IntelligentInvesting

China Internet Ad By Market Segments

2008-01-01T05:47:00.000-08:00

The following is another interesting article from Iresearch detailing the important market segments in the fast-growing China internet ad market.

http://www.iresearchgroup.com.cn/html/Consulting/online_advertising/DetailNews_id_71983.html

3Q 2007: China Internet Ad Market

2008-01-01T05:29:00.000-08:00

Iresearch has a very telling article on China's internet ad market growth stats during 3Q 2007. The takeaway from this research report is that sponsored search is growing fast and accelerating. It has the highest growth rate (yoy 100%; )eventhough it is still just 27% of the entire pie vs. internet banner ad market share of 45%. Sina and Sohu's market share of the entire China internet ad market is shrinking as sponsored search market growth lead by Baidu(100% growth rate) accelerate and QQ is gaining banner ad market share with an astounding 80% growth rate during 3Q 2007.

Link to Iresearch article.

http://iresearchgroup.com.cn/html/consulting/online_advertising/DetailNews_id_74545.html

Sohu's Sensational Comeback

2007-07-01T09:32:00.001-07:00

On last Friday, June 29, 2007, Sohu's stock price reached a new 52-week high, at $31.99 PPS, up $1.85 or 6.15%. Sohu's 52-week stock chart looks awesome now, going from $25.79 to $31.99, or 24% one year return.

For longer term, over the last 2 years, Sohu's stock price has gone up from $21.94 to $31.99, or 45.80%, or for a 23.00% average annual rate of return.

It is time for some perspective and ask some interesting questions if you missed the Sohu boat or if you happen to be still on the Sohu. Below is what a fellow investor asked.

Sohu game driving stock? (Not rated) 1-Jul-07 07:56 am
Author: drugsman12 on Yahoo Finance
I wish i had never sold. I used to be most loyal sohu shareholder. But was too scared to hold because of falling market share and piss poor conference calls that offered no hope. 3 bad earnings reports later and stock is 35% higher. Looks like the theory of selling into Olympics will turn out to be a good one.

Reply:
The take-away lesson learned here is to focus on long-term prospects (i.e. Sohu's exclusive sponsorship to 2008 Beijing Olympic), rather than short-term quarter-to-quarter profit and PPS. Sohu's management, specifically CEO Charles Zhang, has significant (27%) ownership in the company. Therefore, management's interest is aligned with the interests of shareholders. If you are a patient long-term and visionary investor, you should see that Sohu is sacrificing short-term profitability for the benefit of long-term shareholder value as well as sustainability and competitiveness of the company. You don't have to look any further than Sohu's list of acquisitions and initiatives to be able to tell that Sohu management is hard at work to do just that.

Acquisitions:

1. Chinaren.com - China's No. 1 Alumnus Network, ala facebook,
2. 17173.com - China's No. 1 online gaming site
3. Focus.cn - China's No. 2 real estate website
4. Goodfeel - China's leading WAP
5. Go2Map - China's leading online mapping service
6. 21 East - Software solution for online music content and distribution management

Internal Development:

1. Sogou.com - Search Engine with 4.6% market share
2. Tian Long Ba Bu - Sohu internally developed MORGG; consitently ranked top 5 downloaded online game since its open beta launch in May, 2007.
3. Sogou PinYin - very successful Chinese character input system.
4. Sohu Blog - has 10 million registered users
5. Sohu Web 2.0 - Sohu passport that connects Chinaren, Sohu email, Sohu photo, and Sohu blog.
6. Sohu media player - provided online video during 2006 World Cup and will provide services for Sohu's Olympic game video delivery and Sohu video blogging product.
7. Sogou's Super Girl Singing competition- expect another event this November.

In conclusion:Sohu management is hard at work to plough back its profits and reinvest in its business for future growth through acquisitions and internal developments. In the long-run it will pay off in terms of increased market share, revenue, and profits. Always look at things in perspective and for the long-term (2 to 5 year horizon)

Sohu's TL is Ranked High for the 3rd Time in 3 Weeks!

