Sohu’s TLBB 4Q2008 Prediction

My last article on TLBB can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/07/sohu-2q2008-prediction.html

In this article, I am going to calculate the percent of growth for the game XYQ from 3Q 2008 to 4Q2008. I will be doing it using the server count.

The acronyms first -

ACU = Average Concurrent Users

PCU = Peak Concurrent Users

APA = Active Paying Account

ARPU = Average (Quarterly) Revenue per (Active Paying) User

QoQ = Quarter over Quarter

YoY = Year over Year

Now, let's do the 4Q2008 estimate for XYQ.

The server counts for the XYQ can be found in the following table:

There are 3 months in a quarter. Each month has either 4 or 5 weeks. I only use 2 days in a week. I don't do server count every weekend. I only put in the number where I have a server count in both quarter. I also pick 3 days of holidays in this calculation.

I have some computer problem during the months of November and December. That causes me to miss the server count for most of these two months. Therefore, I am not able to get the amount of server counts as I would like.

From the above table, I have a 4Q2008 ACU increase of 5.37% quarter over quarter (QoQ).

To calculate the revenue estimate for the 4Q2008, I use the following table:

	1Q2008	2Q2008	3Q2008	4Q2008
ACU QoQ		4.47%	-0.77%	5.37%
Revenue	38.9	45.5	51	58.65
Revenue QoQ	77%	17%	12%	15%
APA	1.39	1.68	1.86	2.14
APA QoQ	26.4%	21%	10.7%	15%
ARPU	199	179	178	178

The second row is the ACU QoQ increase (or decrease). SOHU only provides PCU in its earning conference. The ACU are my estimates and therefore is not official. The third row is quarterly revenue in millions of dollars. The fourth row is the QoQ comparison for the quarterly revenue. The fifth row is the APA in millions of players. The sixth row is the QoQ comparison for the APA. The Final row is the ARPU in Chinese currency (RMB).

Note that every number in the last column (for the 4Q2008) are my estimates. From previous table, I derive an ACU QoQ estimate of 5.37%. I use that number to give me a rough estimate for the APA QoQ. I conservatively estimate the 4Q APA QoQ number to be 15%. For ARPU, I think it has reach a stable point. Therefore, I use the last quarter estimate for the current quarter, or, it stays as 178 RMB.

With APA grows by 15% while ARPU stays the same, the revenue will grow by 15%. Therefore, the 4Q2008 revenue is estimated to be 58.65 millions.

Now I need to give derive an estimate for SOHU's other game, Blade Online (BO). The following table is the revenue for BO:

	4Q2007	1Q2008	2Q2008	3Q2008	4Q2008
BO Revenue	2.0	2.1	2.4	3.6	4

If any thing can symbolize how can the number 1 gaming vertical, 17173.com (owned by Sohu) and number 2 internet portal can help drive traffic to a game, the recent rejuvenation of BO speaks volumes.

Even though TLBB is not a revolutionary game nor is it very pretty, it is a fun game to play. But a game like BO is a game that really has no redeeming features to it. On top of that, it is a licensed game.

But in the end, a game like BO will not be a major game. I think the recent surge will level off. I think the level off will occur this quarter. Therefore, I predict the revenue of 4 millions dollars.

Adds up the revenue estimates for the two games, we get a quarterly gaming revenue of 62.65 millions for this quarter. It is significantly more than the guidance of 57 to 59 millions SOHU given in the 3Q earning conference.

But I don't have much visibility on how well (or badly) SOHU's other branches (Advertising and wireless) will do this quarter.