Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu’s First Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management’s prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today’s conference call, Tip Fleming from Christensen. Please go ahead, sir.

Thank you, Operator. Thank you all for joining us today to discuss Sohu.com’s first quarter 2012 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; Co-President and Chief Operating Officer, Belinda Wang; Co-President and Chief Financial Officer, Carol Yu. Also with us from Changyou are Chief Executive Offiecr, Tao Wang; President and Chief Operating Officer, Dewen Chen; and Chief Financial Officer, Alex Ho; as well we also have CEO of Sogou, Xiaochuan Wang; Vice President of Sohu and CEO of Sohu Video, Ye Deng. Before management begins their prepared remarks, I would like to remind you of the company’s Safe Harbor statement in connection with today’s conference call. Except for the historical information contained herein, the matters discussed in this conference call are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore, you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about the potential risks and uncertainties, please refer to the company’s filings with the Securities and Exchange Commission, including its registration statement and most recent annual report on Form 10-K. Now, let me turn the call over to Dr. Charles Zhang, the Chairman and CEO. Charles, please proceed.

Thank you and thanks everyone for joining our call. In the first quarter, our financial results were mixed. Our brand advertising business got off to a slow start mainly due to the early Chinese New Year holiday and the softening macroeconomic conditions in China. Some of our advertising customers were cautious with its spending due to concerns about the slow down in China’s economic growth. As a result, brand advertising revenue grew to slower than that in a normal year. The good news is that search revenues and our overall Sogou business continued to deliver solid growth. And we are pleased with the better than expected results of Changyou, our online game subsidiary. Changyou’s flagship games, Tian Long Ba Bu and DDTank, continue to rank among the top games in China in the MMO and Web-based game categories, respectively. Shen Qu, a new Web-based game, was well-received by gamers upon launch, adding to the top-line results. For the remainder of 2012, Changyou has four new games due for launch that feature different genres and graphic styles, and are expected to draw new communities of users while expanding our user base. Now, I would like to share some first quarter financial highlights with you. Total revenue were US$227 million, up 30% year-over-year and are down 8% quarter-over-quarter. Net brand advertising revenue were US$61 million, up 7% year-over-year and in line with our prior guidance. Sogou revenues were US$23 million, exceeding our guidance of US$21 million. This was 184% year-over-year and down 1% quarter-over-quarter. Online games revenue reached a quarterly record of US$127 million, up 34% year-over-year and 3% quarter-over-quarter. Non-GAAP diluted EPS or US$0.61, excluding the high-end of our guidance by US$0.06, (inaudible). Despite unfavorable operating environment for brand advertising revenues were few committed for our strategy that [stands] around our…

Thank you, Charles. We had a challenging first quarter in our brand advertising business. The economic slowdown in China in early year of 2012 clearly had an impact on advertiser sentiment. Because of lackluster auto sales and the slowing real estate market, many automakers and real estate developers decided to defer their marketing plans. While the overall market was soft, e-commerce and the fast-moving consumer goods sectors performed relatively well, each posting over 30% year-on-year revenue growth in the first quarter, Brand ad revenues for the first quarter increased by 7% year-over-year. For easier comparison with our peers, our gross brand advertising revenue before business tax was US$67 million and the net brand advertising revenue was US$61 million. As we progress towards the end of the April, it does not appear that advertiser’s activity are rebounding as strongly as we had hoped. As mentioned by Charles, we decided to setup a dedicated video sales team. With this we expect to undergo a transition period. Please turn to current information, for the second quarter we expect, first for Sohu Group including 17173 brand ad revenues before business tax to be between US$74 million and US$78 million. Second, net brand ad revenues to be between US$68 million and US$71 million, this implies a substantial increase of 12% to 16%. Now I’ll turn the call over to our Co-president and CFO, Carol Yu, who will walk you through the quarter's financials. Carol?