2007-06-06T22:19:00.000-07:00

Sohu's Tian Long Ba Bu(abbreviated as TL) is clearly catching fire! TL, with 534,179 downloads, is ranked number 4 behind Netease's XYQ, with 572,293 downloads, on Xunlei's top 10 most popular download for the week ended June 3, 2007. Number 5 is Nine City's WOW with 487K downloads and Number 5 is Zheng Tu with 455K downloads.

According to Iresearch.com.cn, most of the top 10 popular download online games are old-timers from last year. TL, being a new 2007 MMORG, is the only exception. It is an indication that online game players' population growth has slowed and intense online game market share competition is starting among the new games and old games. Clearly, old popular games continue to attract more new players because switching cost is high and word-of-mouth effect, being a powerful tool for online games, clearly favors the dominant MMORGs, which have massive user base in the millions giving them tremendous first mover advantage.

http://www.iresearch.com.cn/html/online_game/detail_views_id_44876.html

Sohu's Narrowing the Gap with Sina

2007-06-03T12:17:00.001-07:00

June 3, 2007. Sohu shareholders should be happy for the 1Q 2007 results. As it is the first indicator in the past 4 quarters that Sohu online brand advertising revenue is starting to narrow the gap with that of Sina.

1st Quarter is seasonally a weak quarter because of Chinese New Year. Among the three portals, online brand advertising revenue for Sina and Netease all experienced declines. But Sohu's online brand advertising revenue grew during 1Q 2007 to $25,600 from 24,900 in the previous quarter, effectively narrowing the gap with Sina.

Now Sohu's online brand advertising is about 80% of that of Sina. From the beginning of 2007, Sohu has raised its advertising rate. More importantly, Sohu's exclusive 2008 Beijing Olympic sponsorship will have a strong positive effect on its efforts to capture a bigger share of the online advertising market as we get closer to August 2008. The value of Sohu's online brand advertising has been growing as advertisers begin spending more advertising money as the 2008 Beijing Olympic approaches.

All three portals in China will experience a higher rate of online advertising sales growth in the coming months. Sohu's exclusing 2008 Beijing Olympic internet sponsorship will strengthen its ability to capture a greater share of the online advertising market. At the same time, Sina online brand advertsing revenue will reach new heights as well to extend its solid leadership position and strong brand.

Shanda is going to buy Ask Tao?

2007-06-03T07:43:00.000-07:00

June 3, 2007. Shanda Interactive (Nasdaq: SNDA) is considering to buy Ask Tao, a popular MMORG(http://www.iresearch.com.cn/html/online_game/detail_news_id_44731.html) to strengthen its online game research and development capability.

Asktao has a cumulative search total of 10 million since inception, according to Baidu Top game ranking. It has 650K PCU according to published numbers.

It will be interesting to know how much an online game property like this will be worth in the private market if and when Shanda buys it. It will provide a basis in evaluating how much Sohu's TLBB will be worth. BTW, I think if TLBB is commercially very successful, Sohu should consider spinning it off in an IPO. That way Sohu can raise the necessary capital to grow its business to the next level without suffering too much share dilution. It will also create a way to help compensate the TLBB team adequately for the excellent job they did for TLBB online game.

Another recent development on the M & A front is the purchase of Hang Zhou Tian Chang by E-finet Group in Hong Kong. Tian Chang is the developer of 3-D online games, DaTang and DaTang Fantasy, neither is ranked in the top 50 online games by Baidu. It also has 3 other 3-D games in the pipeline. The deal was valued $20 million USD. http://www.iresearch.com.cn/html/online_game/detail_news_id_43983.html

How to Calculate TLBB's Peak Concurrent User(PCU)

2007-06-02T15:47:00.000-07:00

June 2, 2007. Peak Concurrent User(PCU) is defined as the number of players simultaneously online playing a particular game at peak times. It is a metric used to determine the popularity of a particular online game. There are a lot of curious inquiries regarding what TLBB's PCU is since Sohu has not yet published the PCU for TLBB. So I will attempt to calculate it based on a set of assumptions as stated below.

