Today, we will update you regarding our financial results for the second quarter ended June 30, 2014. If you would like a copy of the earnings press release or you would like to sign up for our e-mail distribution list, please go to our IR website at ir.leju.com.
Leading the call today is Mr. Geoffrey He, our CEO, who will review operational highlights for the second quarter of 2014. Ms. Min Chen, our CFO, will then discuss the financial results in more detail. We will then open the call to questions, at which time, our Executive Chairman, Mr. Xin Zhou, will be available.
Before we continue, please allow me to read you Leju's Safe Harbor Statement. Some of the statements during this conference call are forward-looking statements made under the Safe Harbor Provisions of Section 21(E) of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. You are encouraged to review the forward-looking statement section of our IPO prospectus filed with the SEC for additional information concerning factors that could cause those differences.
Leju does not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Our earnings press release and this call includes discussions of unaudited GAAP financial information, as well as some unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.
Please note that, unless otherwise stated, all figures mentioned during this conference call are in U.S. dollars.
I will now turn the call over to Leju's CEO, Geoffrey He. Mr. He, please go ahead.
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Geoffrey He, Leju Holdings Ltd. - CEO [3]
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Thank you everyone for joining us on the call today. We are pleased to report another quarter of strong growth, despite challenging overall market conditions in the first half of 2014.
During the second quarter and over the past few months, we have maintained our focus on implementing our mobile strategies through various product launches, and we have strived to improve the secondary listing operating environment for industry players through our promoting of the verified listing model.
We launched our Weixin mobile product with the Weixin Home Promotion activities in June, which attracted overwhelming participation and positive responses from developers and customers alike.
By mid-August, over 16 million gift packs have been opened, and we have accumulated more than [21 million] (corrected by company after the call) followers on both our Weibo and Weixin accounts.
In July, we upgraded to our mobile e-commerce platform 2.0, which consolidated all of Leju's mobile resources and offers developers an integrated and efficient mobile marketing solution.
Also in July, we signed strategic agreements with over 100 local agencies in 17 key cities to promote the verified listing model to further develop healthy growth of the online secondary listing industry.
And most recently, this month, we launched a new version of our mobile APP Fangniujia for our secondary listing services. This upgraded product offers our consolidated mobile resources in the form of an online store for secondary agents to provide them with more efficient marketing and exposure.
In terms of the overall market, we have begun to notice a gradual recovery in transaction volume in a number of markets as a result of the developers' willingness to offer more concessions and from various local governments who have relaxed restrictions. We believe these are encouraging signs for our industry.
As traditionally, the second half of the year tends to be stronger for real estate sales, we place great emphasis on building our project pipeline and improving execution to position Leju well for upcoming opportunities. We believe that our recently launched mobile products for both e-commerce and secondary listings can help us to gain additional market share.
Now, I will turn the call over to our CFO, Ms. Min Chen, who will review our financial highlights for the second quarter.
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Min Chen, Leju Holdings Ltd. - CFO [4]
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Thank you, He [Zong]. Good morning and good evening, everyone.
We're very pleased to report our strong second quarter top line results with a 63% year-over-year growth. Our e-commerce services revenue of $68.3 million accounted for about 58% of our total revenues. This represents a 159% year-over-year growth, which was primarily driven by increases in discount coupons redeemed as we expanded into more cities and increased our market share, particularly in second and third tier cities.
During the quarter, we generated e-commerce revenue from 58 cities, compared to 38 in the second quarter of last year, and 49 cities at the end of first quarter this year.
Our online advertising revenues was $44.8 million, which is an 11% growth, compared to the same period last year, and contributed to about 38% of our total revenues. The growth was contributed from both of our new homes and home furnishing channels.
In the second quarter, as a result of the lower transaction volume in the secondary market, revenues from our listing service experienced a decrease of 15% to $4.2 million. The listings business has always been a smaller piece of our total revenue pie, but we still see long term growth potential in this market, and continue to monitor the development of this industry and continue to invest in product development and team for this business. We're hopeful that our investments will yield long term results going forward.
Non-GAAP income from operations was $24.1 million, representing an 83% year-over-year growth from the same period last year. Non-GAAP net income attributable to Leju shareholders was $20.5 million, representing a 78% year-over-year growth from the same period last year.
For the first half of 2014, we reported $196 million in total net revenues, representing a 75% increase from the same period of last year. Our e-commerce revenues grew 188% from the first half of last year, to $118 million, contributing about 60% of our total revenues. Our online advertising revenues grew 12% from the first half of last year to $69 million, contributing 35% of total revenues, while our listing revenues remained flat at 80% for the remaining 5%.
