Author | Chen Yan

Editor | Da Feng

Recently, Sohu released its Q2 2024 financial report, sparking heated market discussions.

The financial report shows that Sohu's total revenue for Q2 2024 was US$172 million, a 13% increase from the same period in 2023 and a 24% increase from the previous quarter.

Both of the company's main businesses achieved significant growth. Zhang Chaoyang, Sohu's founder, chairman of the board, and CEO, also said, "In the second quarter of 2024, our brand advertising revenue reached the high end of our previous expectations, online game revenue exceeded expectations, and net profit met previous expectations."

It is not difficult to see that Sohu has once again sent a positive signal to the market, giving investors and shareholders more confidence.

Among domestic internet companies, Sohu is definitely a unique existence.

Founded at the end of the last century, Sohu boasts a string of accolades in the internet industry. It was listed on NASDAQ three years after its establishment and secured the sponsorship qualification for the Beijing Olympics. It has produced a series of leading internet products. The Chinese internet has only been around for over two decades, and the market has been constantly changing. The fact that Sohu has kept pace with the times and persevered until now is essentially due to the talents and capabilities that younger companies lack.

In the face of industry cycle fluctuations, Sohu has systematically advanced various businesses and explored more business opportunities, which is its business philosophy.

Revenue exceeds expectations, unlocking more imagination

In terms of business income, Sohu's current main sources of revenue are brand advertising and online games.

Especially online game revenue, which performed quite well in Q2 2024. According to the financial report, online game revenue in Q2 was US$147 million, a 24% increase from the same period last year and a 25% increase from the previous quarter.

Behind this is Sohu's outstanding performance in mobile gaming. According to the latest financial report, the average monthly active users (MAU) of Changyou's PC games were 2.2 million, a year-over-year increase of 2%, while the MAU of mobile games reached 4.9 million, a year-over-year increase of 273% and a quarter-over-quarter increase of 77%.

Among them, the total number of active paying users on the mobile gaming platform was 1.1 million in the quarter, a year-over-year increase of 299% and a quarter-over-quarter increase of 240%.

In other words, both the monthly active users and paying users of games have achieved more than double growth.

In the second quarter of this year, Sohu just launched a new game, "Journey to the West: Painting the Journey Westward." During its open beta, the game received rave reviews from players. With its exquisite Chinese-style graphics and immersive Journey to the West storyline, the new game has given Sohu's gaming business a significant boost.

In fact, gaming has always been a relatively stable business segment for Sohu, contributing significantly to revenue.

For example, the game "Tian Long Ba Bu" (a martial arts-themed online game) launched years ago still enjoys high popularity and is currently a major revenue generator for Sohu's gaming division. In the second quarter of this year, Sohu also launched various anniversary events for "Tian Long Ba Bu" on PC platforms, including team-based PvP activities for nostalgic players.

The continuous accumulation of IP content and the constant updating of game content have maintained player engagement and loyalty. Meanwhile, the combined efforts of both new and old game IPs have allowed Sohu to deliver a powerful punch.

Not only the gaming business but also Sohu's brand advertising business performed quite well in Q2 2024. According to the financial report, Sohu's brand advertising revenue in Q2 was US$20 million, a 24% increase from the previous quarter. At the financial report meeting, Zhang Chaoyang mentioned that advertisers in the automotive industry increased their spending compared to the previous quarter, and fast-moving consumer goods also performed well this summer.

In the increasingly competitive and complex market environment, many advertising campaigns may not achieve the desired results, wasting limited resources. Therefore, most advertisers are relatively cautious in their spending, and some may even cut their budgets.

In this context, Sohu's advertising revenue still increased by more than 20% quarter-over-quarter, which reflects the company's commitment to brand value and continuous pursuit of innovation. It shows that Sohu, relying on its knowledge-based video platform, leverages advanced live streaming technology and strong dissemination capabilities to continuously enhance its differentiated competitive advantage and create more valuable exposure opportunities for advertisers.