Aproach A - Comparative Analysis using SUN's Published Numbers

To caculate TLBB's PCU, I think inception-to-date(Beta Tests) cumulative count of game searchs on Baidu is perhaps an accurate indicator of the level of popularity among game players.

From 4/4/2007 to 5/29/2007(the period during which TL first had a unlimited final closed beta test and then had an open beta test):TL had 2.31 million searches from Baidu.

From 4/18/2007 to 5/29/2007(SUN started open beta on 4/18; I don't have any search figure for SUN prior to its open beta):SUN had 2.09 million searches from Baidu. Based on the above, according to Baidu, TL's lead over SUN is fairly narrow, or about 13% more search than SUN.

Calculation:400K PCU claimed by SUN(http://sun.the9.com/news/main/index_2.shtml) multiplied by 113% is 452K PCU for TL game. Does my calculation sound reasonable? or is it too conservative. It depends on how accurate is SUN's claim for 400K PCU for its game.

Approach B - Using Server to Calculate PCU

The following factors come into play:

1. Number of servers
2. Maximum User Capacity per Server
3. Server Utilization rate during Peak Times

I would estimate as follows:

Number of server X Maximum User Capacity per Server X Utilization Rate = PCU

166 X 3500 X 65% = 380K

Finally, using the average of the two approach, I get 416K PCU for TL. Of course, my numbers are subjective because if I change my assumptions, I can get widely different numbers.

Below is an article on the Man behind Sohu's TLBB on 17173.com:
http://news.17173.com/content/2007-06-01/20070601211411732,1.shtml

Another article on Sohu's TLBB estimate from 17173.com
http://news.17173.com/content/2007-06-01/20070601181957573.shtml

An article on Sohu's TLBB esimate from a fellow Sohu investor:
http://chinese-net-gaming-stock.blogspot.com/2007_05_01_archive.html

Sohu's TLBB is on the Radar again

2007-06-02T15:19:00.000-07:00

May 27, 2007 Sohu's TLBB is number 1 again.

According to Baidu search, TLBB is consistently ranked as the most searched MMORG during the week from May 21 to May 27, 2007.

See below for a day-by-day search tracking.

Date/Number of Searches
May 21 50,992
May 22 43,730
May 23 45,479
May 24 43,758
May 25 49,618
May 26 55,095
May 27 49,351

Total search for the week: 338,022 compared to 343,311 searches for the week ended May 20, 2007.

Tian Long Ba Bu is Ranked Number 1 on the Radar.

2007-06-02T14:57:00.000-07:00

May 25, 2007 - Tian Long Ba Bu(TLBB) is Number 1!!!

According to Iresearch.com.cn, Sohu's TLBB is ranked number 3 overall behind two casual games. TLBB is the number 1 in MMORG category with 571,182 downloads during the period from May 14 to May 20, 2007.

Netease's XYQ is ranked number 2 with 523,068 downloads and Zheng Tu is ranked number 3 with 476,560 downloads.

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

2007-04-29T16:12:00.000-07:00

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
News , chart , profile , more
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 :
netease com inc sponsored adr
News , chart , profile , more
Last: 19.11-0.04-0.21%4:00pm 04/27/2007Delayed quote data
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 :
shanda interactive entmt ltd sponsored adr
News , chart , profile , more
Last: 25.56-0.03-0.12%4:00pm 04/27/2007 Delayed quote data
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

Sohu's Tian Long Updates 4-28-2007

2007-04-28T15:05:00.001-07:00

Sohu's Tian Long Updates 4-28-2007

TL Game's open beta test will be lauched on 5/9/2007:
http://tl.sohu.com/20070430/n249763309.shtml

Sohu, through its TL game, is now officially in the business of selling virtual pets! Lots of Jin Zi! BIG Bucks! These pets can allow two game player-controlled virtual characters to ride on it. How romantic! It must be a good seller!
http://tl.sohu.com/20070503/n249764201.shtml

