In 2010, at the Golden Eagle Festival held by Hunan Satellite TV, Zhang Chaoyang said to the audience: "China's Internet has reached a decisive moment, this is a war between giants, and there are only seven giants: Sina, Sohu, NetEase, Tencent, Baidu, Alibaba and Shanda." ”
Sadly, in the following ten years, Sohu (NASDAQ: SOHU) seems to be getting quieter and quieter, and even gradually forgotten by the Internet. On the list of Internet giants, Sohu may be difficult to enter.
Zhang Chaoyang, the founder of Sohu, as a "pioneer" of China's Internet and known as the godfather of China's Internet, is now a physics teacher on Sohu video. As of 12:00 on February 20, 2022, "Zhang Chaoyang's Physics Class" has been updated to the 30th issue.
Source: Sohu Video
Red Star Capital Bureau noted that on February 22, Sohu released its financial report for the fourth quarter and full year of 2021. According to the report, Sohu's revenue in 2021Q4 was US$193 million, down 23.72% year-on-year; its revenue for the full year of 2021 was US$836 million, an increase of 11% year-on-year. As of yesterday's close, Sohu's total market capitalization was $706 million.
Sohu, which once had to fight an Internet battle with a number of opponents, is now far lower than its opponents at the capital level in terms of revenue scale, market value and user level. Red Star Capital Bureau will review and sort out how Sohu has reached its peak in the past twenty years, and how it has fallen off the altar. Where will Sohu go in the future?
(i)
For more than 20 years, the rise and fall of Sohu
Zhang Chaoyang himself is a proper academic bully, graduating from the Department of Physics of Tsinghua University at the age of 22, receiving a doctorate from the Massachusetts Institute of Technology at the age of 29, and conducting postdoctoral research at the Massachusetts Institute of Technology. In 1995, the 31-year-old Zhang Chaoyang smelled the huge potential of the future development of the Internet in the United States and decided to return to China to start a business. Sohu's ups and downs have also begun.
Xing: Portal, open the door of Sohu traffic
In 1996, Zhang Chaoyang got the investment and founded Edsin, the predecessor of Sohu.
1998 is known as the "first year of the portal" in the history of China's Internet. At that time, Zhang Chaoyang's Aitesson began to emulate Yahoo as a portal and named it Sohu; Sina was founded in the same year; NetEase was established a year earlier.
Sohu, NetEase and Sina are also known as the earliest Internet "three musketeers" in China.
At that time, the three major portals were definitely the hegemons of the Internet industry. The portal website grasps the entrance of the user's Internet access, which means that the first station of traffic is mastered, and the commercialization path is naturally clearly visible (mainly relying on advertising).
In 1999, Zhang Chaoyang was already on the Hurun Rich List. In 2000, Sohu was successfully listed in the United States, and the scenery was unlimited for a while. According to the company's financial report, in the third quarter of 2002, Sohu achieved full profitability.
Sohu is listed on the NASDAQ
After entering the millennium, with the continuous development of Internet technology, the competition between enterprises and enterprises has also intensified. These competitions are, of course, also competitions for traffic.
Subsequently, the industry began the earliest "traffic war", of which Tencent and Baidu are undoubtedly the strongest competitors of the three major portals.
It is worth mentioning that in 2003, Tencent launched its own portal Tencent. At first, the response was mediocre. The following year, during the 2004 Athens Olympic Games, Tencent made a small page of gold medal dynamics on the QQ client, and clicking on this small page can directly jump to Tencent.com.
This small attempt has brought a lot of traffic to Tencent, but more importantly, the way of diverting traffic to external businesses through social platforms also seems to open up Tencent's new ideas and become one of the important reasons why Tencent dominates the market later.
Decline: The mobile Internet is rapidly coming, and Sohu is difficult to defeat in all directions
In the PC era, the three major portals were indeed enough scenery, but soon the ruin of portals quietly arrived. In addition to the rising competitors, the most difficult thing for portals to compete with is actually the arrival of the mobile Internet era.
The development and popularization of the mobile Internet has made the functions and channels of the original portal site be stripped out one by one, and the applications that users want to use have been packaged into app after APP, and videos, forums, education, automobiles, sports, and stocks have their own independent apps.
The information between these apps forms an island, and users no longer need the portal to navigate categorically. The significance of the portal's existence was momentarily weakened.
This is the trend of the times, and it is also the "disaster" that the three major portals must face.
