Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Sohu second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead.
Thanks, operator. Thank you for joining us today to discuss Sohu second quarter 2020 results. On the call are Chairman and Chief Executive Officer, Charles Zhang, CFO, Joanna Lv, and Vice President of Finance, James Deng. Also with us today are Changyou CEO, Dewen Chen, and CFO, Yaobin Wang. 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 here on this conference call may contain 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 involving 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 the most recent annual report on Form 20-F. With that, I will now turn the call over to Charles Zhang. Charles, please proceed.
Thank you, Huang. Thank you for everyone for joining our call. In the second quarter of 2020, our brand advertising business performed well. The brand advertising revenue had a decent increase, up 48% quarter-over-quarter. Both the brand advertising revenue and the bottom line exceeded our prior guidance. During the quarter, we integrated our Sohu Media Portal's brand advantage and influence with Sohu Video's advanced live broadcast technologies. These initiatives allowed us to more effectively generate and distribute our high-quality original content and further enhanced our credibility with reflecting the attitude and values of Sohu. For Changyou, the privatization was completed on April 17th, 2020, and after that, Changyou's net incomes and loss was wholly attributable to Sohu.com Limited. During the second quarter of 2020, online game revenues met our prior guidance and declined quarter-over-quarter, mainly due to the resumption of work following the easing of COVID-19 restrictions.
For Sogou, it delivered inline results in the second quarter with search maintaining a steady share of traffic and mobile keyboard input further expanding its DAU base. Before I go into more detail about our key financial results, please be reminded that for the second quarter of 2020, Changyou recognized an additional $88 million accrual for withholding income tax since Changyou changed its policy for its PRC subsidiaries for the distribution of cash dividends after the completion of the privatization. In addition, back in the third quarter of 2019 last year, Changyou's cinema advertising business ceased operations. Unless indicated otherwise, the results that we will discuss today exclude the impact of the above-mentioned withholding income tax and the cinema advertising business. Now, for the second quarter of 2020, total revenues were $421 million, down 9% year-over-year and 3% quarter-over-quarter.
Brand advertising revenues, $38 million, down 14% year-over-year, up 48% quarter-over-quarter. Search and search-related advertising revenues, $241 million, down 13% year-over-year and up 1% quarter-over-quarter. Online game revenues, $106 million, up 4% year-over-year and down 21% quarter-over-quarter. GAAP net loss attributable to Sohu.com Limited was $80 million. Excluding the impact of the additional accrual of the withholding income tax described above, GAAP net income attributable to Sohu.com Limited was $8 million, compared with a net loss of $35 million in the second quarter of 2019, and a net loss of $20 million in the first quarter of 2020. Excluding the impact of additional accrual of withholding income tax described above, non-GAAP net income attributable to Sohu.com Limited was $11 million income.
Further excluding the loss generated by Sogou, non-GAAP net income attributable to Sohu.com Limited was $12 million, compared with a net loss of $41 million in the second quarter of last year, and a net loss of $8 million in the first quarter of 2020. Now let me go through some of our key businesses. First, Media Portal and Sohu Video. For Media Portal, we continue to consolidate our core competitiveness and credibility as a mainstream media platform by generating and distributing news and premium content. We also continue to upgrade the quality of our content and recommendation algorithms to provide users with broader and a more personalized experience. As a result, we saw the consumption of content increase significantly during the second quarter. For video, we continue to strengthen our long-form and short-form, so-called two-engine strategy. For the long-form original content, we released the two original idol romance dramas.
One is the "High School Big Bang," or Wo Cheng Le Ta De Ban Zhu Ren , and also another one is "My Dear Lady," Ni Cheng Gong Yin Qi Wo De Zhu Yi Le , which were well-received by audiences and gained widespread attention. For short-form content, we further strengthened our live broadcast capabilities by being able to establish a good reputation with our medical and health areas, live broadcasters, by generating and distributing accurate and reliable information in these areas. We'll continue to push forward in this area while proactively exploring new opportunities in other verticals. On the monetization side, we kept exploring new monetization opportunities by integrating the brand influence of our media portal with Sohu Video's advanced broadcast technologies. During the quarter, we successfully hosted several events that integrated both online and offline features.
We launched a new live broadcast series called "BOSS1+1 ," where we invited industry celebrities to share the inside views on the economy and the market wherever they are, using the live broadcast sharing technology. We also successfully host the Sohu Tech 5G Summit and Sohu News Marathon, which broke geographical boundaries and provided participants with broader views and a greater user experience wherever they are. In June, July, we moved further toward the field of e-commerce by hosting the Best of Sister Selection live from Sohu, [Non-English content ]. We invited celebrities to share their thoughts on live life while recommending premium goods, the favorite products, the goods they use.