Very interesting interview with Sohu's TL game development head. Maybe Sohu should spin off its 100% owned game development unit by taking it public in a Nasdaq IPO or an China stock market IPO during 2008. If Sohu's TL game is a $100 to 200 million USD per year game, it will be worth $1.5 to 2 billion in market value. That can surely create about $40-50 USD per share in shareholder value and make some of these game developers very wealthy; they deserve it! http://www.tkgame.com/inews4/zt_131/2007/04-17/2064A610-5591-F2FE-BBD0-9535B189A89F.html

Sohu's Ranking When Compared to Its Peers 4-27-2007

2007-04-27T08:20:00.002-07:00

Sohu's Ranking When Compared to Its Peers 4-27-2007

The purpose of this exercise is to show how sohu is doing compared to its peers and how forcasts predict Sohu will be doing compared to its peers in 2007 and 2008. From what I see, Sohu appears significantly undervalued as it stands right now at $24.70, especially when factoring in exclusive 2008 Olympic sponsorship and its newly launched and successful TL game, 2007 and 2008 EPS estimates appears to be conservative and beatable. In fact, Sohu may revise it upwards sometime this year.

Share Price Increase % since Dec 31, 2006
1. Sina 21.50%
2. Bidu 13%
3. Sohu 2.9%

Revenue Growth Rate Ranking
1. Bidu 111%
2. Sohu 16%
3. Sina 8.5%

Revenue Ranking(last 12 months)
1. Sina $213M
2. Sohu $134M
3. Bidu $108M

Projected Revenue Ranking (Next 12 months)
1. Sina $240M
2. Bidu $194M
3. Sohu $153M (Maybe revised up because of TL game)

Net Income Ranking (Last twelve months)
1. Sina $39.9M
2. Bidu $38.50M
3. Sohu $26.73M

P/E Ratio Ranking (Last twelve months EPS)
1. Bidu 111
2. Sina 50
3. Sohu 36

Forward P/E Ratio Ranking (Fiscal 2007)
1. Bidu 67
2. Sina 35
3. Sohu 32 (appears to be conservative)

2007 Projected Revenue Ranking
1. Sina $240.06M
2. Bidu $193.57M
3. Sohu $152.59M

2008 Projected Revenue Ranking
1. Bidu $326M
2. Sina $318 M
3. Sohu $200.8M

2007 Projected EPS
1. BIDU $1.79 EPS
2. Sina $0.99 EPS
3. Sohu $0.77 EPS (Maybe revised upwards)

2008 Projected EPS
1. BIDU $2.94 EPS
2. Sina $1.37 EPS
3. Sohu $1.16 EPS (Maybe revised upwards)

Download Top Rank from Lei Xun 4-15-2007

2007-04-25T18:12:00.000-07:00

Download Top Rank from Lei Xun 4-15-2007

Sohu's TL game is strangely absent from the latest top downloaded game list from Lei Xun. Is it because TL game is still in closed beta test and is excluded from Lei Xun's ranking because of that?

If that's the case, we can only wait until May 9 to find out how high TL game will rank on the charts.

Sohu's TL Game Update 4-22-2007

2007-04-22T05:08:00.000-07:00

Update 4-22-2007

TL game now has over 80 servers operating.

Between April 1 and April 15, 2007, TL ranked number one in its category with 357K downloads, according to 52PK.com, number two is XYQ with 332K downloads and number three is QJ World with 315K downloads. That's pretty consistent with Baidu top 50 search ranking.

Game Review:

Following shows links for review article on TL game. The review are generally very positive. On average TL gets 4.5 star out of 5 star. or 94 out of 100. Overall, TL is a very good game!

From QQ game:
http://gamezone.qq.com/a/20070402/000210.htm

From 52PK:
http://new.52pk.com/test/20070416/129840.html

From Wan Yu:
http://news2.92wy.com/html/Article/2007/0417/20070417113007872_4.shtml

Sohu's TL Game 4-16-2007

2007-04-19T20:51:00.000-07:00

Monday 4-16-2007

Tian Long, with 30,000 searches, is now number 2 on Baidu's top searched game list behind Miracle World: 50,000 searches.

