Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


	As of				As of
	September 30, 2014		December 31, 2013		December 31, 2014		September 30, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	840,896	$	1,287,288	$	876,340	$	1,073,879
Restricted time deposits		299,861		393,087		282,186		241,680
Short-term investments		209,508		2,827		191,577		260,431
Investments in debt securities		0		82,009
Accounts receivable, net		179,994		154,342		230,401		285,296
Prepaid and other current assets		123,060		132,002		116,704		161,764
Held-for-sale assets						0		10,080

Total current assets		1,653,319		2,051,555		1,697,208		2,033,130

Fixed assets, net		541,903		564,442		540,778		523,867
Goodwill		320,586		208,795		303,426		155,018
Long-term investments, net		25,638		3,726		24,067		65,480
Intangible assets, net		123,539		107,108		110,691		62,870
Restricted time deposits		143,825		40,961		144,562		139,407
Prepaid non-current assets		8,709		9,527		8,933		6,772
Other assets		34,351		12,601		37,344		32,590

Total assets	$	2,851,870	$	2,998,715	$	2,867,009	$	3,019,134

LIABILITIES
Current liabilities:
Accounts payable (including accounts payable of consolidated variable interest entities (“VIEs”) without recourse to the Company of $3,102 and $16,167, respectively, as of September 30, 2014 and December 31, 2013)	$	135,966	$	125,896
Accrued liabilities (including accrued liabilities of consolidated VIEs without recourse to the Company of $85,463 and $79,041, respectively, as of September 30, 2014 and December 31, 2013)		228,192		227,018
Receipts in advance and deferred revenue (including receipts in advance and deferred revenue of consolidated VIEs without recourse to the Company of $41,743 and $60,140, respectively, as of September 30, 2014 and December 31, 2013)		111,810		113,328
Accrued salary and benefits (including accrued salary and benefits of consolidated VIEs without recourse to the Company of $3,395 and $3,241, respectively, as of September 30, 2014 and December 31, 2013)		123,852		90,901
Taxes payable (including taxes payable of consolidated VIEs without recourse to the Company of $11,088 and $7,616, respectively, as of September 30, 2014 and December 31, 2013)		30,750		48,324
Deferred tax liabilities (including deferred tax liabilities of consolidated VIEs without recourse to the Company of $3 as of both September 30, 2014 and December 31, 2013)		21,500		18,813
Accounts payable (including accounts payable of consolidated variable interest entities (“VIEs”) without recourse to the Company of $3,495 and $33,095, respectively, as of December 31, 2014 and September 30, 2015)					$	127,758	$	131,782
Accrued liabilities (including accrued liabilities of consolidated VIEs without recourse to the Company of $78,051 and $75,198, respectively, as of December 31, 2014 and September 30, 2015)						239,231		317,345
Receipts in advance and deferred revenue (including receipts in advance and deferred revenue of consolidated VIEs without recourse to the Company of $53,641 and $48,028, respectively, as of December 31, 2014 and September 30, 2015)						127,740		137,583
Accrued salary and benefits (including accrued salary and benefits of consolidated VIEs without recourse to the Company of $6,300 and $10,130, respectively, as of December 31, 2014 and September 30, 2015)						108,741		86,822
Taxes payable (including taxes payable of consolidated VIEs without recourse to the Company of $10,767 and $20,974, respectively, as of December 31, 2014 and September 30, 2015)						33,380		50,403
Deferred tax liabilities (including deferred tax liabilities of consolidated VIEs without recourse to the Company of $1,669 and $1,559, respectively, as of December 31, 2014 and September 30, 2015)						22,356		24,096


Short-term bank loans (including short-term bank loans of consolidated VIEs without recourse to the Company of nil as of both September 30, 2014 and December 31, 2013)		0			410,331
Other short-term liabilities (including other short-term liabilities of consolidated VIEs without recourse to the Company of $23,570 and $253,933, respectively, as of September 30, 2014 and December 31, 2013)		91,736			79,798
Contingent consideration (including contingent consideration of consolidated VIEs without recourse to the Company of $2,950 and nil, respectively, as of September 30, 2014 and December 31, 2013)		2,950			0
Short-term bank loans (including short-term bank loans of consolidated VIEs without recourse to the Company of nil as of both December 31, 2014 and September 30, 2015)								25,500			25,500
Other short-term liabilities (including other short-term liabilities of consolidated VIEs without recourse to the Company of $30,893 and $107,107, respectively, as of December 31, 2014 and September 30, 2015)								105,644			154,085
Contingent consideration (including contingent consideration of consolidated VIEs without recourse to the Company of $3,935 and nil, respectively, as of December 31, 2014 and September 30, 2015)								3,935			0
Held-for-sale liabilities (including held-for-sale liabilities of consolidated VIEs without recourse to the Company of nil and $1,251, respectively, as of December 31, 2014 and September 30, 2015)								0			1,251

Total current liabilities		746,756			1,114,409			794,285			928,867

Long-term accounts payable (including long-term accounts payable of consolidated VIEs without recourse to the Company of $1,529 and $1,621, respectively, as of September 30, 2014 and December 31, 2013)		5,211			6,252
Long-term bank loans (including long-term bank loans of consolidated VIEs without recourse to the Company of nil as of both September 30, 2014 and December 31, 2013)		370,000			0
Long-term taxes payable (including long-term taxes payable of consolidated VIEs without recourse to the Company of nil as of both September 30, 2014 and December 31, 2013)		24,820			24,835
Deferred tax liabilities (including deferred tax liabilities of consolidated VIEs without recourse to the Company of $2,795 and $3,777, respectively, as of September 30, 2014 and December 31, 2013)		10,685			12,337
Contingent consideration (including contingent consideration of consolidated VIEs without recourse to the Company of $1,541 and $4,162, respectively, as of September 30, 2014 and December 31, 2013)		1,839			4,162
Long-term accounts payable (including long-term accounts payable of consolidated VIEs without recourse to the Company of $21,534 and $23,503 as of December 31, 2014 and September 30, 2015)								5,143			4,257
Long-term bank loans (including long-term bank loans of consolidated VIEs without recourse to the Company of nil as of both December 31, 2014 and September 30, 2015)								344,500			319,000
Long-term taxes payable (including long-term taxes payable of consolidated VIEs without recourse to the Company of nil as of both December 31, 2014 and September 30, 2015)								24,829			24,765
Deferred tax liabilities (including deferred tax liabilities of consolidated VIEs without recourse to the Company of $1,799 and nil, respectively, as of December 31, 2014 and September 30, 2015)								7,417			12,666
Contingent consideration (including contingent consideration of consolidated VIEs without recourse to the Company of $1,929 and nil, respectively, as of December 31, 2014 and September 30, 2015)								1,929			0

Total long-term liabilities		412,555			47,586			383,818			360,688

Total liabilities		1,159,311			1,161,995			1,178,103			1,289,555

Commitments and contingencies
SHAREHOLDERS’ EQUITY
Sohu.com Inc. shareholders’ equity:
Common stock: $0.001 par value per share (75,400 shares authorized; 38,487 shares and 38,326 shares, respectively, issued and outstanding as of September 30, 2014 and December 31, 2013)		44			44
Common stock: $0.001 par value per share (75,400 shares authorized; 38,507 shares and 38,637 shares, respectively, issued and outstanding as of December 31, 2014 and September 30, 2015)								44			45
Additional paid-in capital		652,627			601,633			650,148			783,801
Treasury stock (5,889 shares as of September 30, 2014 and December 31, 2013)		(143,858	)		(143,858	)
Treasury stock (5,889 shares as of both December 31, 2014 and September 30, 2015)								(143,858	)		(143,858	)
Accumulated other comprehensive income		105,800			116,304			109,402			72,868
Retained earnings		605,500			752,582			585,925			566,727

Total Sohu.com Inc. shareholders’ equity		1,220,113			1,326,705			1,201,661			1,279,583
Noncontrolling interest		472,446			510,015			487,245			449,996

Total shareholders’ equity		1,692,559			1,836,720			1,688,906			1,729,579

Total liabilities and shareholders’ equity	$	2,851,870		$	2,998,715		$	2,867,009		$	3,019,134

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013			2014			2015			2014			2015
Revenues:
Online advertising:
Brand advertising	$	148,823		$	124,780		$	393,334		$	305,208		$	148,823		$	151,517		$	393,334		$	436,187
Search and others		98,437			52,305			247,810			134,528
Search and search-related														98,437			147,938			247,810			388,270

Subtotal of online advertising revenues		247,260			177,085			641,144			439,736			247,260			299,455			641,144			824,457

Online games		150,338			161,494			467,603			497,210			150,338			152,501			467,603			509,845
Others		32,817			29,744			87,134			77,877			32,817			70,134			87,134			136,686

Total revenues		430,415			368,323			1,195,881			1,014,823			430,415			522,090			1,195,881			1,470,988
Cost of revenues:
Online advertising:
Brand advertising		83,424			63,780			230,462			160,214			83,424			91,163			230,462			295,562
Search and others		46,375			26,785			118,532			72,075
Search and search–related														46,375			62,365			118,532			170,836

Subtotal of cost of online advertising revenues		129,799			90,565			348,994			232,289			129,799			153,528			348,994			466,398

Online games		33,949			21,750			90,798			67,381			33,949			34,635			90,798			128,049
Others		17,912			13,175			50,252			42,994			17,912			25,996			50,252			63,066

Total cost of revenues		181,660			125,490			490,044			342,664			181,660			214,159			490,044			657,513

Gross profit		248,755			242,833			705,837			672,159			248,755			307,931			705,837			813,475

Operating expenses:
Product development		107,971			70,551			327,911			185,731			107,971			92,779			327,911			295,741
Sales and marketing		131,742			90,728			410,702			221,129			131,742			98,596			410,702			285,701
General and administrative		49,730			29,365			138,330			77,726			49,730			33,330			138,330			128,214
Goodwill impairment and impairment of intangible assets acquired as part of business acquisitions														0			40,324			0			40,324

Total operating expenses		289,443			190,644			876,943			484,586			289,443			265,029			876,943			749,980

Operating profit /(loss)		(40,688	)		52,189			(171,106	)		187,573			(40,688	)		42,902			(171,106	)		63,495

Other income		896			1,533			5,340			5,596			896			70,219			5,340			72,936
Net interest income		7,468			7,595			24,704			19,794			7,468			5,192			24,704			17,455
Exchange difference		(610	)		(1,305	)		27			(5,274	)		(610	)		4,322			27			3,452

Income /(loss) before income tax benefit /(expense)		(32,934	)		60,012			(141,035	)		207,689			(32,934	)		122,635			(141,035	)		157,338
Income tax benefit /(expense)		1,036			(18,923	)		2,562			(55,192	)		1,036			(29,461	)		2,562			(57,280	)

Net income/(loss)		(31,898	)		41,089			(138,473	)		152,497			(31,898	)		93,174			(138,473	)		100,058
Less: Net income attributable to the mezzanine-classified noncontrolling interest shareholders		0			0			0			17,780
Net income /(loss) attributable to the noncontrolling interest shareholders		(4,760	)		22,855			(19,138	)		70,426
Less: Net income /(loss) attributable to the noncontrolling interest shareholders														(4,760	)		42,142			(19,138	)		107,345
Deemed dividend to noncontrolling Sogou Series A Preferred shareholders		0			82,423			27,747			82,423			0			11,911			27,747			11,911

Net loss attributable to Sohu.com Inc.	$	(27,138	)	$	(64,189	)	$	(147,082	)	$	(18,132	)
Net income /(loss) attributable to Sohu.com Inc.													$	(27,138	)	$	39,121		$	(147,082	)	$	(19,198	)

Net income /(loss)		(31,898	)		41,089			(138,473	)		152,497			(31,898	)		93,174			(138,473	)		100,058
Other comprehensive income /(loss)		(1,005	)		8,249			(14,084	)		33,481
Other comprehensive loss														(1,005	)		(67,599	)		(14,084	)		(54,814	)

Comprehensive income /(loss)														(32,903	)		25,575			(152,557	)		45,244

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2015
Cash flows from operating activities:
Net income /(loss)	$	(138,473	)	$	152,497		$	(138,473	)	$	100,058
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income /(loss) to net cash provided by operating activities:
Amortization of intangible assets and purchased video content in prepaid expense		99,264			53,378			99,264			129,475
Depreciation		59,059			37,997			59,059			60,798
Goodwill impairment and impairment of intangible assets acquired as part of a business acquisition								0			40,324
Share-based compensation expense		29,513			5,523			29,513			28,465
Impairment of intangible assets		1,457			1,504			1,457			12,015
Reversal for allowance for doubtful accounts		(2	)		(134	)
Investment income from investments in debt securities		(1,370	)		(4,143	)
Investment income /(loss) from investments in debt securities and equity investments								(1,140	)		3,791
Provision /(Reversal) for allowance for doubtful accounts								(2	)		1,676
Change in fair value of put option		(2,304	)		144			(2,304	)		0
Gain from sale of the 7Road business and certain Changyou subsidiaries								0			(55,139	)
Gain from sale of an equity investment								0			(12,962	)
Change in fair value of short-term investments		(425	)		(2,292	)		(425	)		(1,050	)
Others		1,649			570			1,419			2,163
Changes in assets and liabilities, net of acquisition:
Accounts receivable		(25,759	)		(49,920	)		(25,759	)		(67,284	)
Prepaid and other assets		32,825			(21,016	)		32,825			2,941
Accounts payable		(4,194	)		11,921			(4,194	)		7,150
Accrued liabilities and other short-term liabilities								83,676			66,636
Receipts in advance and deferred revenue		(941	)		12,578			(941	)		11,202
Taxes payable		(17,463	)		870			(17,463	)		17,592
Deferred tax		(21,727	)		2,809			(21,727	)		9,612
Accrued and other short-term liabilities		83,676			73,100

Net cash provided by operating activities		94,785			275,386			94,785			357,463
Cash flows from investing activities:
Proceeds from /(purchase of) short-term investments, net		(206,662	)		32,856
Acquisition of MoboTap (net of cash acquired)		(86,539	)		0
Purchase of intangible and other assets		(98,706	)		(61,738	)		(98,706	)		(106,613	)
Purchase of fixed assets		(73,440	)		(84,201	)		(73,440	)		(84,127	)
Purchase of short-term investments, net								(206,662	)		(76,588	)
Purchase of long-term investments		(24,609	)		0			(24,609	)		(37,803	)
Cash paid related to restricted time deposits, net		(13,554	)		(121,705	)
Purchase of noncontrolling interest in 7Road		0			(76,010	)
Funds to a third party								0			(20,033	)
Deposited funds								0			(13,086	)
Acquisition of MoboTap, net of cash acquired								(86,539	)		0
Consideration received from sale of the 7Road business and certain Changyou subsidiaries, net of cash in 7Road upon its disposition								0			183,114
Cash received /(paid) related to restricted time deposits, net								(13,554	)		30,840
Proceeds received from sale of an equity investment								0			11,938
Proceeds received from debt securities at maturity		82,009			0			82,009			0
Other cash proceeds related to investing activities		3,404			1,595			3,404			3,866

Net cash used in investing activities		(418,097	)		(309,203	)		(418,097	)		(108,492	)
Cash flows from financing activities:
Issuance of common stock		516			964
Issuance of Sogou Series B Preferred Shares and Class B Ordinary Shares		0			475,472
Repurchase of Changyou American depositary shares (“ADSs”)		0			(9,048	)
Repurchase of Sogou Series A Preferred Shares from noncontrolling shareholders		(47,285	)		0
Repurchase of Sogou Class A Ordinary Shares from noncontrolling shareholders		(24,591	)		0
Proceeds of loans from offshore banks		370,000			111,530
Repayments of loans to offshore banks		(410,194	)		0
Exercise of share-based awards in subsidiary		414			1,794


Portion of Sogou special dividend distributed to holders of Series A Preferred Shares other than Sohu		0			(139,700	)
Proceeds received from early exercise of share-based awards in subsidiary		0			5,278
Cash flows from financing activities:
Loan proceeds								0			12,900
Issuance of common stock								516			2,124
Exercise of share-based awards in subsidiary								414			7
Repayments of loans from offshore banks								(410,194	)		(25,500	)
Repurchase of Sogou Series A Preferred Shares from noncontrolling shareholders								(47,285	)		(21,015	)
Repurchase of Changyou American depositary shares (“ADSs”)								0			(14,517	)
Repurchase of Sogou Class A Ordinary Shares from noncontrolling shareholders								(24,591	)		0
Proceeds of loans from offshore banks								370,000			0
Payment of contingent consideration		(2,813	)		(19,736	)		(2,813	)		0
Other cash payments related to financing activities		(4,935	)		(259	)
Other cash proceeds /(payments) related to financing activities								(4,935	)		2,855

Net cash provided by /(used in) financing activities		(118,888	)		426,295
Net cash used in financing activities								(118,888	)		(43,146	)
Effect of exchange rate changes on cash and cash equivalents		(4,192	)		14,829			(4,192	)		(8,220	)
Reclassification of cash and cash equivalents to held-for-sale assets								0			(66	)

Net increase /(decrease) in cash and cash equivalents		(446,392	)		407,307			(446,392	)		197,539
Cash and cash equivalents at beginning of period		1,287,288			833,535			1,287,288			876,340

Cash and cash equivalents at end of period	$	840,896		$	1,240,842		$	840,896		$	1,073,879

Supplemental cash flow disclosures:
Barter transactions	$	721		$	380		$	721		$	1,411
Supplemental schedule of non-cash investing activity:
Consideration payable for acquisition and equity investment								0			10,722

The accompanying notes are an integral part of these condensed consolidated financial statements.


				Sohu.com Inc. Shareholders’ Equity																				Sohu.com Inc. Shareholders’ Equity
	Total			Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Noncontrolling Interest			Total			Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Noncontrolling Interest
Beginning balance	$	1,836,720		$	44	$	601,633		$	(143,858	)	$	116,304		$	752,582		$	510,015		$	1,836,720		$	44	$	601,633		$	(143,858	)	$	116,304		$	752,582		$	510,015
Issuance of common stock		516			0		516			0			0			0			0			516			0		516			0			0			0			0
Repurchase of Sogou Series A Preferred Shares from noncontrolling shareholders		(47,285	)		0		26,276			0			0			(27,747	)		(45,814	)		(47,285	)		0		26,276			0			0			(27,747	)		(45,814	)
Repurchase of Sogou Class A Ordinary Shares from noncontrolling shareholders		(24,591	)		0		0			0			0			0			(24,591	)		(24,591	)		0		0			0			0			0			(24,591	)
Exercise of right to repurchase from China Web		1,584			0		1,584			0			0			0			0			1,584			0		1,584			0			0			0			0
Purchase of equity interests of a VIE from a third party shareholder		(809	)		0		11			0			0			0			(820	)		(809	)		0		11			0			0			0			(820	)
Share-based compensation expense		29,485			0		13,048			0			0			0			16,437			29,485			0		13,048			0			0			0			16,437
Settlement of share-based awards in subsidiary		798			0		11,336			0			0			0			(10,538	)		798			0		11,336			0			0			0			(10,538	)
Acquisition of MoboTap		53,424			0		0			0			0			0			53,424			53,424			0		0			0			0			0			53,424
Acquisition of noncontrolling interest in a subsidiary		(4,726	)		0		(1,777	)		0			0			0			(2,949	)		(4,726	)		0		(1,777	)		0			0			0			(2,949	)
Net income /(loss) attributable to Sohu.com Inc. and noncontrolling interest shareholders		(138,473	)		0		0			0			0			(119,335	)		(19,138	)		(138,473	)		0		0			0			0			(119,335	)		(19,138	)
Accumulated other comprehensive income /(loss)		(14,084	)		0		0			0			(10,504	)		0			(3,580	)		(14,084	)		0		0			0			(10,504	)		0			(3,580	)

Ending balance	$	1,692,559		$	44	$	652,627		$	(143,858	)	$	105,800		$	605,500		$	472,446		$	1,692,559		$	44	$	652,627		$	(143,858	)	$	105,800		$	605,500		$	472,446

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sohu.com Inc. ~~(“Sohu” or the “Company”)~~(NASDAQ: SOHU), a Delaware corporation organized in 1996, is a leading Chinese online media, search and game service group providing comprehensive online products and services on PCs and mobile devices in the People’s Republic of China (the “PRC” or “China”). ~~The core~~Sohu.com Inc.’s businesses ~~of the Company, together with~~are conducted by Sohu.com Inc. and its ~~wholly-owned and majority-owned~~ subsidiaries and ~~variable interest entities~~VIEs (collectively referred to as the “Sohu Group” or ~~the “Group”~~“the Group”)~~, are online advertising and online games.~~

. The ~~online advertising business~~Sohu Group consists of Sohu, which when referred to in this report, unless the ~~brand advertising business as well as~~context requires otherwise, excludes the ~~search~~businesses and ~~others business.~~

~~The~~the corresponding subsidiaries and VIEs of Sogou Inc. (“Sogou”) and Changyou.com Limited (“Changyou”), Sogou and Changyou. Sogou and Changyou are indirect controlled subsidiaries of Sohu.com Inc. Sohu ~~Group’s brand advertising business offers to its users, over its matrices of~~is a leading Chinese language online media content and services various products and services across multiple Internet-enabled devices, such as PCs, mobile phones and tablets. It also offers advertisements on Sohu Group Web properties to companies seeking to increase their brand awareness online.

~~The majority of the Sohu Group’s products and services are provided on the following platforms:~~

The search and others business, provided by Sohu’s search subsidiary Sogou Inc. (“Sogou”), primarily offers customers pay-for-click services, as well as online marketing services on the Sogou Web Directory.

On September 16, 2013, pursuant to a Subscription Agreement entered into on that date by and among Sogou, THL A21 Limited, a wholly-owned subsidiary of Tencent Holdings Limited (Tencent Holdings Limited together with its subsidiaries, “Tencent”); Sohu’s wholly-owned subsidiary Sohu.com (Search) Limited, a Cayman Islands company (“Sohu Search”); and Photon Group Limited (“Photon”), the investment vehicle of the Sohu Group’s Chairman and Chief Executive Officer Dr. Charles Zhang, and a series of other contracts also entered into on that date between Sogou and Tencent, Tencent invested a net amount of $448 million mobile Internet product provider in ~~cash in Sogou and transferred its Soso search-related businesses and certain other assets to Sogou (collectively, the “Sogou-Tencent Transactions”).~~

On September 16, 2013, Sogou entered into (i) a Repurchase Option Agreement with Sohu Search, exercisable commencing March 16, 2014, granting to Sogou the right to purchase 24 million Series A Preferred Shares of Sogou held by Sohu Search for an aggregate purchase price of $78.8 million; (ii) a Repurchase Option Agreement with Photon, also exercisable commencing March 16, 2014, granting to Sogou the right to purchase 6.4 million Series A Preferred Shares of Sogou held by Photon for an aggregate purchase price of $21 million; and (iii) a Repurchase/Put Option Agreement with China Web Search (HK) Limited (“China Web”), an investment vehicle of Yunfeng Capital, granting to Sogou the right to purchase at any time from March 16, 2014 to July 31, 2014, and granting to China Web the right to put to Sogou at any time prior to July 31, 2014, 14.4 million Series A Preferred Shares of Sogou held by China Web for an aggregate purchase price of $47.3 million.

