The Rabbit is finally out of the Bag! 4-29-2007

The Rabbit is finally out of the Bag! 4-29-2007
The proverbial rabbit is finally out of the bag after the MarketWatch China internet investment commentator, SAGE BRENNAN, mentioned Sohu's Tian Long Ba Bu game in his column this weekend.

To give credit where credit is due, Sage is the first western journalist or analyst for that matter to mention Sohu's new secret weapon, Tian Long Ba Bu game, in a widely circulated report or article. Sohu has never mentioned the development of its Tian Long Ba Bu game in its 10-K or conference call. But, I think Sage might be wrong or downright conservative in comment that TL may not be as great a commercial success as Xi You Qi was for Netease. Zheng Tu, also a free-to-play model game, launched a year ago, is generating about $12 M USD a month as recently as February 2007, and is preparing to go public on Nasdaq later this year.


Below is an excerpt:

After Baidu's boom, Sohu looks to ride the wave
Commentary: Pre-Olympics boom's key; will News give MySpace free rein?
By Sage Brennan
Last Update: 5:08 PM ET Apr 29, 2007
SHANGHAI (MarketWatch) -- Chinese Internet portal Sohu.com will report earnings on Tuesday, smack in the middle of China's week-long Labor Day national holiday period, and investors are clearly expecting to see a boost from a very early start to the 2008 Olympics advertising season.

If we have learned anything from the blowout earnings posted last week by Baidu.com, Inc. (BIDU :
baidu com inc spon adr rep a
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Last: 124.57+15.20+13.90%4:01pm 04/27/2007Delayed quote data

BIDU124.57, +15.20, +13.9%) , and from my subsequent taste of humble pie, we can reasonably assume that Sohu.com Inc. will meet investors' advertising-revenue expectations.
The key to Baidu's quarter was not, as one might have expected, leveraging its search-engine technology or attracting a "long-tail" audience. It lied in the company's dragging revenue from boring old banner advertisements on its content network. Last week, I suggested that Baidu's display ads were a potential wild card in a generally flat first quarter, but investors were pleasantly surprised at the obvious strength of Baidu's content.

Baidu has quietly turned itself into one of China's fastest-growing portal sites during the past year, launching a slew of new features designed to drive users to branded advertisements. This effort was partially to offset the risk of a slowdown in Baidu's core, search-based advertising sales, which I mentioned in last week's rant. It worked.
We are starting to see a significant increase in advertising spending, not just on Baidu's portal channels, but across all media types in China, with large advertisers securing long-term contracts that will carry them through the Beijing Olympic Games in August 2008. As one of the many "official" Olympic partners, Sohu should start to see an advertising boost early.

And there's a game, of course
Sohu, the "search fox," was one of China's earliest Internet portals, and has maintained its following through the tumultuous boom-and-bust cycles of Internet 1.0, wireless services and online games.
After seeing the success of former portal NetEase.com Inc. (NTES :
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NTES19.11, -0.04, -0.2%) in the online games industry, any Chinese Internet company has to have its own in-house developed online game. Sohu now has Tian Long Ba Bu. Although the game is still in a testing stage, gamers say that it will probably compete for users against the lower-tier, free-to-play games on offer from Shanda Interactive Entertainment Ltd (SNDA :
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SNDA25.56, -0.03, -0.1%) and other companies, rather than the latest and greatest in the industry, such as World of Warcraft, operated in China by The9 Limited (NCTY :
the9 ltd adr
Last: 42.12+0.36+0.86%4:00pm 04/27/2007Delayed quote data
Sponsored by:
NCTY42.12, +0.36, +0.9%) .
Sohu will surely attract users to its new game with some aggressive marketing, because the free-to-play operating model is still popular among the relatively unsophisticated Chinese gamer population. The game will make some money for Sohu, but it will probably never be a huge profit leader like NetEase's games have been.

http://www.marketwatch.com/news/story/sohu-looks-ride-beijing-wave/story.aspx?guid=%7B99D85DA5%2DECB4%2D451F%2D87D3%2D3281DF844FB8%7D&siteid=yhoof