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Charles Zhang a Confident Man of Action

As the founder, CEO and president of Sohu.com, Charles Zhang is working to turn his company into China's largest search engine.


Under Zhang's direction, Sohu grew to become the most popular Website in China's fiercely competitive Internet market. This lasted until July, 1999, when the China Internet Network Information Center (CNNIC) reported that Sohu had fallen to number two. Six months later, Sohu dropped another notch, to number three.


According to Zhang's criteria of "concentrated" page views and top operational efficiency, however, Sohu is still number one. Sohu.com averaged six to seven million page views a day in 1998-1999, 90 percent of which came from Mainland China. To Zhang, "concentrated" page views are the most significant measure of the commercial value of a site and are worth more than page views spread out over the globe.


A Jan. 4, 1999 article in China Computerworld described Zhang as "a confident man of action" who compares himself to Silicon Valley entrepreneurs. From early on, it has been his dream to develop a Web site to provide China-related business information to American firms interested in doing business with China.


Zhang studied at the Massachusetts Institute of Technology, where he befriended several scholars and got them to ante up the seed money for his new company, Internet Technologies China (ITC). As the company grew, Zhang was able to attract investment from Intel and Dow Jones as well.


ITC originally focused on helping domestic companies design homepages. Its website originally featured nothing but a series of links to local Web sites.


Not surprisingly, the site didn't do very well. Then, in May 1997, Zhang visited AOL and met with Jerry Yang, the founder of Yahoo!. It was this meeting that inspired him to reinvent the ITC website.


In October of that year Zhang beat Yahoo! to the punch and debuted the first Chinese language search engine, Sohu.com. The concept took off and by April 1999 CNNIC reported that Sohu was the most popular search engine in China. The success of the site was due in part to the free search service, content channels, free email, multimedia services and Net surveys.


The company reported US$1 million in revenues in 1998, 70 percent of which came from online advertising from multinationals such as Microsoft, Intel, Compaq, Nokia, Audi and HP, among the first to sign on. Zhang claimed that in the same year, Sohu garnered 60 percent of all Web ad contracts in China.


In January 2000, Sohu formed a partnership with 8848.com in order to utilize the latter's e-commerce capabilities. It was the first alliance of its kind in China.


By the end of 1999, Sohu was ranked the third most popular website in China. True, it had slipped from its top spot a year and a half earlier, but it still received a huge amount of traffic.


Eager to capitalize on its popularity (and hoping to cash in before it slipped further in the rankings) Sohu applied to list on the Nasdaq in February, 2000. Its goal was to raise over US$86 million by issuing common stock, to upgrade Sohu's networking and computer infrastructure, expand sales, boost marketing efforts, increase personnel and pursue acquisitions and investments.


Unfortunately, Beijing issued regulations in early 2000 requiring Chinese businesses to get government approval before listing abroad. Sohu applied for such approval, but has so far failed to get it. This may be due to Sohu's heavy foreign investment: China currently forbids more than 49 percent foreign investment in its telecom/Internet sector. Sohu's Nasdaq listing is still pending.


Not one to twiddle his thumbs, Zhang has been busy expanding Sohu's business scope and developing new markets. In March, 2000, Sohu announced it would be teaming up with Nokia to introduce wireless Internet services to China's growing numbers of mobile phone users. In a March 3 China Economic Times article, Zhang said he believed the involvement of cellular phone makers in Chinese Internet services could double or even triple the size of China's Internet market. (Source: chinaonline.com)


A Face-to-face Talk With Charles Zhang


On July 13, 2003, Mr. Charles Zhang (Chaoyang), CEO of sohu.com, was invited to CEIBS's (
China Europe International Business School) forum in Beijing to deliver a speech on the "Web Economy's Recovery and Forecast." Mr. Zhang is regarded as an example of China's neo-economy and valued as the "Leader of Tomorrow" by the World Economy Forum.


With the ups and downs of Sohu.com and its high frequency of media exposure and outstanding Nasdaq performance - it has become a subject of appreciation for the Chinese web-population as a beautiful high tech myth. Zhang's presence at the forum undoubtedly provided an opportunity to unveil the myth.