On September 16, 2013, Sogou, Sohu Search, Photon, Mr. Xiaochuan Wang, four other members of Sogou’s management (collectively, the “Sohu Parties”) and Tencent entered into a Shareholders Agreement (the “Shareholders Agreement”) under which the parties agreed to vote their Sogou voting shares in all elections of directors to elect three designees of Sohu Search and two designees of Tencent.

On September 17, 2013, Sogou paid a special dividend to the three holders of Series A Preferred Shares of Sogou in the aggregate amount of $301 million, of which Sohu Search received $161 million, Photon received $43 million, and China Web received $97 million.

On December 2, 2013, Tencent invested $1.5 million in cash in Beijing Sogou Information Service Co., Ltd. (“Sogou Information”), a VIE of Sogou, as additional consideration in connection with the Sogou-Tencent Transactions.

On March 24, 2014, Sogou purchased from China Web, pursuant to the Repurchase/Put Option Agreement between Sogou and China Web, 14.4 million Series A Preferred Shares of Sogou, for an aggregate purchase price of $47.3 million.

In June 2014, Sogou repurchased approximately 4.2 million of its Class A Ordinary Shares from noncontrolling shareholders, some of whom are employees of the Group, for an aggregate purchase price of $41.6 million.

Pursuant to the Shareholders Agreement, Sohu will hold approximately 52% of the total voting power for the election of the Board of Directors of Sogou, assuming that the remaining repurchase options are exercised, Tencent’s non-voting Class B Ordinary Shares are converted to voting shares, and all share options under the Sogou 2010 Share Incentive Plan and all share options under an arrangement providing for Sogou share-based awards to be available for grants to Sohu management and key employees (the “Sohu Management Sogou Share Option Arrangement”) are granted and exercised. As Sohu is the controlling shareholder of Sogou, Sohu consolidates Sogou in the Sohu Group’s consolidated financial statements, and recognizes noncontrolling interest reflecting economic interests in Sogou held by shareholders other than Sohu.

~~The online game business is conducted by Sohu’s majority-owned subsidiary Changyou.com Limited (“Changyou”).~~China. Changyou is a leading online game developer and operator in China as measured by the popularity of its ~~massively multiplayer online~~PC game ~~(“MMOG”) Tian Long Ba Bu (“TLBB”)~~TLBB and its ~~Web games DDTank~~mobile game TLBB 3D, and ~~Wartune (also known as “Shen Qu”), which Changyou developed in-house. Changyou~~ engages primarily in the development, operation and licensing of online games for PCs and mobile devices. Most of the Group’s operations are conducted through the Group’s indirect wholly-owned and majority-owned China-based subsidiaries and VIEs.

Through the operation of Sohu, Sogou and Changyou, the Sohu Group generates online advertising revenues, including brand advertising revenues and search and search-related revenues (which were previously known as search and Web directory revenues); online games revenues; and others revenues. Online advertising and online games are the Group’s core businesses. For the three months ended September 30, 2015, total revenues generated by Sohu, Sogou and Changyou were approximately $522.1 million.

Sohu’s main business is the brand advertising business, which offers to users, over Sohu’s matrices of Chinese language online media, various content, products and services across multiple Internet-enabled devices such as PCs, mobile phones and tablets. The majority of Sohu’s products and services are provided through Sohu Media Portal, Sohu Video and Focus.

Revenues generated by the brand advertising business are classified as brand advertising revenues in the Sohu Group’s consolidated statements of comprehensive income.

Sohu also engages in the others business, which includes the filming business, mobile-related services, sub-licensing of purchased video content to third parties, and paid subscription services. Revenues generated by Sohu from the others business are classified as others revenues in the Sohu Group’s consolidated statements of comprehensive income.

The search and search-related business primarily offers advertisers pay-for-click services, as well as online marketing services on Web directories operated by Sogou. Pay-for-click services enable advertisers’ promotional links to be displayed on the Sogou search result pages and Sogou Website Alliance members’ Websites where the links are relevant to the subject and content of such Web pages. Both pay-for-click services and online marketing services on Web directories operated by Sogou expand distribution of our advertisers’ Website links and advertisements by leveraging traffic on Sogou Website Alliance members’ Websites. The search and search-related business benefits significantly from Sogou’s collaboration with Tencent Holdings Limited (together with its subsidiaries, “Tencent”), which provides Sogou access to traffic generated from users of products and services provided by Tencent.

Revenues generated by the search and search-related business are classified as search and search-related revenues in the Sohu Group’s consolidated statements of comprehensive income.

Sogou also engages in the others business by primarily offering Internet value-added services ( “IVAS”) with respect to the operation of Web games and mobile games developed by third parties as well as other services and products provided to users. Revenues generated by Sogou from the others business are classified as others revenues in the Sohu Group’s consolidated statements of comprehensive income.

Changyou has three businesses, consisting of the online game business, the platform channel business and the others business.

Changyou’s online game business offers to game players PC games ~~include~~which are online games designed primarily for playing on PCs; mobile games, which are played on mobile devices with an Internet connection; and Web games, which are online games played over the Internet using a Web browser. Changyou’s PC games and mobile games are mainly MMOGs, which are interactive online games that may be played simultaneously by hundreds of thousands of game players. All of Changyou’s games are operated under the item-based revenue model, where game players play the games for free but can purchase virtual items to enhance the game-playing experience. Revenues derived from the operation of online games are classified as online game revenues in the Sohu Group’s consolidated statements of comprehensive income.

Changyou’s flagship PC game is its MMOG Tian Long Ba Bu (“TLBB”). For the three and nine months ended September 30, 2015, revenues from the PC game TLBB were $77.8 million and $244.9 million, respectively, accounting for approximately 51% and 48%, respectively, of Changyou’s online game revenues, approximately 41% of Changyou’s total revenues for both periods and approximately 15% and 17%, respectively, of the Sohu Group’s total revenues.

Changyou also owns and operates a number of Web ~~games, which are played over the Internet using a Web browser,~~properties and software applications for PCs and mobile ~~games,~~devices (collectively referred to as “platform channels”), including the 17173.com Website, one of the leading information portals for game players in China; RaidCall, which ~~are played~~provides online music and entertainment services, primarily in Taiwan; and the Dolphin Browser, a gateway to a host of user activities on mobile devices, with ~~an Internet connection.~~the majority of its users based in Europe, Russia and Japan. Changyou’s platform channels serve various needs of its users and help Changyou reach more user communities and conduct cross-promotions of its games and services. Revenues generated by 17173.com are classified as brand advertising revenues, and revenues generated by RaidCall and the Dolphin Browser are classified as others revenues, in the Group’s consolidated statements of comprehensive income.

Changyou also operates a cinema advertising business, which consists of Changyou offering slots for advertisements to be shown in cinemas before the screening of movies. Revenues generated by Changyou’s cinema advertising business are classified as others revenues in the Sohu Group’s consolidated statements of comprehensive income.

The consolidated financial statements include the accounts of ~~Sohu~~Sohu.com Inc. and its wholly-owned and majority-owned subsidiaries and consolidated VIEs. All intercompany transactions are eliminated.

The Sohu ~~Group adopted the guidance of accounting for~~Group’s VIEs ~~which requires VIEs to be consolidated~~are wholly or partially owned by ~~the primary beneficiary~~certain employees of the ~~entity.~~Group as nominee shareholders. For consolidated VIEs, management made evaluations of the relationships between the Sohu Group and the VIEs and the economic benefit flow of contractual arrangements with the VIEs. In connection with such evaluation, management also took into account the fact that, as a result of such contractual arrangements, the Group controls the shareholders’ voting interests in these VIEs. As a result of such evaluation, management concluded that the Sohu Group is the primary beneficiary of its consolidated VIEs. The Sohu Group has ~~three~~two VIEs that are not consolidated, since the Group is not the primary beneficiary.

Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholders. The primary majority-owned subsidiaries and VIEs of the Sohu Group which are consolidated in the Group’s consolidated financial statements with noncontrolling interest recognized are Sogou and Changyou.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions toForm 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report onForm 10-K for the year ended December 31, ~~2013.~~2014.

The accompanying unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. Results for the nine months ended September 30, ~~2014~~2015 are not necessarily indicative of the results expected for the full fiscal year or for any future period.

Commencing in the first quarter of 2014, the Group reclassified the mobile business to the others business, because the Group did not consider the mobile business to be significant enough to constitute a separately-disclosed revenue stream. The mobile business offers mobile-related services and mobile products, in cooperation with China mobile network operators, to mobile phone users and to China mobile network operators. Most the Group’s mobile revenues are contributed by services provided to mobile phone users through products such as short messaging services (“SMS”), ring-back tones (“RBT”), and interactive voice response (“IVR”). To conform to current period presentations, certain comparative figures for prior periods have been reclassified accordingly. Such reclassifications amounted to $14.5 million and $43.6 million, respectively, for revenues and $8.1 million and $26.3 million, respectively, for costs for the three months and nine months ended September 30, 2013.

The Sohu Group’s segments are business units that offer different services and are reviewed separately by the chief operating decision maker (the “CODM”), or the decision making group, in deciding how to allocate resources and in assessing performance. The Group’s CODM is Sohu.com Inc.’s Chief Executive Officer. ~~Some items, such as share-based compensation expense, operating expenses, other income and expense, and income tax benefit and expense, are not reviewed by the CODM. These items are disclosed~~

~~In connection with the reclassification~~second quarter of ~~the mobile business to the others business, as~~2015, the CODM ~~no longer reviewed the mobile business as a separate segment, the Group reclassified the mobile segment to~~did not consider the others segment ~~from~~to be significant enough to be separately reviewed. Therefore, in order to better reflect management’s perspective, the ~~first quarter of 2014.~~Group combined the brand advertising segment and the others segment, and now identifies them together as the Sohu segment. There are ~~four reportable~~now three segments in the Group, consisting of ~~brand advertising,~~the Sohu segment, the Sogou ~~(which mainly consists of the search and others business), Changyou (which mainly consists of the online game business)~~segment, and the ~~others business.~~Changyou segment. The Group has restated the presentation of its reportable segments for prior periods to conform to the current presentation.


	Three Months Ended September 30, 2014
	Brand Advertising and Others
							Brand
	Brand						Advertising															Three Months Ended September 30, 2014
	Advertising			Others			and Others			Sogou			Changyou			Eliminations			Consolidated			Sohu			Sogou			Changyou			Eliminations			Consolidated
Revenues (1)	$	135,301		$	12,325		$	147,626		$	106,158		$	180,819		$	(4,188	)	$	430,415		$	147,626		$	106,158		$	180,819		$	(4,188	)	$	430,415
Segment cost of revenues		(79,286	)		(5,831	)		(85,117	)		(46,463	)		(50,278	)		667			(181,191	)		(85,117	)		(46,463	)		(50,278	)		667			(181,191	)

Segment gross profit /(loss)	$	56,015		$	6,494			62,509			59,695			130,541			(3,521	)		249,224

Segment gross profit																							62,509			59,695			130,541			(3,521	)		249,224
SBC (2) in cost of revenues								(218	)		(193	)		(58	)		0			(469	)		(218	)		(193	)		(58	)		0			(469	)

Gross profit								62,291			59,502			130,483			(3,521	)		248,755			62,291			59,502			130,483			(3,521	)		248,755

Operating expenses:
Product development								(23,767	)		(26,113	)		(52,827	)		788			(101,919	)		(23,767	)		(26,113	)		(52,827	)		788			(101,919	)
Sales and marketing								(57,470	)		(24,570	)		(52,930	)		4,165			(130,805	)		(57,470	)		(24,570	)		(52,930	)		4,165			(130,805	)
General and administrative								(12,159	)		(3,208	)		(26,832	)		(189	)		(42,388	)		(12,159	)		(3,208	)		(26,832	)		(189	)		(42,388	)
SBC (2) in operating expenses								(922	)		(13,094	)		(456	)		141			(14,331	)		(922	)		(13,094	)		(456	)		141			(14,331	)

Total operating expenses								(94,318	)		(66,985	)		(133,045	)		4,905			(289,443	)		(94,318	)		(66,985	)		(133,045	)		4,905			(289,443	)

Operating profit /(loss)								(32,027	)		(7,483	)		(2,562	)		1,384			(40,688	)
Operating loss																							(32,027	)		(7,483	)		(2,562	)		1,384			(40,688	)

Other income /(expense)								1,860			(4	)		283			(1,243	)		896			1,860			(4	)		283			(1,243	)		896
Net interest income								1,966			860			4,642			0			7,468			1,966			860			4,642			0			7,468
Exchange difference								(15	)		4			(599	)		0			(610	)		(15	)		4			(599	)		0			(610	)

Income /(loss) before income tax benefit /(expense)								(28,216	)		(6,623	)		1,764			141			(32,934	)		(28,216	)		(6,623	)		1,764			141			(32,934	)

Income tax benefit /(expense)								1,327			0			(291	)		0			1,036			1,327			0			(291	)		0			1,036

Net income /(loss)							$	(26,889	)	$	(6,623	)	$	1,473		$	141		$	(31,898	)	$	(26,889	)	$	(6,623	)	$	1,473		$	141		$	(31,898	)


	Three Months Ended September 30, 2013
	Brand Advertising and Others
							Brand
	Brand						Advertising															Three Months Ended September 30, 2015
	Advertising			Others			and Others			Sogou			Changyou			Eliminations			Consolidated			Sohu			Sogou			Changyou			Eliminations			Consolidated
Revenues (1)	$	110,008		$	21,560		$	131,568		$	56,940		$	183,068		$	(3,253	)	$	368,323		$	172,902		$	162,300		$	188,875		$	(1,987	)	$	522,090
Segment cost of revenues		(60,512	)		(8,179	)		(68,691	)		(26,687	)		(30,093	)		109			(125,362	)		(99,742	)		(66,035	)		(48,821	)		539			(214,059	)

Segment gross profit /(loss)	$	49,496		$	13,381			62,877			30,253			152,975			(3,144	)		242,961

Segment gross profit																							73,160			96,265			140,054			(1,448	)		308,031
SBC (2) in cost of revenues								(59	)		(24	)		(45	)		0			(128	)		(184	)		(12	)		96			0			(100	)

Gross profit								62,818			30,229			152,930			(3,144	)		242,833			72,976			96,253			140,150			(1,448	)		307,931

Operating expenses:
Product development								(21,758	)		(17,700	)		(30,181	)		0			(69,639	)		(23,708	)		(31,573	)		(40,178	)		1,348			(94,111	)
Sales and marketing								(54,748	)		(10,673	)		(28,092	)		3,144			(90,369	)		(52,315	)		(25,775	)		(21,639	)		1,599			(98,130	)
General and administrative								(11,742	)		(2,952	)		(12,872	)		0			(27,566	)		(12,966	)		(3,956	)		(17,741	)		(203	)		(34,866	)
Goodwill impairment and impairment of intangible assets acquired as part of a business acquisition																							0			0			(40,324	)		0			(40,324	)
SBC (2) in operating expenses								(542	)		(5,389	)		(286	)		3,147			(3,070	)		(2,228	)		1,262			3,368			0			2,402

Total operating expenses								(88,790	)		(36,714	)		(71,431	)		6,291			(190,644	)		(91,217	)		(60,042	)		(116,514	)		2,744			(265,029	)

Operating profit /(loss)								(25,972	)		(6,485	)		81,499			3,147			52,189			(18,241	)		36,211			23,636			1,296			42,902
Other income /(expense) (3)								162,372			(27	)		381			(161,193	)		1,533

Other income																							91,736			32			58,554			(80,103	)		70,219
Net interest income								1,637			231			5,727			0			7,595			587			1,326			3,279			0			5,192
Exchange difference								(170	)		49			(1,184	)		0			(1,305	)		1,360			627			2,335			0			4,322
Income /(loss) before income tax expense								137,867			(6,232	)		86,423			(158,046	)		60,012

Income before income tax expense																							75,442			38,196			87,804			(78,807	)		122,635

Income tax expense								(5,328	)		(0	)		(13,595	)		0			(18,923	)		(1,091	)		(2,586	)		(25,784	)		0			(29,461	)

Net income /(loss)							$	132,539		$	(6,232	)	$	72,828		$	(158,046	)	$	41,089
Net income																						$	74,351		$	35,610		$	62,020		$	(78,807	)	$	93,174


	Nine Months Ended September 30, 2013
	Brand Advertising and Others
							Brand
	Brand						Advertising															Nine Months Ended September 30, 2015
	Advertising			Others			and Others			Sogou			Changyou			Eliminations			Consolidated			Sohu			Sogou			Changyou			Eliminations			Consolidated
Revenues (1)	$	277,974		$	57,800		$	335,774		$	146,144		$	543,024		$	(10,119	)	$	1,014,823		$	450,776		$	426,099		$	599,726		$	(5,613	)	$	1,470,988
Segment cost of revenues		(151,105	)		(28,522	)		(179,627	)		(71,972	)		(91,098	)		329			(342,368	)		(306,221	)		(177,401	)		(174,024	)		1,091			(656,555	)

Segment gross profit /(loss)	$	126,869		$	29,278			156,147			74,172			451,926			(9,790	)		672,455

Segment gross profit																							144,555			248,698			425,702			(4,522	)		814,433
SBC (2) in cost of revenues								(197	)		(29	)		(70	)		0			(296	)		(847	)		(119	)		8			0			(958	)

Gross profit								155,950			74,143			451,856			(9,790	)		672,159			143,708			248,579			425,710			(4,522	)		813,475

Operating expenses:
Product development								(62,566	)		(45,131	)		(76,364	)		0			(184,061	)		(72,362	)		(93,285	)		(124,156	)		3,740			(286,063	)
Sales and marketing								(142,581	)		(28,047	)		(59,559	)		9,790			(220,397	)		(148,241	)		(64,718	)		(76,365	)		5,196			(284,128	)
General and administrative								(29,192	)		(7,020	)		(38,689	)		0			(74,901	)		(44,551	)		(10,873	)		(56,076	)		(459	)		(111,959	)
Goodwill impairment and impairment of intangible assets acquired as part of a business acquisition																							0			0			(40,324	)		0			(40,324	)
SBC (2) in operating expenses								(1,701	)		(5,800	)		(875	)		3,149			(5,227	)		(14,371	)		(5,681	)		(7,539	)		85			(27,506	)

Total operating expenses								(236,040	)		(85,998	)		(175,487	)		12,939			(484,586	)		(279,525	)		(174,557	)		(304,460	)		8,562			(749,980	)

Operating profit /(loss)								(80,090	)		(11,855	)		276,369			3,149			187,573			(135,817	)		74,022			121,250			4,040			63,495
Other income /(expense) (3)								164,533			59			2,197			(161,193	)		5,596

Other income /(expense)																							91,679			122			63,896			(82,761	)		72,936
Net interest income								5,275			837			13,682			0			19,794			2,432			4,011			11,012			0			17,455
Exchange difference								(752	)		196			(4,718	)		0			(5,274	)		1,124			337			1,991			0			3,452

Income /(loss) before income tax expense								88,966			(10,763	)		287,530			(158,044	)		207,689			(40,582	)		78,492			198,149			(78,721	)		157,338

Income tax expense								(11,079	)		(6	)		(44,107	)		0			(55,192	)		(5,642	)		(5,900	)		(45,738	)		0			(57,280	)

Net income /(loss)							$	77,887		$	(10,769	)	$	243,423		$	(158,044	)	$	152,497		$	(46,224	)	$	72,592		$	152,411		$	(78,721	)	$	100,058


	As of September 30, 2014											As of December 31, 2014
	Brand Advertising and Others		Sogou		Changyou		Eliminations			Consolidated		Sohu		Sogou		Changyou		Eliminations			Consolidated
Cash and cash equivalents	$	460,765	$	202,826	$	177,305	$	0		$	840,896	$	431,272	$	224,273	$	220,795	$	0		$	876,340
Accounts receivable, net		124,964		12,420		42,702		(92	)		179,994		137,183		15,341		77,969		(92	)		230,401
Fixed assets, net		252,777		44,512		244,614		0			541,903		252,255		44,686		243,837		0			540,778
Total assets (1)	$	1,148,385	$	279,651	$	1,572,097	$	(148,263	)	$	2,851,870	$	1,159,403	$	305,975	$	1,547,965	$	(146,334	)	$	2,867,009

Sohu (excluding Fox Video Limited), Sogou, Changyou, ~~Sogou,~~ and Fox Video Limited (“Sohu Video”) have incentive plans, and prior to June 28, 2013 7Road.com Limited (“7Road”) had an incentive plan, for the granting of share-based awards, including common stock or ordinary shares, share options, restricted shares and restricted share units, to ~~their executive officers,~~members of the boards of directors, management and other key employees.

Sohu ~~Changyou,~~(excluding Sohu Video), Sogou, and ~~Sogou~~Changyou Share-based Awards

For Sohu (excluding Sohu Video) share options that Sohu granted before 2006 and Sohu restricted share units, Sogou share-based awards, and Changyou ~~and Sogou,~~share-based awards under the Changyou 2008 Share Incentive Plan, share-based compensation expense is recognized as costs and expenses in the consolidated statements of comprehensive income based on the fair value of the related share-based awards on their grant dates.

For Tencent restricted share units that Tencent had granted to employees who transferred to Sogou with the Soso search-related businesses, share-based compensation expense is recognized ~~by Sogou~~ in the consolidated statements of comprehensive income based on the then-current fair value at each reporting date.

For ~~Sogou Class A Ordinary Shares repurchased~~1,068,000 Sohu stock options contractually granted on February 7, 2015, 2,400,000 Changyou share options converted from ~~employees~~restricted share units on February 16, 2015, and 1,998,000 Changyou share options contractually granted on June 1, 2015, awards are expected to vest and become exercisable in four equal installments over a period of four years, with each installment vesting upon satisfaction of a service period requirement and certain subjective performance targets. For purposes ofASC 718-10-25, as of September 30, 2015 no grant date had occurred, because no grant date can be established until a mutual understanding is reached between the companies and the recipients clarifying the subjective performance requirements. In accordance withASC 718-10-55, as the service inception date preceded the grant date, compensation expense was accrued beginning on the service inception date and will be re-measured on each subsequent reporting date before the grant date is established, based on the then-current fair value of the ~~Group~~awards. The estimate of the awards’ fair value will be fixed in the ~~second quarter of 2014, share-based~~period in which the grant date occurs, and cumulative compensation expense ~~is recognized by the Sohu Group in the consolidated statements of comprehensive income in an amount equal to the excess of the repurchase price over~~will be adjusted based on the fair value at the ~~repurchase date~~grant date. In determining the fair value of stock options and share options granted by Sohu and Changyou, the public market price of the ~~Sogou Class A Ordinary Shares that the Group repurchased. See Note 11 - Sohu.com Inc. Shareholders’ Equity.~~

~~Share-based compensation expense is charged to the shareholders’ equity or noncontrolling interest section in the consolidated balance sheets.~~underlying shares at each reporting date was used, and a binomial valuation model was applied.

