Sohu.com (SOHU)

Our online game business may not succeed in a highly competitive market

Competition in the online game market in China is becoming increasingly intense. For example, according to the IDC, there were 140 game developers and 281 game titles in 2007. There were four online game companies, Perfect World, Giant Interactive, Netdragon and Kingsoft, that successfully listed their shares on Nasdaq, the New York Stock Exchange or the Hong Kong Stock Exchange in the second half of 2007 alone, adding to the previously listed public companies focusing on the online game market in China, such as Shanda Interactive Entertainment Limited, The9 Limited, NetEase.com Inc. and Tencent Holdings Limited. Moreover, there are many venture-backed private companies focusing on online game development, further intensifying the competition. Recently, many of our competitors have become more aggressive in the hiring of talent for game development, increasing spending on games marketing and bidding for licensing of games. Increased competition in the online game industry may make it difficult for us to retain our existing employees and attract new employees, and to sustain our growth rate. Furthermore, we also face intense competition for cost-effective marketing resources for online games, such as online game-related websites, which could drive up our marketing costs and decrease the effectiveness of our marketing campaigns.

Our online game business may not succeed in a highly competitive market

Competition in the online game market in China is becoming more and more intense. For example, according to 17173.com statistics, in the fourth quarter of 2007, 51 new MMORPG games or advanced casual games were launched. In the second half of 2007, there were four online game companies, Perfect World, Giant Interactive, Netdragon and Kingsoft, that successfully listed their shares on Nasdaq or the Hong Kong stock market. Prior to those listings, there were only three listed online game companies in China, Shanda, The9 and Netease. Moreover, venture capital funds are investing increasing amounts of capital into the market, which has resulted in even more heated competition. Recently, many of our competitors have become more aggressive in the hiring of talent for game development, increasing spending on games marketing and bidding for games licensing. Increased competition in the online game industry may make it difficult for us to retain and expand our existing user base, growth rate and profitability.

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Our online
game business may not succeed in a highly competitive market

Competition in the online game market in China is becoming more and more intense. For
example, according to 17173.com statistics, in the fourth quarter of 2007, 51 new MMORPG games or advanced casual games were launched. In the second half of 2007, there were four online game companies, Perfect World, Giant Interactive, Netdragon and
Kingsoft, that successfully listed their shares on Nasdaq or the Hong Kong stock market. Prior to those listings, there were only three listed online game companies in China, Shanda, The9 and Netease. Moreover, venture capital funds are investing
increasing amounts of capital into the market, which has resulted in even more heated competition. Recently, many of our competitors have become more aggressive in the hiring of talent for game development, increasing spending on games marketing and
bidding for games licensing. Increased competition in the online game industry may make it difficult for us to retain and expand our existing user base, growth rate and profitability.

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