Free services pay off for China portal

Sohu, one of China's largest web portals and online games firms, has reported a 46 per cent increase in revenues in the third quarter.

Free services are beginning to attract customers, executives at the company said, and profits for the quarter hit $11.7m on revenues of $51.5m.

"You invest in the technology, bandwidth, servers and all those software engineers to develop products that are free, like blogs," said Sohu chairman and chief executive Charles Zhang.

"Actually, indirectly it is fundamental to making our platform more attractive to advertisers. In the long term, you will see the effect of our technological initiatives in brand advertising [revenues]."

Sohu's brand advertising revenues were up 42 per cent year-on-year, reaching $29.8m, the company announced.

"We have not developed any methods to monetise standalone blogs. It is all a free product, but because all these products are interconnected and you can move around so seamlessly, the stickiness improves and the click-throughs are getting better," said Zhang.

However, boosting ad sales through free services is a slow process. While ad revenues grew significantly, Sohu's online games revenue showed explosive growth of 473 per cent year-on-year to thanks to the release of a new massively multiplayer online role playing game this year.

"For online games, it is an immediate reflection on revenue and earnings," Zhang said.

"But for brand advertising, it is a slow but fundamental and irreversible path towards the largest internet portal in China and the largest, most attractive advertising platform in China."