On January 4, 2012, Sohu Video, the holding entity of Sohu’s video division, adopted a 2011 Share Incentive Plan (the “Video 2011 Share Incentive Plan”) which provides for the issuance of up to 25,000,000 ordinary shares of Sohu Video (representing approximately 10% of the outstanding Sohu Video shares on a fully-diluted basis) to management and key employees of the video division and to Sohu management. As of September 30, ~~2014,~~2015, grants of options for the purchase of 16,368,200 ordinary shares of Sohu Video had been contractually made, of which options for the purchase of 4,972,800 ordinary shares were vested.

For purposes ofASC 718-10-25, no grant date may be established until a mutual understanding can be reached between Sohu Video and the recipients as to the option awards’ key terms and conditions, and such mutual understanding cannot be reached until the fair value of the awards is determinable and can be accounted for. No grant date could be determined as of September 30, ~~2014,~~2015, no grant date had occurred, because the broader terms and conditions of the option awards had neither been finalized nor mutually agreed upon with the recipients.

~~Under~~ In accordance withASC 718-10-55, if the service inception date precedes the grant date for equity-classified awards, compensation expense should be accrued beginning on the service inception date and re-measured on each subsequent reporting date before the grant date, based on the estimated fair value of the awards. The estimate of the awards’ fair value would be fixed in the period in which the grant date occurs, and cumulative compensation expense should be adjusted based on the fair value at the grant date. Managementmanagement determined that the service inception date with respect to vested option awards for the purchase of 4,972,800 shares had preceded the grant date. Therefore, the Group began to recognize compensation expense for Sohu Video share-based awards in the second quarter of 2014 and re-measured, and will re-measure, the compensation expense on each subsequent reporting date based on the then-current fair values of the awards until the grant date is established.

For the three and nine months ended September 30, 2014, negative $0.1 million and positive $4.1 million, respectively, of share-based compensation expense was recognized as costs and expenses in the consolidated statements of comprehensive income. The share-based compensation expense was recognized for vested awards based on the difference between their re-measured fair value as of September 30, 2014 and the fair value as of the previous reporting date.

On July 10, 2012, 7Road adopted the 2012 Share Incentive Plan (the “7Road 2012 Share Incentive Plan”), which initially provided for the issuance to selected directors, officers, employees, consultants and advisors of 7Road of up to 5,100,000 ordinary shares of 7Road (amounting to 5.1% of the then outstanding 7Road shares on a fully-diluted basis). On November 2, 2012, 7Road’s Board of Directors and its shareholders approved an increase from 5,100,000 to 15,100,000 ordinary shares (amounting to 13.7% of the then outstanding 7Road shares on a fully-diluted basis) under the 7Road 2012 Share Incentive Plan.

On May 1, 2013, Changyou entered into an agreement with noncontrolling shareholders to acquire all of the outstanding ordinary shares of 7Road held by the noncontrolling shareholders. The acquisition closed on June 5, 2013.

On June 28, 2013, 7Road’s Board of Directors approved the cancellation of ~~the 7Road 2012 Share Incentive Plan.~~this incentive plan. 7Road concurrently offered to a total of 42 7Road employees holding an aggregate of 2,223,750 restricted share units which had been granted under ~~the 7Road 2012 Share Incentive Plan~~this incentive plan the right to exchange their restricted share units for, at each employee’s election, in each case subject to the employee’s continued employment by 7Road, either (i) Scheme I: the right to a cash payment of up to an aggregate of $2.90 per restricted share unit exchanged, vesting and payable at the rate of 40%, 30% and 30%, respectively, on the first, second and third anniversaries of July 18, 2012, which is the date when the surrendered restricted share units were granted under the 7Road 2012 Share Incentive Plan, or (ii) Scheme II: the right to receive an annual cash bonus, over a seven-year period commencing July 1, 2013, based on the adjusted annual cumulative net income of 7Road. ~~All~~As of June 28, 2013, all restricted share units held by these 42 ~~holders under the~~ 7Road ~~2012 Share Incentive Plan as of June 28, 2013 were~~employees had been included in this exchange program.

In the third quarter of 2013, 7Road granted to an additional 48 7Road employees the right to receive an annual cash bonus under Scheme II with the same terms as described above.

On August 17, 2015, Changyou completed the sale of the 7Road business. See Note 12- Business Transactions. As ~~the original awards~~ of ~~restricted share units made~~August 17, 2015, Changyou had recognized an aggregate of $4.2 million of compensation expense under the 7Road 2012 Share Incentive Plan ~~included as a vesting condition the completion~~for Scheme I and $0.7 million of ~~an initial public offering (an “IPO”), which is not considered probable until it occurs, no share-based~~ compensation expense ~~was recognized~~ for Scheme II. In the ~~fair value of the original awards. Incremental~~future, there will be no compensation expense ~~which is not classified as share-based compensation expense, is equal to~~recognized under the ~~fair values of the two new compensation schemes included in the exchange program as of the date of the modification resulting from the exchange program.~~

For Scheme I, compensation expense of $3.9 million was recognized as of September 30, 2014 with respect to the modification, and $0.8 million will be recognized in the consolidated statements of comprehensive income ratably over the remaining vesting period of the awards. For Scheme II, the incremental compensation expense varies depending on 7Road’s financial performance.7Road 2012 Share Incentive Plan.

Share-based compensation expense was recognized in costs and expenses for the three and nine months ended September 30, 2014 and ~~2013,~~2015, respectively, as follows (in thousands):

Share-based compensation expense was recognized for share awards of Sohu (excluding Sohu Video), Sogou, Changyou ~~Sogou~~ and Sohu Video as follows (in thousands):

There was no capitalized share-based compensation expense for the three and nine months ended September 30, 2014 and ~~2013.~~

On February 8, 2014, Changyou’s Board of Directors approved three new employee incentive plans with terms of 10 years, effective January 1, 2014, under which Changyou may pay compensation to employees based on Changyou’s profits, or the profits of specified projects. Eligible employees will receive a cash award from the plans as a bonus based on the number of employee incentive instruments they hold in the plans.

Under two of these three plans, Changyou may pay compensation to employees based on Changyou’s profits. Changyou will distribute to eligible employees who participate in the plans up to 5% of Changyou’s annual adjusted net profits. Combined, these two plans will distribute up to 10% of Changyou’s annual adjusted net profits. Eligible employees will participate in these plans by paying an amount to purchase instruments that will entitle them, while they are employed by Changyou, to receive annual compensation under the plans. After four years of service to Changyou, employees who participate in either of these two plans will be entitled to sell their instruments to other employees at any time during their employment with Changyou at a price negotiated between the two employees, and by doing so would be compensated with the present value of their expected future cash bonuses for the remaining period of the incentive plans. Management concluded that compensation expense associated with these two plans should be accounted for by analogy to deferred compensation arrangements, and that the present value of the amounts forecasted to be distributed under the plans should be amortized over the first four years after the effective date of the plans, before the instruments are first allowed to be transferred to other employees; that the present value of future cash bonuses in the remaining period should be re-measured at each reporting date; that the gain or loss resulting from the re-measurement in the first four years should be amortized over the remaining portion of the four-year period; and that the gain or loss after the four-year period should be booked immediately upon re-measurement at each reporting date after the four-year period. For the three and nine months ended September 30, 2014, compensation expense recognized for these two plans was $1.5 million and $4.3 million, respectively.

The third employee incentive plan is structured to allow eligible employees to receive up to 20% of the annual adjusted net profits of projects that they work on. Unlike under the first two plans, certain of the incentive instruments to be issued under this plan will permit participating employees to sell the instruments to other employees at any time during their employment, and certain of the incentive instruments will not permit participating employees to sell their instruments to other employees. Management concluded that compensation expense in the former case should be accounted for by analogy to deferred compensation arrangements, and accordingly should be accrued as of the effective date of the plan at the then present value of the amounts forecasted to be distributed under the plan; that the gain or loss resulting from the re-measurement of the cash bonus in the remaining period of the plan should be booked immediately upon re-measurement; and that compensation expense in the latter case should be recognized when the amount of relevant distributions under these plans is determined and Changyou’s obligations are established each year. For the three and nine months ended September 30, 2014, compensation expense recognized for this plan was $1.2 million and $27.9 million, respectively.2015.

The Sohu Group’s financial instruments include cash equivalents, restricted time deposits, short-term investments, accounts receivable, prepaid and other current assets, held-for-sale assets, available-for-sale equity securities under long-term investments, accounts payable, accrued liabilities, receipts in advance and deferred revenue, short-term bank loans, other short-term liabilities, held-for-sale liabilities, long-term accounts payable and long-term bank loans.

U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:

Level 1—1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—2 – include other inputs that are directly or indirectly observable in the market place.

Level 3—3 – unobservable inputs which are supported by little or no market activity.

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2014 (in thousands):

The following table sets forth the financial instruments, measured at fair value by level within the fair value hierarchy, as of September 30, ~~2014~~2015 (in thousands):


			Fair value measurements at reporting date using								Fair value measurements at reporting date using
Items	As of September 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		As of September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	473,621	$	0	$	473,621	$	0	$	590,870	$	0	$	590,870	$	0
Restricted time deposits		443,686		0		443,686		0		381,087		0		381,087		0
Short-term investments		209,508		0		209,508		0		260,431		0		260,431		0
Available-for-sale equity securities		13,594		13,594		0		0		15,939		15,939		0		0

Total	$	1,140,409	$	13,594	$	1,126,815	$	0	$	1,248,327	$	15,939	$	1,232,388	$	0

~~The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013 (in thousands):~~

~~The following table sets forth the reconciliation of the fair value measurements using significant unobservable inputs (level 3) from December 31, 2013 to September 30, 2014 (in thousands):~~

The Sohu Group’s cash equivalents mainly consist of time deposits and money market funds with original maturities of three months or less. The fair values of cash equivalents are determined based on the pervasive interest rates in the market. The Group classifies the valuation techniques that use the pervasive interest rates input as Level 2 of fair value measurements. Generally there are no quoted prices in active markets for identical cash equivalents at the reporting date. In order to determine the fair value, the Group must use the discounted cash flow method and observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Restricted time deposits are valued based on the prevailing interest rates in the market using the discounted cash flow method. The Sohu Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.

In February 2013, Sohu deposited $9.0 million in cash into restricted time deposit accounts at a bank as collateral for credit facilities provided by the bank to certain Sogou employees. The facilities were intended to fund the employees’ early exercise of Sogou share options and related PRC individual income tax. Sohu is not subject to any additional potential payments other than the restricted time deposit amounts, and believes that the fair value of its guarantee liability is immaterial.

Commencing in 2012, Changyou drew down loans from offshore branches of certain banks for the purposes of expediting the payment of a special one-time cash dividend to its shareholders, providing working capital to support its overseas operations, and funding its acquisitions and its share repurchase program. These bank loans are secured by an equivalent or greater amount of RMB deposits by Changyou in the onshore branches of such banks. The loans from the offshore branches of the lending banks are classified as short-term and long-term bank loans ~~according to their~~based on the loans’ payment terms.

As of September 30, ~~2014,~~2015, the total amount of the bank loans was ~~$370~~$344.5 million, all of which carried a floating rate of interest based on the London Inter-Bank Offered Rate (“LIBOR”). These loans were secured by RMB deposits in onshore branches of those banks in the total amount of $371.8 million. The deposited amounts are recognized as restricted time deposits. For the three and nine months ended September 30, 2015, interest income from the restricted time deposits securing the loans was $3.0 million and $10.2 million, respectively, and interest expense on the loans was $1.8 million and $5.3 million, respectively. For the three and nine months ended September 30, 2014, interest income from the restricted time deposits securing the loans was $4.1 million and $12.0 million, respectively, and interest expense on the bank loans was $1.7 million and $4.6 million, respectively. For the three and nine months ended September 30, 2013, interest income from the restricted time deposits securing the loans was $2.9 million and $8.8 million, respectively, and interest expense on the bank loans was $2.3 million and $6.4 million, respectively.

In February 2013, Sohu deposited $9 million in cash into restricted time deposit accounts at a bank as collateral for credit facilities provided by the bank to certain Sogou employees. The facilities were intended to fund the employees’ early exercise of Sogou share options and related PRC individual income tax. Sohu is not subject to any additional potential payments other than the restricted time deposit amounts, and believes that the fair value of its guarantee liability is immaterial.

In accordance withASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Sohu Group elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the consolidated statements of comprehensive income as other income /(expense). To estimate fair value, the Group refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.

As of September 30, ~~2014,~~2015, the Sohu Group’s investment in financial instruments was ~~$210~~$260.4 million. The investment instruments were issued by commercial banks in China, and have a variable interest rate indexed to performance of underlying assets. Since these investments’ maturity dates are within one year, they are classified as short-term investments. For the three and nine months ended September 30, 2015, the Sohu Group recorded in the consolidated statements of comprehensive income changes in the fair value of short-term investments in the amounts of $3.0 million and $6.8 million, respectively. For the three and nine months ended September 30, 2014, the Sohu Group recorded in the consolidated statements of comprehensive income changes in the fair value of short-term investments in the amount of both $0.4 million. For the three and nine months ended September 30, 2013, the Group recorded in the consolidated statements of comprehensive income changes in the fair value of short-term investments in the amount of $0.8 million and $2.3 million, respectively.

Available-for-sale equity securities are valued using the market approach based on the quoted prices in active markets at the reporting date. The Group classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. On August 12, 2014, Sohu acquired approximately 6% of the total outstanding common shares of Keyeast Co., Ltd., a Korean-listed company (“Keyeast”), for a purchase price of ~~$14.9~~$15.1 million. The Sohu Group classified this investment as available-for-sale equity securities under long-term investments, and reported it at fair value. As of September 30, ~~2014,~~2015, the fair value of the Keyeast available-for-sale equity securities held by Sohu was ~~$13.6~~$15.9 million. ~~The~~An unrealized ~~loss~~gain representing the change in fair value of ~~$1.3~~$0.8 million in the aggregate was recorded as ~~a deduction from~~an addition to accumulated other comprehensive income in the Sohu Group’s consolidated balance sheets.

In September 2010, Sohu purchased from a PRC-based company (the “Debtor”) a convertible debt security in the principal amount of $74.6 million (or RMB0.5 billion) with interest, payable quarterly in cash, of 3.8% per annum and an initial maturity of twelve months, subject to extension in Sohu’s sole discretion for additional six-month periods. The Debtor’s obligations on the debt were secured by a pledge from the Debtor’s parent company of its entire equity interest in the Debtor. The Company extended the maturity of the security, at an interest rate of 6.8% per annum, for successive six-month periods through March 2014. Under the terms of the security, the Company had the option, exercisable on March 31, 2014, to convert the outstanding principal into fixed percentages of equity interests in two companies which are affiliates of the Debtor. On March 31, 2014, the Company neither extended the debt security nor exercised the option, and accordingly the $81.3 million (or RMB0.5 billion) principal amount of the security was repaid to the Company on that date.

For the three and nine months ended September 30, 2014, interest income generated from this debt security amounted to nil and $1.37 million, respectively. For the three and nine months ended September 30, 2013, interest income generated from this debt security amounted to $1.40 million and $4.14 million, respectively.

The Sohu Group elected the fair value option to account for its investments in debt securities at their initial recognition. Changes in fair value were recognized in other income /(expense). For the three and nine months ended September 30, 2014 and 2013, there was no change in fair value. To estimate fair value, the Group used the income approach, which considers the estimated future return from the investment and the probabilities of getting these returns. The Group classifies the valuation techniques that use these inputs as Level 3 of fair value measurements.

~~As discussed in Note 1—The Company and Basis of Presentation, in~~In September 2013, Sogou entered into Repurchase Option Agreements with Sohu.com (Search) Limited (“Sohu ~~Search~~Search”) and Photon Group Limited (“Photon”), the investment vehicle of the Sohu Group’s Chairman and Chief Executive Officer Dr. Charles Zhang, and a Repurchase/Put Option Agreement with China Web Search (HK) Limited (“China Web”), with respect to Series A Preferred Shares of Sogou held by them. ~~On March 24, 2014,~~See Note 12 – Sogou purchased from China Web, pursuant to the Repurchase/Put Option Agreement between Sogou and China Web, 14.4 million Series A Preferred Shares of Sogou, for an aggregate purchase price of $47.3 million.Transactions.

~~Sogou’s~~The repurchase options ~~with Photon and China Web~~ were initially recognized in additional paid-in capital in the Sohu Group’s consolidated balance sheets at fair value when the agreements were signed. Any subsequent changes in the fair values of the repurchase options were not and will not be recognized. On March 24, 2014, the repurchase option with China Web was exercised by Sogou. As of September 30, 2014, the remaining balance for the repurchase option with Photon in additional paid-in capital was $1.2 million, based on the fair value of the repurchase option on September 16, 2013.

~~China Web’s~~The put option ~~with Sogou~~ was initially recognized in other short-term liabilities in the Sohu Group’s consolidated balance sheets at fair value when the agreement was signed. Subsequent changes in the fair value of the put option were recognized quarterly in other income /(expense) in the Sohu Group’s consolidated statements of comprehensive income. ~~After Sogou’s repurchase of the Series A Preferred Shares from China Web on March 24, 2014, the other short-term liabilities recognized with respect to China Web were reversed to zero.~~

Management determined the fair values of the repurchase options ~~with Photon and China Web~~ when the agreements were signed, and of the put option ~~with China Web~~ before Sogou exercised the repurchase option, using the binominal model, with a discount for lack of marketability, given that the repurchase options and the put option were not publicly traded at the time of grant. Management made the determination ~~with the assistance of a qualified professional appraiser~~ using management’s estimates and assumptions. The Sohu Group classifies the valuation techniques that use these inputs as Level 3 of fair value measurements.

As of September 30, 2015, all of the Series A Preferred Shares of Sogou that were subject to the repurchase options and the put option had been repurchased by Sogou, and the balances of the additional paid-in capital recognized with respect to the repurchase options and of the other short-term liabilities recognized with respect to the put option were zero.

The ~~following are~~fair values of other financial instruments ~~not~~are estimated for disclosure purposes where the financial instruments’ carrying values approximate their fair values.

In September 2015, Changyou’s VIE Beijing Guanyou Gamespace Digital Technology Co., Ltd. (“Guanyou Gamespace”) entered into an agreement to sell all of the equity interests of Beijing Doyo Internet Technology Co., Ltd. (“Doyo”), which engages primarily in the online advertising business, to a PRC company owned by the former members of the management of Doyo. The aggregate consideration contemplated by the agreement includes cash consideration of approximately $2.9 million, and forgiveness, effective upon the completion of the sale, of contingent consideration payable to former members of the management of Doyo in the amount of $6.0 million. As of the date of this report, this sale has been completed and Changyou has received most of the cash consideration.

Management treated the fact that the total consideration for the sale of Doyo pursuant to the agreement will be lower than the carrying value of Doyo’s net assets as an indicator that the goodwill associated with Doyo might be impaired. Therefore, in September 2015, management performed a goodwill impairment test and recognized goodwill impairment in the amount of $1.9 million. See Note 5 – Goodwill.

As a consequence of the sale agreement, the assets and liabilities attributable to Doyo were classified as assets and liabilities held for sale and measured at the lower of their carrying amounts and their fair ~~value~~values, less selling costs, in the consolidated balance ~~sheets,~~sheet as of September 30, 2015. Details of the aggregate assets and liabilities as of September 30, 2015 are as follows (in thousands):

In August 2014, Sohu invested $4.8 million in SoEasy Internet Finance Group Limited (“SoEasy”) and in April 2015 Sohu invested an additional $16.3 million in SoEasy. As of September 30, 2015, Sohu’s accumulated investment in SoEasy was $21.1 million and Sohu held approximately 35% of SoEasy’s equity capital. Sohu continued to account for this investment under the equity method, since Sohu can exercise significant influence but does not own a majority of SoEasy’s equity capital or control SoEasy.

In September 2015, Sogou paid $12.0 million in cash for ~~which~~approximately 3% of the ~~fair value was estimated~~equity capital of Zhihu Technology Limited (“Zhihu”), a company that mainly engages in the business of operating an online question and answer-based knowledge and information sharing platform. Sogou accounted for ~~disclosure purposes.~~the investment in Zhihu using the cost method, since Sogou does not have significant influence over Zhihu.

Accounts receivable and prepaid and other current assets are financial assets with carrying values that approximate fair value due to their short-term nature. Short-term accounts payable, accrued liabilities, receipts in advance and deferred revenue, short-term bank loans and other short-term liabilities are financial liabilities with carrying values that approximate fair value due to their short term nature.

For short-term bank loans, the rates of interest under the agreements with the lending banks were determined based on the prevailing interest rates in the market. The Sohu Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. For other short-term receivables and payables, the Group estimated fair values using the discounted cash flow method, which is unobservable in the market. The Group classifies the valuation technique as Level 3 of fair value measurements.

~~Prepaid non-current assets are financial assets with carrying values that approximate fair value because the impact of applying a discount rate to the carrying values would be immaterial.~~ Long-term accounts payable and long-term bank loans are financial liabilities with carrying values that approximate fair value due to any changes in fair value, after considering the discount rate, being immaterial. For ~~prepaid non-current assets~~long-term accounts payable and long-term ~~accounts payable,~~bank loans, the Group estimated fair values using the discounted cash flow method, which is unobservable in the market. The Sohu Group classifies the valuation technique as Level 3 of fair value measurements.

Commencing in the second quarter of 2015, the Company’s management did not consider the others segment to be significant enough to be separately reviewed. Therefore, in order to better reflect management’s perspective, the Company combined the brand advertising segment and the others segment, and now identifies them together as the Sohu segment.

The changes in the carrying value of goodwill by segment are as follows (in thousands):

Sohu.com Inc. is subject to United States (“U.S.”) income tax, and Changyou’s income that is from a U.S. source is generally subject to U.S. income tax. The majority of the subsidiaries and VIEs of the Sohu Group are based in mainland China and are subject to income taxes in the PRC. These China-based subsidiaries and VIEs conduct substantially all of the Sohu Group’s operations, and generate most of the Sohu Group’s income or losses.

The Group did not have any penalties or significant interest associated with tax positions for the three and nine months ended September 30, ~~2014,~~2015, nor did the Group have any significant unrecognized uncertain tax positions for the three and nine months ended September 30, ~~2014.~~2015.

