Sohu.com (SOHU)

17173.com

The Sohu game portal www.17173.com was launched in 2000 as the first online game portal in China. 17173.com is a leading online destination for game players seeking information on games and feedback from other players on the site’s message boards. With over 400 game zones and millions of registered users supported by alliances with many thousands of Internet cafés, 17173.com is one of the largest online game information and community Websites in China. The game portal www.17173.com is widely recognized as a market leader among the game Websites in China, with strong expertise in running the Website, building a game community and developing relationships with advertising clients in the online game industry. 17173.com is also a strong marketing platform for our own games. In addition, 17173.com’s experienced game editors review and critique our games prior to launch, thereby improving the quality of our games.

17173.com

The Sohu games portal www.17173.com was launched in 2000 as the first online games portal in China and was acquired by Sohu in November 2003. 17173.com is a leading online destination for game players seeking information on games and feedback from other players on the site’s message boards. With over 100 game zones and millions of registered users supported by alliances with over thousands of Internet cafés, 17173.com is one of the largest online games information and community Websites in China. The games portal www.17173.com is widely recognized as a market leader among the games Websites in China, with strong expertise in running the Website, building a game community and developing relationships with advertising clients in the online games industry.

17173.com

17173.com

The Sohu games portal www.17173.com was launched in 2000 as the first online games portal in China and was acquired by Sohu in November 2003. 17173.com is a leading online destination for game players seeking information on games and feedback from other players on the site’s message boards. With over 100 game zones and millions of registered users supported by alliances with over 10,000 Internet cafés, 17173.com is the largest online games information and community Website in China. The games portal www.17173.com is widely recognized as a market leader among the games Websites in China, with strong expertise in running the Website, building a game community and developing relationships with advertising clients in the online games industry.

(c) 17173.com

On November 24, 2003, the Company, through Sohu.com Limited, completed the acquisition of all of the outstanding capital stock of Kylie Enterprises Limited, a company incorporated in the British Virgin Islands, for total consideration of $20,733,000 comprising $20,500,000 in cash and other acquisition costs of $233,000. Kylie Enterprises Limited is the owner of the 17173.com Website which provides information about online multiplayer games in China.

F-17

Table of Contents

The Company completed the acquisition in order to expand its services in the area of online multiplayer games. The purchase price was determined in arms’ length negotiations between Sohu and Kylie Enterprises Limited.

The acquisition has been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company’s consolidated financial statements. During 2004, upon completion of the valuation of the intangible assets, the Company recorded additional identified intangible assets of $42,000 and the recording of the difference of $73,000 between actual and estimated direct professional fees. The allocation of the consideration is as follows (in thousands):

The excess of purchase price over tangible and identifiable intangible assets (including customer lists and domain names) acquired was recorded as goodwill relating to brand advertising segment. The acquired identifiable intangible assets were valued mainly by discounted cash flow method and relief from royalty method; and were amortized over a weighted average period of nine years.

(b) 17173.com

On November 24, 2003, the Company, through Sohu.com Limited, completed the acquisition of all of the outstanding capital stock of Kylie Enterprises Limited, a company incorporated in the British Virgin Islands, for total consideration of $20,733,000 comprising $20,500,000 in cash and other acquisition costs of $233,000. Kylie Enterprises Limited is the owner of the 17173.com Website which provides information about online multiplayer games in China.

F-15

Table of Contents

The Company completed the acquisition in order to expand its services in the area of online multiplayer games. The purchase price was determined in arms’ length negotiations between Sohu and Kylie Enterprises Limited.

The acquisition has been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company’s consolidated financial statements. During 2004, upon completion of the valuation of the intangible assets, the Company recorded additional identified intangible assets of $42,000 and the recording of the difference of $73,000 between actual and estimated direct professional fees. The allocation of the consideration is as follows (in thousands):

The excess of purchase price over tangible and identifiable intangible assets (including customer lists and domain names) acquired was recorded as goodwill. The acquired identifiable intangible assets were valued mainly by discounted cash flow method and relief from royalty method.