Charles Zhang, chairman and CEO of the Beijing-headquartered Internet portal, said yesterday that his firm struck a deal with Go2map on Sunday evening, agreeing to a price of US$9.3 million in cash.
Sohu paid US$400,000 on signing, and will hand over the remainder when the partnership is finalized.
Sohu's American depository shares rose by 10 US cents to US$17.50 on Tuesday.
The owners of Go2map may receive an additional amount of as much as US$2.5 million in two years, depending on the performance of the asset.
"The acquisition strongly shows the direction of our strategy, and that is we are attaching more and more importance to our search business," Zhang said yesterday.
He said the acquisition of Go2map will allow Sohu's Internet search website Sogou.com to launch map search services, as an increasing number of Internet surfers like to search online for shops or a place to eat.
Ouyang Lin, general manager of Go2map.com, said his firm will have a broader platform from which to develop, as NASDAQ-listed Sohu is one of the biggest Chinese Internet portals and has made search services a key line of business.
He said his company was in the red due to heavy investment in technology development, although Go2map achieved positive cash flow in 2003. The company has about 80 employees at present.
Zhang said his company collected about US$2.7 million or 10 per cent of its total revenue from search services, mainly from paid listings and key word searches from small and medium-sized businesses.
Wang Jianjun, president of advertising, searches and online games at Sohu, said the popularity of Go2map will bring in more advertising revenue, but more importantly its contribution will impact on search services.
He said Sohu will launch new mapping services this quarter after resource integration.
Jim Sun, an Internet analyst at British firm Evolution Securities, believes the acquisition will boost Sohu's advertising business, which includes online advertising and paid-for search services.
"It is a good complement to Sohu as the company is changing its image as a pure Internet portal to other areas," said Sun.
He said it is hard to predict the financial benefits of the deal, but it will add to the Sogou range of services and attract more users to its website.
Sohu has also formed an alliance with Chinese auction website Taobao.com, which competes head-to-head with the United States giant eBay in the domestic market.
The partnership will bring more Internet users to both websites. Taobao is desperate to spend more of its advertising budget on the Internet, and is expected to pump a considerable sum of money into Sohu.