The PRC Corporate Income Tax Law (the “CIT Law”) applies an income tax rate of 25% to all enterprises but grants preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs can enjoy an income tax rate of 15% for three years, but need to re-apply after the end of the three-year period. If at any time during the three-year period the relevant tax bureau questions whether an enterprise continues to qualify as an HNTE, the enterprise can be subject to further tax examination and may not be able to continue to enjoy the preferential tax rate. In addition, the CIT Law and its implementing regulations provide that a “Software Enterprise” can enjoy an income tax exemption for two years beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years. An entity that qualifies as a “Key National Software Enterprise” can enjoy a further reduced preferential income tax rate of 10% for two years, but needs to re-apply after the end of the two-year period.

As of September 30, ~~2014,~~2015, the following principal entities of the Sohu Group were qualified as HNTEs and were entitled to an income tax rate of 15%, except that Beijing AmazGame Age Internet Technology Co., Ltd. (“AmazGame”) was entitled to an income tax rate of 10% because it was also qualified as a Key National Software Enterprise and was in an initial preferential period..

The CIT Law imposes a 10% withholding income tax for dividends distributed by ~~foreign invested~~foreign-invested enterprises in the PRC to their immediate holding companies outside ~~mainland~~Mainland China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between ~~mainland~~Mainland China and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be subject to a 5% withholding tax rate under an arrangement between the PRC and the Hong Kong Special Administrative Region on the “Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital” if such holding company is considered a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign invested enterprise distributing the dividends, subject to approval of the PRC local tax authority. However, if the Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to a withholding tax rate of 10%.

In order to fund the distribution of a dividend to shareholders of ~~Sohu’s~~the Sohu Group’s majority-owned subsidiary Changyou, Changyou’s Board of Directors ~~determined~~resolved to cause one of its PRC subsidiaries to declare and distribute a cash dividend of ~~all~~portions of its 2012 ~~stand alone earnings and half of its 2013 and 2014 stand alone~~to 2015 stand-alone earnings to its direct overseas parent company, Changyou.com (HK) Limited (“Changyou ~~HK.~~HK”). With the exception of that dividend, the Sohu Group does not intend to have any of its PRC subsidiaries distribute any undistributed profits of such subsidiaries to their direct overseas parent companies, but rather intends that such profits will be permanently reinvested by such subsidiaries for their PRC operations.

As of September 30, ~~2014,~~2015, Changyou had accrued deferred tax liabilities in the amount of ~~$21.5~~$24.1 million for PRC withholding tax.

~~Effective September 1, 2012, a pilot program (the “Pilot Program”) for transition~~Revenues from the ~~imposition of PRC~~brand advertising business, ~~tax (“Business Tax”)~~revenues from the search and search-related business, revenues from Changyou’s Web games that were not developed in-house and from licensed mobile games, as well as revenues from mobile-related services which are recorded as others revenue are subject to ~~the imposition of~~ value-added tax (“VAT”) for revenues from certain industries was expanded from Shanghai to eight other cities and provinces in China, including Beijing and Tianjin. Commencing August 1, 2013 the Pilot Program was expanded to all regions in the PRC. All the Sohu Group’s brand advertising and search revenues as well as certain online game revenues were subject to the Pilot Program.

. To record VAT payable, ~~on advertising and search revenues as well as online game revenues from Changyou’s Web game operations that were not developed in house is~~the Group adopted the net presentation method, which presents the difference between the output VAT (at a rate of 6%) and available input VAT amount (at the rate applicable to the supplier). Other online game revenues ~~were not affected by~~from the ~~Pilot Program. Before~~operation of PC games and ~~after the Pilot Program, revenues from MMOG operations~~self-developed mobile games are subject to a 5% PRC business tax (“Business Tax, and revenues of 7Road that deemed to be derived from the sale of software are subject to VAT. VAT payable by 7Road is at a rate of 17%, with a 14% immediate tax refund irrespective of the availability of any input VAT, resulting in a net rate of 3%Tax”).

The Group adopted the net presentation method for its brand advertising and search businesses both before and after the implementation of the Pilot Program. The Group adopted the gross presentation method for revenues of 7Road deemed to be derived from the sale of software both before and after the implementation of the Pilot Program.

Sohu.com Inc. is a Delaware corporation that is subject to U.S. corporate income tax on its taxable income at a rate of ~~34% or~~up to 35%. To the extent that itSohu.com Inc. has U.S. taxable income, which generally arises mainly from interest income of the Sohu Group, the Group accrues U.S. corporate income tax in ~~its~~the Group’s consolidated statements of comprehensive income and makes estimated tax payments as and when required by U.S. law.

The Group is subject to various taxes in different jurisdictions, primarily the US and the PRC. Management reviews regularly the adequacy of the provisions for taxes as they relate to the income and transactions of the Group. In order to assess uncertain tax positions, the Sohu Group applies a more likely than not threshold and a two-step approach for tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement.

AsThe following table sets forth our contractual obligations as of September 30, 2014, the Sohu Group had commitments for bandwidth purchases in the amount of $62.9 million, commitments for video content purchases in the amount of $52.0 million, commitments for purchases of games developed by third-parties in the amount of $43.7 million, commitments for purchases of cinema advertisement slot rights in the amount of $40.1 million, commitments for operating leases in the amount of $39.7 million, and commitments for other content and service purchases in the amount of $22.9 million.2015 (in thousands):

The Sohu Group is a party to various litigation matters which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Group’s business, results of operations, financial condition and cash flows.

The Chinese market in which the Sohu Group operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability to operate an Internet business and to conduct brand advertising, search and ~~others,~~search-related, online game, and others services in the PRC. Though the PRC has, since 1978, implemented a wide range of market-oriented economic reforms, continued reforms and progress towards a full market-oriented economy are uncertain. In addition, the telecommunication, information, and media industries remain highly regulated. Restrictions are currently in place and are unclear with respect to which segments of these industries foreign-owned entities, like the Sohu Group, may operate. The Chinese government may issue from time to time new laws or new interpretations of existing laws to regulate areas such as telecommunication, information and media. Certain risks related to PRC law that could affect the Sohu Group’s VIE structure are discussed in Note ~~10 - VIE.~~9 – VIEs.

Regulatory risks also encompass interpretation by PRC tax authorities of current tax law, including the applicability of certain preferential tax treatments. The Sohu Group’s legal structure and scope of operations in China could be subject to restrictions, which could result in limits on its ability to conduct business in the PRC.

The Sohu Group’s sales, purchase and expense transactions are generally denominated in RMB and a significant portion of its assets and liabilities are denominated in RMB. The RMB is not freely convertible into foreign currencies. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB by its subsidiaries in China may require certain supporting documentation in order to effect the remittance.

~~Contingent consideration consists of the fair value of potential payments related to two acquisitions made by Changyou.~~

Changyou’s acquisition of ~~Beijing~~ Doyo ~~Internet Technology Co., Ltd. (“Doyo”),~~ included a contingent consideration arrangement that requires additional consideration to be paid by Changyou based on the achievement of specified performance milestones by Doyo for the fiscal years 2013 through 2015. The ~~range of the undiscounted amounts Changyou could pay under the contingent consideration agreement is between nil and $7.3 million. The~~ fair value of the contingent consideration ~~in the amount of $4.8 million,~~ was recognized on the acquisition date using the income approach /discounted cash flow method with a scenario analysis applied. There were no indemnification assets involved.

~~Changyou’s acquisition~~ In March 2015, as Doyo’s performance had exceeded the relevant performance milestone, Changyou re-classified such contingent consideration to other short-term liabilities in the amount of $6.0 million in the consolidated balance sheet. In September 2015, Changyou entered into an agreement to sell all of the ~~RaidCall business, included a~~equity interests of Doyo. The aggregate consideration under the agreement includes cash consideration of approximately $2.9 million, and forgiveness, effective upon the completion of the sale, of the $6.0 million contingent consideration ~~arrangement that gives Changyou the right to acquire additional shares of TalkTalk Limited (“TalkTalk”) at no cost if specified conditions occur through the 2014 fiscal year. The range~~payable. As of the ~~additional shares~~date of ~~TalkTalk that~~this report, this sale has been completed and Changyou ~~could acquire under the contingent consideration arrangement is between nil and 7.5%~~has received most of the outstanding shares of TalkTalk on a post-issuance fully-diluted basis. The fair value of the contingent consideration recognized on the acquisition date was nil, as management determined that it is unlikely that the specified conditions will occur and that as a result the fair value and the financial impact on recognition of the noncontrolling interest was zero.cash consideration.

~~For the three and nine months ended September 30, 2014, based on management’s assessment, there were no changes in the estimated fair values of these contingent consideration arrangements.~~

PRC laws and regulations prohibit or restrict foreign ownership of companies that operate Internet information and content, Internet access, online games, mobile, value added telecommunications and certain other businesses in which the Sohu Group is engaged or could be deemed to be engaged. Consequently, the Sohu Group conducts certain of its operations and businesses in the PRC through its VIEs.

The Sohu Group consolidates in its consolidated financial statements all of the VIEs of which the Group is ~~the primary beneficiary. The Sohu Group has three VIEs that are not consolidated in the Group’s consolidated financial statements because the Group is not~~ the primary beneficiary.

The Sohu Group adopted the guidance of accounting for VIEs, which requires VIEs to be consolidated by the primary beneficiary of the entity. Management made evaluations of the relationships between the Sohu Group and its VIEs and the economic benefit flow of contractual arrangements with the VIEs. In connection with such evaluation, management also took into account the fact that, as a result of contractual arrangements with its consolidated VIEs, the Sohu Group controls the shareholders’ voting interests in those VIEs. As a result of such evaluation, the management concluded that the Sohu Group is the primary beneficiary of the VIEs which the Group consolidates.

All of the consolidated VIEs are incorporated and operated in the PRC, and the Group’s principal VIEs are directly or indirectly owned by Dr. Charles Zhang, the Sohu Group’s Chairman and Chief Executive Officer, or other executive officers and employees of the Sohu Group identified below. Capital for the consolidated VIEs was funded by the Sohu Group through loans provided to Dr. Charles Zhang and ~~those~~ other executive officers and employees, and was initially recorded as loans to related parties. These loans are eliminated for accounting purposes against the capital of the VIEs upon consolidation.

Under contractual agreements with the Sohu Group, Dr. Charles Zhang and those other executive officers and employees of the Sohu Group who are shareholders of the consolidated VIEs are required to transfer their ownership in these entities to the Group, if permitted by PRC laws and regulations, or, if not so permitted, to designees of the Group at any time as requested by the Group to repay the loans outstanding. All voting rights of the consolidated VIEs are assigned to the Sohu Group, and the Group has the right to designate all directors and senior management personnel of the consolidated VIEs, and also has the obligation to absorb losses of the consolidated VIEs. Dr. Charles Zhang and those other executive officers and employees of the Sohu Group who are shareholders of the consolidated VIEs have pledged their shares in the consolidated VIEs as collateral for the loans. As of September 30, ~~2014,~~2015, the aggregate amount of these loans was ~~$14.9~~$12.6 million.

Under its contractual arrangements with the consolidated VIEs, the Sohu Group has the power to direct activities of the VIEs, and can have assets transferred freely out of the VIEs without any restrictions. Therefore, the Group considers that there is no asset of a consolidated VIE that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves of the VIEs. As of September 30, ~~2014,~~2015, the registered capital and PRC statutory reserves of the consolidated VIEs totaled ~~$84.0~~$78.6 million. As all of the consolidated VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the consolidated VIEs do not have recourse to the general credit of the Sohu Group for any of the liabilities of the consolidated VIEs. Currently there is no contractual arrangement that could require the Sohu Group to provide additional financial support to the consolidated VIEs. As the Sohu Group is conducting certain business in the PRC mainly through the consolidated VIEs, the Group may provide such support on a discretionary basis in the future, which could expose the Group to a loss.

The Sohu Group classified the consolidated VIEs within the Sohu Group as principal VIEs or immaterial VIEs based on certain criteria, such as the VIEs’ total assets or revenues. The following is a summary of the ~~consolidated~~principal VIEs within the Sohu Group:

Beijing Century High Tech Investment Co., Ltd. (“High Century”) was incorporated in 2001. As of September 30, ~~2014,~~2015, the registered capital of High Century was $4.6 million and Dr. Charles Zhang and Wei Li held 80% and 20% interests, respectively, in this entity.

Sohu Internet was incorporated in 2003. As of September 30, 2015, the registered capital of Sohu Internet was $1.6 million and High Century and Heng Da Yi Tong held 75% and 25% interests, respectively, in this entity.

Beijing Sohu Donglin Advertising Co., Ltd. (“Donglin”) was incorporated in 2010. In the second quarter of 2015, High Century transferred its 50% equity interest in Donglin to Sohu Internet. As of September 30, 2015, the registered capital of Donglin was $1.5 million and Sohu Internet held a 100% interest in this entity.

Beijing Heng Da Yi Tong Information Technology Co., Ltd. (“Heng Da Yi Tong”)~~, formally known as “Beijing Sohu Entertainment Culture Media Co., Ltd.” (“Sohu Entertainment”),~~ was incorporated in 2002. As of September 30, ~~2014,~~2015, the registered capital of Heng Da Yi Tong was $1.2 million and Dr. Charles Zhang and Wei Li held 80% and 20% interests, respectively, in this entity.

~~Sohu Internet~~Beijing Focus Interactive Information Service Co., Ltd. (“Focus Interactive”) was incorporated in ~~2003.~~July 2014. In the second quarter of 2015, High Century transferred its 100% equity interest in Focus Interactive to Heng Da Yi Tong. As of September 30, ~~2014,~~2015, the registered capital of ~~Sohu Internet~~Focus Interactive was $1.6 million and ~~High Century and~~ Heng Da Yi Tong ~~held 75% and 25% interests, respectively, in this entity.~~

~~SohuPay Science and Technology Co., Ltd. (“SohuPay”) was incorporated in January 2014. As of September 30, 2014, the registered capital of SohuPay was $16.4 million and Sohu Internet~~ held 100% of the equity interests in this entity.

Beijing Sohu Donglin Advertising Co., Ltd. (“Donglin”) was incorporated in 2010. As of September 30, 2014, the registered capital of Donglin was $1.5 million and High Century and Sohu Internet each held a 50% interest in this entity.

Beijing Pilot New Era Advertising Co., Ltd. (“Pilot New Era”) was incorporated in 2010. As of September 30, 2014, the registered capital of Pilot New Era was $0.7 million and High Century and Sohu Internet each held a 50% interest in this entity.

Beijing Focus Yiju Network Information Technology Co., Ltd. (“Focus Yiju”) was acquired in 2011. As of September 30, 2014, the registered capital of Focus Yiju was $1.6 million and High Century held 100% of the equity interests in this entity.

Tianjin Jinhu Culture Development Co., Ltd. (“Tianjin Jinhu”) was incorporated in 2011. As of September 30, ~~2014,~~2015, the registered capital of Tianjin Jinhu was $0.5 million and Ye Deng and Xuemei Zhang each held a 50% interest in this entity.

~~Beijing Focus Interactive Information Service Co., Ltd. (“Focus Interactive”)~~Guangzhou Qianjun was incorporated in ~~July~~October 2014. As of September 30, ~~2014,~~2015, the registered capital of ~~Focus Interactive~~Guangzhou Qianjun was ~~$1.6~~$3.3 million and ~~High Century~~Tianjin Jinhu held a 100% ~~of the equity interests~~interest in this entity.

Beijing Focus Xin Gan Xian Information Technology Co., Ltd. (“Focus Technology”) was incorporated in August 2014. As of September 30, 2014, the registered capital of Focus Technology was $0.8 million and Focus Interactive held 100% of the equity interests in this entity.

Beijing Focus Real Estate Agency Co., Ltd. (“Focus Real Estate”) was incorporated in August 2014. As of September 30, 2014, the registered capital of Focus Real Estate was $0.2 million and Focus Interactive held 100% of the equity interests in this entity.

Sogou Information was incorporated in 2005. As of September 30, ~~2014,~~2015, the registered capital of Sogou Information was $2.5 million and Xiaochuan Wang, Sogou’s Chief Executive Officer, High Century and Tencent held 10%, 45% and 45% interests, respectively, in this entity.

~~Shenzhen Shi Ji Guang Su Information Technology Co., Ltd. (“Shi Ji Guang Su”)~~Gamease was ~~acquired~~incorporated in ~~September 2013. As~~2007. In the second quarter of ~~September 30, 2014,~~2015, Changyou completed the ~~registered capital of Shi Ji Guang Su was $3.2 million and Sogou Information held 100%~~transfer of the equity interests in ~~this entity.~~

~~Gamease was incorporated in 2007.~~former Chief Executive Officer of Changyou, and Dewen Chen, the current Co-Chief Executive Officer of Changyou, to High Century. As of September 30, ~~2014,~~2015, the registered capital of Gamease was $1.3 million and ~~Tao Wang, Chief Executive Officer~~High Century held a 100% interest in this entity.

Beijing Changyou Star Digital Technology Co., Ltd. (“Changyou Star”) was incorporated in 2015. As of September 30, 2015, the registered capital of Changyou Star was $0.2 million and Dewen Chen ~~President of Changyou,~~and Jie Liu each held ~~60% and 40% interests, respectively,~~a 50% interest in this entity.

Beijing Guanyou Gamespace Digital Technology Co., Ltd. (“Guanyou Gamespace”) was incorporated in 2010. In July 2015, Tao Wang and Dewen Chen transferred their equity interests in Guanyou Gamespace to Gamease, and in the same month Gamease transferred its equity interests in Guanyou Gamespace to Changyou Star. As of September 30, 2015, the registered capital of Guanyou Gamespace was $1.5 million and Changyou Star held a 100% interest in this entity.

Shanghai ICE Information Technology Co., Ltd. (“Shanghai ICE”) was acquired by Changyou in 2010. As of September 30, ~~2014,~~2015, the registered capital of Shanghai ICE was $1.2 million and Runa Pi and Rong Qi each held a 50% interest in this entity.

Guanyou Gamespace was incorporated in 2010. As of September 30, 2014, the registered capital of Guanyou Gamespace was $1.5 million and Tao Wang and Dewen Chen held 60% and 40% interests, respectively, in this entity.

Beijing Zhi Hui You Information Technology Co., Ltd. (“Zhi Hui You”) was incorporated in 2011. Initially Jing Zhou, who is a Sohu employee, and a third party entity each held 50% of the equity interests in this entity. In the first quarter of 2014, Jing Zhou and the third party entity transferred all of their equity interests in Zhi Hui You to Changyou’s VIE Guanyou Gamespace. As of September 30, 2014, the registered capital of Zhi Hui You was $1.6 million and Guanyou Gamespace held 100% of the equity interests in this entity.

68.258% of the equity interests of Shenzhen 7Road were acquired by Gamease in 2011. The remaining 31.742% of the equity interests of Shenzhen 7Road were acquired by Gamease on May 1, 2013. As of September 30, 2014, the registered capital of Shenzhen 7Road was $1.5 million and Gamease held 100% of the equity interests in this entity.

Doyo was acquired by Guanyou Gamespace in November 2013. As of September 30, 2014, the registered capital of Doyo was $1.6 million and Guanyou Gamespace held 100% of the equity interests in this entity.

Beijing Changyou e-pay Co., Ltd. (“Changyou e-pay”) was incorporated in 2013. As of September 30, 2014, the registered capital of Changyou e-pay was $16.4 million and Gamease held 100% of the equity interests in this entity.

Beijing Changyou Aishouxin ecological technology Co., Ltd. (“Aishouxin”) was incorporated in May 2014. As of September 30, 2014, the registered capital of Aishouxin was $2.4 million and Gamease held 100% of the equity interests in this entity.

Fujian Changyou Heguang Electronic Technology Co., Ltd. (“Changyou Heguang”) was incorporated in September 2014. As of September 30, 2014, the registered capital of Changyou Heguang was $3.3 million and Gamease held 100% of the equity interests in this entity.

Beijing Baina Information Technology Co., Ltd. (“Beijing Baina Information”) was acquired by Gamease in July 2014. As of September 30, 2014, the registered capital of Beijing Baina Information was $1.5 million and Gamease and a third-party individual held 60% and 40% interests, respectively, in this entity.

Baina (Wuhan) Information Technology Co., Ltd. (“Wuhan Baina Information”) was acquired by Gamease in July 2014. As of September 30, ~~2014,~~2015, the registered capital of Wuhan Baina Information was $3.0 million and Gamease and ~~a third-party individual~~Yongzhi Yang, the chief executive officer of MoboTap, held 60% and 40% interests, respectively, in this entity.

Wuhan Xingyu Technology Co., Ltd. (“Wuhan Xingyu”) was acquired by Gamease in July 2014. As of September 30, 2014, the registered capital of Wuhan Xingyu was $16,307 and Wuhan Baina Information held 100% of the equity interests in this entity.

Beijing Anzhuoxing Technology Co., Ltd. (“Anzhuoxing”) was acquired by Gamease in July 2014. As of September 30, 2014, the registered capital of Anzhuoxing was $13,204 and Wuhan Baina Information held 100% of the equity interests in this entity.

Wuhan Hualian Chuangke Technology Co., Ltd. (“Hualian Chuangke”) was acquired by Gamease in July 2014. As of September 30, 2014, the registered capital of Hualian Chuangke was $0.1 million and Wuhan Baina Information held 100% of the equity interests in this entity.

Beijing GoodFeel Technology Co., Ltd. (“GoodFeel”) was acquired in 2004. As of September 30, 2014, the registered capital of GoodFeel was $1.2 million and James Deng and Jing Zhou, held 58.1% and 41.9% interests, respectively, in this entity.

Beijing 21 East Culture Development Co., Ltd. (“21 East Beijing”) was acquired in 2006. As of September 30, 2014, the registered capital of 21 East Beijing was $1.6 million and High Century held 100% of the equity interests in this entity.

Beijing Yi He Jia Xun Information Technology Co., Ltd. (“Yi He Jia Xun”) was acquired in September 2011. As of September 30, 2014, the registered capital of Yi He Jia Xun was $2.1 million and Gang Fang and Yanfeng Lv each held a 50% interest in this entity.

The following financial information of the Sohu Group’s consolidated VIEs is included in the accompanying consolidated financial statements (in thousands):


	As of				As of
	September 30, 2014		December 31, 2013		December 31, 2014		September 30, 2015
ASSETS:
Cash and cash equivalents	$	28,637	$	112,316	$	39,534	$	113,988
Short-term investments		20,154		2,460
Restricted time deposit						294		283
Accounts receivable, net		96,846		95,595		129,881		159,027
Prepaid and other current assets		38,296		41,838		23,827		47,981
Held-for-sale assets						0		10,080
Intercompany receivables due from the Company’s subsidiaries		130,657		223,877		176,902		152,825
								��
Total current assets		314,590		476,086		370,438		484,184

Fixed assets, net		9,976		8,190		12,597		8,318
Goodwill		139,874		139,478		154,774		36,738
Long-term investments, net						7,348		15,854
Intangible assets, net		34,778		35,135		39,726		21,585
Other non-current assets		77,626		61,550		71,767		68,337

Total assets	$	576,844	$	720,439	$	656,650	$	635,016

LIABILITIES:
Accounts payable	$	3,102	$	16,167	$	3,495	$	33,095
Accrued and other short-term liabilities		126,469		343,834
Accrued liabilities						78,051		75,198
Receipts in advance and deferred revenue		41,743		60,140		53,641		48,028
Held-for-sale liabilities						0		1,251
Other current liabilities						53,564		139,770
Intercompany payables due to the Company’s subsidiaries		229,415		12,059		259,009		196,052

Total current liabilities		400,729		432,200		447,760		493,394

Long-term liabilities		5,865		9,560
Other long-term liabilities						25,262		23,503

Total liabilities	$	406,594	$	441,760	$	473,022	$	516,897

For the table below, consolidated VIEs under the ~~Brand advertising,~~Sohu segment and the Sogou ~~and Others segments~~segment are classified as Sohu’s VIEs, and consolidated VIEs under the Changyou segment are classified as Changyou’s VIEs.

