SOHU.COM
Clement Chang
Anurag Jain
Bryan Jenkins
Introduction
• Leading Internet portal in China
• Sophisticated Chinese language Web
navigational and search capabilities
• First China online search engine, with
17 main content channels
• Web-based communications and
platform for subscriptions, short
messaging and e-commerce services.
Stock Performance
5 Year Model
SOHU vs Nasdaq Stock Performance 5 Year Model
SOHU.COM Reasons for
Success
GEOPOLITICAL
• Chinese government control limited free flow of
information (esp. anti-government rhetoric).
• SOHU was one of the few portals the government
allowed to do business.
• Country wants to develop major IT infrastructure
• Beijing has China’s “Silicon Valley”- will be poised to
support the IT infrastructure for Internet coverage of
2008 Olympics.
ECONOMIC
•China continues to outstrip economic growth rates of
other countries, posting 7.8% growth in first half of 2002,
providing the basis for strong consumer confidence.
•The market size for online advertising in China continues
to have healthy prospects.
•The China market's compound annual growth rate is
forecast to be the largest in Asia.
ECONOMIC
• China's mobile phone operators had 196 million (out
of more than 1.4 billion population, only 13.5%)
subscribers in November 2002
• This number is forecast to grow to 344 million mobile
phone users in three years time.
• China is opening up further under the terms of WTO
membership as preparations intensify for the 2008
Beijing Olympics and the 2010 Shanghai World Expo.
SARS influence
•
•
•
•
Government quarantines public.
More people are forced to stay at home.
Internet surfing increases as a result.
Very beneficial to ISP and Portal market
Competitive Environment
• SOHU nearly monopolizes the search engine market.
• Although other search engines such as BAIDU.com
does exist. They do not have as large a portfolio of
products to compete with SOHU.
•
Was the first-mover in the e-store, online auction
business in China.
AC
MC
Industry Demand Curve
Perfect Competition
(Five forces are high)
Source: Dr.V.Sethi
At the end of 90’s, all the China dot com were
pure online website style, the business model
were dependent on online advertisement.
Monopoly
(Five forces are low) Source: Dr.V.Sethi
•After its defeat in 2000, Sohu changed its revenue model
from online advertisement to variety revenue.
•Focused on new value-added services: e-store, wireless
content services, online alumni club, stock exchange engine
etc.
•Leveraging its first mover advantage and wide reputation,
Sohu followed the differentiation strategy, allowing it to
become nearly monopolistic.
Indicator of success
• With over 50 million registered users out of 54 million
total internet users (92.59%) at the end of September
2002, SOHU has the largest online user base in
China.
• For the second year in a row the Sinomonitor
International survey - the largest Internet Survey in
the country- ranked SOHU.COM as the most visited
portal in China.
• Stock price has increased over 70%($17 in 1999 to $
30 in 2003) in the past four years.
Continued success?
We feel it will continue ….
Assumptions on uncontrollable variables:
• the Economy remains stable (GDP
continues at about 7% growth rate per year).
• Governmental interest remains afloat.
• Internet usage growth and m-Commerce
continues growing exponentially.
Why & How?
•Constant endeavor to innovate. New services
and products, such as e-Subscription, e-Store
and a stock exchange engine.
•Leveraging their reputation and brand
recognition by offering Enterprise IT solutions.
•Focus on the highest growth demographics
with high education. (long term strategy to acquired chinaren.com)
•A young and technology adept population will
continue to drive m-Commerce initiatives.
Failure of Dot Com.
www.boo.com,
European online apparel e-tailor
They declared bankruptcy just six months after
its debut in 2000.
What Happened?
This happened !
• 1. Outflow $100 M, and Inflow $100,000 in 6
months, a huge adverse balance.
• 2. Funding problem, money shortage.
• 3. Multiple offices, redundant staff force, heavy
entertainment allowances.
• 4. Heavy promotional expensive in 18 countries,
no long term strategy.
• 5. In spite of constant customers complaints on
delivery system, no improvement was made.
A Chinese portal goes bankrupt !
www.163.net
• 1. Short of funding
• 2. Over 90 % Revenue came from online
advertisement, no other value-added services or
products.
• 3. Charged fee for email accounts, resulting in
losing most of its users.
• 4. Lack of long term strategy evolvement,
monotonous services.
Reference :
Macro Economics Environment
•
http://edition.cnn.com/2002/BUSINESS/asia/12/23/china.growth.biz/
Sohu Reputation:
•
•
http://news.bbc.co.uk/1/hi/world/asia-pacific/1445333.stm
http://asianresearch.org/articles/1035.html
Chinese GDP increase in the first quarter of this year
•
http://english.peopledaily.com.cn/200304/18/eng20030418_115349.shtml
Sars influence
•
http://www.audiographics.com/archive/040403.htm
Thanks you !
Any Questions?