Non-GAAP income from operations was $33 million, representing a 208% year-over-year increase from the same period last year. Non-GAAP net income attributable to Leju's shareholders was $28 million, representing a 290% year-over-year growth from the same period last year.
As of June 30, 2014, our cash and cash equivalent balance was $229 million, including approximately $121 million from our IPO proceeds received in April. Our net cash flow from operations for the second quarter was $18.5 million. For the remainder of 2014, we expect to continue investing further into products and market share gains to capture the opportunities ahead of us.
Looking forward at this moment, we are maintaining our previous guidance for the year of 2014 of net revenues of $500 million to $520 million, which represents an increase from full year 2013 of about 49% to 55%.
That concludes our prepared remarks. We are now ready to take questions. Operator, please go ahead.
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Questions and Answers
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Operator [1]
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(Operator Instructions).
Your first question comes from Jinsong Du from Credit Suisse. Your line is open. Please go ahead.
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Jinsong Du, Credit Suisse - Analyst [2]
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Hi. Thanks for answering the questions. My question is regarding the competitive landscape. Could you -- because the marketing revenue growth seems to be much slower than the e-commerce, could you explain is it because of the cannibalization between the e-commerce and the marketing? And also whether the competitions with whom you have put a pressure on your margins for both e-commerce and the marketing business? Thanks.
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Geoffrey He, Leju Holdings Ltd. - CEO [3]
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Thank you, Jinsong. I think for the e-commerce is still our core business and our major direction to develop further. That's why I think you can see a good growth compared to a little less more of growth of traditional online advertising. And I think it's a strategic choice of our company because when we go to the developers, we first -- our top priority for us is to get a project to do the e-commerce. And then we are looking for opportunities to do some online advertising. So it's actually a strategic choice trust for us.
As to the margin, I think, given the market situation, I think e-commerce we already set up a very strong position on the market. And for us, I think it's how to grab as bigger market share as possible. That's our top priority at current quarter.
I don't know if you -- I answered the question, Jinsong.
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Jinsong Du, Credit Suisse - Analyst [4]
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Right. Just interesting to note that when you grow your e-commerce business at full speed, will it, in the process, put a cap or suppress the growth of your marketing revenue? That's number one.
And number two, as you said, now your focus is to gain market share. And while you continue to gain market share, will that put a pressure on the overall margin of the business as well? If you could elaborate a little bit more on that, that would be great. Thanks.
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Geoffrey He, Leju Holdings Ltd. - CEO [5]
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I think for the market as an estimate, I think how to maintain or consolidate our number one market share is still very important. Because when you look at the money, actually, it really depends on the market situation, how long or when e-commerce projects will continue. Especially as the market is changing, I think the worst time, actually, has already passed. So for us, we get more market share, get more e-commerce projects that will be positive for us to get more revenue, and even will be helpful to our margins.
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Min Chen, Leju Holdings Ltd. - CFO [6]
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I think, Jinsong, just to add on to what He Zong was saying. The other thing that we're also actually looking -- spending a lot of time looking at is how to further innovate and develop our products to be more efficient. So, yes, we are investing into gaining more market share, but we're also spending investments onto new product development with better and more suitable products for the market to meet our customers' needs.
For instance, our mobile products and our Weixin-Weibo public accounts that we recently launched. We hope that that would offset a part of the competitive pressure that I think you're alluding to. And offset a little bit of the pressure on the margins.
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Jinsong Du, Credit Suisse - Analyst [7]
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Right. And I think, to put from a better term, for your online advertising business, will the online advertising business growth continue to be much lower, or even get affected because of your expansion in e-commerce?
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Geoffrey He, Leju Holdings Ltd. - CEO [8]
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Yes because -- as I said because when we go to developer, the top priority for us is to first get the e-commerce projects. To some extent, actually, the growth of both online advertising and the e-commerce absolutely are, they're going to happen at one time. So it's unreasonable for us to get both high growth on both sectors. So we have to strategically choose which one to be our first growth priority.
And I think we are also making some preparations for us to give the market developers more innovative product offerings. I think they will be helpful both for the e-commerce and online advertising. Although we are still at the very early stage of the mobile products offerings.
But I think we have already laid a very solid foundation to get further, especially when we look at the market, we see that the demand from the developers actually they are looking for more innovative promotion ways to have their deals done. So e-commerce is an innovative model. And I think the mobile products will also be another -- they are very interested product.
So for us, I think these mobile projects will either help us to get more e-commerce projects and will - also will help us to grow the online advertising in the future.
