A Sohu employee walks past the reception area of the company's office in Shanghai on July 25.

    BEIJING, July 29 -- The top Chinese Internet portal Sohu.com Inc reported a continued growth with a boost from its advertising business and the FIFA World Cup, but the results fell below analysts' estimates, leading to a sharp decline of its stock prices on the NASDAQ in New York.

    The Beijing-based Chinese Web portal said on Friday that its revenues reached US$34.1 million in the second quarter, 36 per cent higher than the same period of last year and 12 per cent higher than the first quarter.

    "The year 2006 has so far proven to be an excellent year for us," said Charles Zhang, chairman and CEO of Sohu, at a conference call on Friday.

    The growth was mainly driven by Sohu's advertising business, which grew by 35 per cent year-on-year to US$22.8 million in the second quarter.

    The Chinese firm, the official Internet partner of 2008 Beijing Olympic Games, also benefited from the FIFA World Cup in Germany during June and July, because Sohu is one of the Cup's online broadcasters in China.

    Non-advertising business, mostly wireless value-added services, rose by 39 per cent year-on-year to US$11.2 million.

    However, Sohu's shares on the NASDAQ fell by almost 3 per cent before the announcement of the financial results because of worries of failure to meet market expectations.

    The results did lead to worries, which dragged the stock price down by another 11 per cent in after-hours trading to US$19.50.

    Lu Bowang, a senior consultant with China Internet Network Information Centre, said the results were not encouraging enough.

    "The first quarter is usually a poor season for online advertising and the second is usually better, but even with the World Cup, the performance of Sohu was far from meeting expectations," Lu said.

    While Sohu was previously expected to get 50 million yuan (US$6.25 million) from World Cup-related advertising, its brand advertising revenues, which do not include paid searches, only grew by US$2.6 million in the second quarter.

    Sohu's moderate guidance on the third quarter added more concerns to the market.

    The company said its revenues in this quarter are expected to be US$32.5 million to US$34.5 million, with a fall of 4.7 per cent or a growth of 1 per cent over the second quarter.

    Brand advertising revenues are forecast to be US$20 million to US$20.5 million.

    "A combination of the growth in the second quarter with the guidance for this quarter may be suggesting that Sohu's advertising business almost gets no growth, except for the boost of the World Cup," said Jim Sun, an analyst with Evolution Securities.

    However, Sohu's Zhang said his company would continue to build strength in its Internet content and online advertising business.

    On Friday, Sohu signed an agreement with France-based sports broadcaster and website operator Eurosport Group to provide news either in text or video formats from the latter. The deal will significantly enrich Sohu's sports contents, as the Chinese firm still heavily relies on news agencies for international sports news.

    Eurosport will also help Sohu provide more video content as broadband becomes popular in China.

    (Source: China Daily)