Loan and share pledge ~~agreements~~agreementbetween Sohu ~~Era~~Media and the shareholders of High ~~Century and Heng Da Yi Tong: These loan agreements provide~~Century: The agreement provides for loans to the shareholders of High Century ~~and Heng Da Yi Tong~~ for them to make contributions to the registered capital of High Century ~~and Heng Da Yi Tong~~ in exchange for the equity interests in High Century, and ~~Heng Da Yi Tong, and under these pledge agreements~~ the shareholders pledge those equity interests to Sohu ~~Era~~Media as security for the loans. The ~~loan agreements include~~agreement includes powers of attorney that give Sohu ~~Era~~Media the power to appoint nominees to act on behalf of the shareholders of High Century in connection with all actions to be taken by High Century. Pursuant to the agreement, the shareholders executed in blank transfers of their equity interests in High Century, which transfers are held by the Sohu Group’s legal department and may be completed and effected at Sohu Media’s election.

Loan and share pledge agreementbetween Focus HK and the shareholders of Heng Da Yi Tong: The agreement provides for loans to the shareholders of Heng Da Yi Tong for them to make contributions to the registered capital of Heng Da Yi Tong in exchange for the equity interests in Heng Da Yi Tong, and the shareholders pledge those equity interests to Focus HK as security for the loans. The agreement includes powers of attorney that give Focus HK the power to appoint nominees to act on behalf of the shareholders of Heng Da Yi Tong in connection with all actions to be taken by ~~High Century and~~ Heng Da Yi Tong. Pursuant to the ~~loan agreements,~~agreement, the shareholders executed in blank transfers of their equity interests in ~~High Century and~~ Heng Da Yi Tong, which transfers are held by the Sohu Group’s legal department and may be completed and effected at ~~Sohu Era’s~~Focus HK’s election.

Loan and share pledge agreements between Sogou Technology and the shareholders of Sogou Information. The loan agreement provides for a loan to Xiaochuan Wang, the individual shareholder of Sogou Information, to be used by him to make contributions to the registered capital of Sogou Information in exchange for his equity interest in Sogou Information. The loan is interest free-and is repayable on demand, but the shareholder may repay the loan only by transferring to Sogou Technology his equity interest in Sogou Information. Under the pledge agreement, all of the shareholders of Sogou Information pledge their equity interests to Sogou Technology to secure the performance of their obligations under the various VIE-related agreements. If any shareholder of Sogou Information breaches any of his or its obligations under any VIE-related agreements, Sogou Technology is entitled to exercise its right as the beneficiary under the share pledge agreement. The share pledge agreement terminates only after all of the obligations of the shareholders under the various VIE-related agreements are no longer in effect.

Exclusive equity interest purchase right agreements between Sogou Technology, Sogou Information and the shareholders of Sogou Information. Pursuant to these agreements, Sogou Technology and any third party designated by it have the right, exercisable at any time when it becomes legal to do so under PRC law, to purchase from the shareholders of Sogou Information all or any part of their equity interests at athe lowest purchase price ~~equal to the shareholders’ initial contributions to registered capital.~~permissible under PRC law.

Business operation agreementamong Sogou Technology, Sogou Information and the shareholders of Sogou Information. The agreement sets forth the right of Sogou Technology to control the actions of the shareholders of Sogou Information. The agreement has a term of 10 years, renewable at the request of Sogou Technology.

Powers of Attorney executed by the shareholders of Sogou Information in favor of Sogou Technology with a term of 10 years, extendable at the request of Sogou Technology. These powers of attorney give Sogou Technology the right to appoint nominees to act on behalf of each of the three Sogou Information shareholders in connection with all actions to be taken by Sogou Information.

Loan agreements and ~~share~~equity pledge agreementsbetween ~~Sohu Era~~Video Tianjin and the ~~respective~~ shareholders of ~~GoodFeel: These~~Tianjin Jinhu. The loan agreements provide for loans to the shareholders of ~~GoodFeel~~Tianjin Jinhu for them to make contributions to the registered capital of ~~GoodFeel~~Tianjin Jinhu in exchange for the equity interests in ~~GoodFeel, and under these~~Tianjin Jinhu. Under the equity pledge agreements, the shareholders of Tianjin Jinhu pledge ~~those equity interests~~ to Sohu Era as security for the loans. The loan agreements include powers of attorney that give Sohu Era the power to appoint nominees to act on behalf of the shareholders of GoodFeel in connection with all actions to be taken by GoodFeel. Pursuant to the loan agreements, the shareholders executed in blank transfers ofVideo Tianjin their equity interests in ~~GoodFeel, which transfers are held by the Sohu Group’s legal department and may be completed and effected at Sohu Era’s election.~~

~~Loan and share pledge agreements~~ between Sohu Era and the shareholders of Yi He Jia Xun. The loan agreement provides for loans to the individual shareholders of Yi He Jia Xun, to be used by them to make contributions to the registered capital of Yi He Jia Xun in exchange for the equity interest in Yi He Jia Xun. The loans are interest free-and are repayable on demand, but the shareholders may repay the loans only by transferring to Sohu Era their equity interest in Yi He Jia Xun. Under the pledge agreements, all of the shareholders of Yi He Jia Xun pledge their equity interests to Sohu EraTianjin Jinhu to secure the performance of their obligations under the ~~various VIE-related~~loan agreements and Tianjin Jinhu’s obligations to Video Tianjin under their business agreements. If any shareholder of Yi He Jia Xun breaches any of his or its obligations under any VIE-related agreements, Sohu Era is entitled to exercise its right as the beneficiary under the share pledge agreement. The ~~share pledge agreement terminates only after all of the obligations of~~loans are interest free and are repayable on demand, but the shareholders ~~under~~can only repay the ~~various VIE-related agreements are no longer~~loans by transferring to Video Tianjin their equity interests in ~~effect.~~Tianjin Jinhu.

~~Exclusive equity~~Equity interest purchase right agreements between ~~Sohu Era, Yi He Jia Xun~~Video Tianjin, Tianjin Jinhu and the shareholders of ~~Yi He Jia Xun.~~Tianjin Jinhu. Pursuant to these agreements, ~~Sohu Era~~Video Tianjin and any third party designated by it have the right, exercisable at any time when it becomes legal to do so under PRC law, to purchase from the shareholders of ~~Yi He Jia Xun~~Tianjin Jinhu all or any part of their equity interests at athe lowest purchase price ~~equal to the shareholders’ initial contributions to registered capital.~~permissible under PRC law.

Business operation agreementamong ~~Sohu Era, Yi He Jia Xun~~Video Tianjin, Tianjin Jinhu and the shareholders of ~~Yi He Jia Xun.~~Tianjin Jinhu. The agreement sets forth the right of ~~Sohu Era~~Video Tianjin to control the actions of the shareholders of ~~Yi He Jia Xun.~~Tianjin Jinhu. The agreement has a term of 10 years, renewable at the request of ~~Sohu Era.~~Video Tianjin.

Powers of Attorney executed by the shareholders of ~~Yi He Jia Xun~~Tianjin Jinhu in favor of ~~Sohu Era~~Video Tianjin with a term of 10 years, extendable at the request of ~~Sohu Era.~~Video Tianjin. These powers of attorney give ~~Sohu Era~~Video Tianjin the right to appoint nominees to act on behalf of each of the ~~two Yi He Jia Xun~~Tianjin Jinhu shareholders in connection with all actions to be taken by ~~Yi He Jia Xun.~~Tianjin Jinhu.

Loan agreements and equity pledge agreements between AmazGame and the shareholders of Gamease and between Gamespace and the shareholders of Guanyou Gamespace. The loan agreements provide for loans to the respective shareholders of Gamease and Guanyou Gamespace ~~respectively,~~ for ~~them~~the shareholders to make contributions to the registered capital of Gamease and Guanyou Gamespace in exchange for the equity interests in Gamease and Guanyou ~~Gamespace, respectively.~~Gamespace. Under the equity pledge agreements, the respective shareholders of Gamease and Guanyou Gamespace ~~respectively,~~ pledge to AmazGame and Gamespace, ~~respectively,~~ their equity interests in Gamease and Guanyou Gamespace ~~respectively,~~ to secure the performance of their obligations under the loan agreements and Gamease’s and Guanyou Gamespace’s obligations to AmazGame and Gamespace under ~~their business~~the various VIE-related agreements. The loans are interest free and are repayable on demand, but the shareholders can only repay the loans by transferring to AmazGame and Gamespace, ~~respectively,~~as the case may be, their equity interests in Gamease and Guanyou Gamespace.

Equity interest purchase right agreements between AmazGame and the shareholders of Gamease and between Gamespace and the shareholders of Guanyou Gamespace. Pursuant to these agreements, AmazGame and Gamespace ~~respectively,~~ have ~~the right, and any third party designated by them has~~ the right, exercisable at any time ~~during the terms of the agreements, if and~~ when it becomes legal to do so under PRC law, to purchase from the respective shareholders of Gamease and Guanyou Gamespace ~~respectively,~~ all or any part of their equity interests at a purchase price equal to their initial contributions to ~~the~~ registered ~~capital of Gamease and Guanyou Gamespace or the proportional amount of such initial contribution in the case of a partial purchase of such equity interests.~~

~~Business operation agreements~~among AmazGame, Gamease and the shareholders of Gamease and among Gamespace, Guanyou Gamespace and the shareholders of Guanyou Gamespace. These agreements set forth the rights of AmazGame and Gamespace, respectively, to control the actions of the shareholders of Gamease and Guanyou Gamespace, respectively. The agreements have a term of 10 years.capital.

Powers of attorney executed by the shareholders of Gamease in favor of AmazGame and by the shareholders of Guanyou Gamespace in favor of Gamespace, with a term of 10 years. These powers of attorney give AmazGame and Gamespace ~~respectively,~~ the exclusive right to appoint nominees to act on behalf of ~~the~~their respective shareholders in connection with all actions to be taken by Gamease and Guanyou Gamespace.

Business operation agreements between AmazGame and the shareholders of Gamease and between Gamespace ~~respectively.~~and the shareholders of Guanyou Gamespace. These agreements set forth the right of AmazGame and Gamespace to control the actions of the respective shareholders of Gamease and Guanyou Gamespace. Each agreement has a term of 10 years.

Call option agreement among ICE Information, Shanghai ICE and Shanghai ICE shareholders. This agreement provides to ICE Information and any third party designated by ICE Information the right, exercisable at any time during the ~~terms~~term of the ~~agreements,~~agreement, if and when it ~~becomes~~is legal to do so under PRC law, to purchase from the shareholders all or any part of their shares in Shanghai ICE or purchase from Shanghai ICE all or part of its assets or business at the lowest purchase price permissible under PRC law. The agreement ~~is terminable~~further provides that Shanghai ICE or its shareholders will transfer back to ICE Information any such purchase price they have received from ICE Information, upon the request of ICE Information, as and to the extent allowed under PRC law. The agreement terminates only if ICE Information is dissolved.

Share pledge agreementamong ICE Information, Shanghai ICE and the shareholders of Shanghai ICE. ~~Under this agreement~~Pledge by the shareholders ~~pledge~~ to ICE Information of their equity interests in Shanghai ICE, to secure the performance of their obligations ~~under the call option agreement described above~~ and Shanghai ICE’s obligations tounder the various VIE-related agreements. If Shanghai ICE or any of the shareholders of Shanghai ICE breaches its, his or her obligations under any VIE-related agreements, ICE Information ~~under their business agreements described below.~~is entitled to exercise its rights as pledgee of the equity interests.

Business operation agreementamong ICE Information, Shanghai ICE and the shareholders of Shanghai ICE. This agreement sets forth the right of ICE Information to control the actions of the shareholders of Shanghai ICE. ~~The~~This agreement ~~is terminable~~terminates only if ICE Information is dissolved.

~~Amended and restated equity interest purchase right~~Share pledge agreementamong ~~7Road~~Beijing Baina Technology, ~~Shenzhen 7Road~~Wuhan Baina Information and the shareholders of Wuhan Baina Information, which are Gamease ~~which~~and Yongzhi Yang. Pledge by the Gamease and Yongzhi Yang to Beijing Baina Technology of their equity interests in Wuhan Baina Information, to secure the performance of their respective obligations and Wuhan Baina Information’s obligations under the various VIE-related agreements. If Wuhan Baina Information or any of the shareholders of Wuhan Baina Information breaches its or his obligations under any VIE-related agreements, Beijing Baina Technology is ~~Shenzhen 7Road’s sole shareholder. Under this~~entitled to exercise its rights as pledgee of the equity interests.

Call option agreement ~~7Road~~among Beijing Baina Technology, Gamease, Wuhan Baina Information and Yongzhi Yang. Provides to Beijing Baina Technology and any ~~third-party~~third party designated by ~~7Road~~Beijing Baina Technology ~~have~~ the right, exercisable at any time during the term of the agreement, if and when it is legal to do so under PRC law, to purchase from Gamease and Yongzhi Yang all or any part of ~~its~~their shares in ~~Shenzhen 7Road~~Wuhan Baina Information or to purchase from Wuhan Baina Information all or part of its assets or business at ~~a nominal~~the lowest purchase ~~price. This agreement has a term of 10 years, is renewable by 7Road Technology for such term as it may determine and is terminable by 7Road Technology by notice to the other parties at any time when,~~price permissible under PRC law as then in effect, 7Road Technology cannot exercise its purchase right, and is also terminable if Shenzhen 7Road’s or 7Road Technology’s existence is terminated, by mutual agreement of the parties or upon the written request of 7Road Technology. Neither Gamease nor Shenzhen 7Road has any power to terminate the agreement.law.

~~Equity interest pledge~~Assignment agreementamong ~~7Road~~Beijing Baina Technology, ~~Shenzhen 7Road~~Gamease, Wuhan Baina Information and ~~Gamease. Under this agreement,~~Yongzhi Yang. Gamease ~~agreed to pledge to 7Road~~and Yongzhi Yang, as shareholders of Wuhan Baina Information, irrevocably appoint Beijing Baina Technology or its equity interests in Shenzhen 7Road to secure the performance of its obligations and Shenzhen 7Road’s obligations under the various VIE-related agreements. If Gamease or Shenzhen 7Road breaches its obligations under any VIE-related agreements, 7Road Technology is entitleddesignee to exercise ~~its~~their voting and other rights as ~~the beneficiary under the Equity Interest Pledge Agreement. This agreement terminates only after all~~shareholders of ~~the obligations of Gamease and of Shenzhen 7Road under the various VIE-related agreements are no longer in effect.~~

~~Business operation agreement~~among 7Road Technology, Shenzhen 7Road and Gamease. This agreement grants to 7Road Technology the right to control the actions of Shenzhen 7Road and the actions of Gamease in its capacity as the shareholder of Shenzhen 7Road. This agreement has a term of 10 years, is renewable by 7Road Technology for such term as it may determine and is terminable early if the existence of Shenzhen 7Road or 7Road Technology is terminated, by mutual agreement of the parties or upon the written request of 7Road Technology.

~~Power of attorney~~executed by Gamease in favor of 7Road Technology. This power of attorney gives 7Road Technology the exclusive right to appoint designees to act on behalf of Gamease in connection with all actions to be taken by Shenzhen 7Road requiring shareholder approval.Wuhan Baina Information.

Exclusive technology consulting and service agreementbetween Sohu Era and Sohu Internet. Pursuant to this agreement Sohu Era has the exclusive right to provide technical consultation and other related services to Sohu Internet, in exchange for a percentage of the gross income of Sohu Internet. The agreement has an initial term of two ~~years, and is renewable at the request of Sohu Era.~~

~~Exclusive technology consulting and service agreement~~between GoodFeel and Sohu Era. Pursuant to this agreement Sohu Era has the exclusive right to provide technical consultation and other related services to GoodFeel in exchange for a fee. The agreement has a term of two years, and is renewable at the request of Sohu Era.

~~Exclusive technology consulting and service agreement~~between Yi He Jia Xun and Sohu Era. Pursuant to this agreement Sohu Era has the exclusive right to provide technical consultation and other related services to Yi He Jia Xun in exchange for a fee. The agreement has a term of ten years, and is renewable at the request of Sohu Era.

Business cooperation agreement between Sogou Technology and Sogou Information. Pursuant to this agreement, Sogou Information provides Internet information services to Sogou Technology’s customers in exchange for a fee payable to Sogou Information. The agreement has a term of 10 years, and is renewable at the request of Sogou Technology.

Exclusive technology consulting and service agreementbetween Sogou Technology and Sogou Information. Pursuant to this agreement Sogou Technology has the exclusive right to provide technical consultation and other related services to Sogou Information in exchange for a fee. The agreement has a term of 10 years and is renewable at the request of Sogou Technology.

Exclusive technology consulting and service agreementbetween Video Tianjin and Tianjin Jinhu. Pursuant to this agreement Video Tianjin has the exclusive right to provide technical consultation and other related services to Tianjin Jinhu in exchange for a fee. The agreement has a term of 10 years and is renewable at the request of Video Tianjin.

Technology support and utilization agreements between AmazGame and Gamease and between Gamespace and Guanyou Gamespace. Pursuant to these agreements, AmazGame and Gamespace ~~respectively,~~ have the exclusive right to provide certain product development and application services and technology support to Gamease and Guanyou Gamespace, respectively, for a fee equal to a predetermined percentage, subject to adjustment by AmazGame or Gamespace at any time, of Gamease’s and Guanyou Gamespace’s respective revenues. ~~These agreements will be terminated~~Each agreement terminates only when AmazGame ~~and~~or Gamespace ~~are~~is dissolved.

Services and maintenance agreementsbetween AmazGame and Gamease between Gamespace and Guanyou Gamespace. Pursuant to these agreements, AmazGame and Gamespace, respectively, provide marketing, staffing, business operation and maintenance services to Gamease and Guanyou Gamespace, respectively, in exchange for a fee equal to the cost of providing such services plus a predetermined margin. ~~These agreements will be terminated~~Each agreement terminates only when AmazGame ~~and~~or Gamespace, ~~are~~as the case may be, is dissolved.

Exclusive business cooperation agreementbetween ICE Information and Shanghai ICE. This agreement sets forth the exclusive right of ICE Information to provide business support and technical services to Shanghai ICE. The agreement ~~will be terminated~~terminates only ~~when~~if ICE Information is dissolved.

Exclusive technology consulting and services agreement between ICE Information and Shanghai ICE. This agreement provides to ICE Information the exclusive right to provide technical consultation and other related services to Shanghai ICE in exchange for a fee equal to the balance of Shanghai ICE’s gross income after deduction of related costs and expenses. The agreement ~~will be terminated~~terminates only ~~when~~if ICE Information is dissolved.

~~Technology development and utilization~~Exclusive Services agreementbetween ~~7Road~~Beijing Baina Technology and ~~Shenzhen 7Road. Under this agreement, 7Road~~Wuhan Baina Information. Beijing Baina Technology ~~has the exclusive right~~agrees to provide ~~product~~Wuhan Baina Information with technical services, business consulting, capital equipment lease, market consulting, integration of systems, research and development of products and ~~application~~maintenance of systems. Service fees are to be determined with reference to the specific services ~~and technology support to Shenzhen 7Road for a fee~~provided, based on Shenzhen 7Road’s revenues, which fee can be adjusted by 7Road Technology at any time in its sole discretion. The fee is eliminated upon consolidation. This agreement will terminate if the existence of 7Road Technology or Shenzhen 7Road is terminated, by mutual agreement of the parties or upon failure to perform due to a ~~force majeure event.~~

~~Services and maintenance agreement~~between 7Road Technology and Shenzhen 7Road. Pursuant to this agreement, 7Road Technology provides marketing and maintenance services to Shenzhen 7Road in exchange for a fee equal to the cost of providing such services plus a predetermined margin. This agreement will terminate if the existence of 7Road Technology or Shenzhen 7Road is terminated, by mutual agreement of the parties or upon failure to perform due to a force majeure event.transfer pricing analysis.

Certain of the contractual arrangements described above between the VIEs and the related wholly-owned subsidiaries of the Sohu Group are silent regarding renewals. However, because the VIEs are controlled by the Sohu Group through powers of attorney granted to the Sohu Group by the shareholders of the VIEs, the contractual arrangements can be, and are expected to be, renewed at the subsidiaries’ election.

It is possible that the Sohu Group’s operation of certain of its operations and businesses through VIEs could be found by PRC authorities to be in violation of PRC ~~laws~~law and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. IfWhile the Sohu Group’s management considers the possibility of such a finding by PRC regulatory authorities under current law and regulations to be remote, on January 19, 2015, the Ministry of Commerce of the PRC, or (the “MOFCOM”) released on its Website for public comment a proposed PRC law (the “Draft FIE Law”) that appears to include VIEs within the scope of entities that could be considered to be foreign invested enterprises (or “FIEs”) that would be subject to restrictions under existing PRC law on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the concept of “actual control” for determining whether an entity is considered to be an FIE. In addition to control through direct or indirect ownership or equity, the Draft FIE Law includes control through contractual arrangements within the definition of “actual control.” If the Draft FIE Law is passed by the People’s Congress of the PRC and goes into effect in its current form, these provisions regarding control through contractual arrangements could be construed to reach the Sohu Group’s VIE arrangements, and as a result the Sohu Group’s VIEs could become explicitly subject to the current restrictions on foreign investment in certain categories of industry. The Draft FIE Law includes provisions that would exempt from the definition of foreign invested enterprises entities where the ultimate controlling shareholders are either entities organized under PRC law or individuals who are PRC citizens. The Draft FIE Law is silent as to what type of enforcement action might be taken against existing VIEs that operate in restricted or prohibited industries and are not controlled by entities organized under PRC law or individuals who are PRC citizens. If a finding were made by PRC authorities, under existing law and regulations or under the Draft FIE Law if it becomes effective, that the Sohu Group’s operation of certain of its operations and businesses through VIEs is prohibited, regulatory authorities with jurisdiction over the licensing and operation of such operations and businesses would have broad discretion in dealing with such a violation, including levying fines, confiscating the Sohu Group’s income, revoking the business or operating licenses of the affected businesses, requiring the Sohu Group to restructure its ownership structure or operations, or requiring the Sohu Group to discontinue all or any portion of its operations. Any of these actions could cause significant disruption to the Sohu Group’s business operations, and have a ~~materially~~severe adverse impact on the Sohu Group’s cash flows, financial position and operating performance. ~~The Group’s management considers the possibility of such a finding by PRC regulatory authorities to be remote.~~

In addition, it is possible that the contracts ~~with~~among the Sohu Group, the Sohu Group’s VIEs and shareholders of its VIEs would not be enforceable in China if PRC government authorities or courts were to find that such contracts contravene PRC ~~laws~~law and regulations or are otherwise not enforceable for public policy reasons. In the event that the Sohu Group was unable to enforce these contractual arrangements, the Sohu Group would not be able to exert effective control over the affected VIEs. Consequently, such VIE’s results of operations, assets and liabilities would not be included in the Sohu Group’s consolidated financial statements. If such were the case, the Sohu Group’s cash flows, financial position and operating performance would be ~~materially~~severely adversely affected. The Sohu Group’s contractual arrangements with respect to its consolidated VIEs are ~~approved and~~ in place. The Sohu Group’s management believes that such contracts are enforceable, and considers the possibility remote that PRC regulatory authorities with jurisdiction over the Sohu Group’s operations and contractual relationships would find the contracts to be unenforceable.

