How Sohu executives interpret the second quarter earnings?

NetEase Technology News July 28, Sohu (Nasdaq: SOHU) today announced the unaudited financial results for the second quarter of 2014 as of June 30, Data show that Sohu sales of 400 million US dollars in the second quarter, up 18%, growth of 10%; net loss attributable to the company was 45 million US dollars, net profit in 2013 was 22 million US dollars, down from the previous year, but the previous quarter The net loss of 79 million US dollars has improved.

After the earnings release, Zhang Zhaoyang, Chairman and CEO of Sohu's Board of Directors, co-president and CFO Yu Chukai, Changyou President Chen Dewen, COO Hong Xiaogun, Sogou CEO Wang Xiaochuan, Sohu's vice president and Sohu video COO Deng Ye held a conference call to interpret the key points and Answer analyst questions.

Bank of America - Merrill Lynch Liang Weiliang: Q3 performance outlook mentioned brand advertising business growth may slow, may I ask what is the specific reason? What impact does the World Cup have on content costs in the second quarter and the third quarter?

Yu Choyuan: The slowdown is due to the fact that we received the second-quarter license of "China Good Voice" in the third quarter of last year, which attracted a lot of advertising funds. This year's growth rate is hard to match (note: this year we did not get any authorization). In terms of video ad revenue, the third quarter's growth rate will be reduced from 85% in the second quarter to 40%.

In the World Cup-related expenses, the second and third quarters of the relatively average, there is no big difference between the two quarters.

Barclays Capital Analyst: Sogou cooperation with WeChat, on-line "WeChat public platform search", management believes that the promotion of revenue how much? What are the potential monetary measures? When is the expected revenue to reach a certain size? We see some vertical channels such as cars, real estate, there are some changes, these changes Sohu have any effect? What is the outlook for the third quarter? What is the demand for car and real estate ads?

Wang Xiaochuan: WeChat public number search the main purpose is to promote Sohu search, the formation of differentiated services with competitors to improve the sogou search awareness, and no monetization expectations. After launching WeChat public search, we can see the rapid growth of traffic and the increase of 30% of search traffic. This is partly due to the launch of WeChat public search.

Zhang Chaoyang: First of all, I want to clarify your question, not search on WeChat Sogou search, but Sogou search access WeChat content. Now this feature has been added to Sogou web search, Sogou search traffic thus increased, its monetization approach and other similar search, do not have to develop other monetization measures for WeChat search.

Sohu's media business will continue to stay the same, regardless of medium and small businesses will continue to advertise in Sohu platform, our car channel will be integrated with the media business, especially the mobile media business, we will not enter the O2O business.

Yu Chuyuan: Let me explain the meaning of General Zhang. In order to improve monetization, the key to the overall strategy of Sohu's media business is data collection, focusing on the monetization of mobile terminals. As for real estate advertising, we all know that the real estate market is currently not healthy. As a result, the demand for real estate advertising has weakened. We expect the growth of focus.cn to slow down from 80% to about 40%.

JP Morgan analyst Yao orange: In the allocation of resources, you already have Sogou browser and 17173 browser, and now the dolphin browser was acquired, the company's internal resources will be how to allocate?

Zhang Chaoyang: Our allocation of resources is very clear. These three browsers have different business focus, 17173 browser focuses on game information, dolphin browser focuses on overseas markets, especially the United States and Europe, Sogou browser mainly for the Chinese mainland.

Yao Orange: Management mentioned that the video industry is highly competitive. What do you think about the content procurement strategy in 2015?

Zhang Chaoyang: We will make a reasonable investment in content procurement, content costs will increase slightly, especially overseas content, such as from the United States and South Korea's content. However, this is manageable and we will ensure that these items receive the most attention and traffic, and revenue will catch up.

Yao orange: Sohu will be how to do with the contents of competitors form a difference?

Zhang Chaoyang: We believe we have better judgment or very precise target choice, so we have very good content. As you can see, the U.S. drama on our site is the best, and most of the repertoires we have chosen have won Emmys.

In addition, we have cross-market capabilities. As I always said, Sohu Video is not only a video website but also a media company, so we can cross-promote our video content on Sohu News clients, portals and even Sohu Pinyin. So we can take full advantage of our content. In the second quarter, Sohu video traffic growth is much higher than the industry average.

Morgan Stanley analyst Philip Wang (Philip Wang): Sogou business, the mobile terminal contribution revenue? What is the goal for this year? When is expected to search dogs to achieve profitability?

Wang Xiaochuan: The proportion of wireless search to total search revenue has been gradually increased, but is currently slightly higher than 10% level. Looking toward the end of the year, although the revenue from wireless search is growing rapidly, it is hard to predict the proportion to be reached by the end of the year as PC search is also rapidly growing.

Zhang Chaoyang: Sogou profit for the problem, our current goal is to expand market share, although we are currently in the mobile search in second place, but the distance from the first place is very large, so the current stage of our goal is to gain market share , Profit is not the primary goal of search business.

Phillip Wan: In expanding market share, Sogou will take what measures?

Zhang Chaoyang: We have very good resources. In mobile search, we have the largest Pinyin user base, Sogou Pinyin in China is the second largest installed mobile phone software, second only to WeChat. We have ample ammunition, and we only need to make a smart strategy to implement it.

Analyst, HSBC: Regarding the video business, management just mentioned that the structure of spending in the video industry is unsatisfactory. What measures do you think should be taken to improve the economic performance of this industry? Do you think what kind of integration measures should be taken next to expand the scale of Sohu video?

Zhang Chaoyang: We will work hard to reduce bandwidth costs, including several ways, such as playing a good relationship with telecommunications companies, the use of P2P technology. In fact, the biggest part of spending is content. Each video site has strong financial support, each competing for market share. But as everyone becomes sane, the price of the content will decrease. We hope content costs will be manageable in the near future. But above all, we need to dramatically scale our revenue streams, such as getting ads delivered more accurately and membership or transactional services for some premium content. These measures can expand the revenue scale, then the entire industry expenditure structure will be more satisfactory.

HSBC analyst: You will use the opportunity to expand integration Sohu video scale it?

Zhang Chaoyang: We can use Sohu's huge user base, so even without large-scale mergers and acquisitions, we can also increase traffic and achieve substantial growth, without dilution of the shares of Sohu shareholders.

Citigroup analyst Zhuang Yihong: Could you tell us about PC search strategy? How to improve PC search market share in the future? How many mobile search traffic from QQ browser?

Wang Xiaochuan: PC search will continue the "three rocket" strategy, through the browser to increase search traffic. We now have the ability to begin differentiating our products and brands by providing access to WeChat content and WeChat search. Therefore, we are starting from the simple channel strategy to have confidence and the leader of the brand quality contest path. This is an upgrade to the previous strategy.

Wireless search, in addition to QQ mobile browser support, we also released in the second quarter Sogou search APP, the application than the PC version adds more user search portfolio access, but also enhance the brand and quality of the product, through Differentiated services to attract users, and thus in a more favorable position for wireless search.

CIC Securities analyst: Sogou application of MAU and DAU data, respectively, how much? Advertising revenue mobile terminal contribution ratio? Video and search?

Zhang Chaoyang: Just now mentioned, the proportion of mobile revenue contributed slightly more than 10%. MAU data for video and search applications are not readily available. July video application traffic increased 50% to 60% from March.