Sohu.com (SOHU)

Product Development Expenses

Product development expenses increased by $1.8 million to $13.3 million for the three months ended March 31, 2009, as compared to $11.5 million for the three months ended March 31, 2008. The increase was primarily due to a $2.9 million increase in personnel expenses resulting from increases in headcount, salaries and bonuses, offset by a $1.0 million decrease in share-based compensation expense under SFAS 123(R) and a $0.1 million decrease in other expenses.

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Product Development Expenses

Product development expenses increased by $24.3 million to $49.7 million for the year ended December 31, 2008, as compared to $25.4 million for the year ended December 31, 2007. The increase was primarily due to a $18.7 million increase in personnel expenses resulting from an increase in headcount, salaries and bonuses, a $3.9 million increase in share-based compensation expense under SFAS 123(R), a $1.0 million increase in travel and entertainment, a $0.9 million increase in depreciation of servers and computer equipment and bandwidth leasing expenses, and a $0.9 million increase in other expenses, offset by a $1.1 million decrease in license fee.

Product Development Expenses

Product development expenses
increased by $24.3 million to $49.7 million for the year ended December 31, 2008, as compared to $25.4 million for the year ended December 31, 2007. The increase was primarily due to a $18.7 million increase in personnel expenses resulting
from an increase in headcount, salaries and bonuses, a $3.9 million increase in share-based compensation expense under SFAS 123(R), a $1.0 million increase in travel and entertainment, a $0.9 million increase in depreciation of servers and computer
equipment and bandwidth leasing expenses, and a $0.9 million increase in other expenses, offset by a $1.1 million decrease in license fee.

Product Development Expenses

Product development expenses increased by $7.7 million to $25.4 million for the year ended December 31, 2007, as compared to $17.7 million for the year ended December 31, 2006. The increase was primarily due to a $4.9 million increase in personnel expenses resulting from an increase in headcount, salaries and bonuses, a $2.2 million increase in license fee, and a $1.0 million increase in share-based compensation expense under SFAS 123(R), which was offset by a $400,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $6.1 million to $13.0 million for the three months ended September 30, 2008, and increased by $18.3 million to $35.3 million for the nine months ended September 30, 2008, as compared with the corresponding three and nine month periods in 2007. The increase for the three months ended September 30, 2008 from the corresponding period in 2007 primarily consists of a $4.3 million increase in personnel expense resulting from an increase in headcount, salaries and bonuses, a $1.0 million increase in share-based compensation expense under SFAS 123(R), a $0.3 million increase in depreciation of servers and computer equipment and bandwidth leasing expenses, and a $ 0.5 million increase in other expenses. The increase for the nine months ended September 30, 2008 from the corresponding period in 2007 primarily consists of a $12.7 million increase in personnel expense resulting from an increase in headcount, salaries and bonuses, a $3.0 million increase in share-based compensation expense under SFAS 123(R), a $0.9 million increase in depreciation of servers and computer equipment and bandwidth leasing expenses, a $0.8 million increase in travel and entertainment expenses, a $0.3 million increase in facilities expenses, and a $0.6 million increase in other expenses.

Product Development Expenses

Product development expenses increased by $5.3 million to $10.8 million for the three months ended June 30, 2008, and increased by $12.1 million to $22.3 million for the six months ended June 30, 2008, as compared to the corresponding three and six month periods in 2007. The increase for the three months ended June 30, 2008 from the corresponding period in 2007 primarily consists of a $4.2 million increase in personnel expense resulting from an increase in headcount, salaries and bonuses, a $0.5 million increase in

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share-based compensation expense under SAFS123(R), and a $0.6 million increase in other expenses. The increase for the six months ended June 30, 2008 from the corresponding period in 2007 primarily consists of a $8.4 million increase in personnel expenses resulting from an increase in headcount, salaries and bonuses, a $2.0 million increase in share-based compensation expense under SFAS 123(R), a $0.8 million increase in traveling and entertainment expenses, and a $0.9 million increase in other expenses.