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Jinsong Du, Credit Suisse - Analyst [9]
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All right. Thanks. I'll go back to the queue.
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Operator [10]
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Your next question comes from Sisi Lu from China Renaissance. (Operator Instructions).
Sisi, your line is open. Please go ahead.
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Sisi Lu, China Renaissance - Analyst [11]
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And thank you for taking my question. And congratulations on another solid quarter. Actually, my question, again, related to e-commerce business. I understand that we have seen trends that developed -- right now that developers are getting demanding. And also so far mentioned that -- mentioned about considering a new e-commerce business model where they are trying to get into the real transactions and really use their platform to complete the whole transaction.
So could you please give us any colors on your thoughts? And how you think that the current e-commerce model is sustainable going forward? Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [12]
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Sure, Sisi. Thank you. The way that we look at e-commerce is we still think that there is a lot of market potential for growth for the leading players. And based on our numbers, you've seen that we've been able to both increase the market share and penetration in the cities that we operate in.
We primarily see our role as a marketing agent for the developers to help market and sell their residential units. That's something that we've been doing using online and offline resources. And most recently, with our mobile resources as well. We've been relatively successful in achieving some of the results that we were hoping to achieve.
In terms of getting into the transaction value chain that some other players are moving towards, we think that the results of that remain to be seen. It's not necessarily a proven business model yet.
But we're obviously monitoring the market in general, what our developer clients are demanding us to do to help them with the sales of their units. And also what our competitors are doing so that we can be ahead of the curve.
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Sisi Lu, China Renaissance - Analyst [13]
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Great. That's helpful. Thank you. I will go back to the queue.
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Operator [14]
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Your next question comes from Alex Yao from JPMorgan. Your line is open. Please go ahead.
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Alex Yao, JPMorgan - Analyst [15]
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Hi. Good evening, everyone. Thank you very much for taking my question. I have a question on the Weibo and the Weixin partnership. Can you talk about where do these partnerships create value to you guys? And to what extent do they generate incremental sales leads? And then, lastly, when do you guys expect to see a meaningful financial contribution? Thank you. I'll stop here.
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Min Chen, Leju Holdings Ltd. - CFO [16]
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Sure. Sure. Thanks, Alex. Our partnerships with both Weibo and Weixin are, from our perspective, very strategic. We've looked at the user habits of the current population of the Chinese potential home-buying population, and we noticed that for the trend of moving from PC to mobile and the most two obvious entry points for these mobile users is Weibo and Weixin. So from that perspective, the value of having access to these entry points is tremendous for us.
Currently, as you know, Leju's operating philosophy is to keep an open platform where we are able to increase and maximize our access to potential users and potential home buyers, both for - our e-commerce business, as well as for the online advertising audiences.
So with the access of both Weibo and Weixin, what we've done so far is adding these two mobile entry points as additional channels of our access to the potential users, and delivering the information and content to these users so that we can promote and market our clients' real estate units for the new houses segment.
But, going forward, having established the followers on our Weibo and Weixin accounts, we are looking for ways, I would say, to potentially monetize -- to generate revenue from, I guess, these specific entry points.
But so far, the Weibo and Weixin accounts and our mobile products -- the e-commerce product version 2.0 is really an additional channel for us to drive our e-commerce business.
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Alex Yao, JPMorgan - Analyst [17]
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Got it. Very helpful. I'll get back to the queue. Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [18]
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Thanks, Alex.
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Operator [19]
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Your next question comes from Jiong Shao from Macquarie. Your line is open. Please go ahead.
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Jiong Shao, Macquarie - Analyst [20]
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Thank you for taking my question. And congrats on the results, particularly your results seem to be much better than the market of some of your competitors.
My question is that your primary competitor in this space recently made some investments in offline agency, although it's in a new construction primary market. But they indicated that they are plan potentially to invest in the secondary agencies as well.
I look to hear your view sort of the plus and minuses investing in the offline agencies, whether or not that's something Leju is thinking about doing? Or whether or not that may prevent you from doing since you are a part of E-House? Thank you.
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Geoffrey He, Leju Holdings Ltd. - CEO [21]
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Thank you. I think we know that our competitors were doing something new and actually something quite surprising. But we actually don't know what's their strategy. But for us, I think our strategy is very clear.
We will stick to our strategies to develop our mobile products, to further get more market share of our e-commerce business. I think, this, we will not be changed actually by some competitor's change. We will stick -- still thinking how to consolidate our mobile position and how to further consolidate our number one e-commerce positions.
Of course, we will monitor how our competitors are doing during their new change. And actually we have no comment today because [we] have no results from their change.