Total servers are now 79 as of 4/17/2006. It will probably hit 100 by this weekend. That's capable of handling 500,000 concurrent players!

The number 1 popular game, XYQ, has 450 servers. It may take Sohu 12 to 18 months to achieve that status.

I will be happy if Sohu's TL game achieves $6 million in revenue per month in 3 to 5 months. That will add $1 per share EPS to 2008's estimated EPS of $1.17.

Some of these postings make pretty funny readings.

Why I love Tian Long:
http://game.xunlei.com/news/00141_news.htm?http://tl8.duowan.com/2007/04/11/06737261.html

Why Tian Long is worth it for me to abandon WOW. What Tian Long are advantages:
http://game.xunlei.com/news/00141_news.htm?http://tl8.duowan.com/2007/04/12/07193818.html

Why Wu Dang in Tian Long:
http://tl8.duowan.com/2007/04/06/24638482.html

Tian Long's Love affair:
http://game.xunlei.com/news/00141_news.htm?http://tl8.duowan.com/2007/04/12/07423055.html

How to Make Money in Tian Long:
http://tl8.duowan.com/2007/04/05/36656250.html

Tian Long Never Say Goodbye.
http://tl8.duowan.com/2007/04/13/11492183.html

Sohu's TL Game now has 80 servers 4-18-2007
http://tl.sohu.com/20070418/n249529792.shtml

Thoughts after playing Tian Long for 2 weeks
http://tl8.duowan.com/2007/04/19/10562558.html

Sohu's TL Game 4-15-2007

2007-04-19T20:49:00.000-07:00

4-15-2007
Again Sohu's TL was amazing on Saturday. According to Baidu, there was 44,547 searches on TL. The other important thing to keep in mind is that Baidu only represents part of the TL's amazing download picture. People can get to TL's download page from other sites, for example, 17173.com (the biggest game site, another Sohu property), and also Xunlei. According to Xunlei, TL had 31,063 downloads on Saturday. So my conservative estimate is that TL has at least 50,000 downloads per day on the weekends. That's about 150K in 3 days.

According to Sina Game, Sohu's TL game broke download record in online game history - 50 servers in 4 days:
http://games.sina.com.cn/o/n/2007-04-07/1938193531.shtml

According to Sina Game, MuoYu game was the record holder in 2006.
http://games.sina.com.cn/o/n/2006-12-23/1500180748.shtml

More Thoughts on Sohu's TL game 4-13-2007

2007-04-19T20:47:00.000-07:00

More Thoughts 4-13-2007
Sohu has announced that TL will be a Free-to-play game. The China's online game market's competition is very intense. Free-to-play will help TL gain market share faster and make more money more quickly. Sohu's TL now has opened 68 servers. One server can handle up to 5000 simultaneous players. That's 340K concurrent players! A Free-to-play game probably only needs 200,000 players to breakeven. This weekend will be TL's second weekend. We will see how many more servers and downloads TL get!

I am beginning to keep track of Baidu's download record just to see when Sohu hits 1 million download.

Tian Long Ba Bu DownLoad Record
Beginning April 4, 2007
Grand total
287,150
Date
Amount
4/4/2007
25,000
4/5/2007
25,000
4/6/2007
25,000
4/7/2007
25,000
4/8/2007
26,958
4/9/2007
28,306
4/10/2007
30,004
4/11/2007
32,104
4/12/2007
33,709
4/13/2007
36,069
4/14/2007
4/15/2007
4/16/2007
Total
287,150

Sohu's TL Game 4-13-2007

2007-04-19T20:45:00.000-07:00

Friday, 4-13-2007

Now I am beginning to believe that Sohu's TIan Long Ba Bu will be a HUGE success.

Sohu is ranked the #1 Free-to-play game download on Baidu top ranked game list:
http://top.baidu.com/game.html

Notice eventhough Sohu is ranked number 3 on the list, but the first two games are casual games and are completely free.

WOW, a Pay-to-play game, is ranked behind Sohu on the list. WOW is a $100 million USD per year game.

