SOHU.COM Clement Chang Anurag Jain Bryan Jenkins

Introduction Leading Internet portal in China Sophisticated Chinese language Web navigational and search capabilities First China online search engine, with 17 main content channels Web-based communications and platform for subscriptions, short messaging and e-commerce services.

Stock Performance 5 Year Model

SOHU vs Nasdaq Stock Performance 5 Year Model

SOHU.COM Reasons for Success

Chinese government control limited free flow of information (esp. anti-government rhetoric). SOHU was one of the few portals the government allowed to do business. Country wants to develop major IT infrastructure Beijing has China’s “Silicon Valley”- will be poised to support the IT infrastructure for Internet coverage of 2008 Olympics. GEOPOLITICAL

ECONOMIC China continues to outstrip economic growth rates of other countries, posting 7.8% growth in first half of 2002, providing the basis for strong consumer confidence. The market size for online advertising in China continues to have healthy prospects. The China market's compound annual growth rate is forecast to be the largest in Asia.

ECONOMIC China's mobile phone operators had 196 million (out of more than 1.4 billion population, only 13.5%) subscribers in November 2002 This number is forecast to grow to 344 million mobile phone users in three years time. China is opening up further under the terms of WTO membership as preparations intensify for the 2008 Beijing Olympics and the 2010 Shanghai World Expo.

SARS influence Government quarantines public. More people are forced to stay at home. Internet surfing increases as a result. Very beneficial to ISP and Portal market

Competitive Environment SOHU nearly monopolizes the search engine market. Although other search engines such as BAIDU.com does exist. They do not have as large a portfolio of products to compete with SOHU. Was the first-mover in the e-store, online auction business in China.

Industry Demand Curve AC MC Perfect Competition (Five forces are high) Source: Dr.V.Sethi At the end of 90’s, all the China dot com were pure online website style, the business model were dependent on online advertisement.

Monopoly ( Five forces are low) Source: Dr.V.Sethi After its defeat in 2000, Sohu changed its revenue model from online advertisement to variety revenue. Focused on new value-added services: e-store, wireless content services, online alumni club, stock exchange engine etc. Leveraging its first mover advantage and wide reputation, Sohu followed the differentiation strategy, allowing it to become nearly monopolistic.

Indicator of success With over 50 million registered users out of 54 million total internet users (92.59%) at the end of September 2002, SOHU has the largest online user base in China. For the second year in a row the Sinomonitor International survey - the largest Internet Survey in the country- ranked SOHU.COM as the most visited portal in China. Stock price has increased over 70%($17 in 1999 to $ 30 in 2003) in the past four years.

Continued success? We feel it will continue …. Assumptions on uncontrollable variables: the Economy remains stable (GDP continues at about 7% growth rate per year). Governmental interest remains afloat. Internet usage growth and m-Commerce continues growing exponentially.

Why & How? Constant endeavor to innovate. New services and products, such as e-Subscription, e-Store and a stock exchange engine. Leveraging their reputation and brand recognition by offering Enterprise IT solutions. Focus on the highest growth demographics with high education. (long term strategy to acquired chinaren.com) A young and technology adept population will continue to drive m-Commerce initiatives.

Failure of Dot Com. European online apparel e-tailor They declared bankruptcy just six months after its debut in What Happened?

This happened ! 1. Outflow $100 M, and Inflow $100,000 in 6 months, a huge adverse balance. 2. Funding problem, money shortage. 3. Multiple offices, redundant staff force, heavy entertainment allowances. 4. Heavy promotional expensive in 18 countries, no long term strategy. 5. In spite of constant customers complaints on delivery system, no improvement was made.

A Chinese portal goes bankrupt ! 1. Short of funding 2. Over 90 % Revenue came from online advertisement, no other value-added services or products. 3. Charged fee for accounts, resulting in losing most of its users. 4. Lack of long term strategy evolvement, monotonous services.

Reference : Macro Economics Environment Sohu Reputation: Chinese GDP increase in the first quarter of this year Sars influence

Thanks you ! Any Questions?