Sohu aiming to take industry lead
(China Daily)
Updated: 2005-03-04 08:46

Charles Zhang, chairman and CEO of the Chinese Internet company Sohu.com Inc, is aiming to grow his firm into the country's No 1 Internet portal and search engine service provider, taking the lead from Sina Corp, even though the latter is in acquisition talks with the largest online game operator in China, Shanda Interactive Entertainment.

"Our new goal is to become the biggest online media platform and search engine provider in China," said Zhang in an interview in Beijing, adding that he has no intention of selling his firm in the face of stiffening competition from its market rival.

He said online advertising and search engine services will be the focuses and growth engines of his company this year.

Sina is the biggest Chinese Internet portal and online advertising company, but the possible acquisition of Sina by Shanghai-based Shanda may be the incentive Sohu needs to achieve its goal.

Zhang said that although the two companies are big players in their respective fields and are believed to be complimentary to each other, consolidating resources is much more complicated.

He believed the acquisition would bring more opportunities than threats, as Sina's management is consumed with the potential merger and formulating defences.

Shanda had acquired about 19.5 per cent of Sina's outstanding shares by February 10 from open market purchases and has become the company's biggest single shareholder.

However, Sina threw a fly into the ointment on February 23, by trying to force Shanda into management talks, rather than let them take control of the company by other means, meaning talks may drag on.

Sohu is believed to be one of the firms that would be seriously affected by any Shanda-Sina deal, as the two companies' strengths could combine to force Sohu further down the market pecking order.

But Zhang said that with its rapidly growing online advertising business, Sohu had narrowed the gap on China's premier Internet portal over the past year.

NASDAQ-listed Sohu reported advertising revenues of US$55.7 million in 2004, 89 per cent higher than those in 2003, while its arch-rival Sina Corp's revenues from online advertising rose by a lesser 59 per cent year-on-year to US$65.4 million in 2004.

Zhang believed his company's Internet matrix strategy played an important role in increasing Sohu's influence on netizens and advertisers.

Sohu operates four websites: the Internet portal Sohu.com; the alumni website Chinaren.com; the real estate information website Focus.cn; and the online game portal 17173.com.

The growth of Focus.cn has been significant in attracting more advertising contracts. According to market researcher Shanghai iResearch Co Ltd, the real estate sector became the fifth largest Internet advertiser last year.

Besides Sohu's progress in this regard, its search engine service also played a part in last year's growth in advertising revenues.

Sohu has more than 80,000 small and medium-business customers advertising through its search engine, via 1,000 agents across the country.

The company recently released a new version of its search engine - Sogou 2.0 - to the market, in an attempt to lure more users through faster and more accurate search results.

As for Sohu's wireless value-added services, including a short messaging service, multimedia messaging service and Wireless Applications Protocol, Zhang believed the market's decline had bottomed-out, after months of adjustments.

He said wireless services only accounted for about 25 per cent of Sohu's total revenues, which is a reasonable proportion.

Most of China's NASDAQ-listed Internet companies such as Sina, Tom Online and Linktone rely on wireless services through sharing revenues with mobile operators, but regulatory campaigns on pornographic and other illegal content and the country's dominant mobile operator China Mobile's use of a new billing and management platform have dampened the once-hot sector.

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