Sohu.com (SOHU)

Revenues

Total revenues for the third quarter ended September 30, 2009 were US$136.6 million, representing increases of 7% sequentially and 13% year-on-year.

Brand advertising revenues for the third quarter of 2009 totaled US$48.5 million, representing a sequential increase of 11% and a decrease of 2% year-on-year.

Online game revenues for the third quarter of 2009 were US$68.7 million, representing increases of 3% sequentially and 26% year-on-year.

Wireless revenues for the third quarter of 2009 were US$16.8 million, representing increases of 12% sequentially and 16% year-on-year. The increase in wireless revenues was mainly a result of the Company promoting its products through a greater number of channels.

Revenues

Total revenues for the second quarter ended June 30, 2009 were US$127.1 million, representing an increase of 10% sequentially and an increase of 25% year-on-year.

Brand advertising revenues for the second quarter of 2009 totaled US$43.6 million, representing a sequential increase of 12% and a year-on-year increase of 5%.

Online game revenues for the second quarter of 2009 were US$66.6 million, representing an increase of 8% sequentially and 39% year-on-year.

Wireless revenues for the second quarter of 2009 were US$15.0 million, an increase of 12% sequentially and 63% year-on-year. The increase in wireless revenues was mainly because the Company promoted its products through a greater number of channels.

REVENUES

Total revenues were $115.7 million and $84.8 million for the three months ended March 31, 2009 and 2008, respectively.

Revenues

Total revenues for the first quarter ended March 31, 2009 were US$115.7 million, representing a decrease of 5% sequentially and increase of 36% year-on-year.

Brand advertising revenues for the first quarter of 2009 totaled US$39.1 million, down 13% quarter-on-quarter seasonally but up 18% year-on-year.

Online game revenues for the first quarter of 2009 were US$61.6 million with an increase of 6% quarter-on-quarter and 50% year-on-year. The increases were mainly attributable to an increase in Tian Long Ba Bu (“TLBB”) revenues as a result of user base expansion and enhanced user loyalty, as well as increased revenues from Blade Online (“BO”).

Revenues

Total revenues were $429.1 million and $188.9 million for the years ended December 31, 2008 and 2007, respectively.

Revenues

Total revenues were $188.9 million and $134.2 million for the years ended December 31, 2007 and 2006, respectively.

REVENUES

Total revenues were $120.7 million and $307.5 million for the three and nine months ended September 30, 2008, respectively, as compared with $51.5 million and $123.6 million for the corresponding periods in 2007.

REVENUES

Total revenues were $102.0 million and $186.8 million for the three and six months ended June 30, 2008, respectively, as compared to $39.0 million and $72.1 million for the corresponding periods in 2007.

REVENUES

Total revenues were $84.8 million and $33.1 million for the three months ended March 31, 2008 and 2007, respectively.

Revenues

Total revenues were $134.2 million and $104.5 million for the years ended December 31, 2006 and 2005, respectively.

Revenues

Total revenues were $134.2 million and
$104.5 million for the years ended December 31, 2006 and 2005, respectively.

REVENUES

Total revenues were $51.5 million and $123.6 million for the three and nine months ended September 30, 2007, respectively, as compared to $35.4 million and $99.9 million for the corresponding periods in 2006.

REVENUES

Total revenues were $39.0 million and $72.1 million for the three and six months ended June 30, 2007, respectively, as compared to $34.1 million and $64.5 million for the corresponding periods in 2006.

REVENUES

Total revenues were $33.1 million and $30.4 million for the three months ended March 31, 2007 and 2006, respectively.

Revenues

Total revenues were $104.5 million and $97.0 million for the years ended December 31, 2005 and 2004, respectively.

REVENUES

Total revenues were $35.4 million and $99.9 million for the three and nine months ended September 30, 2006, respectively, as compared to $27.4 million and $74.9 million for the corresponding periods in 2005.

REVENUES

Total revenues were $34.1 million and $64.5 million for the three and six months ended June 30, 2006, respectively, as compared to $25.0 million and $47.5 million for the corresponding periods in 2005.

REVENUES

Total revenues were $31.3 million and $23.7 million for the three months ended March 31, 2006 and 2005, respectively.

