About this Blog

The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, May 5, 2009

CYOU – Why does Sohu have to set CYOU free?

This is my first post on CYOU. My last post on Cyou’s game can be found here:

I wrote this article a while ago. For some reason, I never got the chance to put into my blog. It may be a little late. But here it is.

After Sohu decided to split up its game division and having an IPO for its gaming division, its stock had been under great pressure. All of the Wall Street analysts hated it.

Why are they so short-sighted?

Many years ago, Charles Zhang, the CEO of Sohu knew of a young and talent engineer named Robin Li. He wanted very much to hire Robin to take charge of Sohu’s search engine business. He did everything he could to convince the young Robin Li. But eventually, Robin wants to be his own boss and starts a company called Bidu.

If the Mr. Charles Zhang had offered Robin Li the same deal that he offered to Mr. Tao Wang, the CEO of Cyou, Robin would probably agree to work for Sohu. If that was the case, today Sohu would own 70% of Bidu. How much would Sohu worth now if that is the case?

From the following articles,

Charles Zhang talked about the decision to split off Sohu’s gaming division.

Even way back in 2002, Charles knew of the importance of MMORPG gaming in China. He license games and develops in-house games, but Sohu’s gaming business continues to flounder. Mr. Charles Zhang was so desperate, he went to Great Wall, puts on a ancient knight costume and hop on a horse. It made some nice PR on the news in China. But the game sucks and people still don’t want to play.

Each MMOPG game is heavily influenced by its chief game designer. Just like a director for a movie, the chief game designer determines the overall feel and the general direction of the game. Just like movie directors, those hot shot chief game designers have ego the size of Texas.

By 2004, Mr. Charles Zhang finally find a hot shot named Mr. Tao Wang. Mr. Wang had a great resume. He developed PC games as a software developer. He was the chief game designer for internet games. He then become vice President of a company who is responsible for game operation and distribution. Then he became the top guy in Sina responsible for gaming operation and development.

In 2004, Sina is number 1 and Sohu is number 2. To a guy like Mr. Tao Wang, to become the top game guy for Sohu would equate as a demotion.

Mr. Charles Zhang can see the future in the gaming business in China. But he just can’t find the right guy to do it. Finally he found Mr. Tao Wang. Eventually, they worked out the agreement. Mr. Tao Wang basically guaranteed the success of Sohu’s gaming business and Charles allows Mr. Wang to be his own boss through the IPO of Cyou.

In addition, with the IPO of Cyou, it also allows Cyou to attract more top level chief gaming designers. By providing more share based compensation, it allows these finicky game designers the monetary rewards they can’t refuse.

Today, more than 50% of the revenue for Sohu comes from its gaming division. Without Mr. Tao Wang, these revenue would not have been there. I for one am extremely happy of the decision that Charles had made.

1 comment:

Great Penny Stocks Under 2 Dollars said...

What about buy and holding your stocks not forever but it could be for some time. This method is not popular but sometimes it still works the best. Their are stocks like petsmart that traded at 2 dollars a share 11 years ago now the stocks almost fifty. Also pricesmart traded at about 7 dollars a share about seven or eight ago now its almost around sixty dollars. Their are many other examples Apple computer traded ar only 5 dollars a share in 1998 now its over 400. These stocks are being held quite a long time generally speaking I would say four to six years would be about right as far as buy and hold go. I have a website where I have been following stocks under five dollars. I generally hold my stocks anywhere form 2 to 6 years.


A test for now