Thank you, Belinda. Hello everyone. I will now take you through our financials for the first quarter. One, revenues, total revenues were US$227 million, up 30% year-over-year and down 8% quarter-over-quarter. Brand advertising revenues were US$61 million, up 7% year-over-year, and down 22% quarter-over-quarter. During the first quarter, Changyou integrated the 17173 Business and aims to make 17173 the platform for new services and products targeted for gamers over this coming year. Brand advertising revenues from the 17173 Business, which decreased 34% quarter-over-quarter and increased 4% year-over-year to US$8.2million, total revenues were US$23 million, up 184% year-over-year, and down 1% quarter-over-quarter. Of this, search-related revenues were US$22 million, up 171% year-over-year and down 6% quarter-over-quarter. The number of search customers and average spending customer increased by 69% and 37% year-over-year. Online games revenue reached a quarterly record of US$127 million, up 34% year-over-year and 3% quarter-over-quarter. Wireless revenues were US$13 million, a year-over-year increase of 14% and quarter-over-quarter decrease of 8%. Now, let me provide some more details about our financials. From now on, most of the figures discussed will be non-GAAP. As a reminder, you will find a reconciliation of these non-GAAP measures in our official earning release. Two, gross margins, non-GAAP gross margin for the first quarter was 65% compared to 71% in the previous quarter, and 73% for the same period last year. Three, operating expenses, non-GAAP operating expenses for the first quarter of 2012 totaled US$92 million, a decrease of 2% from the previous quarter, and an increase of 55% from the same period last year. The year-over-year increase in non-GAAP operating expenses was primarily due to an increase in number of employees and higher expenses associated with marketing and promotion activities. Four, operating margins, non-GAAP operating margin was 24%, compared with 33% in the previous…

Thank you. (Operator Instructions) And your first question comes from the line of Dick Wei of JP Morgan. Dick Wei – JP Morgan: Hello, and thank you for taking my question. My question is about a video, if management can discuss the video advertising revenue for the quarter and so, what is the sales trend going to be like, keeping the sales team transition [in light of] video revenue will be like under a couple of quarters maybe also for this year as well and if...

Okay. (Inaudible) Dick Wei – JP Morgan: Okay, about the cost?

Cannot hear you.

Dick, we cannot hear you the line is very bad, can you choose speak slower and shorter? Dick Wei – JPMorgan: Okay, yeah. Hope, this is better. So if you can discuss your video ad revenue for the quarter.

Slowly. Dick Wei – JPMorgan: And then also how does that look like for next couple of quarters, given the sales team transition, and then also the video cost amortization for the next couple of quarters that will be great? Thank you.

I think we made a important decision tribute our dedicated sales team winning the Sohu video organization before the video sales are winning the portal sales team and to in order to have the total marketing package for advertisers, but then there is the problem that there is no dedicated sales team to specially address the needs of the video advertisers. So we are in a transition period that we believe that the – with a dedicated sales team, my focus been also closer to the content and product production. I think our video advertising sales will significantly improve in the future. And also because some of the exclusive titles, content titles we bought, our we bought the peak of the price last year, the most incentive (inaudible) and so we’ll have tentative pressure of our common costs, but as I said that there is already the price easing and because of the other video size website they all be coming rational in bidding so, if going to improve this year, and yeah…

Dick, hello. Dick Wei – JPMorgan: Yeah, hi, can you hear me. Hello, Carol.

Yes. I think you’re asking about amortization right? Dick Wei – JPMorgan: That’s correct.

Okay. I’ll just give you a complete picture of TV content purchase situation for the year 2012. For content that’s going to be broadcasted on Sohu Video, the contract amount in total is US$48 million. This is included those repurchased last year, and those who are going to purchase for the rest of the year. So the total budget that we’re working at is US$48 million. In terms of cash flow, we already paid US$70 million as of last year and then we expect to pay the balance of US$31 million this year, of which US$5 million has been paid during Q1. In terms of amortization for content service broadcast of this year, the amortization expense is US$28 million and for those had purchased or broadcast of last year, the carry forward impact is about US$19 million, so total is US$47 million. Dick Wei – JPMorgan: All right, great. And let me just go back to the revenue question. What is the target for the year for video advertising, given the changes?

Yeah, actually in the first quarter, we achieved about over 90% total sales growth rate on our video brand advertising revenue, compared to the same period of last year, but as we mentioned earlier by Charles we have decided to set up a dedicated team in Sohu on a video organization. So we will undergo a transition period I know we will see a slower growth rate in the – yeah, the late three quarters this year. Yeah, so it’s still early to predict the total picture of the whole year 2012.

I think Q2 and Q3 – Q4 actually [was an increment.]

Okay, your next question comes from the line of Alicia Yap of Barclays. Alicia Yap – Barclays Capital: Good evening, thanks for taking my questions. My question is also related to video. Just wanted to understand a little bit more on alliance with Qiyi and Tencent on the content purchase. So, can you elaborate how the cost will be split, would that be equally and will the alliance be focusing on by order future content or will you still go out on your own to be on some content independently. Thank you.

So in principle, the alliances what we do, the comment called for some hot TV episode reductions by two-third basically a one-third we will pay one-third of the price if we went to buy alone, so day-to-day pricing alliances as well as leveraged.

