Sohu goes on spending spree despite profit fall
Mainland internet media, gaming and search giant Sohu.com plans to continue making 'heavy investments' this year despite a sharp fall in second-quarter net profit.
Nasdaq-listed Sohu.com, which operates the mainland's fifth-most visited website, yesterday reported a 71 per cent drop in net profit in the quarter to June to US$12.78 million from US$55.26 million a year earlier, due to lower growth in advertising sales and higher operating expenses.
'As China's economic growth continued to decelerate and we initiated some operational transitions in our online video business, revenues from brand advertising recorded only a low single-digit year-on-year increase,' Charles Zhang Chaoyang, the chairman and chief executive of Beijing-based Sohu.com, said.
The increase in operating expenses last quarter was attributed primarily to the addition of more employees, higher salaries and benefits expense as well as an increase in marketing campaigns.
But Sohu.com's revenue was up 29 per cent to US$255.73 million. That included record quarterly revenue posted by its online games subsidiary, Changyou.com. The Chinese online game developer and operator's revenue rose 30 per cent to US$147.34 million from a year ago.
Zhang said Sohu.com's latest quarterly earnings results 'help demonstrate the resilience of our business mix and the benefit of having diversified operations'.
For the third quarter, revenue is forecast to be between US$272 million and US$277 million. That compares with the US$275 million average of analysts' estimates compiled by Bloomberg.
Online game revenue is expected to be between US$141 million and US$144 million, which represents an annual increase of 22 to 24 per cent.
Belinda Wang Xin, the co-president and chief operating officer of Sohu.com, described this year as a period of critical transition for the company.
'As we continue to make heavy but necessary investments across our strategically important business lines, we are confident of seeing a payoff in 2013,' Wang said.
According to a report by JPMorgan Asia-Pacific Equity Research, Sohu.com has been investing in the creation of two separate sales teams for online video and portal advertising. The firm is also spending more to develop Changyou.com into a larger platform for social, mobile and web games.