Kevin Li (Shanyou), vice president of Sohu.com and an EMBA participant with the 2002 Beijing class 2, opened the forum with an introduction to Sohu's fast growing performance. It has experienced stock prices hitting highs of US$40, market capitalization reaching US$1.43 billion (which is half of that of Legend Group) and profit of US$7.2 million, which is the same as Digital China.


Zhang did not highlight Sohu's outstanding performance in his speech. Instead, he explained the features of high risk and high return of high-tech companies using the zigzagging and painstaking start-up of Sohu as a study case. Sohu's development is the epitome of Internet business in China.


Capital operation and business modes are two indispensable engines for Sohu's growth. The four financing efforts before its listing and its Nasdaq IPO in the United States on July 12, 2000, have both financially secured the overall process of Sohu's growth, namely the start-up, the buyout of Chinaren.com, profiting in the third quarter of 2002, and the great success in 2003. Yet, according to Zhang, financial support on its own does not guarantee success. Key to the competition in China's web portals industry is a unique business mode. Sohu has found its own path to success through relentless endeavors, that is, its charging system has changed from an enclosed to an open system that has more recently become spiral.


In his speech, Zhang mentioned several times about the advent of a new season for the Internet industry. Indeed, Sohu itself is the pathfinder and barometer of the neo-economy. The 2C mode, Corporate Business and Consumer Business, have laid the Sohu path with gold. In particular, the mobile phone message business is the brightest star for Sohu and its prime profit earners. Zhang summarized that China's internet business depends upon messages and that the American Internet industry, in contrast, depends upon searching, such as services provided by Google.


Zhang responded to the audience's questions with openness and a good sense of humor. Mr. Ma Yusheng, CEIBS' chief representative, wrapped up the forum with an enlightening talk and gave his appreciation of thanks. (Source: CEIBS website)


About Sohu

Sohu.com (NASDAQ: SOHU) is China's premier online brand and indispensable to the daily life of millions of Chinese who use the portal for their e-mail, SMS messaging, news, search, browsing and shopping. As China's most comprehensive web site, Sohu offers its users the broadest possible choices regarding information, commerce and community, and, equally important, how they access these products and services. Through its pioneering roll-out of wireless products since 2000, Sohu has become a frontrunner in making the Internet ubiquitously available, whether in the office, at home or on the road.


The web site's massive use base and strong brand presence in China make Sohu.com, a household name throughout the country, the platform of choice for corporate clients to promote their business.


The Internet in China is an established medium particularly for the urban youth, who are spending more time online at the expense of watching television, making it the most effective marketing vehicle for companies to target this highly attractive segment in the Chinese market.


The Company is quickly realizing its goal of building a sustainable and diversified business model on two strong pillars: a steadfast home-market corporate advertising base and a massive, paying user population.


With over 50 million registered users at the end of September 2002, Sohu has the largest online user base in China. It is a household name among the 300 million people living in urban centers. For the second year in a row the Sinomonitor International survey - the largest Internet Survey in the country- ranked Sohu.com as the most visited portal in China.


Sohu, with its exclusive focus on the China market, is operating in a high-growth industry under compelling market conditions. The Chinese Ministry of Information Industry (MII) predicts that the Internet sector will grow to 200 million users by 2005.China's economic growth is expected to remain robust in coming years as the country is opening up further under the terms of WTO membership and preparations intensify for the 2008 Beijing Olympics and the 2010 Shanghai World Expo. (Source: sohu.com)


Charles Zhang's profile


Birth date: Oct, 1964
Birth place:  Xi'an, N.W. China's Shaanxi Province
Education: Ph.D in experimental physics, M.I.T., U.S.; 
               BS from Qinghua University, Beijing
Important facts:        
1998  launched Sohu.com;
        was named one of TIME Digital Cyber Elite Top 50 by Time Magazine
1996  founded ITC
1995  served as chief representative of Internet Securities
1993  served as MIT's liaison officer for China

(Xinhua News Agency September 5, 2003)

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