Sohu's online video business gain market share

Sohu has just reported its fourth quarter result. One thing stood out: it’s online video business has been gaining market share. In terms of time spent, it increased from 3.4% in December 2009 to 13.4% in December 2010, at the expense of the top video portals, i.e. Youku and Tudou. (No wonder Youku’s share price keeps dropping after its IPO.)

Sohu video unique visitors reached 100 million. Management said, Sohu video strength is partly because of an exclusive content deal – Sohu had 23 of the 30 top primetime TV dramas in 2010 and five of these were exclusive. Sohu indicated its video revenue reached US$28 million (based on Youku accounting treatment). Analyst Wallace Cheung of Credit Suisse estimated Sohu’s video business will break even in 2012. He valued Sohu’s online video business at US$581 million (against Youku at US$3 billion).

Other points worth noticing are:

  • Baidu is not the only one benefiting from Google’s leaving China. Sohu’s search engine, Sogou, is also doing very well. Fourth quarter revenue was up 125% from a year earlier.

  • Brand advertising was up 31% from a year earlier due to ad spending from the auto, financial services, online games and FMCG sectors. The second largest online portal in China expected this will grow even faster. First quarter brand ad revenue will increase 39-44% from a year earlier.

  • Overall, total revenues were US$173.2 million, up 27% year-over-year and 6% quarter-over-quarter. GAAP net income was US$41.5 million, up 41% year-over-year and 7% quarter-over-quarter.