Games Bring in the Most Revenue for Sohu in the 4th Quarter

Despite government crackdowns on social media users, social games continue to grow in China.  Sohu’s (NASDAQ: SOHU) fourth quarter financial results are in, and the largest share of the company’s revenue came from games, which brought in $123 million and showed an increase of 34 percent year-over-year and 6 percent quarter-over-quarter.

Sohu.com, Inc. is the parent company of the Chinese language online media destination www.sohu.com; the interactive search engine www.sogou.com; the games information portal www.17173.com; the real estate website www.focus.cn; the online alumni website www.chinaren.com; the wireless value-added services provider www.goodfeel.com.cn; the online mapping service provider www.go2map.com; and the developer and operator of online games at www.changyou.com/en/.

The company’s business model is based on brand advertising, sponsored search services, online games, and wireless value-added services like downloadable ringtones. Overall revenues are at an all-time high of $246 million, representing a 42 percent increase over the fourth quarter last year.

In May 2011 Sohu’s subsidiary Changyou bought the majority stake in the online gaming company Shenzhen 7Road Technology Co. for $32.76 million. Changyou’s games include the martial arts game “Tian Long Ba Bu” and a new massively multiplayer online role-playing game (MMORPG) called “Duke of Mount Deer” for hard-core gamers. In December, Sohu sold its 17173 website to Changyou for $162.5 million and will provide tech support and advertising for around $30 million.

Said Dr. Charles Zhang, Chairman and CEO of Sohu.com Inc., “For online game business, in 2011 Changyou achieved healthy growth in its MMO game portfolio and diversified into other fast growing areas such as Web-based games. In 2012, with our leading game information portal 17173.com under its leadership, Changyou will jumpstart a platform-based initiative.”

Next quarter, revenue for 17173 is expected to be between  $7 million and $8 million – a $4 million to $5 million drop from last quarter. Co-president and CFO Carol Yu explained that the first quarter of the year is always a slow season for online gaming advertising, and that new game launches have been affected by the early arrival of the Chinese New Year holiday.

NASDAQ.com has a good analysis of Sohu’s net income, which dropped despite the increase in revenue. To read the transcript of the earnings call, click here.

Image by sevenke via Shutterstock.