Product Development Expenses

Product development expenses increased by $6.8 million to $11.5 million for the three months ended March 31, 2008, as compared to $4.7 million for the three months ended March 31, 2007. The increase was primarily due to a $4.2 million increase in personnel expenses resulting from an increases in headcount, salaries and bonuses, a $1.5 million increase in

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share-based compensation expense under SFAS 123(R), a $0.7 million increase in traveling and entertainment expenses, and a $0.4 million increase in other expenses.

Product Development Expenses

Product development
expenses increased by $7.7 million to $25.4 million for the year ended December 31, 2007, as compared to $17.7 million for the year ended December 31, 2006. The increase was primarily due to a $4.9 million increase in personnel expenses
resulting from an increase in headcount, salaries and bonuses, a $2.2 million increase in license fee, and a $1.0 million increase in share-based compensation expense under SFAS 123(R), which was offset by a $400,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $4.9 million to $17.7 million for the year ended December 31, 2006, as compared to $12.8 million for the year ended December 31, 2005. The increase was primarily due to a $2.8 million increase in personnel expenses resulting from an increase in headcount and salary increment and $1.9 million of share-based compensation expense under SFAS 123(R), and an increase in other expenses of $200,000.

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Product Development Expenses

Product development expenses increased by $2.1 million to $6.9 million for the three months ended September 30, 2007, and increased by $4.0 million to $17.0 million for the nine months ended September 30, 2007, as compared to the corresponding three and nine month periods in 2006. The increase for the three months ended September 30, 2007 from the corresponding period in 2006 was mainly due to $2.2 million increase in personnel expenses resulting from an increase in headcount and salaries. The increase for the nine months ended September 30, 2007 from the corresponding period in 2006 was due to a

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$3.6 million increase in personnel expenses resulting from an increase in headcount and salaries, a $893,000 increase in share-based compensation expense under SFAS 123(R), offset by a $493,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $1.2 million to $5.5 million for the three months ended June 30, 2007, and increased by $2.0 million to $10.2 million for the six months ended June 30, 2007, as compared to the corresponding three and six month periods in 2006. The increase for the three months ended June 30, 2007 from the corresponding period in 2006 was due to a $828,000

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increase in personnel expenses resulting from an increase in headcount and salaries and a $390,000 increase in share-based compensation expense under SFAS 123(R), offset by a $18,000 decrease in other expenses. The increase for the six months ended June 30, 2007 from the corresponding period in 2006 was due to a $1.4 million increase in personnel expenses resulting from an increase in headcount and salaries and $696,000 increase in share-based compensation expense under SFAS 123(R), offset by a $96,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $0.7 million to $4.9 million for the three months ended March 31, 2007, as compared to $4.2 million for the three months ended March 31, 2006. The increase was primarily due to a $525,000 increase in personnel expenses resulting from increases in headcount and salaries and a $303,000 increase in share-based compensation expense under SFAS 123(R), offset by a $128,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $4.9 million to $13.7 million for the year ended December 31, 2005, as compared to $8.8 million for the year ended December 31, 2004. The increase was primarily due to a $2.9 million increase in personnel expense as a result of increase in headcount and salary increment, a $1.3 million increase in office and depreciation expense and a $700,000 increase in traveling expense and others. The increase in product and development expenses is a result of our increased investment in the long-term growth opportunities of the Company.

Product Development Expenses

Product development expenses increased by $1.6 million to $5.0 million for the three months ended September 30, 2006, and increased by $3.7 million to $13.9 million for the nine months ended September 30, 2006, as compared to the corresponding three and nine month periods in 2005. The increase for the three months ended September 30, 2006 from the corresponding period in 2005 was due to a $766,000 increase in personnel expenses resulting from an increase in headcount and salary increment and $495,000 of the required expensing of share-based compensation cost under SFAS 123(R), and a increase in other expenses of $339,000. The increase for the nine months ended September 30, 2006 from corresponding period in 2005 was primarily due to a $2.3 million increase in personnel expenses resulted from an increase in headcount and salary increment and $1.4 million of the required expensing of share-based compensation cost under SFAS 123(R).