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Jiong Shao, Macquarie - Analyst [22]
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Okay. Thank you, He Zong.
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Geoffrey He, Leju Holdings Ltd. - CEO [23]
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Thank you.
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Operator [24]
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The next question comes from Eddie Leung from Merrill Lynch. Your line is open. Please go ahead.
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Eddie Leung, Merrill Lynch - Analyst [25]
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Good evening. Thank you for taking my question. My question is on your geographical expansion. So wondering if you could give us some more color on the plans for the rest of the year, and for next year in terms of your coverage for your e-commerce and potentially secondary listing business? And just a related note, if you could give us some high color breakdown of your revenue mix from different tiering of cities for the quarter, that would be great. Thanks.
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Min Chen, Leju Holdings Ltd. - CFO [26]
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Sure. Thanks, Eddie. In terms of operations geographically, I mentioned our e-commerce business for this quarter generated revenue from 58 cities. And, obviously, the traditional for its first tier about 34 second tier cities, and then about 20 cities that are third tier and the lower.
For the secondary listings business, earlier in July, we actually announced that we signed strategic alliances with our brokerage agencies in 17 cities. So we're actively driving our secondary listing business in these 17 cities. But we -- in terms of going forward for the second half of this year and potentially into the next year, both for primary and secondary business, we're monitoring and evaluating potential new markets to enter into. But those new market expansion will be very selective. It's not going to be large scale.
In terms of revenue generation -- revenue distribution, from e-commerce side, our revenues from first tier cities is about 40%; second tier cities are around 53%; and the remaining is from third tier or lower tier cities.
A similar distribution for our advertising as well. For the online advertising, about 36% from first tier cities, 50% from second tier, and 13% from the remaining cities that we operate in.
Eddie Leung: Thank you very much, Min. Very helpful. Thanks.
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Min Chen, Leju Holdings Ltd. - CFO [27]
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Thank you, Eddie.
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Operator [28]
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Your next question comes from Gregory Chow from Barclays. Your line is open. Please go ahead.
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Gregory Chow, Barclays - Analyst [29]
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Good evening, everyone. And thanks for taking my question. My question is about your listing services. And we have observed, we have very decent growth in some cities like Shanghai in terms of a number of listings.
And if you could mention, share some colors of your efforts in expanding your agency coverages in the first tier cities like Beijing, Shanghai and Guangzhou? And what's your current monetization method on the listing services? Is it like a fixed package for subscription? Or kind of some beating advertising? Thanks.
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Min Chen, Leju Holdings Ltd. - CFO [30]
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For our listing business, as you all know, our 2013 revenues for the listing segment was primarily from one city, that is Beijing. This year, we've started our expansion into more cities. I mentioned just now that we are actively operating in about -- at least in 17 cities, and are laying out the network and the teams in a few additional cities.
In terms of the listing business model, currently, what we've done very successfully in Beijing last year was a verified listing which we are promoting in all the cities that we're operating our secondary listings business in.
So that is still going to be -- as of now, that is still going to be the primary -- the verified listing will still be the primary business model, but we've also announced in July that we have launched an upgraded listing product where we've been able to consolidate our mobile resources to better serve our broker clients as well so that, in addition to -- it's all still based on the verified listing foundation.
But in addition to the traditional PC channel of marketing, they're now getting a lot more channels and resources at their hands to market their housing information.
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Gregory Chow, Barclays - Analyst [31]
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Okay. Thank you very much.
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Operator [32]
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Your next question comes from Wendy Wong from Standard Chartered. Your line is open. Please go ahead.
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Wendy Wong, Standard Chartered - Analyst [33]
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Thank you. Recently, we have seen the price cutting from many of your competitors on the listings as well as the primary e-commerce business. How do you view the pricing power that Leju has towards the customers? And also, is there any way, in your view, for the online real estate platform to increase its pricing power toward the customers in the long term? Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [34]
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As we developed our verified listing model, our pricing model was targeted towards giving our broker clients a reasonable return on their investment, which is the advertising dollar that they spend with us. So we monitor the clicks and the phone calls and the potential business that our listings have been able to generate for them. And we price our listings -- our verified listings accordingly.
So, obviously, with what I just mentioned, in addition to the PC channel of marketing, with the additional mobile resources that they're now being able to market their housing information on Weibo, and now Weixin, on their cell through our Fangniujia app. There's a greater chance of these agents being able to generate higher views of their housing information. So that is linked to our pricing power of our secondary listing model.
