Yuchuyan: We are very confident about Sohu's video business

Absrtact: Chief Executive Officer Charles Zhang, chief financial Officer Yuchuyan, COO Wang, Sogou CEO Wang Xiaoquan and other executives attended the conference call. Sohu was established in 1998 and listed on Nasdaq in 2000. The provision of Internet services coverage from media

Senior Chief Executive Officer Charles Zhang, chief financial Officer Yuchuyan, COO Wang, Sogou CEO Wang Xiaoquan attended the conference call.

Sohu was established in 1998 and listed on Nasdaq in 2000. The provision of Internet services covers many fields from media information.

Conference Highlights:

1 Talk about video business: confident that the business will make ends meet within 18-24 months.

2 Talk about mobile strategy: not just copy PC products to the mobile end, but also add more products.

3) Talk search: Search user growth has seen a noticeable slowdown, but will remain stable over the next two or three years.

Interview background:

November 6 News, Sohu released the audit as at September 30, 2012, the third quarter of 2012 financial report. Sohu's third-quarter revenue was 285 million U.S. dollars, up 23% from the same period in 2011, up 12% from the previous quarter;

JPMorgan analyst Wei: about the prospects for branded advertising, which seems to be a pretty good season in the fourth quarter of the year, what does management think is the reason?

Sohu chief Operating Officer Wang: fast-moving consumer goods industry's advertising demand is strong, especially our online video content to promote FMCG industry demand, and improve our ability to provide excellent advertising. In addition, as mentioned earlier, the real estate industry contributed a large amount of advertising revenue, although the real estate industry did not see a clear signal of policy changes, but the developers want to improve sales in the short term, so that the third and fourth quarter of our advertising revenue growth.

In the last quarter, the top three of advertising revenue was in cars, real estate and FMCG.

Bank of America-Merrill Lynch analyst Eddy Liang: about the video business, the third quarter is good, management can comment on the third quarter video business revenue growth?

Sohu chief operating Officer Wang: the third quarter belongs to the transition period, because we set up a specialized sales team for the network Video department. The team did improve the sales capacity of the Department, especially in the FMCG industry, and we saw an increase in the number of advertisers in the industry. Second, the team is working to improve the efficiency of our video advertising management system, which will help us gain more revenue from CPM consumption patterns.

Barclays analyst Elisia Jappe: Baidu full acquisition of video site Archie Art stake in the development of Sohu video what impact? How will New-jin enterprises affect the search industry in the future?

Chief Financial Officer Yuchuyan: In the video business, I do not think that Baidu acquisition of Archie Surplus shares will have an impact on Sohu. We have always been confident in our video business and committed to the development of the business, we will always support Sohu's video business. In fact, the video business has increased commercialization, giving us greater confidence to move the business forward.

In Sogou business, the industry's new 360 search has been confirmed through the client software to promote the development of browsers, and then through the browser to drive the search query flow of the equation's attraction. There are now two leading search companies in the market proving that the equation is effective and successful. We will continue to develop this model.

Sohu CEO Charles Zhang: the entire Sohu platform, including Sohu News, Sohu homepage, Sohu News client has been a good development, Sohu Video will get the overall support of Sohu platform, including Sohu homepage, Sohu Mobile and Sogou browser.

86 Securities Research analyst Chunming: At present, in addition to Sogou Pinyin, Management believes that Sohu also what products are users will often use? What is Sohu's mobile strategy next year?

Charles Zhang, Sohu chief executive: As I mentioned before, Sogou Pinyin has become one of the five mobile mobile apps, and we hope Sohu Video and Sohu news apps will get the same results. Now is to seize the market share of the stage, we believe that as long as we master a certain market share, will form a certain business model. So as long as we get users, we can form a business model.

Chief Financial Officer Yuchuyan: We will not just copy the PC products to the mobile side, we have to do, for example, in the Sogou, there are three major products, that is, pinyin, browser and search, we will not only replicate these three products on the mobile side, but also to add more products. At present, we will launch two on the mobile end of the product has never been launched on the PC side, the launch time in the next 3-6 months.

Morgan Stanley analyst: About the Sogou business, what is the latest number of employees in the department? How many are the developers?

Charles Zhang, Sohu CEO: More than 1300 employees, about 1000 people are research and development staff, more than 80%.

Citigroup analyst: About the search business, because the amount of PC search is decreasing, is the business under pressure?

Sogou CEO Wang Xiaoquan: The current situation shows a noticeable slowdown in the growth of PC search users, but we believe that the size of PC users will remain stable for the next two or three years, and not fall. Therefore, we will still increase the number of users of the PC search. We have just mentioned that we have a richer product line on the wireless side.

JPMorgan analyst Wei: Can you disclose the revenue of the third-quarter video advertising business? What is the outlook for the quarter four? video business spending in the quarter and 2013?

Chief Financial Officer Yuchuyan: 2012 Total content procurement cost is 50 million dollars. We don't have a 2013-year budget to fix, because we have a lot of confidence in Sohu's video business, which can increase by 30% or 40%.

Lian Chang International Analyst: What is the development trend of the first three quarters and the third quarter video business? Do you expect revenue growth in the video business to catch up with the overall growth in the video industry in the fourth quarter?

Chief Financial Officer Yuchuyan: I don't expect the video business to make ends meet in 2013, but in the long run, because advertisers are moving their advertising budgets from TV to video, I am confident that the business will make ends meet within 18-24 months. In the development trend, Sohu Video has been a good development trend until the second quarter of this year, when we announced the establishment of a dedicated marketing team, so the third quarter of development slowed, but the quarter will return to the development track. For 2013, our goal is to double growth.

I expect growth to exceed the industry average, we have lagged behind in the past two quarters, so we have to catch up.

Macquarie Securities analyst Shao: What is the proportion of advertising revenue of Sohu brand in auto industry? Most of them come from Japanese carmakers?

Chief Operating Officer Wang: the auto industry still accounts for about 25% of total advertising revenue. In the third quarter, if normal, Japanese carmakers would contribute 10% to 20% of their car advertising revenues. Affected by the Diaoyu Islands incident, the third quarter was abnormal.

Shao: Regarding the search business, how does management view the gap between the CPC, the reading rate and the coverage of the leading enterprises in the search industry?

Sohu Chief Executive Officer Charles Zhang: Now our advertising point reading rate is 80% of Baidu, we are narrowing the gap with Baidu, our CPC is Baidu's One-third to One-second, coverage close to the level of Baidu.