Product Development Expenses

Product development expenses increased by $1.0 million to $4.6 million for the three months ended June 30, 2006, and increased by $2.2 million to $8.9 million for the six months ended June 30, 2006, as compared to the corresponding three and six month periods in 2005. The increase for the three months ended June 30, 2006 from the corresponding period in 2005 was due to a $888,000 increase in personnel expenses resulting from an increase in headcount and salary increment and $369,000 of the required expensing of share-based compensation cost under SFAS 123(R), which amounts were offset by a decrease in other expenses of $257,000. The increase for the six months ended June 30, 2006 from corresponding period in 2005 was primarily due to a $1.5 million increase in personnel expenses resulted from an increase in headcount and salary increment and $863,000 of the required expensing of share-based compensation cost under SFAS 123(R), which amounts were offset by a $163,000 decrease in other expenses.

Product Development Expenses

Product development expenses increased by $1.1 million to $4.2 million for the three months ended March 31, 2006, as compared to $3.1 million for the three months ended March 31, 2005. The increase was primarily due to a $640,000 increase in personnel expenses resulted from increases in headcount and salary increment, $493,000 of the required expensing of share-based compensation cost under SFAS 123(R), and were offset by a $33,000 decrease in office and depreciation expense.

Product Development Expenses

Product development expenses increased by $1.3 million to $8.8 million for the year ended December 31, 2004, as compared to the year ended December 31, 2003. The increase was primarily due to a $1.7 million increase in personnel expense for additional employees and a $59,000 increase in other items including traveling expenses, professional fees and communications, offset by a $459,000 decrease in office and depreciation expenses.

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Product Development Expenses

Product development expenses increased by $977,000 to $3.4 million for the three months ended September 30, 2005 and increased by $3.7 million to $10.2 million for the nine months ended September 30, 2005, as compared to the corresponding three and nine month periods in 2004. The increase for the three months ended September 30, 2005 from the corresponding period in 2004 was primarily due to a $589,000 increase in personnel expense, a $256,000 increase in office and depreciation expenses, and a $132,000 increase in traveling and entertainment expenses and others. The increase for the nine months ended September 30, 2005 from the corresponding period in 2004 was primarily due to a $2.1 million increase in personnel expense, a $1.0 million increase in office and depreciation expenses, and a $586,000 increase in traveling and entertainment expenses and others.

Product Development Expenses

Product development expenses increased by $1.5 million to $3.6 million for the three months ended June 30, 2005 and increased by $2.7 million to $6.7 million for the six months ended June 30, 2005, as compared to the corresponding three and six month periods in 2004. The increase for the three months ended June 30, 2005 from corresponding period in 2004 was primarily due to a $808,000 increase in personnel expense for additional employees, a $250,000 increase in content and license expenses, a $348,000 increase in office and depreciation expenses, and a $96,000 increase in other items. The increase for the six months ended June 30, 2005 from corresponding period in 2004 was primarily due to a $1.5 million increase in personnel expense for additional employees, a $800,000 increase in office and depreciation expenses, a $235,000 increase in content and license expenses, and a $165,000 increase in other items.

Product Development Expenses

Product development expenses increased by $1.3 million to $3.1 million for the three months ended March 31, 2005, as compared to the three months ended March 31, 2004. The increase was primarily due to a $702,000 increase in personnel expense for additional employees, a $452,000 increase in office and depreciation expenses and a $146,000 increase in traveling entertainment expenses, professional fees and communications.

Product Development Expenses

Product development expenses were $7.5 million for the year ended December 31, 2003, as compared to $5.5 million for the year ended December 31, 2002. Product development expenses increased $2.0 million to $7.5 million for the year ended December 31, 2003, primarily due to increased salary expense of $1.6 million for additional employees to support our increased investment in our products and online games development, game license fees of $160,000, traveling and entertainment of $140,000 and training, communications, and office expense of $100,000.