The Sohu Group’s operations and businesses rely on the operations and businesses of its VIEs, which hold certain recognized and unrecognized revenue-producing assets. The recognized revenue-producing assets include goodwill and intangible assets acquired through business acquisitions. Goodwill primarily represents the expected synergies from combining an acquired business with the Sohu Group. Intangible assets acquired through business acquisitions mainly consist of customer relationships, non-compete agreements, user bases, copyrights, trademarks and developed technologies. Unrecognized revenue-producing assets mainly consist of licenses and intellectual property. Licenses include operations licenses, such as ~~internet~~Internet information service licenses and licenses for providing content. Intellectual property developed by the Sohu Group mainly consists of patents, copyrights, trademarks, and domain names. The Sohu Group’s operations and businesses may be adversely impacted if the Sohu Group loses the ability to use and enjoy assets held by these VIEs.

As of September 30, ~~2014, Sohu~~2015, the Group had ~~three~~two VIEs which were not consolidated within the Sohu Group. Since the Sohu Group neither has the power to direct these VIEs’ activities that will significantly impact their economic performance nor has the obligation to absorb losses of, or the right to receive benefits from, these VIEs that could potentially be significant to these VIEs, the Group is not the primary beneficiary and, accordingly, the Group recognizes the investments under the equity method or the cost method according to the share percentage the Group holds. In assessing the maximum exposure to a loss on the investments compared to the cost of its investment, the Sohu Group determined that it did not have further obligations exceeding the cost of the investments and that there were no terms of the investment arrangements that could require the Sohu Group to provide further financial support to the VIEs.

Sohu intends to adopt appropriate defensive measures in the future on a case by case basis as and to the extent that Sohu’s Board of Directors determines that such measures are necessary or advisable to protect Sohu stockholder value in the face of any coercive takeover threats or to prevent an acquirer from gaining control of Sohu without offering fair and adequate price and terms.

Treasury stock consists of shares repurchased by ~~Sohu~~Sohu.com Inc. that are no longer outstanding and are held by ~~Sohu.~~Sohu.com Inc. Treasury stock is accounted for under the cost method.

For the three and nine months ended September 30, ~~2014~~2015 and ~~2013,~~2014, the Company did not repurchase any shares of its common stock.

Sohu (excluding Sohu Video), Sogou, Changyou, ~~Sogou,~~ and Sohu Video have incentive plans, and prior to June 28, 2013 7Road had an incentive plan, for the granting of share-based awards, including common stock or ordinary shares, share options, restricted shares and restricted share units, to their directors, ~~executive officers,~~management and other key employees.

Sohu’s 2000 Stock Incentive Plan (the “Sohu 2000 Stock Incentive Plan”) provided for the issuance of up to 9,500,000 shares of common stock, including those issued pursuant to the exercise of share options and upon vesting and settlement of restricted share units. Most of these awards vest over a period of four years. The maximum term of any issued stock right under the Sohu 2000 Stock Incentive Plan is ten years from the grant date. The Sohu 2000 Stock Incentive Plan expired on January 24, 2010. As of the expiration date, 9,128,724 shares of common stock had been issued or were subject to issuance upon the vesting and exercise of share options or the vesting and settlement of restricted share units granted under the plan. A new plan (the “Sohu 2010 Stock Incentive Plan”) was adopted by Sohu’s shareholders on July 2, 2010.

For the three and nine months ended September 30, 2015, there was no share-based compensation expense recognized for awards under the Sohu 2000 Stock Incentive Plan, as these awards were fully vested in 2014. For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for awards under the Sohu 2000 Stock Incentive Plan was nil and $1.4 million, respectively. For the three and nine months ended September 30, 2013, total share-based compensation expense recognized for awards under the Sohu 2000 Stock Incentive Plan was $0.5 million and $1.7 million, respectively.

A summary of share option activity under the Sohu 2000 Stock Incentive Plan as of and for the nine months ended September 30, ~~2014~~2015 is presented below:

No options have been granted under Sohu’s 2000 Stock Incentive Plan since 2006. For the three and nine months ended September 30, 2014 and ~~2013,~~2015, no compensation expense was recognized for share options because the requisite service periods for all outstanding share options had ~~ended~~been completed by the end of 2009.

For the three and nine months ended September 30, 2015, total cash received from the exercise of share options amounted to $0.1 million and $2.1 million, respectively. For the three and nine months ended September 30, 2014, total cash received from the exercise of share options amounted to $0.1 million and $0.5 million, respectively. ~~For the three and nine months ended September 30, 2013, total cash received from the exercise of share options amounted to $0.1 million and $1.0 million, respectively.~~

~~A summary of restricted share unit activity under the Sohu 2000 Stock Incentive Plan as of and for the nine months ended September 30, 2014 is presented below:~~

For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for restricted share units was nil and $1.4 million, respectively. ~~For the three and nine months ended September 30, 2013, total share-based compensation expense recognized for restricted share units was $0.5 million and $1.7 million, respectively.~~

~~There was no unrecognized compensation expense for restricted share units as of September 30, 2014, because all remaining unvested restricted shares units vested in the first quarter of 2014.~~ The total fair value on their respective vesting dates of restricted share units that vested during the three and nine months ended September 30, 2014 was nil and $9.3 million, respectively. ~~The total fair value on their respective vesting dates~~In 2015, there was no share-based compensation expense recognized for the restricted shares units under the Sohu 2000 Stock Incentive Plan, as these awards were fully vested in the first quarter of ~~restricted share units vested during the three and nine months ended September 30, 2013 was nil and $6.2 million, respectively.~~2014.

On July 2, 2010, ~~Sohu’s~~the Company’s shareholders adopted the Sohu 2010 Stock Incentive Plan, which provides for the issuance of up to 1,500,000 shares of common stock, including shares issued pursuant to the vesting and settlement of restricted share units and pursuant to the exercise of share options. The maximum term of any stock right granted under the Sohu 2010 Stock Incentive Plan is ten years from the grant date. The Sohu 2010 Stock Incentive Plan will expire on July 1, 2020. As of September 30, ~~2014, 1,306,513~~2015, 254,794 shares were available for grant under the Sohu 2010 Stock Incentive Plan.

On February 7, 2015, the Company’s Board of Directors approved contractual grants of options for the purchase of an aggregate of 1,068,000 shares of common stock to the Company’s management and key employees with nominal exercise prices of $0.001. These awards are expected to vest and become exercisable in four equal installments over a period of four years, with each installment vesting upon satisfaction of a service period requirement and certain subjective performance targets. Because the grant date had not been established as of September 30, 2015, compensation expense was accrued beginning on the service inception date and will be re-measured based on the then-current fair value of the awards on each subsequent reporting date until the grant date is established. To determine the fair value of these share options, the public market price of the underlying shares at each reporting date was used and a binomial valuation model was applied.

For the three and nine months ended September 30, 2015, total share-based compensation expense recognized for these share options was $1.7 million and $ 13.3 million, respectively.

A summary of restricted share unit activity under the Sohu 2010 Stock Incentive Plan as of and for the nine months ended September 30, ~~2014~~2015 is presented below:


Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value		Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2014		123		$	84.82
Unvested at January 1, 2015							67		$	78.16
Granted		36			67.57		17			53.71
Vested		(4	)		72.92		(11	)		58.04
Forfeited		(9	)		81.33		(15	)		83.80

Unvested at September 30, 2014		146			81.08
Unvested at September 30, 2015							58			73.57

Expected to vest thereafter		108			52.25		44			72.81

For the three and nine months ended September 30, 2015, total share-based compensation expense recognized for restricted share units was $0.6 million and $1.8 million, respectively. For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for restricted share units was $1.3 million and $3.8 million, respectively. ~~For the three and nine months ended September 30, 2013, total share-based compensation expense recognized for restricted share units was $0.2 million and $0.6 million, respectively.~~

As of September 30, ~~2014,~~2015, there was ~~$4.9~~$1.7 million of unrecognized compensation expense related to unvested restricted share units. The expense is expected to be recognized over a weighted average period of ~~1.16~~0.91 years. The total fair value on their respective vesting dates of restricted share units that vested ~~was $0.2 million~~ during ~~both~~ the three ~~months~~ and ~~the~~ nine months ended September 30, ~~2014.~~2015 was $0.3 million and $0.7 million, respectively. The total fair value on their respective vesting dates of restricted share units that vested during both the three months and the nine months ended September 30, ~~2013 was $0.4 million.~~

Changyou’s 2008 Share Incentive Plan (the “Changyou 2008 Share Incentive Plan”) originally provided for the issuance of up to 2,000,000 ordinary shares, including ordinary shares issued pursuant to the exercise of share options and upon vesting and settlement of restricted share units. The 2,000,000 reserved shares became 20,000,000 ordinary shares in March 2009 when Changyou effected a ten-for-one share split of its ordinary shares. Most of the awards granted under the Changyou 2008 Share Incentive Plan vest over a period of four years. The maximum term of any share right granted under the Changyou 2008 Share Incentive Plan is ten years from the grant date. The Changyou 2008 Share Incentive Plan will expire in August 2018.

Through September 30, 2014, Changyou had granted under the Changyou 2008 Share Incentive Plan 15,000,000 ordinary shares to its chief executive officer Tao Wang, through Prominence Investments Ltd., which is an entity that may deemed under applicable rules of the Securities and Exchange Commission to be beneficially owned by Tao Wang. As of September 30, 2014, Changyou had also granted under the Changyou 2008 Share Incentive Plan restricted share units, settleable upon vesting by the issuance of an aggregate of 4,983,552 ordinary shares, to its executive officers other than Tao Wang, and certain other Changyou employees.

For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for awards under the Changyou 2008 Share Incentive Plan was $0.5 million and $1.2 million, respectively. For the three and nine months ended September 30, 2013, total share-based compensation expense recognized for awards under the Changyou 2008 Share Incentive Plan was $0.3 million and $0.9 million, respectively.

All of the restricted ordinary shares and restricted share units granted before Changyou’s IPO became vested in 2012 and 2013, respectively. Hence there has been no share-based compensation expense recognized with respect to such restricted ordinary shares and restricted share units since their respective full vesting dates.

Through September 30, 2014, in addition to the share-based awards granted before Changyou’s IPO, Changyou had granted restricted share units, settleable upon vesting with the issuance of an aggregate of 1,787,552 ordinary shares, to certain of its executive officers other than Tao Wang and to certain of its other employees. These restricted share units are subject to vesting over a four-year period commencing on their grant dates. Share-based compensation expense for such restricted share units is recognized on an accelerated basis over the requisite service period. The fair value of restricted share units was determined based on the market price of Changyou’s American depositary shares on the grant date.

~~A summary of activity for these restricted share units as of and for the nine months ended September 30, 2014 is presented below:~~

For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for the above restricted share units was $0.5 million and $1.2 million, respectively. For the three and nine months ended September 30, 2013, total share-based compensation expense recognized for the above restricted share units was $0.3 million and $1.2 million, respectively.

As of September 30, 2014, there was $2.2 million of unrecognized compensation expense related to the unvested restricted share units. The expense is expected to be recognized over a weighted average period of 1.15 years. The total fair value of these restricted share units vested during the three and nine months ended September 30, 2014 was ~~nil and $0.44 million, respectively. The total fair value of these restricted share units vested during the three and nine months ended September 30, 2013 was nil and $4.7 million, respectively.~~

On June 25, 2014, Changyou reserved 2,000,000 of its Class A ordinary shares under the Changyou.com Limited 2014 Share Incentive Plan (the “Changyou 2014 Share Incentive Plan”) for the purpose of making share incentive awards to its executive officers and employees. As of September 30, 2014, Changyou had not made any awards under the Changyou 2014 Share Incentive Plan.$0.2 million.

Sogou adopted a share incentive plan on October 20, 2010. The number of Sogou ordinary shares issuable under the plan was 41,500,000 after an amendment that was effective August 22, 2014 (as amended, the “Sogou 2010 Share Incentive Plan”). Awards of share rights may be granted under the Sogou 2010 Share Incentive Plan to management and employees of Sogou and of any present or future parents or subsidiaries or variable interest entities of Sogou. The maximum term of any share right granted under the Sogou 2010 Share Incentive Plan is ten years from the grant date. The Sogou 2010 Share Incentive Plan will expire on October 19, 2020. As of September 30, ~~2014,~~2015, Sogou had granted options for the purchase of ~~37,829,113~~33,309,513 ordinary shares under the 2010 Sogou Share Incentive Plan.

Of the granted options for the purchase of ~~37,829,113~~33,309,513 shares, options for the purchase of ~~25,319,113~~24,869,513 shares will become vested and exercisable in four equal installments, with each installment vesting upon a service period requirement for management and key employees being met, as well as Sogou’s achievement of performance targets for the corresponding period. The performance target for each installment will be set at the beginning of each vesting period. Accordingly, for purposes of recognition of share-based compensation expense, each installment is considered to be granted as of that date. As of September 30, ~~2014,~~2015, performance targets had been set for options for the purchase of ~~21,885,713~~23,135,637 shares, subject to vesting upon service period requirements for management and key employees being met and Sogou’s achievement of performance targets and, accordingly, such options were considered granted for purposes of recognition of share-based compensation expense. As of September 30, ~~2014,~~2015, options for the purchase of ~~15,733,513~~21,274,249 shares had become vested and exercisable because both the service period and the performance requirements had been met, and of such vested options, options for the purchase of ~~15,276,505~~18,984,555 shares had been exercised.

Of the granted share options, options for the purchase of ~~8,550,000~~8,440,000 shares will become vested and exercisable in four or five equal installments, with (i) the first installment vesting upon Sogou’s completion of an IPO of its ordinary shares (“Sogou’s IPO”) and the expiration of all underwriters’ lockup periods applicable to Sogou’s IPO, and (ii) each of the three or four subsequent installments vesting on the first, second, third and, if applicable, fourth anniversary dates, respectively, of the closing of Sogou’s IPO.

The remaining granted share options, for the purchase of 3,960,000 Sogou ordinary shares, will become vested and exercisable in four equal installments, with (i) the first installment vesting upon the first anniversary of the occurrence of either of the following events (“Event”): (a) completion of Sogou’s IPO; (b) the consolidation of Sogou with or the acquisition of Sogou by another person or entity in a sale of all or substantially all of its assets or shares, and (ii) each of the three subsequent installments vesting on the second, third and fourth anniversary dates, respectively, of the occurrence of an Event. If there has not been an Event within 24 months after June 15, 2013, all installments of these remaining options for the purchase of 3,960,000 Sogou ordinary shares will cease to vest.

All installments of options for the purchase of 8,550,000 shares that are subject to vesting upon completion of Sogou’s IPO and options for the purchase of 3,960,000 shares that are subject to vesting upon the completion of an Event were considered granted upon the issuance of the options. The completion of an ~~Event~~IPO is considered to be a performance condition of the awards. An IPO ~~or other Event~~ is not considered to be probable until it is completed. UnderASC 718, compensation cost should be accrued if it is probable that the performance condition will be achieved and should not be accrued if it is not probable that the performance condition will be achieved. As a result, no compensation expense will be recognized related to these options until the completion of an ~~Event,~~IPO, and hence no share-based compensation expense was recognized for the three and nine months ended September 30, ~~2014~~2015 for the options for the purchase of ~~8,550,000~~8,440,000 shares that are subject to vesting upon completion of Sogou’s ~~IPO or for the~~IPO.

On June 15, 2013, Sogou granted options for the purchase of 3,960,000 ordinary shares, ~~that are subject to~~which would have vested and become exercisable in four equal installments, with (i) the first installment vesting upon the first anniversary of the occurrence of either (each, an “Event”): (a) completion of Sogou’s IPO or (b) the consolidation of Sogou with or the acquisition of Sogou by another person or entity in a sale of all or substantially all of Sogou’s assets or shares, and (ii) each of the three subsequent installments vesting on the second, third and fourth anniversaries, respectively, of the occurrence of an Event. However, if there was no Event by June 15, 2015, all installments of the options would cease to vest and be cancelled. As there had not been an Event as of June 15, 2015, all of the options ceased to vest and were cancelled.

A summary of share option activity under the Sogou 2010 Stock Incentive Plan as of and for the nine months ended September 30, ~~2014~~2015 is presented below:


Options	Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding at January 1, 2014		17,953		$	0.251
Outstanding at January 1, 2015									19,117		$	0.236
Granted		6,578			0.001				1,509			0.001
Exercised		(5,242	)		0.001				(3,692	)		0.001
Forfeited or expired		(170	)		0.001				(4,343	)		0.001

Outstanding at September 30, 2014		19,119			0.236		7.99
Outstanding at September 30, 2015									12,591			0.358		7.32

Vested at September 30, 2014 and expected to vest thereafter		6,120
Vested at September 30, 2015 and expected to vest thereafter									3,827

Exercisable at September 30, 2014		457
Exercisable at September 30, 2015									2,290

For the three and nine months ended September 30, 2015, total share-based compensation expense recognized for share options under the Sogou 2010 Share Incentive Plan was negative $0.4 million and $3.5 million, respectively. For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for share options under the Sogou 2010 Share Incentive Plan was $9.8 million and $10.7 million, respectively. ~~For the three and nine months ended September 30, 2013, total~~The negative $0.4 million resulted from Sogou’s true-up of share-based compensation expense ~~recognized~~ for share options ~~under~~forfeited during the ~~Sogou 2010 Share Incentive Plan was $1.7 million and $1.8 million, respectively.~~third quarter of 2015.

As of September 30, ~~2014,~~2015, there was ~~$23.9~~$4.5 million of unrecognized compensation expense related to the unvested share options. The expense is expected to be recognized over a weighted average period of ~~0.26~~0.33 years.

The fair value of the ordinary shares of Sogou was assessed using the income approach /discounted cash flow method, with a discount for lack of marketability, given that the shares underlying the award were not publicly traded at the time of grant, and was determined with the assistance of a qualified professional appraiser using management’s estimates and assumptions. This assessment required complex and subjective judgments regarding Sogou’s projected financial and operating results, its unique business risks, the liquidity of its ordinary shares and its operating history and prospects at the time the grants were made.

The fair value of the options granted to Sogou management and key employees was estimated on the date of grant using the Binomial option -– pricing model (the “BP Model”) with the following assumptions used:

Sogou estimated the risk-free rate based on the market yields of U.S. Treasury securities with an estimated country-risk differential as of the valuation date. An exercise multiple was estimated as the ratio of the fair value of the shares over the exercise price as of the time the option is exercised, based on consideration of research studies regarding exercise patterns based on historical statistical data. In Sogou’s valuation analysis, a multiple of two was applied for employees and a multiple of three was applied for management. Sogou estimated the forfeiture rate to be ~~0% or~~ 1% for Sogou management’s share options granted as of September 30, ~~2014~~2015 and 12% for Sogou employees’ share options granted as of September 30, ~~2014.~~2015. The life of the share options is the contract life of the option. Based on the option agreement, the contract life of the option is 10 years. The expected volatility at the valuation date was estimated based on the historical volatility of comparable companies for the period before the grant date with length commensurate with the expected term of the options. Sogou has no history or expectation of paying dividends on its ordinary shares. Accordingly, the dividend yield is estimated to be 0%.

Under an arrangement providing for Sogou share-based awards to be available for grants to members of Sohu’s Board of Directors, management and other key employees (“Sohu Management Sogou Share Option Arrangement”), which was approved by the boards of directors of Sohu and Sogou in March 2011, Sohu has the right to provide to ~~Sohu~~members of Sohu’ Board of Directors, management and other key employees the opportunity to purchase from Sohu up to 12,000,000 ordinary shares of Sogou at a fixed exercise price of $0.625 or $0.001 per share. Of these 12,000,000 ordinary shares, 8,800,000 are Sogou ordinary shares previously held by Sohu and 3,200,000 are Sogou ordinary shares that were newly-issued on April 14, 2011 by Sogou to Sohu at a price of $0.625 per share, or a total of $2$2.0 million. As of September 30, ~~2014,~~2015, Sohu had granted options for the purchase of ~~10,763,000~~10,724,500 Sogou ordinary shares to ~~Sohu~~members of Sohu’ Board of Directors, management and other key employees under the Sohu Management Sogou Share Option Arrangement.

Of the granted options for the purchase of ~~10,763,000~~10,724,500 shares, options for the purchase of ~~8,363,000~~8,309,500 shares will become vested and exercisable in four equal installments, with each installment vesting upon a service period requirement for Sohu’s management and key employees being met, as well as Sogou’s achievement of performance targets for the corresponding period. Options for the purchase of 15,000 shares granted to members of Sohu’ Board of Directors will become vested and exercisable upon a service period requirement being met. The performance target for each installment will be set at the beginning of each vesting period. Accordingly, for purposes of recognition of share-based compensation expense, each installment is considered to be granted as of that date. As of September 30, ~~2014,~~2015, performance targets had been set for options for the purchase of ~~8,208,000~~8,154,500 shares vesting upon service period requirements for Sohu’s management and key employees being met and Sogou’s achievement of performance targets and, accordingly, such share options were considered granted. As of September 30, ~~2014,~~2015, options for the purchase of ~~6,585,750~~8,064,740 shares had become vested and exercisable because both the service period and the performance requirements had been met, and vested options for the purchase of ~~6,378,500~~6,979,700 shares had been exercised.