Yeah, Alicia I think the answer is yes. We wish to split the cost equally and the alliance will cover the big purchases that hit big drama. But I do believe each of us – the three of us will also go out and buy smaller content from time-to-time as well. So it would not be covering 100% of everybody’s content, I don’t think that’s at all feasible. Alicia Yap – Barclays Capital: I see, can I sort of ask, for how long this alliance will last?

There is unspecified period, we are doing this as long as we want to. Alicia Yap – Barclays Capital: Okay, great, thank you. I will get back to the queue. Thanks.

[Philip] your line is open.

Hello, can you hear me.

Yes.

All right. Hello, hi, evening, thanks for taking my question. I’ve a question about your advertising outlook. Could you please share with us a bit more about the recent trend for auto and properties sector based on your discussion with the advertisers and also – and when do you expect the advertising spending for them to come back? Thank you.

As we mentioned in our script, we went through a slow quarter in the first quarter of 2012 and the second quarter we have give our guidance. That according to the contract framework we have signed that with our major advertisers, we can – actually we’ll be more optimistic about the second half of the 2012.

Are you seeing some appetite that’s delaying the spending in Olympic period?

Olympic? Say that again.

I’m just wondering is there any marketing campaign postponed for the summer Olympics period that they allow you to see a more optimistic view and things like that?

We can see some advertisers postpone their marketing plans especially in the automobile and the real estate sectors, because the auto – the new car sales slow down this year and the regulations on real estate industry really impact some real estate developers marketing plan. But we have them to see some sign about the marketing plans around Olympic games, so still too early to predict whatever happened about this major advertisers to consider about the Olympic game marketing plans.

Okay, thank you.

Your next question comes from the line of Eddie Leung of Merrill Lynch. Eddie Leung – Bank of America/Merrill Lynch: Hi, good evening. Thank you for attending my question. I have a question on your search basis, could you help us to understand more about the advertisers on your search platform? What are the top industries and are we seeing better momentum from the so called (inaudible) from the larger advertisers? Any color would be useful. Thank you. [Foreign Language]

So the top five categories are e-commerce, IT Service and the other potential level… [Foreign Language]

Okay, text and services (inaudible). [Foreign Language]

Commercial businesses

Commercial services like insurance or education, yeah, and… [Foreign Language]

So with a 100% growth from the year so, it’s definitely a growth aspect during that time. [Multiple Speakers] Eddie Leung – Bank of America/Merrill Lynch: Are we going to see fast growth at the moment from the Sohu SMEs or from the large advertisers? [Foreign Language]

Smallest, SMEs.

Yeah, I mean SMEs. Eddie Leung – Bank of America/Merrill Lynch: Thank you.

And are you ready for the next question? Mr. Fleming?

Yes, please.

Thank you. Your next question comes from the line of Jialong Shi of CLSA. Jialong Shi – CLSA: Thank you. My first question is a follow-up on to the previous question. May be could you repeat, because I didn’t get it, could you repeat your top five advertising categories and their growth rate?

You mean for search right? Jialong Shi – CLSA: No, no, brand advertising.

Oh, brand.

The top advertising industry structures include transportation, online game, real estate, e-commerce and FMCG. Jialong Shi – CLSA: And also I have a follow-up question on 17173. I recall (inaudible) just mentioned over the time of conference call, 17173 it seems to be going through a changing strategy from sales oriented to a product oriented. So, just want to – does that mean 17173 will gradually evolve into a game operation platform from current marketing platform or in other words, are you going to take few advertisements from your competitors going forward on 17173? [Foreign Language]

For the 17173 Business it is currently, it does have a game operation platform where it jointly operates web-based games, but it’s under a separate domain name, its called 3711.com. [Foreign Language]

But because 103 already has this domain under the radiance of business, we are not using – we are not focusing out from a strategic point of view specifically, on despite of this business?

[Foreign Language]

In the next month, we will rethink our strategy on the game joined operation business and we could share more details next quarter.

[Foreign Language]

Because 17173’s main audience is gamers. The most important works that we have to do right now is to discover and understand the needs of our audience.

[Foreign Language]

For the management’s in terms of management’s time we will not put to much focus on the online advertising business. But I want some of them free and the online advertising business the 17173 will continue to grow and operate as usual and grow with the industry growth rate.

[Foreign Language]

We hope to be able to expand 17173’s business and discover new areas of growth in terms of, for example on the web based games, mobile games side and also overseas. Thank you. Jialong Shi – CLSA: Thank you.

