On May 16, Sohu announced the financial report for the first quarter of 2022. According to the financial report, Sohu’s total revenue in the first quarter was $193 million and its net profit was $9 million.
Founder of Sohu Dr. Zhang Chaoyang, chairman and CEO of the board of directors, said: “In the first quarter of 2022, despite the negative impact of covid-19 pneumonia and the challenges of the macroeconomic environment, we continued to focus on optimizing products and improving operational efficiency. Thanks to the excellent performance of the online game business, the group’s profits exceeded the previous guiding expectations and achieved profits. In this quarter, Sohu media continued to upgrade products, improve content quality, continue to attract users and remain active.”
However, on a year-on-year basis, the company’s revenue from brand advertising was US $23.77 million, a year-on-year decrease of 23% and a month on month decrease of 29%. The decline was mainly due to the decline in portal advertising revenue. It is worth noting that its net profit attributable to the parent company under non US GAAP was US $9 million, a year-on-year decrease of 75% and a month on month increase of 4400%.
However, considering the previous expectation that the net loss in the first quarter was between $10 million and $20 million. Therefore, this performance still exceeded Sohu’s own expectations. In this regard, Zhang Chaoyang, founder, chairman of the board of directors and CEO of Sohu, said that in the first quarter of 2022, thanks to the excellent performance of the online game business, the group’s profits exceeded the previous guiding expectations and achieved profits.
But overall, due to the continuous decline of advertising revenue and the stripping of Sogou business, Sohu’s revenue is increasingly dependent on Changyou’s online game business revenue. However, Changyou has only relied on one IP of “Tianlong Babu” for many years, and its achievements in recent years are not good. Therefore, Sohu still needs to make some efforts even if it no longer expands and focuses on the current “one third of an acre”.
a “not good” financial report
From the perspective of financial report, compared with Baidu and Tencent in the same period, Sohu is obviously lagging behind.
Data show that Sohu’s total revenue in the first quarter was $193 million. The revenue of microblog with US stocks in the first quarter was US $459 million. In terms of ancestry, Weibo is a sub product stripped from Sina;
In terms of business, Sohu’s brand advertising revenue in the first quarter was US $24 million, a year-on-year decrease of 23%; Online game revenue was $158 million, down 11% year-on-year. The total number of active PC users in the same period of last year was 130000, with an average decrease of 2% over the same period of last year; The total number of active paying users in the quarter was 1 million, an increase of 4% over the same period of last year and the previous quarter. In terms of mobile games, the total average number of monthly active users was 2.4 million, an increase of 16% over the same period last year; The total number of active paying users in the quarter was 500000, an increase of 14% over the same period last year
It can also be seen from the above data that in terms of revenue structure, Sohu obviously relies more on the revenue of game business than ever before. This can be seen from the proportion of game business in Sohu’s revenue – in the first quarter of 2022, Sohu’s online game revenue accounted for 82% of the total revenue, which was 76% in 2021 and 72% in 2020.
This trend also means that Sohu has not made the expected progress in content ecology. Before Sohu sold Sogou, Sogou, as an important traffic portal for Sohu, achieved extensive user coverage for Sohu. According to the China Mobile Internet 2020 semi annual report, as of June 2020, the number of monthly active users (MAU) of Sogou mobile input method exceeded 500 million, ranking third in the whole category of app and first in the category of input method, second only to wechat and mobile Taobao. In terms of revenue, according to the Q1 financial report of 2021, Sogou’s total revenue is US $137 million, and the net income attributable to Sogou’s parent company is US $35.3 million.
However, the existence of Sogou has dragged down Sohu’s revenue efficiency to a great extent. Its outstanding performance is that in Q1 2021, Sogou achieved a revenue of 137 million US dollars, down from the same period last year; Sogou achieved a gross profit of US $29.37 million, with a gross profit margin of 21.4%. The changes in the advertising market in recent years have also made it more difficult for Sogou to achieve the profitability of the previous year, let alone achieve a certain degree of growth.
For this reason, Sohu chose to sell Sogou in the second half of 2021. While obtaining $1.2 billion in cash, it hopes to further improve its operating efficiency.
After the disclosure of the first quarterly report in 2022, it can be seen that the sale of Sogou did not bring the expected efficiency improvement to Sohu’s operation end – the company’s gross profit margin was 75% in that quarter, compared with 79% in the same period last year; In terms of total profit, Sohu’s operating profit in the first quarter was US $13 million, compared with us $51 million in the same period in 2021.
At the same time, compared with the total profit of US $79 million in 2021, it only achieved 11.39% of last year’s total. Among the reduced data, Sohu’s operating expenses rose, recording $132 million, a year-on-year increase of 6%.
Facing the second quarter of 2022, Sohu’s expectation is not optimistic:
In the second quarter of 2022, Sohu expects that the brand advertising revenue will be between us $22 million and US $25 million, a decrease of 32% to 40% compared with the same period in 2021 and a decrease of 7% to an increase of 5% compared with the first quarter of 2022.
Online game revenue ranged from $150 million to $160 million, down 1% to 6% from the same period in 2021 and down 5% to 1% from the first quarter of 2022.
The non US GAAP net loss attributable to Sohu is between us $15 million and US $5 million, and the US GAAP net loss attributable to Sohu is between us $18 million and US $8 million.
apart from financial report, why did the CEO personally end up marketing
In the mainstream perspective in recent years, compared with Sohu itself, perhaps its leader Zhang Chaoyang has a greater degree of topic.
This is not just because he began to teach netizens physics classes live online in the past two years, and claimed that he “only slept four hours a day” two years ago. Since Zhang Chaoyang founded Sohu, his behavior does not seem to be in step with the mainstream perspective:
For example, in July 1999, Zhang Chaoyang, who had not founded Sohu for a long time, put on his helmet and played roller skating in front of Tiananmen Square, and the photo made the headlines of Nanfang Weekend;
As another example, in the field of life science, Zhang Chaoyang felt that “it is shameful for people to live at the age of 80”. Therefore, he confidently told the media that he hoped to live to the age of 150. Similar remarks have been talked about by some netizens and can be found everywhere on the Internet. The above cases show to varying degrees that in terms of temperament, Zhang Chaoyang appears to be more independent compared with new Internet giants such as Zhang Yiming and Wang Xing, or Internet people of the same era as Ma Yun, Liu qiangdong and Ma Huateng. To a large extent, this has become the temperament of Sohu today: idle clouds and wild cranes, unconventional.
However, in terms of root causes, Zhang Chaoyang’s above-mentioned behavior should be counted as the category of Internet marketing to a large extent: because in July 2000, the US stock NASDAQ suffered a mass slump due to the bursting of the European and American Internet foam. At that time, Sohu had just landed on NASDAQ.
For this reason, in order to attract investors and make up for the gap between Sohu and other companies in technology, Sohu’s boss had to go to the front desk and market himself as a brand. It is reported that this is called “attention marketing” by Zhang Chaoyang himself.
It is worth noting that the current share price of Sohu, after more than 20 years of ups and downs, is now quite close to that of 20 years ago. Recently, Zhang Chaoyang has also “transformed” into a physics teacher of netizens and broadcast physics courses live on Sohu Video every day. Although the content of “marketing” is different, the situation of the company is basically similar. This has to be said to be a coincidence
