Sohu.com Inc. (SOHU:US), owner of China’s third-largest search engine, posted a surprise quarterly profit amid surging revenue from advertising for brands.
Fourth-quarter net income was $2 million, the Beijing-based company said in a statement yesterday. That compares with the $14.3 million net loss projected by the average of five analyst estimates (SOHU:US) compiled by Bloomberg. Revenue rose 29 percent to $385 million, compared with analyst expectations for $387.7 million.
Sohu, which saw brand advertising revenue jump 50 percent in the quarter, is targeting online video and mobile services to add new sales and become less dependent on its search and Web portals. The company faces competition with Baidu (BIDU:US) and Tencent Holdings Ltd. (700) in China’s online-video market, which Internet consultant IResearch estimates may reach 17.8 billion yuan ($2.9 billion) this year and 36.6 billion yuan in 2017.
“Growth on brand advertising accelerated a bit, search business was fairly strong,” said Stephen Yang, a Hong Kong-based analyst at Sun Hung Kai Financial Ltd. “The results this quarter were OK.”
Online gaming revenue for New York-listed Sohu rose 9 percent to $172 million and total advertising income, which also includes sales from search services, surged 55 percent to $188 million.
Sohu forecasts first-quarter revenue to reach $355 million to $367 million. That missed the $378.3 million average of four analysts’ estimates compiled by Bloomberg. The company said it expects a first-quarter non-GAAP net loss in the range of $42 million to $46 million.
The company’s stock was little changed to close at $71.55 in Nasdaq trading yesterday.
Sohu’s online-video business ranked third in December based on the time viewers spent on its site, trailing Youku Tudou Inc. (YOKU:US) and Baidu. Viewers spent 426.5 million hours on Sohu, compared with 619.7 million hours for top-ranked Youku, according to data compiled by Bloomberg.
Tencent, Asia’s largest Internet company by market value, bought a 36.5 percent stake in Sohu’s Sogou search unit in September to expand its Web offerings.
Sogou accounted for 4.3 percent of search engine queries in the third quarter ending September, according to data compiled by Bloomberg. Baidu accounted for about 78 percent and Qihoo 360 Technology Co. about 13 percent.
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