ZhengTu, a Free-to-play game, is ranked number 7. Zheng Tu does $100 million USD per year in revenue.

See Sina's article:

http://games.sina.com.cn/o/n/2007-04-11/2022194101.shtml

Sohu's TL Game 4-9-2007

2007-04-19T20:43:00.000-07:00

4-9-2007

It looks like Sohu's TL game has hit a home run. An independent source, Baidu's top ranked game list has Sohu's Tian Long Game as #4 on its list! Above XYQ, ZhengTu, which are extraordinarily successful games!

http://top.baidu.com/game.html

More Thoughts on Sohu's TL 4-7-2007

2007-04-19T20:40:00.000-07:00

4-7-2007

More Thoughts:

Netease's 3-year old XYQ(http://xyq.163.com/) with 1.5 Million peak concurrent players has about 450 servers running that game! XYQ is a $200 million USD per year game! Therefore, SOHU, on its 3rd day of Closed Beta Test, certainly has very good momentum with 45 servers running. I certainly hope that Sohu can build on its initial success and make TLBB into a $100 million USD per year game. Any way, at $21.80, the market expects nothing from TL game and hardly anything from 2008 Beijing Olympics. So there is really not much to lose for current investors and a lot to gain if TL game continues its initial success. I am loading more SOHU shares on Monday too. I currently own about $40,000 worth of SOHU will probably double my position.

Hope SOHU runs to $60 plus by June 2008! My goal is to make about $200,000 before tax on Sohu's TLBB and 2008 Olympic opportunity. Holding period is about 15 months!

Sohu's Tian Long 4-7-2007

2007-04-19T20:38:00.000-07:00

4-7-2007
TL game, if tremendously successful as it is so far, can easily run for 5 years. During that time the profit to SOHU will be HUGE, which SOHU can use to develop more games and businesses to create even more shareholder value. To give you an idea, during the TL game closed beta test started 4/4/07, the servers have doubled from 15 to 31, then, to 45 on 4/6/07. Each server can support about 12K to 20K players! I conservatively estimate that TL game in three days already have 500K registered users with thousands of more players registering every hour.

How much money will this game bring to SOHU? It depends on the revenue model SOHU picks. SOHU has not disclosed it yet. There are two revenue models. 1. FREE-to-play(FTP) model: require players to buy things to advance to higher levels. 2. Pay based on Playtime(PBP) model: pay by the playtime hour. Most successful FTP-model game now is ZhengTu(ZT, Long Journey- http://www.ztgame.com.cn/). ZT game is reporting 800K concurrent users, and generating $12 mil USD in monthly net profits. That's $150 mil USD net profit per year! A business like that is worth about $2 billion USD in stock market. The company making ZT is still privately held. When ZT started in late 2005, it only was adding 2 new servers a day(http://www.ztgame.com.cn/html/20060102/113613131529.shtml). SOHU on the 3rd day already has 45 servers running at close to full capacity. Most successful PBP model game for the last 4 years has been Netease's MengHuanXiYou(http://xyq.163.com/). Netease is making $7 million USD monthly net profit on this game and is valued at $2.2 billion by the stock market.

In conclusion, Sohu's 100% internally developed TL game has a tremendous initial success during closed beta test. If SOHU makes $10 million net profit per month on its TL game, that's worth additional $40 per share in stock price not including 2008 Beijing Olympic opportunity! So I estimate Sohu could be an $60 - 80 per share stock by 2008 Olympic! At $21.80, SOHU is a GREAT buying opporutnity. The profit is HUGE in 1.2 years!

Sohu's Tian Long (TL) Game 4-6-2007

2007-04-19T20:34:00.000-07:00

4-6-2007

Sohu's Tian Long(TL) Ba Bu is having a huge initial success for closed Beta testing:
http://chinese-net-gaming-stock.blogspot.com/

With stock at only $21.80, I am buying more on Monday.

I think if TL is a $50 mil to $60 mil USD per year game for Sohu, Sohu will easily be worth $50 or more by 2008 Olympic.