China’s Sohu Plunges To $79 Million Loss

Online giant grapples with transition to mobile

UDINE, Italy — Sohu, China’s online search, video and games group, plunged into loss in the first quarter of the year.

It recorded a net loss of $79 million for the three months to end March 2014. That compared with a $2 million profit in the previous quarter and a profit of $23 million in the equivalent first quarter of 2013.

The group pointed to higher promotion and compensation costs as it expanded its mobile and games activities. Total revenues were up 19% at $365 million.

“With the accelerated migration to mobile internet, I am pleased to report that Sohu Group’s portfolio of mobile properties is gaining great traction. On the media front, Sohu WAP portal, Sohu News App, as well as Sohu Video App are all growing rapidly. Notably, in the first quarter, mobile video traffic has surpassed PC traffic,” said Charles Zhang, chairman and CEO, in a statement.

Online advertising revenues, which include revenues from brand advertising and search and other businesses for the first quarter of 2014, were $175 million, up 51% year-over-year and down 7% quarter-over-quarter.

The company also pointed to content acquisition costs as another problem area.

“Based on our regular review of traffic data for video content, we noticed a change in viewership patterns for licensed domestic TV dramas. Commencing January 1, 2014, we adjusted our accounting estimates for amortization of content costs for new domestic TV dramas to reflect such change, which resulted in a further acceleration of the amortization of content costs,” the company said.

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