Going forward, as we -- we launched our upgraded secondary listing product in early August, just this last week -- two weeks ago. So as more and more of our broker clients are getting used to this product and start using it every day, we expect that the views and the calls that they're receiving will increase. And that, in turn, will increase our pricing power for our listings business.
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Geoffrey He, Leju Holdings Ltd. - CEO [35]
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Yes, adding to - Min's comments that our pricing strategy model of our existing business is based on the ROI. So if we have more views, more clicks that means we get big power -- pricing power ratings. If the market gets softer and we get lower page views then the price will go down.
So it's automatically changed, the pricing model. So I think most agents have accepted the model that is why we upgrade our listing model to consolidate mobile resources into that. This will help us to get a big pricing power because we will bring more exposure, more calls or more clicks to the agents.
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Wendy Wong, Standard Chartered - Analyst [36]
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Thank you.
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Operator [37]
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Your next question comes from Tian Hou from T.H. Capital. Your line is open. Please go ahead.
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Tian Hou, T.H .Capital - Analyst [38]
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Hi, management. Thanks for taking my question. One question which you mentioned regarding the relaxation of some cities on the restriction policies. And, certainly, the weakness in China's housing market, indeed caused some cities to release a even much more softer policy and less restriction on the purchase. And I wonder if you have seen any kind of results out of that policy? And would you think those kind of relaxation policies could do to Leju?
Another question is I wonder what are some factors stopping you from going into more cities instead of currently 50-some cities? That's all my questions.
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Geoffrey He, Leju Holdings Ltd. - CEO [39]
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Okay. For the first one is that we actually see some signals that for some cities when they announced relaxing their restrictions and the trading volume is slightly up. But for the rest of the cities, although they announced these relaxing policies, but their trading volumes remains same -- almost the same.
But, overall, I think the market situation is getting a change because the overall market expectation it think that the worst time, maybe it's changed. Maybe it's gone. We don't know when the market will overall change to become more positive. But I think the signal is quite good for us.
For our business, I think when the market goes to be positive, I think it still will be positive to our revenue because it will shorten the time period for us to sell off the e-coupons program project. This means will help us to save the cost and even get a higher revenue.
So the market is changing. We expect that the changing will still continue. But we don't know how -- to what extent it will be changing.
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Min Chen, Leju Holdings Ltd. - CFO [40]
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Tian, I think just one more point to add on the market. Obviously, the other -- we serve -- a big group of our clients are developers that operate in China. So we obviously take the cue from our developer clients as well.
As of now, most developers have been closely monitoring the market, and we're not aware of many of them changing their full year sales targets by too much. So that's also another signal to us that developers are hopeful that their full year -- well, they're hopeful of reaching their full-year targets, which is another sign for us that the second half of the market will stabilize somewhat.
And then, to your second question about the number of cities that we operate in -- for e-commerce and advertising, we actually operate in about 73 cities. The 58 cities that we mentioned were cities that had e-commerce revenue contributions for the second quarter of this year alone.
So depending on the developer launch schedules in various cities, from quarter to quarter, that number is going to change. And then, obviously, in a very, very good quarter, we'll have 73 cities contributing revenue.
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Tian Hou, T.H .Capital - Analyst [41]
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I got it. Thank you.
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Operator [42]
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Your next question comes from Jinsong Du from Credit Suisse. Your line is open. Please go ahead.
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Jinsong Du, Credit Suisse - Analyst [43]
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Hi. Thanks for taking my question again. I'd just like to follow up on the impact of the market. If the market is getting better, would that mean good for your margins, or it's going to be the same?
And also, if the market is getting better, will the developers be in less need of more innovative promotions, or going back to the more traditional online advertising? Or they will still be chasing more innovative ways of using your WeChat home promotions, for example, or other things?
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Min Chen, Leju Holdings Ltd. - CFO [44]
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I think, overall, for this year our view of the margin is that it will be relatively stable compared to last year. We mentioned that the more innovative the mobile product will help us in offsetting some of the marketing expenses that we have to incur to successfully solve these projects.
But, at the same time, we want to continuously invest into more of the products that we can offer to our clients. So regardless of whether the real estate market, in general, is getting a lot better or remains the way it is now, I think developer clients are always interested in seeing new and more effective products.
And we think that the mobile products that we have launched, including Weixin and Weibo accounts, have actually been able to help them reach more accurate and more - are higher intentional buyers as compared to the traditional advertising formats.
So that's something that developers can see immediate results of. So we think that they'll always be welcoming new products that we can show results to them.
And then, also, that's obviously a reason why we will continue investment into the product development. And, at the same time, as you are very aware, as you mentioned early on, the competitive landscape is also getting very interesting.
