Continued Revenue Growth Fuels 2Q Records in Gross Margin Improvements; Management Promotions Announced

BEIJING, CHINA, July 24, 2001 - SOHU.COM (Nasdaq: SOHU), China's leading online media, communications and commerce company, today reported results for the second quarter ended June 30, 2001.

Business Highlights
- Record quarterly revenues of US$2.9 million, climbing 17% sequentially and 116%
year-on- year
- Non-advertising revenue grows from 15% to 23% of total revenues in Q2, well ahead of Company's year-end Guidance
- Proforma gross margin almost doubles to 22%, exceeding Guidance
- Outstanding $944,000 reduction in proforma net loss to $3.3 million, a 22% improvement over Q1, driven by further cost containment & enhanced monetization
- All-time quarterly high of 6.8 million new registered users; 25.4 million in total
- Entrenched industry leadership; No.1 China Property (iamasia and NetValue) and No.1 China Web Domain (iamasia)
- Further monetization of large & expanding User Base, Brand and Technology assets
- Quarterly burn rate down by 31% to $3.1 mln from $4.5 mln in Q1
- Top-line and bottom-line growth continues to beat market consensus and Company Guidance

In addition, SOHU expects third quarter revenues to increase by 17%, gross margins to reach not less than 23%, and the proforma net loss to decline by a further 6%.

"Yet again, SOHU has proven its ability to deliver on expectations by posting record results for the second quarter of 2001. SOHU continues to grow and monetize its assets through the implementation of a diversified and sustainable revenue model, coupled with intelligent cost controls," said Charles Zhang, CEO and president of SOHU.COM.

SOHU reported record total revenues of US$2.9 million for its second fiscal quarter ended June 30, 2001. Gross margins exceeded Company Guidance by almost doubling from 12% in the first quarter 2001 to 22% in the second quarter. Pro forma net loss was US$3.3 million or US$0.09 per share for the second quarter 2001, a 22% improvement from the previous quarter. *

* Pro forma net loss excludes non-cash charges for amortization of intangibles, accretion on mandatorily redeemable convertible preferred stock, and stock-based compensation. Taking into account these non-cash charges, net loss attributable to common stockholders for the second quarter of 2001 was $7.6 million or $0.21 loss per share. This compares to the net loss attributable to common stockholders of $6.5 million or $0.69 per share for the second quarter of 2000 and the net loss attributable to common stockholders of $8.5 million or $0.24 per share for the first quarter of 2001.

Business Results
For the second quarter of 2001, advertising revenue grew 7% to US$2.2 million while its proforma gross margins enjoyed a 100% improvement to reach 22%, in part due to Management's focus on offering innovative products and services, as well as Management's commitment to maintaining a sustainable customer mix. Advertising revenue from the more stable domestic companies grew to 52% of total advertising revenues from 49% in the previous quarter, multinationals represented 35%, while sales to dotcoms were stable at 13%. SOHU's advertisers included Chinese blue chips TCL, Founder, Sinopec, Kelon, Legend, and ChinaNetcom, as well as Compaq,and Intel. Multinational consumer brands such as Coca-Cola and P&G have started using SOHU's innovative marketing technology to promote their products online in the Chinese market.

Non-advertising revenue (including e-technology, e-subscriptions and e-commerce) rose 78% to US$651,000 or 23% of total revenues, already in excess of SOHU's year-end target for diversified revenues to reach 20% of total revenues. Gross margins for non-advertising revenue expanded to 23% from 19% in the previous quarter. Cross-selling of products from SOHU's principal business lines helped boost overall revenues and margins, while entrenching clients with full-service solutions. Clients that took advantage of SOHU's cross-selling initiatives included Tricon's China (KFC, Pizzahut) operations, Hewlett Packard, and Taiji Qumei, a leading pharmaceutical company.

Pro forma operating expenses decreased from US$5.3 million in first quarter 2001 to US$4.5 million in second quarter 2001. This 16% reduction reflects SOHU's continued re-engineering of its cost structure, confirming its commitment to scalability and improved operating efficiencies. SOHU's valuable brand equity further permitted it to reduce sales & marketing expenses by 14%, while growing revenues by 17% and registered users by 36%. SOHU's ability to monetize its brand is yet another key advantage over its competitors.

SOHU continued its drive to profitability by reducing its pro forma net loss by US$944,000 from the first quarter of 2001. In addition, SOHU's monthly burn rate in the three months ended June 30, 2001 dropped 31% from the previous quarter to US$1.0 million, a substantial improvement on SOHU's own target of US$1.4 million for Q2 set in April this year.

"SOHU continues to meet important financial and operational milestones, rendering its path to profitability more visible than ever. SOHU has consistently grown revenues while dramatically improving margins due to our sound strategy of diversified and sustainable business lines," said Derek Palaschuk, Chief Financial Officer.

As of June 30, 2001 SOHU's total net cash balance was US$54 million.

During the second quarter of 2001, SOHU continued to widen its competitive lead over other China portals. SOHU, through its group of websites, has been ranked the No. 1 China Web Property for each of the prior six months by iamasia, the Hong-Kong based Internet measurement company. In iamasia's latest monthly report, SOHU's reach among general Internet users was 53%. In the same report, iamasia also ranked SOHU.COM (on a stand-alone basis) the No.1 China Domain, signifying that more users go to the SOHU website than any other website in China. SOHU's reach among users from the highest income bracket soared to 72%. In a similar survey in May, NetValue confirmed SOHU's Web Property leadership. These results continue to evidence the value of SOHU's brand.

During the second quarter of 2001, 6.8 million new registered users joined SOHU, driving the total up to 25.4 million, a 37% increase. Traffic rose 17% to 127 million average daily page views for the month of June, compared to 107 million averaged in March 2001.

Business Outlook
SOHU is confident that it can continue on its present path to reach profitability

About SOHU.com
SOHU.com is the leading Internet portal in Mainland China with current daily page views exceeding 12 million. It provides navigation/search, news, sports, business and finance, real estate channel, entertainment, chat, email and e-commerce activities for a solid and wide base of visitors. Dr. Charles Zhang founded SOHU.com in 1997. Its investors include Intel, Dow Jones, IDG, the Morningside China Group, PCCW, Legend and Hikari. Its content partners include CNET, DOW Jones and dozens of local media organizations in China.

For further information:
Dahlia Wei
SOHU Investor Relations and Communications
Tel: +86 10 6272 6598
E-mail: ir@sohu-inc.com
http://www.sohu.com/about/English/