Of course, Zhang Chaoyang also realized that the decline of the portal was sooner or later, so Sohu began to split up internally.
Sohu spun off Search Business Sogou, Game Business Changyou and Video Business Sohu Video. In April 2009, Changyou was listed on the NASDAQ, and in November 2017, Sogou was listed on the New York Stock Exchange.
But from a business point of view alone, the search business Sogou has always been suppressed by Baidu; the game business Changyou mainly relies on a single hit; as for the video business, this is originally a heavy content investment business, and it is currently difficult for domestic long video streaming platforms to make profits, which will not be an option for Sohu to make money.
Although Sohu's revenue structure is no longer single, each business single out does not occupy an absolute dominant position. Looking back at the three giants of the portal, NetEase has games, e-commerce business, etc., and Sina has launched Weibo. It is worth mentioning that when Sina launched Weibo in 2009, the market set off a terrifying wave, and in 2010, Zhang Chaoyang launched Sohu Weibo and Sina Weibo to fight a decisive battle, but finally ended the battle with Sohu invincible.
Former Sohu Weibo landing page
Sohu's difficulties may be far less than that. In 2011, Zhang Chaoyang announced that he would be closed for more than a year due to physical reasons, coupled with the loss of Sohu personnel at that time and the loss of Weibo, under the chain reaction, the Internet company that should have been racing against time began to lose its "engine".
(ii)
Sohu's dilemma: lack of core products that can be played
It can be said that with the advent of the mobile Internet, the original market order has been overthrown and rebuilt. The moat that Sohu had initially built up by relying on portals was also instantly dismantled. In the subsequent mobile Internet war, Sohu stumbled, looking for every new opportunity has competitors preemptively entrenched, and now look at Sohu's main business, it seems single, weak, lack of market competitiveness.
Search business is "cut"
From the perspective of Sohu's revenue structure, according to the company's financial report, before 2020Q3, the company's revenue mainly comes from three parts, namely search-related business, games and Sohu brand advertising. That is to say, Sohu is walking on the three legs of "search + game + portal".
According to the company's financial report, In 2020Q2, Sohu's total revenue was $421 million, search and search-related advertising business revenue was $241 million, online game revenue was $106 million, and brand advertising revenue was $38 million. It can be found that at that time, search and search-related advertising business was the main source of Revenue for Sohu, accounting for more than half of the total revenue ratio.
In July 2020, Sogou announced that it had received an initial non-binding takeover offer from Tencent. After the completion of the transaction, Sogou will become an indirect wholly-owned subsidiary of Tencent and will be delisted from the New York Stock Exchange, and will no longer retain any rights and interests in Sogou. Since 2020Q3, Sogou's performance has no longer appeared in Sohu's financial statements, and the game business has also carried the banner of Sohu's revenue.
According to the 2020Q3 financial report, Sohu's revenue fell to $158 million, of which online game revenue was $101 million and brand advertising revenue was $41 million. After divesting the search business, Sohu undoubtedly cut off the most important arm.
Portal and game business, can not support the future of enterprises
Judging from the updated financial report of Sohu yesterday, Sohu achieved revenue of $193 million in 2021Q4, down 23.72% year-on-year. In terms of revenue composition, games continue to be Sohu's largest source of revenue, with online game revenue of $144 million and brand advertising business revenue of $34 million.
Source: Company Financial Report, Red Star Capital Bureau
According to the financial report, Sohu's portal advertising revenue has been negative growth for three consecutive quarters, with 2021Q4 falling 19% from the same period last year. Perhaps in the context of the decline of the portal, the portal advertising itself is not a good business, and Sohu has always focused more on the game business.
According to the financial report, from 2020Q4 to 2021Q4, Sohu's game business revenue accounted for 77%, 79%, 74%, 77% and 75% of the total revenue, respectively.
However, Sohu's game foundation is not stable, and in 2021Q4, the year-on-year growth rate of Changyou revenue fell sharply by 26.5%.
The revenue of the game business began to decline, mainly because although Changyou has a number of game products, the most profitable of it is the online game "Tianlong Babu" and its derivatives launched in 2007, including Tianlong Duanyou, classic Tianlong mobile game, and novice game Tianlong Glory Edition.
Changyou has also tried other games, and has launched many games such as "Sword" and "Sword Fairy", but the market response has not been as expected, and the embarrassing situation of a game playing the world is still difficult to get rid of.