The remaining options for the purchase of 2,400,000 shares will become vested and exercisable in five equal installments, with (i) the first installment vesting upon Sogou’s IPO and the expiration of all underwriters’ lockup periods applicable to the IPO, and (ii) each of the four subsequent installments vesting on the first, second, third and fourth anniversary dates, respectively, of the closing of Sogou’s IPO. All installments of the options for the purchase of 2,400,000 shares that are subject to vesting upon the completion of Sogou’s IPO were considered granted upon the issuance of the options. The completion of a firm commitment IPO is considered to be a performance condition of the awards. An IPO event is not considered to be probable until it is completed. UnderASC 718, compensation cost should be accrued if it is probable that the performance condition will be achieved and should not be accrued if it is not probable that the performance condition will be achieved. As a result, no compensation expense will be recognized related to these options until the completion of an IPO, and hence no share-based compensation expense was recognized for the three and nine months ended September 30, ~~2014~~2015 for these options for the purchase of 2,400,000 shares.

A summary of share option activity as of and for the nine months ended September 30, ~~2014~~2015 is presented below:


Options	Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding at January 1, 2014		3,880		$	0.625
Outstanding at January 1, 2015									4,165		$	0.625
Granted		1,623			0.625				15			0.001
Exercised		(1,273	)		0.625				(584	)		0.625
Forfeited or expired		0							(6	)		0.625

Outstanding at September 30, 2014		4,230			0.625		7.68
Outstanding at September 30, 2015									3,590			0.622		6.90

Vested at September 30, 2014 and expected to vest thereafter		1,696
Vested at September 30, 2015 and expected to vest thereafter									1,085

Exercisable at September 30, 2014		207
Exercisable at September 30, 2015									1,085

For the three months and the nine months ended September 30, 2015, total share-based compensation expense recognized for share options under the Sohu Management Sogou Share Option Arrangement was nil and $0.7 million, respectively. For the three months and the nine months ended September 30, 2014, total share-based compensation expense recognized for share options under the Sohu Management Sogou Share Option Arrangement was $2.3 million and $3.6 million, respectively. For both the three months and the nine months ended September 30, 2013, total share-based compensation expense recognized for share options under the Management Share Option Arrangement was $0.5 million.

As of September 30, ~~2014,~~2015, there was ~~$5.5 million of~~no unrecognized compensation expense related to unvested Sogou share options. ~~The expense is expected to be recognized over a weighted average period of 0.25 years.~~

The method used to determine the fair value of share options granted to ~~Sohu management~~members of Sohu’s Board of Directors and ~~key~~to Sohu’s executive officers and other employees was the same as the method used for the share options granted to Sogou’s management and key employees as described above, except for the assumptions used in the BP Model as presented below:

In the first and second quarter of 2013, a portion of the share options granted under the Sogou 2010 Share Incentive Plan and the Sohu Management Sogou Share Option Arrangement were exercised early, and the resulting Sogou ordinary shares were transferred to trusts with the original option grantees as beneficiaries. The trusts will distribute the shares to those beneficiaries in installments based on the vesting requirements under the original option agreements. Although these trust arrangements caused a modification of the terms of these share options, the modification was not considered substantive. Accordingly, no incremental fair value related to these shares resulted from the modification, and the remaining share-based compensation expense for these shares will continue to be recognized over the original remaining vesting period.

As of September 30, ~~2014,~~2015, options for the purchase of ~~15,320,000~~11,660,200 shares granted under the Sogou 2010 Share Incentive Plan and options for the purchase of ~~612,500~~40,800 shares granted under the Sohu Management Sogou Share Option Arrangement, or options for the purchase of a total of ~~15,932,500~~11,701,000 shares, had been exercised early but had not been distributed to the beneficiaries of the trusts. All of the early-exercised shares that were distributed to those beneficiaries by the trusts in accordance with the vesting requirements under the original option agreements have been included in the disclosures under the headings “Sogou 2010 Share Incentive Plan” and “Share-based Awards to Sohu Management” above.

Tencent Share-based Awards Granted to Employees Who Transferred to Sogou with Soso Search-related Businesses

Certain persons who became Sogou employees when Tencent’s Soso search-related businesses were transferred to Sogou on September 16, 2013 had been granted restricted share units under Tencent’s share award arrangements prior to the transfer of the businesses to Sogou. These Tencent restricted share units will continue to vest under the original Tencent share award arrangements provided the transferred employees continue to be employed by Sogou during the requisite service period. After the transfer of the Soso search-related businesses to Sogou, Sogou applied the guidance inASC 505-50 to measure the related compensation expense, based on the then-current fair value at each reporting date, which is deemed to have been incurred by Tencent as an investor on Sogou’s behalf. To determine the then-current fair value of the Tencent restricted share units granted to these employees, the public market price of the underlying shares at each reporting date was applied. Because Sogou is not required to reimburse Tencent for such share-based compensation expense, the related amount was recorded by Sogou as a capital contribution from Tencent.

As of September 30, ~~2014,~~2015, unvested Tencent restricted share unit awards held by these employees provided for the issuance of up to ~~428,300~~169,550 ordinary shares of Tencent, taking into consideration a five-for-one split of Tencent’s shares that became effective in May 2014. Share-based compensation expense of ~~$1.0~~negative $0.9 million and ~~$4.6~~$1.5 million ~~respectively,~~ related to these Tencent restricted share units was recognized in the Group’s consolidated statements of comprehensive income for the three and nine months ended September 30, ~~2014.~~2015. The negative $0.9 million resulted from Sogou’s true-up of share-based compensation expense for forfeited restricted share units and re-measurement of share-based compensation expense based on the then-current fair value of the awards on September 30, 2015. As of September 30, ~~2014,~~2015, there was ~~$3.4~~$1.0 million of unrecognized compensation expense related to these unvested restricted share units. This amount is expected to be recognized over a weighted average period of ~~2.84~~2.21 years.

InChangyou’s 2008 Share Incentive Plan (the “Changyou 2008 Share Incentive Plan”) originally provided for the issuance of up to 2,000,000 ordinary shares, including ordinary shares issued pursuant to the exercise of share options and upon vesting and settlement of restricted share units. The 2,000,000 reserved shares became 20,000,000 ordinary shares in March 2009 when Changyou effected a ten-for-one share split of its ordinary shares. Most of the awards granted under the Changyou 2008 Share Incentive Plan vest over a period of four years. The maximum term of any share right granted under the Changyou 2008 Share Incentive Plan is ten years from the grant date. The Changyou 2008 Share Incentive Plan will expire in August 2018.

Through September 30, 2015, Changyou had granted under the Changyou 2008 Share Incentive Plan 15,000,000 ordinary shares to its former chief executive officer Tao Wang, through Prominence Investments Ltd., which is an entity that may be deemed under applicable rules of the Securities and Exchange Commission to be beneficially owned by Tao Wang. As of September 30, 2015, Changyou had also granted under the Changyou 2008 Share Incentive Plan restricted share units, settleable upon vesting by the issuance of an aggregate of 4,614,098 ordinary shares, to certain members of its management other than Tao Wang, and certain other Changyou employees.

For both the three and the nine months ended September 30, 2015, total share-based compensation expense recognized for awards under the Changyou 2008 Share Incentive Plan was negative $0.3 million. The negative amount resulted from Changyou’s reversal of share-based compensation expense for restricted share units that were cancelled due to termination of employment prior to vesting. For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for awards under the Changyou 2008 Share Incentive Plan was $0.5 million and $1.2 million, respectively.

All of the restricted ordinary shares and restricted share units granted before Changyou’s IPO became vested in 2012 and 2013, respectively. Hence there was no share-based compensation expense recognized with respect to such restricted ordinary shares and restricted share units since their respective vesting dates.

Through September 30, 2015, in addition to the share-based awards granted before Changyou’s IPO, Changyou had granted restricted share units, settleable upon vesting with the issuance of an aggregate of 1,581,226 ordinary shares, to certain members of its management other than Tao Wang and to certain of its other employees. These restricted share units are subject to vesting over a four-year period commencing on their grant dates. Share-based compensation expense for such restricted share units is recognized on an accelerated basis over the requisite service period. The fair value of restricted share units was determined based on the market price of Changyou’s ADSs on the grant date.

A summary of activity for these restricted share units as of and for the nine months ended September 30, 2015 is presented below:

For both the three and the nine months ended September 30, 2015, total share-based compensation expense recognized for the restricted share units described above was negative $0.3 million. The negative amount resulted from Changyou’s reversal of share-based compensation expense for restricted share units that were cancelled due to termination of employment prior to vesting. For the three and nine months ended September 30, 2014, total share-based compensation expense recognized for the restricted share units described above was $0.5 million and $1.2 million, respectively.

As of September 30, 2015, there was $0.1 million of unrecognized compensation expense related to the unvested restricted share units. The expense is expected to be recognized over a weighted average period of 0.88 years. The total fair value of these restricted share units vested during the three and nine months ended September 30, 2015 was nil and $0.7 million, respectively. The total fair value of these restricted share units vested during the three and nine months ended September 30, 2014 was nil and $0.44 million, respectively.

On June 27, 2014, ~~Sogou repurchased approximately 4.2 million~~Changyou reserved 2,000,000 of its Class A ~~Ordinary Shares~~ordinary shares under the Changyou.com Limited 2014 Share Incentive Plan (the “Changyou 2014 Share Incentive Plan”) for the purpose of making share incentive awards to certain members of its management and key employees. On November 2, 2014, the number of Class A ordinary shares reserved under the Changyou 2014 Share Incentive Plan increased from ~~noncontrolling shareholders, some~~2,000,000 to 6,000,000. As of ~~whom~~September 30, 2015, 2,404,000 shares were available for grant under the Changyou 2014 Share Incentive Plan.

On November 2, 2014, Changyou approved the contractual grant of an aggregate of 2,416,000 Class A restricted share units to certain members of its management and certain other employees. On February 16, 2015, Changyou’s Board of Directors approved the conversion of 2,400,000 of these Class A restricted share units into options for the purchase of Class A ordinary shares at an exercise price of $0.01. On June 1, 2015, Changyou’s Board of Directors approved the legal grant of options for the purchase of an aggregate of 1,998,000 Class A restricted share units to certain members of its management and certain other employees at an exercise price of $0.01.

These options provide for vesting in four equal installments over a period of four years, with each installment vesting upon satisfaction of a service period requirement and the achievement of certain subjective performance targets. The grant date had not been established as of September 30, 2015, because a mutual understanding had not been reached between Changyou and the recipients clarifying the subjective performance requirements. Compensation expense for these options is accrued commencing on the service inception date and is re-measured based on the then-current fair value of the ~~Group, for an aggregate repurchase price of $41.6 million, which exceeded~~options on each subsequent reporting date until the grant date is established. To determine the fair value of these share options, the ~~ordinary shares. Under~~~~ASC 718~~~~, the excess~~public market price of the ~~repurchase price~~underlying shares at each reporting date was used and a binomial valuation model was applied.

For the three and nine months ended September 30, 2015, share-based compensation expense recognized for these share options under the Changyou 2014 Share Incentive Plan was negative $3.2 million and $7.7 million, respectively. The negative amount resulted from Changyou’s reversal of share-based compensation expense for restricted share units that were cancelled during the third quarter of 2015 due to termination of employment prior to vesting.

As of September 30, 2015, Changyou had contractually granted under the 2014 Share Incentive Plan an aggregate of 16,000 Class A restricted share units to an employee. These Class A restricted share units are subject to vesting over ~~the~~a four-year period commencing on their grant dates. The fair ~~value~~values as of the ~~equity instruments repurchased from employees should be~~grant dates of the restricted share units were determined based on market price of Changyou’s ADSs on the grant dates.

A summary of activity for these restricted share units as of and for the nine months ended September 30, 2015 is presented below:

For both the three and nine months ended September 30, 2015, share-based compensation expense recognized ~~as additional compensation expense. Therefore, in~~for these restricted share units under the Changyou 2014 Share Incentive Plan was nil and negative $17,000, respectively, due to termination of employment during the second quarter of ~~2014, approximately $17.0 million~~2015, prior to vesting. As of ~~share-based~~September 30, 2015, there was no unrecognized compensation expense ~~was recognized in the Sohu Group’s statements~~for these restricted share units, as all of ~~comprehensive income as share-based compensation expense in connection with the repurchases.~~them had been forfeited.

On January 4, 2012, Sohu Video adopted the Video 2011 Share Incentive Plan, under which 25,000,000 ordinary shares of Sohu Video are reserved for the purpose of making share incentive awards to management and key employees of ~~the video division~~Sohu Video and to Sohu management. The maximum term of any share incentive award granted under the Video 2011 Share Incentive Plan is ten years from the grant date. The Video 2011 Share Incentive Plan will expire on January 3, 2021. As of September 30, ~~2014,~~2015, grants of options for the purchase of 16,368,200 ordinary shares of Sohu Video had been contractually made under the Video 2011 Share Incentive Plan, and options for the purchase of 4,972,800 ordinary shares were vested.

For the three months and the nine months ended September 30, 2015, total share-based compensation expense recognized for vested options under the Video 2011 Share Incentive Plan was $99,000 and $199,000, respectively. For the three months and the nine months ended September 30, 2014, total share-based compensation expense recognized for vested options under the Video 2011 Share Incentive Plan was negative $0.1 million and ~~positive $ 4.1~~$4.1 million, respectively.

The ~~method used to determine the~~ fair value of ~~share~~the options ~~granted was the same as the method used for the share options~~contractually granted to ~~Sogou’s~~ management and key employees ~~as described above, except for~~of Sohu Video and to Sohu management was estimated on the ~~assumptions used in~~reporting date using the BP Model, ~~as presented below:~~with the following assumptions used:

On July 27, 2013, Changyou’s Board of Directors authorized a share repurchase program of up to $100 million of the outstanding ADSs of Changyou over a two-year period from July 27, 2013 to July 26, 2015. In the third quarter of 2015, Changyou repurchased 557,600 ADSs, representing 1,115,200 ordinary shares, at an aggregate cost of approximately $13.2 million. As of the July 26, 2015 expiration date of the share repurchase program, Changyou had repurchased under the program an aggregate of 1,364,846 Changyou ADSs, representing 2,729,692 ordinary shares, at an aggregate cost of approximately $35 million.

On August 17, 2015, (i) Changyou’s VIE Beijing Gamease Age Digital Technology Co., Ltd. (“Gamease”), a PRC company that is a VIE of Changyou, completed the sale to Shanghai Yong Chong Investment Center LP, a PRC limited partnership, of all of the equity interests in Shenzhen 7Road Technology Co., Ltd., a PRC company primarily engaged in the Web game business, and (ii) Changyou.com (HK) Limited, a Hong Kong company that is a wholly-owned subsidiary of Changyou, completed the sale to Supermax Holdings Group Limited, a British Virgin Islands company, of all of the equity capital of Changyou My Sdn. Bhd, a Malaysia company, and Changyou.com (UK) Company Limited, a United Kingdom company, which are engaged in the online game business in Malaysia and the United Kingdom, respectively. The aggregate consideration for these transactions was $205.0 million in cash. As of September 30, 2015, all the consideration had been paid to Changyou. In connection with these transactions, a disposal gain of $55.1 million was recognized in the Group’s consolidated statements of comprehensive income for the third quarter of 2015.

On October 22, 2010, Sogou issued and sold 24.0 million, 14.4 million and 38.4 million, respectively, of its newly-issued Series A Preferred Shares to Alibaba ~~Investments~~Investment Limited, a subsidiary of Alibaba Group Holding Limited (“Alibaba”),; China ~~Web~~Web; and Photon for $15 million, $9 million, and $24 million, respectively. On June 29, 2012, Sohu purchased Alibaba’s 24.0 million Sogou Series A Preferred Shares for a purchase price of $25.8 million.

On September 16, 2013, Sogou entered into a series of agreements with Tencent, Sohu Search and Photon pursuant to which Sogou issued Series B Preferred Shares and Class B Ordinary Shares to Tencent for a net amount of $448 million in cash and Tencent transferred its Soso search-related businesses and certain other assets to ~~Sogou.~~Sogou (collectively, the “Sogou-Tencent Transactions”). Also on that date, Sogou entered into Repurchase Option Agreements with Sohu Search and Photon, and a Repurchase/Put Option Agreement with China Web, with respect to all of the Series A Preferred Shares of Sogou held by Sohu Search and China Web, and a portion of the Series A Preferred Shares of Sogou held by Photon. Also on that date, Sogou, Sohu Search, Photon, Mr. Xiaochuan Wang, four other members of Sogou’s management (collectively, the “Sohu Parties”) and Tencent entered into a Shareholders Agreement (the “Shareholders Agreement”) under which the parties agreed to vote their Sogou shares in all elections of directors to elect three designees of Sohu Search and two designees of Tencent.

On September 17, 2013, Sogou paid a special dividend to the three holders of Series A Preferred Shares of Sogou in the aggregate amount of ~~$301~~$300.9 million, of which Sohu Search received ~~$161~~$161.2 million, Photon received ~~$43~~$43.0 million, and China Web received ~~$97~~$96.7 million.

On December 2, 2013, Tencent invested $1.5 million in cash in ~~Sogou’s~~Sogou Information, which is a VIE of Sogou, ~~Information,~~ as additional consideration ~~for~~in connection with the Sogou-Tencent Transactions, in return for a 45% equity interest in Sogou Information. Through a share pledge agreement and an exclusive equity interest purchase right agreement between Tencent and Sogou Technology, and similar agreements between the other two shareholders of Sogou Information, Sogou Technology controls all shareholder voting rights in Sogou Information, has the power to direct the activities of Sogou Information, and is the primary beneficiary of Sogou Information, and Tencent and the other two shareholders of Sogou Information act as Sohu Technology’s nominees.

OnIn March ~~24,~~ 2014, Sogou purchased from China Web, pursuant to the Repurchase/Put Option Agreement ~~between Sogou and China Web,~~entered into in September 2013, 14.4 million Series A Preferred Shares of Sogou, for an aggregate purchase price of $47.3 million.

In June 2014, Sogou repurchased approximately 4.2 million of its Class A Ordinary Shares from noncontrolling shareholders, ~~some~~a majority of whom ~~are~~were employees of the Group, for an aggregate purchase price of $41.6 million.

~~As of~~In September ~~30, 2014,~~2015, Sogou ~~had outstanding a combined total of 357,445,588 ordinary shares and preferred shares held as follows:~~

~~132,834,750 Class A Ordinary Shares and 24,000,000 Series A Preferred Shares. Of the Class A Ordinary Shares, 5,634,750 shares are subject to purchase~~purchased from Sohu ~~under options held by Sohu management~~Search and ~~key employees. All of~~Photon, pursuant to the ~~24,000,000 Series A Preferred Shares are subject to repurchase by Sogou commencing March 16, 2014;~~

~~38,400,000~~Repurchase Option Agreements entered into in September 2013, 24.0 million and 6.4 million Series A Preferred Shares of ~~which 6,400,000~~Sogou, for an aggregate purchase price of $78.8 million and $21.0 million, respectively. After these repurchases, the Sohu Group holds approximately 36% of the outstanding equity capital of Sogou, assuming that all share options under the Sogou 2010 Share Incentive Plan and all share options under the Sohu Management Sogou Share Option Arrangement are ~~subject to repurchase by Sogou commencing March 16, 2014;~~

~~6,757,875~~granted and exercised and that all of the 4.2 million Class A Ordinary Shares ~~65,431,579 Series B Preferred Shares~~Sogou repurchased in June 2014 were issued to shareholders other than Sohu.

Pursuant to the Shareholders Agreement, the Sohu Group holds approximately 52% of the total voting power and ~~79,368,421 non-voting Class B Ordinary Shares; and~~

~~Since Sohu controls~~control the election of the Board of Directors of Sogou, assuming that Tencent’s non-voting Class B Ordinary Shares are converted to voting shares, and that all share options under the Sogou 2010 Share Incentive Plan and all share options under the Sohu Management Sogou Share Option Arrangement are granted and exercised. As Sohu.com Inc. is ~~Sogou’s~~the controlling ~~shareholder. Therefore, Sohu~~shareholder of Sogou, Sohu.com Inc. consolidates Sogou in the ~~Sohu~~ Group’s consolidated financial statements, and recognizes noncontrolling interest reflecting economic interests in Sogou held by shareholders other than ~~Sohu.~~Sohu.com Inc.

As of September 30, 2015, Sogou had outstanding a combined total of 330,736,138 ordinary shares and preferred shares held as follows:

Because no ordinary shares will be issued with respect to share options granted by Sogou until they are vested and exercised, share options granted by Sogou that have not vested and vested share options that have not yet been exercised are not included as outstanding shares of Sogou and have no impact on the Sohu Group’s basic net income per share. Unvested share options with performance targets achieved and vested share options that have not yet been exercised do, however, have a dilutive impact on the Sohu Group’s dilutive net income per share. See Note ~~16—~~14 – Net ~~Income /(Loss)~~Income/(Loss) per Share.

In connection with the Sogou-Tencent Transactions, Sogou’s shareholders adopted a Fifth Amended and Restated Memorandum of Association and Second Amended and Restated Articles of Association (together, the “Revised Sogou Memorandum and Articles”), which became effective on September 16, 2013. The following is a summary of some of the key terms of the Sogou Series A Preferred Shares and Series B Preferred Shares (collectively, the “Sogou Preferred Shares”) under the Revised Sogou Memorandum and Articles.

Sogou may not declare or pay dividends on its Class A Ordinary Shares or Class B Ordinary Shares (collectively, “Ordinary Shares”) unless the holders of the Sogou Preferred Shares then outstanding first receive a dividend on each outstanding Preferred Share in an amount at least equal to the sum of (i) the dividends that would have been payable to the holder of such Preferred Share if such share had been converted into Ordinary Shares, at the then-applicable conversion rate, immediately prior to the record date for such dividend, and (ii) all accrued and unpaid Accruing Dividends. “Accruing Dividends” are calculated from the date of issuance of the Series A Preferred Shares at the rate per annum of $0.0375 per Series A Preferred Share and from the date of issuance of the Series B Preferred Shares at the rate per annum of $0.411 per Series B Preferred Share.

In the event of any “Liquidation Event,” such as the liquidation, dissolution or winding up of Sogou, a merger or consolidation of Sogou resulting in a change of control, the sale of substantially all of Sogou’s assets or similar events, the holders of Series B Preferred Shares are entitled to receive an amount per share equal to the greater of (i) $6.847 plus any unpaid Accruing Dividends or (ii) such amount per share as would have been payable if the Series B Preferred Shares had been converted into Ordinary Shares prior the Liquidation Event, and holders of Series A Preferred Shares are entitled to receive, after payment to the holders of the Series B Preferred Shares but before any payment to holders of Ordinary Shares, an amount equal to the greater of (i) 1.3 times their original investment in the Series A Preferred Shares plus all accrued but unpaid Accruing Dividends or (ii) such amount per share as would be payable if the Series A Preferred Shares had been converted into Ordinary Shares immediately prior to the Liquidation Event.

