Sohu.com, the Chinese internet company, saw its fourth quarter profit decline 43% to US$32.2 million, US$4 million short of the projected figure. The loss is attributed to the company’s decision to spinoff Changyou.com, its online games unit, into a separate entity. Gaming is considered one of China’s strongest growth sectors and Changyou previously contributed 94% of Sohu’s revenue in this segment. The company, which still holds a 71% stake in Changyou, is attempting to make up for its smaller share of the gaming business by cultivating stronger online advertising sales and video revenues.
The potential withdrawal of Google from the Chinese search market leaves the door wide open for expansion from established internet players like Sohu, along with its competitors Tencent and Netease. While these portals occupy strong positions within their individual internet segments, in search they hold negligible shares compared to market leader Baidu and Google.
Sohu’s is among the first internet portals to declare its earnings for the fourth quarter of 2009. The likes of Baidu are also expected to have suffered from a weak market, but this weakness is unlikely to continue. The first quarter of 2010 should offer opportunities for substantial gains in revenues as the search advertising market strengthens.