Revenues

Total revenues were $103.2 million and $80.4 million for the years ended December 31, 2004 and 2003, respectively.

Advertising Revenues

Advertising revenues were $55.7 million and $29.5 million, or 54% and 37% of total revenues for the years ended December 31, 2004 and 2003, respectively. For the year end December 31, 2004, advertising revenues consisted of revenues from brand advertising of $46.1 million, and revenues from sponsored search of $9.7 million. For the year ended December 31, 2003, advertising revenues consisted of revenues from brand advertising of $23.9 million, and revenues from sponsored search of $5.6 million.

Brand advertising. Brand advertising revenues increased by $22.2 million to $46.1 million as compared to $23.9 million for the year ended December 31, 2003. The increase of $22.2 million from 2003 to 2004 consisted of: (i) a $17.3 million in revenues from new advertisers, as more companies used the Internet as an advertising medium; (ii) a $13.0 million increase in revenues from the advertisers who advertised with us in 2003 and who continued to do so in 2004; and (iii) a $8.1 million decrease in revenues as a result of some of the advertisers who advertised with us in the year ended December 31, 2003, not advertising on our Websites in the year ended December 31, 2004. The 2004 increase in revenue also includes the impact of an increase in rates we charge for advertising ranging from 16% to 20% during the year. Sohu had approximately 1,000 advertisers in 2004 as compared to 800 advertisers in 2003. Sales to Sohu’s five largest advertisers were 9% and 12% of total brand advertising revenues for the years ended December 31, 2004 and 2003, respectively. Sohu’s advertising customers consisted primarily of companies within the automobile, information technology, real estate, online gaming, telecommunication and education industries in 2004. Revenues and related cost of revenues from advertising barter transactions were not recognized. As of December 31, 2004 and 2003, we had $1.5 million and $1.3 million of receipts in advance from advertisers, respectively.

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Sponsored search. Sponsored search services revenue increased by $4.1 million to $9.7 million for the year ended December 31, 2004 as compared to $5.6 million for the year ended December 31, 2003. Sponsored search services primarily include priority placements in our search directory and listing in our classified advertisement section, in addition to pay-for-click services of displaying the text-based links to the Websites of our advertisers. We normally provide the priority placements services and the listing in our classified advertisement section for a fixed fee over a period. Pay-for-click services of displaying the text-based links to our advertiser’s Websites is charged on a cost-per-click basis, so that an advertiser pays us only when a user clicks on the displayed link. The priority of the display of text-based links is based on the bidding price of different advertisers. For the year ended December 31, 2004, the increase of sponsored search revenue was resulted from increasing acceptance of this targeted marketing medium in the PRC.

Non-advertising Revenues

Non-advertising revenues are derived principally from wireless, e-commerce and other services.

Non-advertising revenues were $47.5 million and $50.9 million, or 46% and 63% of total revenues for the years ended December 31, 2004 and 2003, respectively. Because of restrictions on foreign companies working in the PRC telecommunications industry, we have used our VIEs to contract on our behalf with PRC mobile network operators who provide the gateway for sending messages and collect our short messaging fees. Our VIEs collect the fees from the operators and then transfer them to our subsidiaries. There was no material impact on our revenues or margins from our reliance on these related party arrangements. On July 1, 2003, we prospectively adopted FIN 46R, which resulted in the consolidation of our VIEs. Thus, wireless and e-commerce revenues earned by our VIEs prior to the date are disclosed as revenue from related parties and are not so disclosed thereafter.

In 2004, non-advertising revenues were derived from wireless services of $36.4 million, e-commerce services of $6.2 million, and other services of $4.9 million. In 2003, non-advertising revenues were derived from wireless services of $44.0 million, e-commerce services of $3.8 million, and other services of $3.1 million. Although we managed to increase our e-commerce and other services revenues by approximately 63% and 59%, respectively, the increases were outweighed by the 17% decrease in our wireless revenues.