In addition, from the perspective of revenue scale, Sohu's game revenue in 2021Q4 was 144 million US dollars, Tencent's game revenue in the third quarter of 2021 was 44.9 billion yuan, and NetEase's game revenue in the third quarter of 2021 was 15.9 billion yuan, which is obviously Sohu's game business is still too far behind.
How long the residual temperature of "Tianlong Babu" can last is still unknown, and whether it can find the revenue baton of the game business is crucial for the current Sohu.
(iii)
The future of Sohu, is there a new story to tell?
Where the future of Sohu will go, in fact, Zhang Chaoyang himself has also expressed this.
At Sohu's 2019 financial report online media communication meeting, Zhang Chaoyang revealed that live broadcasting, social networking and short videos are the focus of Sohu's efforts in 2020. However, the three major sectors of "live broadcast + social + short video" are undoubtedly more difficult to walk in today's highly competitive market environment.
Live streaming services
When it comes to live broadcasting, Sohu may inevitably have some regrets. In October 2014, Sohu Video acquired the video sharing website 56.com, but it did not include 56.com's most profitable live broadcast business, "I Show", only because Sohu Video had no related business at that time.
But soon live broadcasting became a "new outlet". According to public data, the number of online live broadcasting platforms in China exceeded 200 in 2015. Sohu was late in the live broadcasting business, and in April 2016, it released the mobile live broadcasting platform "Qianfan Live".
For Qianfan live broadcast, Zhang Chaoyang is also very hardworking, every morning at 8 o'clock on Qianfan live English reading newspaper, but it has been difficult to reverse the situation.
Nowadays, Zhang Chaoyang has once again worked hard to open a physics class on Sohu video, in fact, for Sohu, it is more likely to see the cake of knowledge live broadcasting. After all, e-commerce live broadcasts and show live broadcasts have been rolled up to the point where they can no longer be rolled.
But even so, after so many years of live broadcast war, the major platforms have their own core plates, naturally will not give up the knowledge of live broadcasting this market; plus today's live broadcast entrance has become the basic configuration of major network platforms, and Sohu wants to tell a new story in the live broadcast track, I am afraid it is not easy.
Social business
In June 2019, the Sohu social APP Fox Friends was launched, and Zhang Chaoyang was full of confidence in Fox Friends at that time, and he introduced the Fox Friends APP as the revival of Sohu Weibo. He also declared that once Fox Friends achieves exponential explosive growth, Sohu's video, news, games, live broadcasting and other businesses will have a fertile land to bear.
In order to promote fox friends, Zhang Chaoyang once again personally did it, the update dynamics are very frequent, fox friends homepage directly wrote, "Sohu products, find me on the line." At the same time, fox friends mainly accurately target young groups such as college students, fox friends school grass, school flower competitions, contestants to participate, audience voting are required to participate through registration fox friends.
Source: Fox Friends APP
However, social networking is not a "good bone" after all, and fox friends are more disapproving voices.
Qimai data shows that the best data of Fox Friends stayed on June 10, 2019, when it was officially launched, but it was only 301 in the free list, 26 in the social list, and currently stayed in about 200 in the social list.
Source: Seven Wheat Data
Although Sohu seems to have placed a heavy bet on the Fox Friends APP, the feedback of the entire market is still flat, and Fox Friends still has not gotten rid of the fate of most social platforms.
Short video business
Finally, when it comes to short videos, the current Douyin and Kuaishou have become giants in the industry that devour traffic, and user production content and commercialization have initially formed a closed loop.
Questmobile data shows that in September 2021, the MAU (monthly active users) of the short video industry reached 925 million, and the Douyin and Kuaishou MAU reached 672 million and 416 million respectively, and the short video track entered the stock market battle.
Giants are in charge, in the absence of content there is no user gathering, no user gathering is difficult to regenerate the short video track of good content, and the Matthew effect of the industry is becoming more and more significant. Therefore, on the road of short videos, Sohu itself may not have much illusion.
brief summary
Reviewing the road that Sohu has traveled in the past twenty years, it has tried several times in the Internet field, but in the end it has not left a work that can be beaten. Maybe the opponent's strength is too strong, or maybe the belated Sohu always misses the best time.
Sohu, whose "voice" is getting smaller and smaller on the Internet, where should it go? For people living in Beijing, Sohu's more presence may only come from those few houses in Zhongguancun.
Red Star News reporter Yu Yao Liu Mi
Edited by Yu Dongmei
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