So we want to maintain our market share leadership in this market to continue to serve our clients.
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Jinsong Du, Credit Suisse - Analyst [45]
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And for your secondary listing business, do you expect the revenue in this secondary listing business to continue to decline for the rest of the year? Or is it going to be rebounding in the second half? And also, what's your outlook -- just rough outlook on your secondary listing business, maybe, next year?
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Geoffrey He, Leju Holdings Ltd. - CEO [46]
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I think, first of all, for our secondary market study is because we are expanding to more cities nationwide is that how many high ratings we have is the top priority for us, no matter how much they pay, because we are setting the new markets in these new cities. So that's our top priority.
And the second, as to the revenues side is because our pricing model is based on performance and how many clicks and how many page views every agents will receive, so it will be dynamic.
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Jinsong Du, Credit Suisse - Analyst [47]
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All right. Thank you.
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Operator [48]
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You next question comes from Alex Yao from JPMorgan. Your line is open. Please go ahead.
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Alex Yao, JPMorgan - Analyst [49]
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Thank you for taking my follow-up question. I have a question regarding the investment activities in the second half. You guys mentioned in the prepared remarks you are ready for more investment for market share gain and the new product development. Just wondering how would these investments affect margins? Thank you.
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Geoffrey He, Leju Holdings Ltd. - CEO [50]
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I think this investment, first, is in our mobile product innovation. This investment mainly on the labor costs. But, compared to our total payroll, I think the addition of the new payroll will be very limited -- very limited.
And the second investment is because we are still getting more e-commerce projects and our softer market; we need to invest more to do both the online and offline offerings to the developers. This will also be another marketing investment for us.
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Min Chen, Leju Holdings Ltd. - CFO [51]
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Alex, I think to add onto that, Weixin and Weibo for us, as I mentioned before, we see these as two entry points. But having these resources at hand actually, for us, we think that there is a number of different products that we can develop and offer to our clients, using these two entry points to create new marketing campaigns, to create new online and, potentially, online plus offline events for our clients.
It's not always going to be just Weixin and Weibo public accounts. We've already launched the three set of integrated product suites in July. And that's been very well-received by our developer clients. So we think that there's additional possibilities and variations that we can do with these two entry points. That's something that we will continue to look to invest into.
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Jinsong Du, Credit Suisse - Analyst [52]
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Very helpful. Thank you very much.
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Operator [53]
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Your next question comes from Jiong Shao from Macquarie. Your line is open. Please go ahead.
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Jiong Shao, Macquarie - Analyst [54]
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Thanks for taking my follow-up questions. Firstly, I want to better understand the reasons and the drivers behind your much faster growth in e-commerce business than your peers. Your growth rate is much higher than your peers. I just want to understand. Is that just basic blocking and tackling or are there other reasons behind that performance?
And, secondly, for the listing business, could you talk about your pricing compared to your competitor. And could you also talk about your competitor reasons that they cut price by 40% nationwide? Do you feel that the pricing in the industry today generally is okay? How can you handicap the risk that a further price cut may still be necessary for the secondary listing to keep some of the offline agencies afloat, per se. Thank you.
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Geoffrey He, Leju Holdings Ltd. - CEO [55]
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To answer your first question is that because we have already set up a very solid leadership on the market, so it will give more confidence to our developers to choose us to do their e-commerce projects. And especially, we have a very mature, both online and offline, we call O2O experience, especially the offline experience. That's the first one.
The second one is because we upgrade our offerings to developers, especially our mobile products with Weibo and Weixin. You can see that the event we do the home -- Weixin Home Promotion activities actually received very, very positive feedback from the developers. They are very eager to integrate these new products into the total offerings of our e-commerce projects. So this will also help us to gain more e-commerce products from our competitors.
When you look at the landscape, you can see our competitors only can give the traditional online things and very little offline things. But we can provide them integrated both online and offline things plus very innovative mobile offerings. So that's, I think, the key reason, that's why we are very competitive. We have the competitive edge to get in the e-commerce products. That's the first one.
The second one is that, for us, we can see, as I have mentioned several times, that our pricing model is very different from our competitors. Our competitors actually been giving a very fixed amount of price to the agents. And our pricing is based on ROI. If the ROI -- so we try to remain the same ROI for the agents.
So if they see their ROI doesn't change, they develop less pressure on the price. Of course, when we see the page views and the clicks because of the market going down, the price will still going down. So our price strategy is very dynamic. So we don't actually do -- is to say, we do not have such a strong price pressure from our competitors actually.