We have seen a number of positive results from these new initiatives, given that they are providing advertisers with a variety of marketing strategies that fit the current moment and meet general public demand. We'll continue to diversify our revenue sources and actively explore new opportunities to grow advertising dollars. Let's talk about Changyou. For the second quarter of 2020, online game revenues decreased for a quarter-over-quarter and met our prior guidance, mainly due to a decrease in player engagement as a result of the work resumption following the eased COVID-19 pandemic in China. For PC games, Changyou launched a new expansion pack of TLBB PC during the quarter with various anniversary events, also new maps and dungeons that were developed using advanced rendering technologies. All of this new content served to greatly improve the user experience.
For mobile games, an expansion pack of Legacy TLBB Mobile's three-year anniversary was launched during the quarter. The newly introduced gameplay, which allowed players to explore randomly generated content, was also well-received. For third quarter of 2020, Changyou will focus on stabilizing player engagement and roll out in-game reward-giving events and fresh content for TLBB PC and Legacy TLBB Mobile. Looking ahead, Changyou will continue to focus on executing its core strategy of top games. MMORPG mobile games will remain a key strategic focus, while we are also scanning the market for opportunities across various genres as we look to diversify our product portfolio. Meanwhile, we will also increase expanding our efforts overseas. Currently, several key games are being developed and prepared for launch. We believe Changyou will bring more quality games for players in the future. Lastly, let me talk about Sogou.
Despite great challenges under the COVID-19 pandemic, Sogou has been proactively upgrading its development strategy to focus on generating more user value and building out a business that is oriented toward long-term value and growth. In the second quarter of 2020, Sogou delivered inline results with healthy momentum in its core search and mobile keyboard businesses. Sogou Search maintained a steady share of traffic and reinforced its position as China's second-largest search engine. Mobile keyboard further expanded its DAU base to 484 million, maintaining the third-largest Chinese mobile app in terms of DAUs, according to iResearch. In addition, its AI hardware business recorded solid growth during the quarter. Going forward, Sogou will further boost AI empowerment and the synergies across their businesses while continually drive technological advances. Now let me turn the call over to Joanna, our CFO, who will walk you through our financial results. Joanna?
Thank you, Charles. I will walk you through the key financials of our four major segments for the second quarter of 2020. All of the numbers that I will mention are all on an non-GAAP basis. You can find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $22 million, down 7% year-over-year and up 49% quarter-over-quarter. The quarterly operating loss was $18 million, compared with an operating loss of $38 million in the same quarter last year. For Sohu Video, quarterly revenues were $22 million, up 6% year-over-year and down 4% quarter-over-quarter. The quarterly operating loss was $10 million, compared with an operating loss of $23 million in the same quarter last year. For Changyou, quarterly revenues, including 17173, $109 million, up 3% year-over-year and down 20% quarter-over-quarter.
Changyou posted an operating profit of $37 million, compared with an operating profit of $38 million in the same quarter last year. For Sogou, quarterly revenues were $261 million, down 14% year-over-year and up 2% quarter-over-quarter. Net loss was $6 million, compared with net income of $28 million in the same quarter last year. For the third quarter of 2020, we expect brand advertising revenues to be between $37 million and $42 million. This implies an annual decrease of 9%-20% and a sequential decrease of 3% to a sequential increase of 11%. Online game revenues to be between $85 million and $95 million. This implies an annual decrease of 12%-21% and a sequential decrease of 10%-20%, excluding profit and loss generated by Sogou. Non-GAAP net loss attributable to Sohu.com Limited to be between $10 million and $20 million.
GAAP net loss attributable to Sohu.com Limited to be between $15 million and $25 million. This forecast reflects Sohu's management's current and preliminary view, which is subject to substantial uncertainty, particularly in view of the potential ongoing impact of COVID-19 virus, which remains difficult to predict. Lastly, please be reminded that we won't take questions regarding any Sogou business updates and Tencent's non-binding proposal for Sogou privatization in the Q&A session. This concludes our prepared remarks. Operator, we would now like to open the floor to questions.
Thank you. Ladies and gentlemen, we will now begin the question -and -answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, it is star one for questions. Our first question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question.