Wireless. Our wireless revenues included SMS and MMS services launched in 2003 and other advanced second generation technology, or 2.5G, wireless services such as WAP, and IVR. Our wireless services include alumni club, dating and friends matching, e-mail, ring tone and logo downloads and various other related products provided to mobile phone users. Short messaging fees are charged on a monthly or per message basis. For the year ended December 31, 2004, approximately 80% of our SMS revenues were derived from consumers who subscribe for our SMS services on a monthly basis, for which we charge a monthly fixed fee ranging from approximately $0.4 to $3.0.

For the year ended December 31, 2004, our wireless revenues decreased by $7.6 million to $36.4 million as compared to $44.0 million for the year ended December 31, 2003, primarily due to the decrease of $15.8 million in SMS revenues. This decrease was partially offset by an increase of $2.7 million in MMS revenues, $2.6 million in revenues from two products, WAP and IVR, and revenues of $2.8 million as a result of the acquisition of Goodfeel. The decrease in SMS revenues was the result of the tightened controls over billing procedures and practices by our mobile operators. The increase in MMS revenues was the result of successful product promotion and wider user acceptance of MMS services in China. However, effective September 1, 2004, our MMS services were temporarily suspended by CMCC for a one-year period.

E-commerce. E-commerce revenues are earned primarily from sales of consumer products through Sohu’s Website, store.sohu.com, where we undertake fulfillment e-commerce activities and conduct e-commerce transactions. Our e-commerce products consisted of over 27,700 consumer products, such as books, health care products, videos, music and computer equipment. We purchased products from suppliers, stock the goods in our warehouse and, upon receiving the orders, arrange for delivery to our customers. Fulfillment was provided by delivery companies or through postal services. Substantially all sales were done on a cash on delivery basis. E-commerce revenues increased by $2.4 million to $6.2 million for the year ended December 31, 2004 as compared to $3.8 million for the year ended December 31, 2003.

Others. Other services mainly included provision of online games, Internet access, and our design of Websites and provision of Internet software to third parties. The increase of $1.8 million to $4.9 million for the year ended December 31, 2004 was primarily due to an increase in revenues from our online games, as we launched our Knight Online and Blade Online in February 2003 and October 2004, respectively.

REVENUES

Total revenues were $28.3 million and $77.9 million for the three and nine months ended September 30, 2005, respectively, as compared to $25.9 million and $79.1 million for the corresponding periods in 2004.

REVENUES

Total revenues were $25.9 million and $49.6 million for the three and six months ended June 30, 2005, respectively, as compared to $27.3 million and $53.2 million for the corresponding periods in 2004.

REVENUES

Total revenues were $23.7 million and $25.9 million for the three months ended March 31, 2005 and 2004, respectively.

Revenues

Total revenues were $80.4 million and $28.7 million for the years ended December 31, 2003 and 2002, respectively.

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Advertising Revenues

Advertising revenues were $29.5 million and $13.9 million, or 37% and 48% of total revenues, for the years ended December 31, 2003 and 2002, respectively. The increase of $15.6 million from 2002 to 2003 consisted of (1) $12.7 million from new advertisers, as more companies using the Internet as an advertising medium; (2) a $4.2 million increase in revenues from the advertisers who advertised with us in fiscal year 2002 and who continued to do so in 2003; and (3) $3.1 million increase in fees we received for listing companies in our search directory. These increases were partly offset by a $4.4 million loss in revenues, resulting from some of our 2002 advertisers not advertising on our Website in 2003. The 2003 increase in revenues also includes the impact of an increase in rates we charge for advertising of approximately 25%, or approximately $3.9 million of the $15.6 million increase, from 2002 to 2003. Sohu had approximately 800 advertisers in 2003 as compared to 500 advertisers in 2002. Sohu’s advertising customers consisted primarily of companies within the information technology products, automobile, telecommunication products, healthcare products and education industries in 2003. Sales to Sohu’s five largest advertisers were 10% and 14% of total advertising revenues for the years ended December 31, 2003 and 2002, respectively. There were no advertising revenues from related parties in 2003 or 2002. We have not recorded any revenue from advertising barter transactions. As of December 31, 2003 and 2002, we had $3.5 million and $1.4 million of deferred advertising revenues, respectively.