Your next question comes from the line of Catherine Leung of Goldman Sachs. Catherine Leung – Goldman Sachs: Hi, I am just curious; would you expect the set up of your dedicated video sales team to create any disruption on the rest of your total advertising business? Thank you.

I think that the impact is minimum. For short-term there is some, but the long-term there is a minimum. It’s because the bandwidth sales team are actually targeting a set of new kind of advertisers, most of them from traditional TV advertisers. And also on behalf for even for one advertiser they are, they have two type of needs. They needed to do marketing on portal at the same time they need to allocate budgets on video, so it’s their overall marketing trend. So, where actually it’s kind of ambitious, and we’re actually expanding the advertiser customer base. Catherine Leung – Goldman Sachs: And so, is this same advertiser wanted to advertise both on your portal and for your video channels, would you be sending the same sales person or would two different sales people visit this customer?

Yeah, we’ll send out two dedicated salesperson to speak about the two different web properties that is portal and online video.

So you (inaudible) Catherine Leung – Goldman Sachs: Yeah, there was a joint sales force, yeah.

With some focus, we will, because we will also, I mean in the same company and we will (inaudible) discuss the original need of the customers and to understand that their marketing enterprise and then decide which team will take lead. Catherine Leung – Goldman Sachs: Okay, understood. Thank you.

The next question comes from the line of Mark Marostica of Piper Jaffray. Mark Marostica – Piper Jaffray: Yes, thank you for taking my question. With the weakness in auto and also the real estate markets I’m curious if you’re evaluating whether or not to rationalize the size of your brand or portal sales team at all or do you feel that the team in place today is the team that you’ll continue with going forward?

What do you exactly mean by rationalize, we are – our focus is that we want to have a dedicated sales team. So we’ll be hiring more people. Mark Marostica – Piper Jaffray: Yeah, what I’m getting at here is I’ve – just recognizing that from your comments that portal is facing some challenges, and as you build your online video dedicated sales team I’m curious whether or not you’re looking at perhaps shrinking your portal sales team at all, if there is a relationship there, or if that’s not the case and I’m not planning to…

No, there is no relationship there.

Okay, fair enough. I think the Internet user base still grow in China and also the consumption on the Internet are much deeper, and then more – so that the Internet platform as advertising marketing platform is still yet to be realized by more advertisers and the potential is still there, they’re more potentials than (inaudible) [to each portal]. So you kind of downsizing our sales team, when you’ve actually expanding, now especially with the video sales and also portal sales, we all have new opportunities because our portal site in terms of content and traffic. We are undergoing some innovative revolution or to basically at the time of what 2.0 how to provide people with the best news and the most related news and also use a generic content also video content and pictures and everything. So even the photocells find there’s the new optimism that’s all we need to continue to expand these types of shrinkings. Mark Marostica – Piper Jaffray: Thanks for the color.

Your next question comes from the line of Shao, Jiong of Macquarie Jiong Shao – Macquarie: Hi, thank you very much for taking my question. Can you hear me okay? Jiong Shao – Macquarie: Okay, great. I have a two-part question on your video business. Firstly, could you please remind us your content cost amortization schedule? And secondly, I think I heard Charles, who was talking about, and so who would be optimistic in terms of potentially acquiring other video players, I was wondering could you please elaborate a bit on sort of the characteristics, and a metrics you would be looking at it, when you’re looking at the potential acquisition targets? Thank you.

On the amortization part, our policy is to amortize 50% on, 50% for the first six months after launch, after broadcasting, and then 30% in the following six months, and then with the balance of the 20% over the following one year, so it’s 80% in the first year, and then 20% in the second year. Jiong Shao – Macquarie: Considering the, there was some of the industry merger & acquisition mergers we doesn’t pay. Keep our remind open to optimize this for consolidation, but with or without we need to and to maintain or to continue to develop our own SOHU’s issues, own core competitive advantage of which is basically our understanding of (inaudible) industry and as I’m the marketing capability and our capability and also our technology division capability. So we believe that, the video are basically, a motion picture phenomenon is mostly related to entertainment, unlike the photon side of were, you provide so many channels and for information consumption to all, so many areas. For video entertainment that its key applications and with this – traditionally our understanding and competitive advantage so even with consolidation work and it to maintain stand off were interrupted our core competent and even without the I think we’ll be able to maintain or to continue to maintain our leadership provision actually in the past two quarters Sohu even without the our competitors on Sohu’s and the video is traffic. Actually it go faster than our competitors.

Thank you for participating in today’s conference. You may now disconnect. I would like to turn the call back over to Tip for closing remarks.