Hey, good evening, guys. Just two quick questions. The first one is about broadcasting. I think, Charles, you mentioned that there has been some synergy from using the influencer as well as broadcasting. Wondering if you have any operating metrics or financial share to share with us on the performance of broadcasting you achieved in the quarter, and how is it growing into third quarter? That's my first question. The second question is about games. I also think you mentioned that after people returning to work, there has been some weakness in the game industry in general. Just wondering whether we have seen some stabilization on that front, and as we enter summer, which traditionally should be a good quarter in general for the game industry, any color on the general industry trend of game industry into third quarter would be great. Thanks.
Eddie, your first question is about live broadcasting, right?
Yes.
On a daily basis, we have dozens of influencers to broadcast. There's probably 10 or 20 that we actually using our platform to market them. These are the live broadcasts. We're using general push to market about 10 broadcasts. We call it a value broadcasting, or we call it where the people from the medical health industry or lifestyle or cosmetic industry or those kind of influencers to teach people about knowledge, things, information. We have a few top live broadcasts that myself participate in. Each month we do three or four with some top celebrities to share their life experience and some products.
Then we are able to connect our chat room or live broadcast room to e-commerce platforms like Jingdong or Taobao and others, that when a celebrity recommends some product they use, then the users can click that small shopping cart to be delivered directly to the e-commerce platform to purchase. Because of this transaction-based advertising, and also we actually give some reward or some kind of lottery for people to click. It's not really the sales volume of those products. It's really the chat room's popularity and also the celebrity's recommendation, or verbal recommendation or those kind of things is a good advertising effect that become a good reason for some big advertisers to spend money on our overall advertising. This is a central part of the whole contract. Am I answering your question, Eddie?
Yes. Basically, there is no direct e-commerce revenue, I think, right? Charles, you are using the content to attract advertising in general. That's actually the current business model, right?
There is e-commerce revenue because the advertisers give us a deep discount.
Oh, I see.
Yeah. Actually, why it becomes so popular and people are really coming to this chat room, because they are getting the best price online. Jingdong and Taobao, the advertisers are willing, because this is really good for the brand, they are willing give the deepest discount to us. That price difference is considered to be our e-commerce revenue.
Oh, I see. Understood.
I'm saying that's not the big part. The main part is really the total advertising dollar, and the advertiser spend.
Understood.
It drives the whole contract. It's become a very important component of our overall contract. Let's say if an auto company spends CNY 3 million advertising, in this contract, probably like CNY 1 million was spent on this chat room advertising. Also, we are able to get that CNY 3 million contract because we have this component. It's very creative and everyone is talking about this.
Yes, understood. Any color on the industry trend of games heading into summer, which traditionally a strong quarter would be helpful? Thank you.
Compared with Q1, people are spending less time at home. Also, actually, because of the declining economy, people have less disposable income, right? The two reasons that, right?
[Non-English content]
First of all, during the pandemic, there are different for different gaming companies and different genres of games. We got different impact caused by the pandemic. Mostly our games are MMO hardcore RPG games, so we rely on those free player to, or higher-paying users. We benefited from the restrictions in the first quarter. But during the second quarter, we saw some pressures on the economy. We saw some pressure on the payment players investment in the games. You can see that from the data in the second quarter, we had a decline APA number. We expect in the third quarter, it will be stabilized.
Got it. Thank you. [Non-English content], Dewen.
My question is stabilized, but the earning is less because of the cost increase, right? Because of the marketing.
[Non-English content]
The industry will be more stabilized.
The industry will be more stabilized. Okay. All right. Next.
Thank you. Our next question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Hi. Thanks management for taking my questions. I think first, I have a question about the 3Q brand advertising guidance. Given that it is a - 3% to positive over 10% sequential growth, I'm just wondering under what circumstances would we expect to hit the low end and the high end of the guidance. Can you comment about the ad spending among different categories? My second question is about the China and the U.S. tension. Does that have any impact to our revenue coming from international advertisers? Thank you.
Answer your second question. You mean international advertiser?
Like those international brands.
No impact, right? International brands are still advertising in China, right?
The FMCG increases the hype of.
Oh, FMCG actually increased. For international advertisers, they actually increased their advertising.
Yes.
Yeah, it's actually better. To answer your first question, I think the wide range of the forecast depends on really the COVID-19 situation, the economy and. We'll continue our innovative product innovation and user-based elements to that, trying to momentum, but the economy and the uncertainties. That would give a wide range of forecast.
I see. Thanks, Charles. Is there any color about our key categories? Is the momentum similar-
Oh, yeah.
to what we saw recently?
I think it's a Euro allocation, like auto industry.
Auto, I think then FMCG.
FMCG.