Non-advertising Revenues

Non-advertising revenues were $51 million and $14.9 million, or 63% and 52%, of total revenue for the years ended December 31, 2003 and 2002, respectively. Non-advertising revenues for the years ended December 31, 2003 and 2002 included non-advertising revenues from our variable interest entities of $28.6 million and $10.1 million, respectively. Because of restrictions on foreign companies working in the PRC telecommunications industry, we have used our variable interest entities to contract on our behalf with PRC mobile network operators who provide the gateway for sending messages and collect our short messaging fees. Our variable interest entities collect the fees from the operators and then transfer them to our subsidiaries. There was no material impact on our revenues or margins from our reliance on these related party arrangements. On July 1, 2003, we prospectively adopted FIN 46, which resulted in the consolidation of our variable interest entities. Thus, wireless and e-commerce revenues earned by our variable interest entities prior to the date are disclosed as revenue from related parties and are not so disclosed thereafter.

In 2003, non-advertising revenues were derived from wireless services of $44.0 million, e-commerce services of $3.8 million, and other services of $3.1 million. In 2002, non-advertising revenues were derived from wireless services of $10.1 million, e-commerce services of $4.2 million, and other services of $544,000.

Wireless. Most of the growth in non-advertising revenues was attributable to increases in our wireless revenues which include short messaging services, multi messaging services launched in 2003 and other advanced second generation technology, or 2.5G, wireless services. For the year ended December 31, 2003, wireless revenues increased by $33.9 million from 2002. The increase was attributable to increases in the wireless user base for our Web based products as well as new products for use with mobile phones. Our wireless services included alumni club, dating and friends matching, e-mail, ring tone and logo downloads and various other related products for mobile phone users. Short messaging fees are charged on a monthly or per message basis. For the year ended December 31, 2003, approximately 80% of our SMS revenues were derived from consumers who subscribe for our SMS services on a monthly basis, for which we charged a monthly fixed fee ranging from approximately $0.6 to $4.8.

Our wireless services were introduced in China in late 2000 and our growth in this area during 2003 was mainly attributable to a combination of a number of factors, such as increases in the number of Chinese mobile phone users who had been subscribing for our wireless services and our introduction of new products to the market. As of December 31, 2003, we provided over 500 different monthly subscription wireless services and over 500 services which were charged on a per message basis. We regularly introduced new products and adaptations to our existing products. Depending on the product, subscribers may use the product for as short as one month or may use it on an ongoing basis. As described below, there were certain products and marketing methods which contributed to our growth. Price increases were not a factor in our short messaging growth, because we had many different products and pricing was normally set when the product was launched and remained unchanged during the life of the product. Approximately 25% of our growth in 2003 was attributable to improvements in the short messaging billing and transmission platform, as our approximate billing failure rate for the year ended December 31, 2003 was 25%, as compared to approximately 40% for the year ended December 31, 2002.

In 2003, the largest contributor to our wireless revenues growth was our online dating and friends matching service, which we refer to as “Jiqinggongshe” or “GGMM,” and accounted for approximately 25% of our wireless revenues in 2003. We developed this product in the fourth quarter of 2002, and it accounted for 4% of our wireless revenues for the year ended December 31, 2002. Most of our GGMM subscribers were acquired through Website union, where we used third party Websites to market our products. At the instruction of the mobile operators, we stopped using Website union in July 2003. We also used Website union for marketing numerous other products, which, excluding GGMM, accounted for approximately 15% of our total revenue for the year ended December 31, 2003. As a result of our inability to use Website union to promote our products or acquire subscribers, we experienced substantially lower growth in wireless revenues for the three months ended September 30, 2003 and December 31, 2003 as compared to the three months ended June 30, 2003, March 31, 2003 and December 31, 2002. Our subscriber base for products previously promoted through Website union (especially GGMM) declined, which had a negative impact on our revenue growth. Our GGMM subscribers declined from a high of 2.2 million in April 2003 to 1.5 million at December 31, 2003. We charged a monthly fee of US$0.63 for GGMM.

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E-commerce. E-commerce revenue decreased by $400,000 to $3.8 million for the year ended December 31, 2003 because we discontinued sales of cosmetics in 2003.

Others. Other services included our design of Websites and provision of Internet software to third parties.