Sohu switches gears to SMEs as shares plummet on forecasts of annual losses

Sohu.com Inc, the Chinese Web portal that has shed almost a fifth of its value in 2016, is shifting its focus to small and medium enterprises as the nation's economy slows and analysts forecast a third consecutive annual loss, said CEO Charles Zhang.

The stock, which gained 7.5 percent in 2015, has tumbled 19 percent in New York this year amid a broad selloff in Chinese stocks as the economy expands at the slowest pace in 25 years. Zhang, who in December said he planned to pay as much as $600 million to increase his 20 percent stake, said the focus on SMEs, which contributed 20 percent of media ad revenue in the fourth quarter, will help offset the macroeconomic impact as smaller companies cut spending less than their larger counterparts.

"That's why our media and video portals in the future targeting SMEs would be resilient to the macro situation," he said in Beijing. "We believe that structure of advertising is healthier."

Sohu will also implement an ad-targeting system akin to Google Inc's for its video business and ramp up spending on its media platform, Zhang said. The company's big push into digital media－where it acquires licensed content and provides original shows like Netflix, and streams professionally produced content like Youtube－may crimp its profitability especially when bigger players such as Alibaba Group Holding Ltd's Youku Tudou are already competing for content and user engagement.

"We need to spend enough to stay in the first tier so that our streaming businesses can pick up. It's important because in the long term, it will create stickiness within the community," Zhang said.