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Min Chen, Leju Holdings Ltd. - CFO [56]
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I think, Jiong, in other words, if you look at our pricing model versus some of the fixed price models, when markets are good, we benefit from the increased volume and increased views and calls that the agents are receiving. But when the markets are down, such as this year, we actually -- inherent in our pricing model, we actually share a part of the slow-down with the agents.
Like He Zong said, we haven't seen much of a direct demand of pricing cuts from our clients. But, obviously, the overall market environment is such that everybody -- all the industry players -- will have to share part of the pain.
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Operator [57]
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Your next question comes from Eric Wen from China Renaissance Security. Your line is open. Please go ahead.
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Eric Wen, China Renaissance Security - Analyst [58]
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Good evening, He Zong and Chen Zong. Thanks very much for taking my question. And congratulations on a great quarter. I just have a follow-up question on your listing business. It seems to be that there are some regulation changes regarding the qualifications of the common real estate agency.
And some of the developers like Vanke is experimenting with a -- partnering with individuals to sell the real estate, even talking about partnership with some e-commerce companies. How do you see those developments to impact your listing business strategy as you develop your business from scratch leveraging the mobile internet? Thanks.
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Min Chen, Leju Holdings Ltd. - CFO [59]
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Okay. Eric, I'll translate the question for our Chairman and he'll answer your question. Okay. Thanks.
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Xin Zhou, Leju Holdings Ltd. - Executive Chairman [60]
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(interpreted) First of all, the policy changes, Eric, that you mentioned, was we understand a ministerial level change to relax qualifications for both the real estate agency business as well as five other industries. This, to us, is actually a sign of the central government being more willing to let the economy and the market drive these industries, which is positive.
Secondly, regarding Vanke's promotion of independent brokers, again, it's a sign to us. It shows us that the consumers, as well as industry players, are actually placing more and more emphasis on internet and various marketing channels as a tool for real estate marketing.
For E-House as well as Leju over the past decade or so for E-House, we've done a number of product developments and new innovations around the real estate marketing industry itself, both online and offline.
So what Vanke is doing this time with this new agency model, we think is actually a very positive thing for the industry, as well as for the developers because now they have infinitely more potential agents that are helping them to do the marketing of their real estate.
In terms of impact to the real estate marketing market, both for primary houses and secondary -- or for online -- for different ways of doing the marketing online and offline, we actually think for real estate marketing and promotion, in general, this past couple of years has been very rapidly changing industry, especially after internet and especially after mobile technology entered into the scene.
So what we're facing is actually a relatively, an almost all new industry where we have to continue to innovate to be able to do our job, real estate marketing well.
We think that in a changing market, the changes are actually opportunities for those that are well-prepared and are ready to grasp the changes. So both for E-House and Leju, over the past few years, we've faced a number of changes and have been able to adapt to the industry changes every time.
So we think that, even with this changing secondary brokerage policy with the changing industry landscape, we're prepared to seek the opportunities to come up with better products to serve our clients, as well as to deliver returns to our investors.
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Eric Wen, China Renaissance Security - Analyst [61]
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Thank you very much, Xin Zhou. Very helpful.
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Operator [62]
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Your next question comes from Ella Ji from Oppenheimer. Your line is open. Please go ahead.
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Ella Ji, Oppenheimer - Analyst [63]
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Good evening, management. And thank you for taking my questions. Two quick questions. The first, if my calculation is correct, the average revenue per coupon for this quarter declined moderately from 1Q. Just wonder if this is because the mix shifted to more lower tier cities. Or let's say, in the same tier one or tier two cities, are you also seeing the declining coupon ticket size?
And the second question of mine is in mobile, you currently have your own mobile app and then you have a Weixin and a Weibo. It seems that Weixin and Weibo have been a very effective marketing channel for you, I just wonder, going forward, how are you going to use the Weixin and Weibo?
Are they going to be just treated just like an in-house channel? Or will waiting, maybe, continue -- you will do more of big sales events like what you did for the last time Weixin (inaudible)?
And also if you can quickly comment on the effectiveness of Weixin and Weibo versus your own mobile app? That would be helpful. Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [64]
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Sure. Actually, to answer your first question, your assumption is right. It's actually just because a mix of cities, especially the increase in the number of cities that are lower tier. So the average coupon prices have declined slightly. In the same tier cities, the prices have been, actually, rather stable.
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Geoffrey He, Leju Holdings Ltd. - CEO [65]
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And for the second, I think technically -- I think we have actually tried to balance the development of Weibo and Weixin. Actually, that's the mobile -- how to say that's the mobile platforms development. And also our own app application called Pocket Leju, the development.
