Sohu.com (SOHU)

Our investment in the online games business may not be successful.

We have invested and may invest further in our online games business. The offering of online games is currently one of the fastest growing online services in the PRC. Sohu had operated two online games, namely Knight Online and Blade Online, which we licensed from third party game companies. We discontinued the operation of Knight Online in March 2007 when the license expired. Our license of Blade Online will expire in September 2008. In the event that a license expires and we wish to renew such license, the licensor may only agree to renew such license upon an increase in the license fee that we pay to such licensor. Our new in-house developed online game – Tian Long Ba Bu (or TLBB) will begin its open beta testing in May 2007. If the operation of TLBB is not as successful as we have expected, our online games business may be negatively impacted. In addition, our business might be significantly affected if there are any changes in the PRC laws or regulations in relation to these businesses. For example, the PRC government has issued a new law to implement restrictions and further regulation on the online games industry. Based on

-31-

Table of Contents

these rules, online games companies are required to install an “anti-fatigue system”, which discourages game participants from playing games for more than five hours per day. In addition, the PRC government is planning to make a compulsory requirement for online game players to register their real names and provide ID numbers when playing games. Also, with the requirement of the real name registration for online game players, the government will implement a rating system for online games. For those online games rated as not suitable for children under the age of 18, children under the age of 18 will be unable to access such game if a real name registration is in place. As a result, our revenues from online games may be adversely affected. We may not succeed in these markets despite our investment of time and funds. If we fail to achieve a significant market position, we will fail to realize our anticipated returns on these investments.

Our investment in the online games business may not be successful.

We have invested and may invest further in our online games business. The offering of online games is currently one of the fastest growing online services in the PRC. We currently rely on licenses from third party game companies. Our license of Knight Online expired in November 2006, and we discontinued our operation of Knight Online when the license contract expired. Our license of Blade Online will expire in September 2008. In the event that a license expires and we wish to renew such license, the licensor may only agree to renew such license upon an increase in the license fee that we pay to such licensor. In addition, our business might be significantly affected if there are any changes in the PRC laws or regulations in relation to these businesses. For example, the PRC government has issued a new law to implement restrictions and further regulation on the online games industry. Based on these rules, online games companies are required to install an “anti-fatigue system”, which discourages game participants from playing games for more than five hours per day. In addition, the PRC government is planning to make a compulsory requirement for online game players to register their real names and provide ID numbers when playing games. Also, with the requirement of the real name registration for online game players, the government will implement a rating system for online games. For those online games rated as not suitable for children under the age of 18, children under the age of 18 will be unable to access such game if a real name registration is in place. As a result, our revenues from online games may be adversely affected. We may not succeed in these markets despite our investment of time and funds. If we fail to achieve a significant market position, we will fail to realize our anticipated returns on these investments.

Our investment in online games business may not be successful.

We have invested and may invest further in our online games business. Online games is currently one of the fastest growing online services in the PRC. We currently rely on licenses from third party game companies. Our licenses of Knight Online and Blade Online will expire in November 2006 and September 2007, respectively. In the event that a license expires and we wish to renew such license, the licensor may only agree to renew such license upon an increase in the license fee that we pay to such licensor. In addition, our business might be significantly affected if there are any changes in the PRC laws or regulations in relation to these businesses. For example, the PRC government has issued a new law to implement restrictions and further regulation on the online games industry. Based on these rules, online games companies are required to install an “anti-fatigue system”, which discourages the game participants from playing games for more than five hours per day. In addition, the PRC government is planning to make a compulsory requirement for online game users to register their real names and provide ID numbers when playing games. Also, upon the requirement of the real name registration for online game users, the government will implement a rating system for online games. For those online games rated as not suitable for child under 18, such child will be not able to access the game if a real name registration is in place. As a result, our revenues from online games may be adversely affected. We may not succeed in these markets despite our investment of time and funds. If we fail to achieve a significant market position, we will fail to realize our anticipated returns on these investments.

-38-

Table of Contents