Chinese portal Sohu.com said yesterday that second-quarter earnings fell 20 percent from a year ago despite a bigger-than-expected growth in revenue.
The Website increased spending on new product development, marketing and company branding, which explains the result.
Net income was US$5.7 million, or 15 US cents per fully diluted share. Total revenue was US$39 million, up 14 percent year on year, exceeding previous company forecasts of an upper range of US$37.5 million for the quarter, the Beijing-based company said.
The strong growth in sales was mainly driven by a record spending by advertisers rushing to be affiliated with the 2008 Beijing Olympics' only official Web partner. Brand advertising grew 38 percent year on year to US$26.6 million, accounting for 94 percent of total ad revenue in the quarter.
"Efforts to reshuffle our businesses from a year ago has brought bigger traffic, while the our dominant advantages surrounding the Beijing event next year are also paying off," said Charles Zhang, chairman and chief executive officer of Sohu, in a briefing after the earnings release.
According to Zhang, 60 percent of the Olympics' 21 partners and sponsors, which include UPS, Volkswagen, Adidas and itself, have advertised on Sohu in the quarter.
Sohu, which operates the official Website for the Beijing Olympics, attracted users with content such as a blog by Chinese hurdler Liu Xiang. The portal has also added sports photos and videos from the United States National Basketball Association and Britain's Chelsea Football Club.
Sohu has been in war against three of the country's top Websites that formed an Olympic reporting alliance last month, as its opponents seek to enhance their bargaining power among other measures to jointly exploit the marketing opportunities created by the giant event.
Sohu, China's third-largest portal, is also exploring multi-player online games while cutting down its wireless business, which accounts for 17 percent of revenue, from nearly 30 percent last year.