One of China's top-ranked Web portals, Sohu.com Inc., reported that it's third-quarter net loss totalled US$25 million on revenue of $3.6 million, an increase of 525 percent compared to the same period one year ago when the company reported a loss of $4 million.
The sharp drop in net income was the result of a $17.7 million write-off in the form of unamortized goodwill from its acquisition of community portal ChinaRen Inc. in October of last year, said David Cui, a Hong Kong-based media analyst at Merrill Lynch & Co. Inc. Despite that one-off charge, the Chinese portal's future looks positive, he said, adding Sohu should continue efforts to reduce its dependence on advertising revenues.
"Business models will evolve because relying on advertising is clearly a tough road in this current market," Cui said. "Sohu diversifying into other forms of revenue is a positive development."
Sohu's non-advertising revenue increased to over $1.1 million, or about one-third of total revenue, during the third quarter, the company said. However, advertising dollars still formed the bulk of revenue at more than $2.4 million.
The portal claimed to have seen a 31 percent sequential increase in the number of new subscribers, bringing the total number of registered users to 33.2 million by the end of the third quarter. In September, due to events such as Beijing's selection as the host city for the 2008 Olympics and the Sept. 11 attacks on the U.S., new subscriptions swelled to a record of 3 million users in a month, the company said.
Cui dismissed recent Chinese media speculation that one of Sohu's major stockholders, Beijing-based Beida Jade Bird Ltd., is dumping its stock. He said trading volumes have not been heavy and did not suggest such a move. However, if Beida Jade Bird was thinking of selling its share, it might do so privately to another company, he said. At the same time, consolidation with other portals is unlikely since Sohu's management appear unwilling to sell, Cui said.