Sohu.com (SOHU)

We depend on the introduction of new online games and improvements of our existing games to sustain our profitability. If we fail to develop and launch new online games or to improve our existing games, our profitability may be adversely affected.

Currently, we operate two online games, BO and TLBB. We have operated BO for more than 3 years, and we expect that it will gradually lose its attractiveness to users within the next one or two years. Revenues from TLBB, which was launched in 2007, represent approximately 84% of our total game revenues for 2007. We expect that revenue from TLBB will become mature during 2008.

In order to maintain the long-term profitability of our online game business, we will need to continually introduce new online games to attract game users and increase our game revenues. Though we have successfully launched our in-house developed game TLBB, we may fail to develop and launch additional new games in the market if we are unable to a) anticipate and catch up with future technical trends, new business models, and changed game players’ preferences and requirements, b) effectively plan and organize marketing and promotion activities and, c) differentiate our new games from existing games. If so, the profitability of our game business will be materially and adversely affected.

Furthermore, in order to sustain the revenues of TLBB, which constituted 84% of our total game revenue in 2007, we may need to trace and meet players’ preferences and needs in a timely manner; thus we must continually improve TLBB’s in-game quality and launch new features or new extension packs in order to retain existing users and attract new users. If we fail to meet our users’ preferences and needs, TLBB may lose its attraction for existing and potential users, which would have a significant adverse effect on our online game revenues.