Fast-moving consumer goods.
Internet services.
Internet services, like e-commerce.
Yep.
Yeah, e-commerce. I think e-commerce is number two, right?
Auto is number one.
Yeah.
E-commerce is number two, and FMCG.
Yeah.
Some IT companies, right?
Yes.
followed by financial industry factors, right? Financial industry.
Real estate.
Real estate. Yeah, real estate also. Yeah, that's the Euro ranking of these spending.
I see. Got it. Thank you, Charles.
Okay.
Thank you. Our next question comes from the line of Alicia Yap from Citigroup. Please ask your question.
Hi. Thank you. Good evening, Charles and management. Thanks for taking my question. I have two questions. One is that following the closer integrations of your ad system and also the sales team between the Sohu Video and Sohu Portal. Could you elaborate and help us to understand more the future prospect of Sohu Portal? What is your plan and aspiration to transform the Sohu Portal to become to? The second question is on your video content strategy. Assuming you are getting more cash, will you spend more money in video content production again, or will you actually continue your strategy on cutting the loss on the video business? Thank you.
Yeah, we have now a clear strategy for both our key application. That means the Sohu News app and the Sohu Video app. Well, we have other H5-based Sohu Wang and also PC. Our focus is really on the Sohu News app and the Sohu Video app. On the Sohu News app, the product innovation will mostly focus on the two information delivery mechanism. One is really we'll continue to have high-quality content, editorial content, and original content, and also content with collaborators. The editorial delivery, plus the machine delivery, basically the algorithm, we will continue to improve the algorithm, so that news becomes so relevant to each individual users and information. Also, the percentage of video content in the information stream. The second delivery is also our focus, is really the social network. I mean, social media delivery.
Basically, people are followers. We have a different channel for that. That's the two areas that we believe will be the driver for our news apps user growth. For video, the long-form content is this drama. Then the short form is really the short video clips, basically the YouTube type, people actually upload short video. People also produce short video by live broadcasting. Live broadcasting as a way to produce short form, or not even short form. Sometimes people broadcast for an hour and then it become a one-hour replay. These are also the two type, then the delivery also, there is the front page editorial delivery, and we have also this social media delivery. Especially the social media delivery, the followers and the tweet, retweet. It's our focus. Then the synergy of these two app.
For live broadcast, we do not allow the news app to reinvent the wheel to have a live broadcast feature. The whole company has only the live broadcasting feature at the Sohu Video app, and other user base, the traffic will be driven to the video app. That's the synergy, where some of those are live broadcast. Previously, before the Sohu Video app had, well-known for its TV drama and the American dramas, but it's now established as one of the key live broadcast app, and also some kind of key breaking news app.
The video news, and then people using the news app are more likely to watch this kind of content, and then there's a link or a direct link between the two apps, so that people using news app can directly, one click away, enter into the live broadcast room to watch those live broadcast video content of news type or other knowledge type, not just the long form of the video drama. It's kind of complicated, and I hope you understand what I'm saying.
Mm-hmm. Yeah.
We are looking at basically a matrix of user base with the two app specializing in its features and the content form, and also this H5, Shouji Sohu, with more of the traditional PC and the Shouji Sohu on the more traditional browsing activities. it's a matrix of content, and then for video and live broadcast, all the traffic will diverted into the video app. Yeah.
That means we are not going to spend more money in the long-form content production again, right?
In the last few years, we've been able to manage to generate, to produce some, in terms of like some low budget TV series episodes, but could be a hit. We've done this many times. If we have more money, we're not going to spend like we did in 2017 or 2016, buying a lot of very expensive content. Probably will increase the density or frequency of, I mean, a number of TV series per quarter. Like in 2019, or let's say the first two quarters, we only have three TV episodes, right, TV drama. At the current pace, in the next half of this year, we'll also only have another two or three.
Yeah.
With more money, we probably only double that. That means we probably have like, instead of five or six TV dramas a year, we probably have 10-12. That means a lot of increase of spending on the long form. Our video business growth most will be driven by the short form, user upload, UGC content, and live broadcast. Any TV dramas will be an opportunity to develop new users because it's exclusive content here. That a lot of users will come here to watch our new TV dramas, and then they will stay because they will not only watch that TV drama, they find a lot of other social network features, so they will stay. Yeah, that's our strategy.
Okay, great. Thank you, Charles. Very helpful.
Okay, you're welcome.
Yeah, sure.
Thank you. Once again, ladies and gentlemen, if you have a question now, please press star one on your telephone. All right, there are no further question. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.