To seek better development, Sohu also increased some forward-looking investments in the second quarter of this year, such as expanding platform scale and acquiring users, leading to strategic losses.

However, these are issues that any platform encounters during the expansion process. Overall, Sohu's cash flow situation is good, and it is currently in the investment stage of exploring business models. Previously, Zhang Chaoyang also revealed in an interview, "Sohu is in a stage of development and must spend money. We need to develop products and invest in channels. The current losses are for future greater profits."

From Sohu's continuous share repurchases, it can also be seen that the company's management is confident in the company's long-term growth. Sohu previously announced a US$150 million American Depositary Share (ADS) repurchase program. As of August 1, 2024, the company had repurchased 2.347 million ADSs for a total of approximately US$26 million.

The strong performance of its main business and its long-term vision are unlocking more imagination for Sohu.

Video + Media, Exploring Diverse Business Opportunities

Sohu's current achievements are attributed to its ability to continuously explore and improve its commercialization capabilities through a thorough understanding of internet business models.

In the past two years, Sohu has raised two flags: knowledge live streaming and internet events. It has gradually optimized and interconnected its product matrix to form a high-quality content ecosystem, enhancing user stickiness and strengthening brand influence.

Take Zhang Chaoyang as an example; he himself is a major internet celebrity IP under Sohu.

In 2024, it has become an unavoidable trend for entrepreneurs to become internet celebrities. While other entrepreneurs are still trying to come up with jokes, Zhang Chaoyang has chosen a different path by embracing the more valuable field of knowledge live streaming. From live streaming English lessons to "Zhang Chaoyang's Physics Class," he has made serious knowledge accessible to audiences.

In July of this year, Zhang Chaoyang engaged in two live streaming events, conducting exclusive interviews with top scientists Xu Yihong and Cumrun Vafa, delving into topics such as the history of quantum mechanics, higher-dimensional spacetime, and the cutting-edge theory of superstrings in physics. Zhang Chaoyang's rigorous approach during the live streams has won recognition from both the academic community and audiences.

In addition to "Zhang Chaoyang's Physics Class," Sohu Video's knowledge live streaming platform has also achieved leapfrog development in recent years, offering a rich content ecosystem ranging from "Astronomy and Physics Lectures," "Scientific Research and Application," to "Medicine, Health, and Sports" and "Natural History and Science Popularization." Experts and professors from various fields such as physics, biology, history, law, and medicine have gathered on Sohu Video.

Knowledge live streaming has become another business driver for Sohu Video, complementing its film and TV content.

As a media platform, Sohu adheres to the concept of "events as content" and continuously innovates content marketing activities, creating influential original content IPs such as "Sohu Tech Forum," "Sohu Finance Forum," "Sohu News Marathon," and "Sohu Fashion Awards."

For example, the "Sohu News Marathon" has been held for the 16th time this year. While continuing to plan events, Sohu is also seeking new breakthroughs. Over the years, it has invited sports champions, singers, young artists, entrepreneurs, and other figures from all walks of life to participate in marathons in places like Lijiang and Sanya, showcasing Sohu's commitment to long-term goals.

Through these knowledge live streams and meaningful social activities, Sohu has not only enriched its content but also enhanced user engagement and social interaction, gradually turning these individuals into Sohu's core audience. These actions, in turn, have consolidated Sohu's influence and competitive advantage as a mainstream media platform, earning it high recognition from advertisers.

In the latest financial report, Zhang Chaoyang also mentioned, "In terms of Sohu Media and Sohu Video, relying on the increasingly optimized and interconnected product matrix, we have further promoted the production and consumption of high-quality content, effectively enhancing social interaction among users. Benefiting from differentiated projects and marketing activities, we have continuously strengthened our brand influence and explored diverse commercialization opportunities."

Over the past two decades, Sohu has navigated through various cycles and established a solid moat for itself.