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SOHU » Topics » Revenue recognition of online game operations depends on the data captured in the related billing systems. If such billing systems fail to operate effectively, the completeness and accuracy of the recognition of revenue will be materially affected.

This excerpt taken from the SOHU 10-K filed Feb 28, 2008.

Revenue recognition of online game operations depends on the data captured in the related billing systems. If such billing systems fail to operate effectively, the completeness and accuracy of the recognition of revenue will be materially affected.

We have adopted an item-based business model for our revenue derived from the online game operation. Under this item-based model, billing systems are required to capture data, such as items purchased, amount spent and amount accumulated by each individual user, which are critical for the calculation of revenue earned from time to time. If the related billing systems are damaged by system failure, network interruption, or virus infection, or invaded by a hacker, the integrity of data would be compromised, which in turn could have an adverse effect on our recognized game revenue.

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