So we have actually have a - we have a plan. We, first, I think we will focus on the Weibo and Weixin because it's much easier for our users, for the home buyers to get access to the mobile services we provided. And, of course, we also have a very complete plan how to develop our app, but it's the next step.
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Ella Ji, Oppenheimer - Analyst [66]
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Got it. Thank you.
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Operator [67]
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Your next question comes from Jinsong Du from Credit Suisse. Your line is open. Please go ahead.
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Jinsong Du, Credit Suisse - Analyst [68]
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Yes. My original question was already asked. But just a quick follow-up on your Weixin, the home promotion, you have just made a second launch -- a second batch of the launch at which you said is upgrade. Could you just quickly mention what exactly is the additional upgrade that may make it better?
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Geoffrey He, Leju Holdings Ltd. - CEO [69]
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I think we actually had a lot of new games that include the activities. The first [element] of this event is actually mainly focused on the red packet -- that gift packet.
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Min Chen, Leju Holdings Ltd. - CFO [70]
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Right. The gift pack.
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Geoffrey He, Leju Holdings Ltd. - CEO [71]
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And the second time, I think we add -- in Chinese, we called it (inaudible).
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Min Chen, Leju Holdings Ltd. - CFO [72]
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[Cross] purchasing.
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Geoffrey He, Leju Holdings Ltd. - CEO [73]
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Yes. Cross purchasing. It's kind of a new game. And we will add a lot of various new interesting products we are trying -- the first one is we are trying to put the house directly to sell on the Weixin. And we also have a try. And the second is that we will also put some lucky draw player games into that. So you can see -- in Chinese, we actually do not have only red packet, we have more games on that.
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Min Chen, Leju Holdings Ltd. - CFO [74]
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So, Jinsong, I think the second season of the -- the continuation of the Weixin promotion was really when we announced the first one for the period of the month towards the end, towards the second half of that promotion period, we were getting, actually, increased demand from developers who want to participate in this event. So that's why we decided to extend it with the second season.
And with the second season, as He Zong mentioned, we are finding -- I guess creating more ways for both developers and consumers to participate in these events.
If you think about the power of marketing, moving from passing by an ad, a traditional advertising billboard, or even an online banner ad, to something that you can participate and play games with on your cell phone -- the effects of that new marketing is a lot more powerful. So that's why we are now in our second season. And I guess it's back by popular demand.
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Jinsong Du, Credit Suisse - Analyst [75]
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Great. Thanks a lot.
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Operator [76]
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Your next question comes from Gregory Chow from Barclays. Your line is open. Please go ahead.
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Gregory Chow, Barclays - Analyst [77]
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Thanks for taking my second question. My second question is about our selling and general admin expenses. How much shall we allocate the expenses to your investment, in R&D or mobile development?
And in the release you also mentioned that the increase of the selling expenses was primarily due to the increase of your e-commerce business.
But I think the e-commerce business revenue is growing faster than the selling marketing expenses. So would you please share some color about the correlation between the e-commerce revenue and the selling marketing expenses? Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [78]
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Thank you. I'll answer your second question first. The increase in expenses is lower than the revenue because really we went from 49 cities to 58. There's a lot of synergies that we've been able to generate in cities where we're operating multiple projects on.
And then for some of the marketing events that we organized, we've been able to promote multiple projects in one event. So there's a lot of synergies within cities, within different projects, some developed by the same developer, so that we can grow our revenues a lot faster than the marketing expenses. That's number one.
And in terms of your first question about investment amounts in the second half, He Zong mentioned earlier, the bulk of investment into product development is really getting the team, the technology up and running. And we think that the framework has been laid out already.
We've successfully launched the Weixin promotion, which is the foundation for a lot of the other things that we're working on. So the additional investment into development products will not be as large as before. It's probably more incremental and it will be more variable and changes along with the various events that we launch. I hope that answers your question.
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Gregory Chow, Barclays - Analyst [79]
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Yes. Very helpful. Thank you.
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Min Chen, Leju Holdings Ltd. - CFO [80]
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Thanks.
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Operator [81]
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We are now approaching the end of the conference call. I would like to turn the call back over to Leju's Investor Relations Director, Ms. Melody Liu, for closing remarks.
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Melody Liu, Leju Holdings Ltd. - IR Director [82]
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Thank you. This concludes today's call. If you have any follow-up questions, please contact us at the numbers or e-mails provided on our earnings release and on our website. Thank you.
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Operator [83]
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Thank you for your participation in today's' conference call. This does conclude the presentation. You may all disconnect. Thank you.
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Editor [84]
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Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.
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