Nasdaq has actually taken the shine off Internet portal sohu, says its chief. But given another chance, Zhang Chaoyang would say no to Nasdaq

The past year has been unusually dull for Zhang Chaoyang, CEO of China's major portal sohu.com (Nasdaq: SOHU). The glamour boy, once in the spotlight, seems to have been largely forgotten by the public as has his company.

In the annual market survey released by the Internet Society of China (ICS) on January 11, sohu.com fell off the ranking as one of China's top three portals, for the fist time. While Zhang claimed the ranking of portals was meaningless during an interview on January 15, he admitted that he sometimes had to yield to pressure from Wall Street-sohu.com was listed on Nasdaq in July 2000-by putting netizens' demands on the backburner, thereby creating for companies like baidu (Nasdaq: BIDU) a historic opportunity to develop itself.

Same market structure

According to the ICS survey, sina.com (Nasdaq: SINA), 163.com (Nasdaq: NTES) and tencent.com (0700.HK) were the most used Internet portals in China in 2006.

"I haven't read that report," said Zhang Chaoyang, who seemed unaffected by his company's position being taken over by newcomer tencent.com, developer of China's leading instant messaging service platform "QQ." Despite sohu's low-key style, Zhang takes every opportunity to speak to media, so that his company will not be totally forgotten.

Asked to comment on the ICS report, Zhang said a website's ranking and its influence in China were two different things. He said data provided by a third party, including on website traffic, lacked credibility, rendering the ranking on a certain index meaningless.

"At present, Chinese netizens get their information from sina and sohu, chat on QQ and do their searches with baidu. The market structure has not changed one bit," said Zhang.

He said his company's profits were still mainly generated by advertising revenue although sohu has been vigorously developing and promoting its search engine and blog products.

Regrettable listing

As one of the first Chinese Internet elites to go public on Nasdaq amid the frenzy of going global, Zhang said given another chance, he would say no to Nasdaq.

"The overseas listing frenzy was regrettable. Sohu got so busy with charts, valuation, financial statements and wireless value added services that we forgot about our customers," he said. He added that while China's major websites were tied down to preparing for overseas listing and dealing with Wall Street requirements, baidu got a strategic opportunity to develop into China's most popular search engine.

Currently, baidu enjoys a clear edge with more than half of the domestic search engine market share, even as it prepares to go global. However, Zhang, who has high expectations of sohu's own search engine, believes China's search engine market that is still in its fledging stage will see more competition before a final winner emerges. With portal giants netease and tencent both launching their own search engines, this market segment is already seeing more competition.

"We still have to wait and see whether baidu is too powerful to be edged out," said Zhang. He claimed that baidu's recent announcement to jump into the Japanese market, highly applauded by investors from Wall Street, might be a good thing for baidu's adversaries including sohu. His reason is that baidu-listed at Nasdaq in August 2005-will become increasingly enslaved by international investment, and suffer the same failures as sohu.

(Source: Dongfang Daily)