Businessmodel of Sohu.com

Customer Segments

Sohu.com provides a range of services and products. It provides advertising and online marketing solutions to commercial entities across multiple sectors, predominantly through media agencies, advertising agencies, and brand marketers. In 2015 The majority of the Company’s advertising services, around 74%, were distributed by third-party advertising agencies. The Company’s advertisers include multinational companies, including a number of Fortune 500 businesses, as well as Chinese domestic medium and small companies.

Sohu.com’s other products, including its internet content, online games and web portals, are targeted at general consumers across all demographics. The Company provides a range of content to suit all audiences, including sport, news and finance portals.

Despite being incorporated in the US, Sohu.com and its subsidiaries and operating assets are located in China. The Company is one of the largest internet companies in China and derives all of its revenue from its Chinese operations.

Value Propositions

Sohu provides value to its customers through the quality of its original content online and gaming content, the reliability of its web services, the standing of the Company within the Chinese tech market, and the accessibility and flexibility of its multi-platform offerings.

Sohu.com is among China’s largest and most recognised internet service brands. Its name is broadly associated with positive coverage, including reports of high-profile partnerships with domestic and international names.

Channels

Sohu.com operates a its own web portal at www.sohu.com, through which customers are able to access the Company’s services and find links to the Company’s various other websites and portals. These include channels operated by the Company’s Changyou segment, 17173.com Website, the Dolphin Browser and RaidCall, as well as the Company’s email, web search and gaming portals. Sohu.com also provides its customers with a range of mobile applications available for iOS and Android devices.

Sohu.com’s advertising and marketing solutions are delivered via a hybrid sales model, comprising the Company’s in-house direct sales team and various advertising and brand marketing agencies.

Customer Relationships

Sohu.com’s consumer-focused products – namely its web portal and services, internet search engine, gaming platform, and video and music streaming services – are available on a self-service basis through the Company’s various online channels. Consumers are able to register for and manage accounts across multiple services and pay for services without interacting with members of the Sohu.com sales team.

Customers of Sohu.com’s core advertising and online marketing solutions, however, are required to consult directly with the Sohu.com sales team in order to discuss their needs, pricing and product options. The Company frequently negotiates multi-year deals with advertising customers.

Sohu.com makes a range of support resources available to customers through its various online portals. Customers are also able to contact the Company directly via email and over the phone, as well as through its social media accounts.

Key Activities

Sohu.com is a leading Chinese online media, search and game service provider. It offers a comprehensive suite of online products and services across desktop and mobile devices in China.

Sohu.com comprises three principal business segments: Sohu, which generates Chinese language online media content and provides a portfolio of web-based services such as an email portal; Sogou, which provides online search services, client software and mobile internet product solutions; and Changyou, which operates as an online game developer and operator in China, which develops, operates and licenses a range of mobile and desktop games to consumers.

The Company also provides mobile-related services, sub-licensing of purchased video content to third parties, and paid subscription services.

Key Partners

Sohu.com primarily partners with companies from within the technology sector, including developers of software, games and mobile applications.

Among the Company’s recent partnerships are a co-production deal with Israeli format distributor Armoza Formats to produce original programming content; a search partnership with China’s e-commerce giant AliBaba; a tie-up with gaming-focused production company Machinima to bring the company’s gaming and original programming to Sohu.com; and a content license purchasing agreement with competing Chinese online companies Tencent and iQiyi.

Reports have also suggested that Sohu.com has been in talks with Google, with a view to establishing a search partnership, whereby Google would perform some search functions for Sohu.com.

Key Resources

Sohu.com’s key resources are its technology and intellectual properties, its IT infrastructure – comprising a network of servers and data centres, its network of technology partners, its online content, and its personnel. Sohu.com owns a number of patents, copyrights and trademarks which it considers to be critical to its commercial success.

The Company has three registered service marks with the US Patent and Trademark Office, as well as a number of trademarks and patents filed in China.

Cost Structure

Sohu.com incurs costs in relation to the development of its online presence, the maintenance of its IT infrastructure, the management of its partnerships, and the retention of its personnel.

As of 31st December 31 2015 Sohu.com employs 10,600 employees, accruing costs in the form of salaries and benefits, and pays to employ a number of independent contractors on an ad hoc basis. The Company also pays rent and utility fees for the operation of its various branch offices.

Revenue Streams

Sohu.com generates revenue through a variety of internet media and online games products and solutions. Its revenue is reported across its three business segments:

• Sohu, which generates revenue primarily through various online advertising solutions, including traditional display and video advertising;
• Sogou, which generates revenue through search and pay-per-click advertising services, and the provision of internet value-added services such as facilitation of third-party games; and
• Changyou, which generates revenue primarily through its online games under an item-based revenue model, whereby users can play the games for free but are optionally able to pay for virtual items. In 2015 Sohu.com generated total revenue of $1.94 billion through Sohu, Sogou and Changyou segments, with Sohu contributing $584.5 million, Sogou contributing $591.7 million and Changyou contributing $763.8 million. The Company’s online advertising business continues to be its largest revenue generator, accounting in 2015 for 58% of total revenues. Revenue generated through online games accounted for 33%. A significant portion of Sohu.com’s game revenue is attributable to its popular its PC game Tian Long Ba Bu.