Each Sogou Preferred Share is convertible, at the option of the holder, at any time, and without the payment of additional consideration by the holder. Each Sogou Preferred Share is convertible into such number of Class A Ordinary Shares as is determined, in the case of Series A Preferred Shares, by dividing $0.625 by the then-effective conversion price for Series A Preferred Shares, which is initially $0.625, and, in the case of Series B Preferred Shares, by dividing $7.267 by the then-effective conversion price for Series B Preferred Shares, which is initially $7.267. The conversion prices of the Sogou Preferred Shares are subject to adjustment on a weighted average basis upon the issuance of additional equity shares, or securities convertible into equity shares, at a price per share less than $0.625, in the case of Series A Preferred Shares, or less than $7.267, in the case of Series B Preferred Shares, subject to certain customary exceptions, such as shares issued pursuant to the Sogou 2010 Share Incentive Plan. Each Sogou Preferred Share will be automatically converted into Class A Ordinary Shares of Sogou upon the closing of a qualified IPO of Sogou based on the then-effective conversion ratio of such Sogou Preferred Share, which is currently one-for-one for both Series A Preferred Shares and Series B Preferred Shares.

Each holder of Sogou Preferred Shares is entitled to cast the number of votes equal to the number of Class A Ordinary Shares into which the Sogou Preferred Shares held by such holder are then convertible.

The holders of Sogou Preferred Shares have various other rights typical of preferred share investments.

The Class A Ordinary Shares and Class B Ordinary Shares have identical rights, except that Class B Ordinary Shares do not have voting rights unless the holders of at least a majority of the then outstanding Class B Ordinary Shares elect, by written notice to Sogou, to convert them into shares with voting rights.

On July 27, 2013, Changyou’s Board of Directors authorized a share repurchase program of up to $100 million of the outstanding ADSs of Changyou over a two-year period from July 27, 2013 to July 26, 2015. During the nine months ended September 30, 2014, Changyou did not repurchase any of its ADSs under the share repurchase program.

On July 16, 2014, Changyou, through a wholly-owned subsidiary, entered into an investment agreement with MoboTap Inc. (“MoboTap”), a Cayman Islands company which is the mobile technology developer behind the Dolphin Browser, MoboTap’s subsidiaries and variable interest entities, and MoboTap’s shareholders pursuant to which Changyou agreed to purchase from existing shareholders of MoboTap shares of MoboTap representing 51% of the equity interests in MoboTap on a fully-diluted basis for approximately $91 million in cash. In addition, Changyou has the right to purchase up to 10% of the equity interests in MoboTap from the noncontrolling shareholders, at a price of 20% below the IPO price, before a qualified IPO of MoboTap. If MoboTap achieves specified performance milestones for 2016 and certain other conditions specified in the shareholder agreement, including the completion of an IPO, are not met, the noncontrolling shareholders of MoboTap will have a one-time right to put to Changyou shares of MoboTap held by them, representing up to 15% of the equity interests in MoboTap, for an aggregate price of up to $53 million. The Sohu Group began to consolidate MoboTap’s financial statements commencing with the acquisition.

~~On the acquisition date, the allocation of the consideration of the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):~~

The acquired identifiable intangible assets represent the Dolphin Browser user base, technology and trademark, the useful lives of which were 2.4 years, 5.4 years and 10.4 years, respectively. The acquired user base was valued with the cost approach, and the acquired technology and trademark were valued with the income approach. Goodwill of $113 million primarily represents the expected synergies from combining the operations of Changyou and MoboTap, which are complementary to each other. In accordance with~~ASC 350, goodwill is not amortized but is tested for impairment and is not deductible for tax purposes. As of September 30, 2014, no measurement period adjustment had been recorded.~~

Based on an assessment of MoboTap’s financial performance, MoboTap is not considered material to the Sohu Group. Thus the Sohu Group’s management concluded that the presentation of pro forma financial information with respect to the results of operations of the Sohu Group including the acquired MoboTap is not necessary. As the Dolphin Browser serves as an important entrance point for Changyou to accumulate traffic from users of mobile devices, which is complementary to Changyou’s game business, MoboTap will be reported under the online game segment.

Mezzanine Equity consisted of the noncontrolling interest in 7Road and a put option pursuant to which the noncontrolling shareholders would have had the right to put their ordinary shares in 7Road to Changyou at a pre-determined price if 7Road achieved specified performance milestones before the expiration of the put option and 7Road did not complete an IPO on NASDAQ, the New York Stock Exchange (the “NYSE”) or the Stock Exchange of Hong Kong (the “HKEX”). The put option was due to expire in 2014. Since the occurrence of the sale was not solely within the control of Changyou, the noncontrolling interest was classified as mezzanine equity instead of permanent equity in the Sohu Group’s and Changyou’s consolidated financial statements.

~~Under~~~~ASC 480-10~~, the Sohu Group calculated, on an accumulative basis from the acquisition date, (i) the amount of accretion that would increase the balance of noncontrolling interest to its estimated redemption value over the period from the date of the Shenzhen 7Road acquisition to the earliest redemption date of the noncontrolling interest in 7Road and (ii) the amount of net profit attributable to noncontrolling shareholders of 7Road based on their ownership percentage. The carrying value of the noncontrolling interest as mezzanine equity was adjusted by an accumulative amount equal to the higher of (i) and (ii).

On May 1, 2013, Changyou entered into an agreement to acquire all of the ordinary shares of 7Road held by the noncontrolling shareholders. The acquisition closed on June 5, 2013, and 7Road has been a wholly-owned subsidiary of Changyou since then. As the put option held by the owners of the noncontrolling interest lapsed upon the closing of Changyou’s acquisition of their shares in 7Road, there was no associated accretion and no mezzanine equity during and after the third quarter of 2013.

For the three and nine months ended September 30, 2013, accretion charges of nil and $17.8 million, respectively, were recorded in the Sohu Group’s statements of comprehensive income as net income attributable to the mezzanine-classified noncontrolling interest shareholders of 7Road. There was no associated accretion in 2014, as no mezzanine equity existed after Changyou’s acquisition on June 5, 2013 of all of the ordinary shares of 7Road held by the noncontrolling shareholders.

The primary majority-owned subsidiaries and VIEs of the Sohu Group which are consolidated in its consolidated financial statements ~~but~~ with noncontrolling interest recognized are ~~Changyou~~Sogou and ~~Sogou.~~

As Sohu is Changyou’s controlling shareholder, Changyou’s financial results have been consolidated with those of Sohu for all periods presented. To reflect the economic interest in Changyou held by shareholders other than Sohu (the “Changyou noncontrolling shareholders”), Changyou’s net income /(loss) attributable to the Changyou noncontrolling shareholders is recorded as noncontrolling interest in the Sohu Group’s consolidated statements of comprehensive income, based on their share of the economic interest in Changyou. Changyou’s cumulative results of operations attributable to the Changyou noncontrolling shareholders, along with changes in shareholders’ equity, adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and adjustment for changes in Sohu’s ownership in Changyou, are recorded as noncontrolling interest in the Sohu Group’s consolidated balance sheets.

Since ~~Sohu~~Sohu.com Inc. controls the election of the Board of Directors of Sogou, ~~Sohu~~Sohu.com Inc. is Sogou’s controlling shareholder. Therefore, Sogou’s financial results have been consolidated with those of ~~Sohu~~Sohu.com Inc. for all periods presented. To reflect the economic interest in Sogou held by shareholders other than ~~Sohu~~Sohu.com Inc. (the “Sogou noncontrolling shareholders”), Sogou’s net income /(loss) attributable to the Sogou noncontrolling shareholders is recorded as noncontrolling interest in the Sohu Group’s consolidated statements of comprehensive income. Sogou’s cumulative results of operations attributable to the Sogou noncontrolling shareholders, along with changes in shareholders’ equity /(deficit) and adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and the Sogou noncontrolling shareholders’ investments in Sogou Preferred Shares and Ordinary Shares are accounted for as a noncontrolling interest classified as permanent equity in the Sohu Group’s consolidated balance sheets, as the Sohu Group has the right to reject a redemption ofrequested by the noncontrolling ~~interest is solely within the control of Sohu.~~interest. These treatments are based on the terms governing investment, and on the terms of the classes of Sogou shares held, by the noncontrolling shareholders in Sogou.

By virtue of these terms, Sogou’s losses have been and will be allocated in the following order:

Net income from Sogou has been, and future net income from Sogou will be, allocated in the following order:

As Sohu.com Inc. is Changyou’s controlling shareholder, Changyou’s financial results have been consolidated with those of Sohu.com Inc. for all periods presented. To reflect the economic interest in Changyou held by shareholders other than Sohu.com Inc. (the “Changyou noncontrolling shareholders”), Changyou’s net income /(loss) attributable to the Changyou noncontrolling shareholders is recorded as noncontrolling interest in the Sohu Group’s consolidated statements of comprehensive income, based on their share of the economic interest in Changyou. Changyou’s cumulative results of operations attributable to the Changyou noncontrolling shareholders, along with changes in shareholders’ equity, adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and adjustment for changes in Sohu.com Inc.’s ownership in Changyou, are recorded as noncontrolling interest in the Sohu Group’s consolidated balance sheets.

As of December 31, 2014 and September 30, ~~2014 and December 31, 2013,~~2015, noncontrolling interest in the consolidated balance sheets was ~~$472.4~~$487.2 million and ~~$510.0~~$450.0 million, respectively.

As of September 30, 2014 and December 31, 2013, the noncontrolling interest of Changyou was recognized in the Sohu Group’s consolidated balance sheets, representing as of both dates a 32% economic interest in Changyou’s net assets held by shareholders other than Sohu and reflecting the reclassification of Changyou’s share-based compensation expense from shareholders’ additional paid-in capital to noncontrolling interest.

As of December 31, 2014 and September 30, ~~2014 and December 31, 2013, the~~2015, noncontrolling interest of Sogou of $145.5 million and $96.6 million, respectively, was recognized in the Sohu Group’s consolidated balance sheets, representing Sogou’s cumulative results of operations attributable to shareholders other than ~~Sohu,~~Sohu.com Inc.; Sogou’s share-based compensation ~~expense, and~~expense; the investments of shareholders other than ~~Sohu~~Sohu.com Inc. in Preferred Shares and Ordinary Shares of ~~Sogou, the adjustment of the investment basis of shareholders other than Sohu due to the special dividend paid to holders of Series A Preferred Shares of Sogou on September 17, 2013,~~Sogou; the repurchase of Sogou Series A Preferred Shares from ~~China Web on~~noncontrolling shareholders in March ~~24,~~ 2014 and September 2015; and Sogou’s repurchase of Class A Ordinary Shares from noncontrolling shareholders in June 2014.

As of December 31, 2014 and September 30, 2015, noncontrolling interest of Changyou of $341.7 million and $353.4 million, respectively, was recognized in the Sohu Group’s consolidated balance sheets, representing a 32% and 31% economic interest, respectively, in Changyou’s net assets held by shareholders other than Sohu.com Inc. and reflecting the reclassification of Changyou’s share-based compensation expense from shareholders’ additional paid-in capital to noncontrolling interest.

Noncontrolling Interest in the Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2014, net loss attributable to the noncontrolling interest in the consolidated statements of comprehensive income was $4.8 million and $19.1 million, ~~respectively, compared with net income attributable to noncontrolling interest of $22.9 million and $70.4 million, respectively, for~~respectively. For the three ~~months~~ and nine months ended September 30, ~~2013.~~2015, net income attributable to the noncontrolling interest in the consolidated statements of comprehensive income was $42.1 million and $107.3 million, respectively.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013			2014			2013			2014			2015		2014			2015
Sogou													$	(3,977	)	$	35,930	$	(12,712	)	$	74,212
Changyou	$	(783	)	$	23,596		$	(7,191	)	$	73,486			(783	)		6,212		(7,191	)		33,133
Sogou		(3,977	)		(1,143	)		(12,712	)		(3,109	)
Others		0			402			765			49			0			0		765			0

Total	$	(4,760	)	$	22,855		$	(19,138	)	$	70,426		$	(4,760	)	$	42,142	$	(19,138	)	$	107,345

For the three months ended September 30, 2014 and 2015, a $4.0 million net loss and $35.9 million net income attributable to the noncontrolling interest of Sogou, respectively, was recognized in the Sohu Group’s consolidated statements of comprehensive income /(loss), representing Sogou’s net income /(loss) attributable to shareholders other than Sohu.com Inc.

For the three months ended September 30, 2014 and ~~2013,~~2015, a $0.8 million net loss and $6.2 million net income, respectively, attributable to the noncontrolling interest of Changyou, representing ~~the~~a 32% and 31% economic interest, respectively, in Changyou attributable to shareholders other than ~~Sohu for both periods,~~Sohu.com Inc., was recognized in the Sohu Group’s consolidated statements of comprehensive income.

For the three months ended September 30, 2014 and 2013, net loss attributable to the noncontrolling interest of Sogou was recognized in the Sohu Group’s consolidated statements of comprehensive income, representing Sogou’s net loss attributable to shareholders other than Sohu.

Basic net income /(loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income /(loss) per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise or settlement of share-based awards using the treasury stock method. The dilutive effect of share-based awards with performance requirements is not considered before the performance targets are actually met. The computation of diluted net income /(loss) per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect (i.e. an increase in earnings per share amounts or a decrease in loss per share amounts) on net income /(loss) per share. For the three months ended September 30, 2015, 32,000 common shares potentially issuable upon the exercise or settlement of share-based awards using the treasury stock method were dilutive and included in the denominator for calculation of diluted net income per share. For the nine months ended September 30, ~~2014, 99,000 and 114,000, respectively,~~2015, 64,000 common shares potentially issuable upon the exercise or settlement of share-based awards using the treasury stock method were anti-dilutive and excluded from the denominator for calculation of diluted net loss per share.

Additionally, for purposes of calculating the numerator of diluted net income /(loss) per share, the net income /(loss) attributable to ~~the Sohu Group~~Sohu.com Inc. is adjusted as follows. The adjustment will not be made if there is an anti-dilutive effect.

In the calculation of the Sohu Group’s diluted net income /(loss) per share, assuming a dilutive effect, all of Changyou’s existing unvested restricted share units, and vested restricted share units that have not yet been settled, are treated as vested and settled by Changyou under the treasury stock method, causing the percentage of the weighted average number of shares held by Sohu in Changyou to decrease. As a result, Changyou’s net income /(loss) attributable to the Sohu Group on a diluted basis decreased accordingly. The effect of this calculation is presented as “incremental dilution from Changyou” in the table below. Assuming an anti-dilutive effect, all of these Changyou restricted share units are excluded from the calculation of the Sohu Group’s diluted net income /(loss) per share. As a result, Changyou’s net income /(loss) attributable to the Sohu Group on a diluted basis equals the number used for the calculation of the Sohu Group’s basic net income /(loss) per share.

For the three months ended September 30, 2014, all of these Changyou restricted share units had a dilutive effect, and therefore were included in the calculation of the Sohu Group’s diluted net loss per share. This impact is presented as “incremental dilution from Changyou” in the table below.

For the nine months ended September 30, 2014, all of these Changyou restricted share units had an anti-dilutive effect, and therefore were excluded in the calculation of the Sohu Group’s diluted net loss per share, and “incremental dilution from Changyou” in the table below was zero.

In the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s diluted net income /(loss) per share, assuming a dilutive effect, the percentage of ~~the Sohu Group’s~~Sohu.com Inc.’s shareholding in Sogou was calculated by treating convertible preferred shares issued by Sogou as having been converted at the beginning of the period and unvested share options with the performance targets achieved as well as vested but unexercised share options as having been exercised during the period. The dilutive effect of share-based awards with a performance requirement was not considered before the performance targets were actually met. The effect of this calculation is presented as “incremental dilution from Sogou” in the table below. Assuming an anti-dilutive effect, all of these Sogou shares and share options are excluded from the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s diluted income /(loss) per share. As a result, Sogou’s net income /(loss) attributable to ~~the Sohu Group~~Sohu.com Inc. on a diluted basis equals the number used for the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s basic net income /(loss) per share.

For the three and nine months ended September 30, ~~2014,~~2015, all of these Sogou shares and share options had an anti-dilutive effect, and therefore were excluded from the calculation of Sohu.com Inc.’s diluted net income /(loss) per share, and “incremental dilution from Sogou” in the table below was zero.

In the calculation of Sohu.com Inc.’s diluted net income /(loss) per share, assuming a dilutive effect, all of Changyou’s existing unvested restricted share units, and vested restricted share units that have not yet been settled, are treated as vested and settled by Changyou under the treasury stock method, causing the percentage of the weighted average number of shares held by Sohu.com Inc. in Changyou to decrease. As a result, Changyou’s net income /(loss) attributable to Sohu.com Inc. on a diluted basis decreased accordingly. The effect of this calculation is presented as “incremental dilution from Changyou” in the table below. Assuming an anti-dilutive effect, all of these Changyou restricted share units are excluded from the calculation of Sohu.com Inc.’s diluted net income /(loss) per share. As a result, Changyou’s net income /(loss) attributable to Sohu.com Inc. on a diluted basis equals the number used for the calculation of Sohu.com Inc.’s basic net income /(loss) per share.

For the three and nine months ended September 30, 2015, all of these Changyou restricted share units had a dilutive effect, and therefore were included in the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s diluted net ~~loss~~income /(loss) per share. This impact is presented as “incremental dilution from ~~Sogou”~~Changyou” in the table below.

~~As discussed in Note 1—The Company and Basis of Presentation, on~~In March ~~24,~~ 2014, Sogou purchased from China Web 14.4 million Series A Preferred Shares of Sogou for an aggregate purchase price of $47.3 million. ~~The transaction~~In September 2015, Sogou purchased from Photon 6.4 million Series A Preferred Shares of Sogou for an aggregate purchase price of $21.0 million. These transactions gave rise to a deemed ~~dividend amounting to~~dividends of $27.7 million and $11.9 million, respectively, which ~~was~~were deemed to have been contributed by ~~Sohu,~~Sohu.com Inc., as a holder of ordinary shares of Sogou, ~~for~~representing a portion of the ~~difference~~differences between the ~~price~~prices Sogou paid to China Web and Photon for the Series A Preferred Shares and the carrying ~~amount~~amounts of these ~~14.4 million~~ Series A Preferred Shares in the Group’s consolidated financial statements. This deemed dividend has been subtracted from net income attributable to Sohu.com Inc. for the nine months ended September 30, 2014 in the table below when calculating the basic and diluted net loss per share attributable to Sohu.com Inc.

The following table presents the calculation of the Sohu Group’s basic and diluted net loss per share (in thousands, except per share data).


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013			2014			2015			2014			2015
Numerator:
Net loss attributable to Sohu.com Inc., basic (after subtracting the deemed dividend to noncontrolling Sogou Series A Preferred shareholders)	$	(27,138	)	$	(64,189	)	$	(147,082	)	$	(18,132	)
Net income /(loss) attributable to Sohu.com Inc., basic (after subtracting the deemed dividend to noncontrolling Sogou Series A Preferred shareholders)													$	(27,138	)	$	39,121		$	(147,082	)	$	(19,198	)

Effect of dilutive securities:
Incremental dilution from Sogou														(1,259	)		0			(3,429	)		0
Incremental dilution from Changyou		(5	)		(297	)		0			(723	)		(5	)		(324	)		0			(884	)
Incremental dilution from Sogou		(1,259	)		(535	)		(3,429	)		(1,673	)

Net loss attributable to Sohu.com Inc., diluted	$	(28,402	)	$	(65,021	)	$	(150,511	)	$	(20,528	)
Net income /(loss) attributable to Sohu.com Inc., diluted													$	(28,402	)	$	38,797		$	(150,511	)	$	(20,082	)

Denominator:
Weighted average basic common shares outstanding		38,485			38,288			38,457			38,239			38,485			38,633			38,457			38,582
Effect of dilutive securities:
Share options and restricted share units		0			234			0			242			0			32			0			0

Weighted average diluted common shares outstanding		38,485			38,522			38,457			38,481			38,485			38,665			38,457			38,582

Basic net loss per share attributable to Sohu.com Inc.	$	(0.71	)	$	(1.68	)	$	(3.82	)	$	(0.47	)
Basic net income /(loss) per share attributable to Sohu.com Inc.													$	(0.71	)	$	1.01		$	(3.82	)	$	(0.50	)

Diluted net loss per share attributable to Sohu.com Inc.	$	(0.74	)	$	(1.69	)	$	(3.91	)	$	(0.53	)
Diluted net income /(loss) per share attributable to Sohu.com Inc.													$	(0.74	)	$	1.00		$	(3.91	)	$	(0.52	)

~~The~~In February 2015, the FASB issued~~Reporting Discontinued Operations~~Consolidation (Topic 810) – Amendments to the Consolidation Analysis. The amendments in Topic 810 respond to stakeholders’ concerns about the current accounting for consolidation of variable interest entities, by changing aspects of the analysis that a reporting entity must perform to determine whether it should consolidate such entities. Under the amendments, all reporting entities are within the scope ofSubtopic 810-10, Consolidation – Overall, including limited partnerships and ~~Disclosures of Disposals of Components of an Entity,~~ ~~which changes the threshold for reporting discontinued operations and adds new disclosures.~~similar legal entities, unless a scope exception applies. The new guidance defines a discontinued operation as a disposal that “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The standard is requiredamendments are intended to be ~~adopted by public business entities in annual periods~~an improvement to current U.S. GAAP, as they simplify the codification of FASB Statement No. 167,Amendments to FASB Interpretation No. 46(R), with changes including reducing the number of consolidation models through the elimination of the indefinite deferral of Statement 167 and placing more emphasis on risk of loss when determining a controlling financial interest. The amendments are effective for publicly-traded companies for fiscal years beginning ~~on or~~ after December 15, ~~2014,~~2015, and for interim periods within those ~~annual periods. Entities may “early adopt” the guidance for new disposals. The Group is currently evaluating the impact on its consolidated financial statements of adopting this guidance.~~

On May 28, 2014, the FASB and IASB issued their long-awaited converged standard on the recognition of revenue from contracts with customers. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. The FASB is amending the FASB~~Accounting Standards Codification~~ ~~and creating a new Topic 606,~~~~Revenue from Contracts with Customers~~~~, to supersede the revenue recognition requirements in Topic 605,~~~~Revenue Recognition~~~~, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the amendments supersede some cost guidance included in Subtopic 605-35,~~~~Revenue Recognition—Construction-Type and Production-Type Contracts~~. For a public entity, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Group is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

~~In June 2014, under~~~~ASC 718, Compensation—Stock Compensation~~~~, the FASB issued~~~~Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period~~. These amendments apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015.fiscal years. Earlier adoption is permitted. The Group is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

In ~~August 2014,~~September 2015, the FASB issued~~Presentation~~ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for acquirers in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of ~~Financial Statements – Going Concern~~.any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidanceupdate is effective for ~~annual periods ending after December 15, 2016~~interim and ~~interim periods within~~ annual periods beginning after December 15, ~~2016. Early application is~~2015, with early adoption permitted. The ~~Company does~~implementation of this update is not ~~anticipate that this adoption will~~expected to have ~~a significant~~any material impact on ~~its~~the Group’s condensed consolidated financial ~~position, results~~statements.

As of ~~operations, or~~the date of this report, Changyou has completed the sale of Doyo and has received most of the cash ~~flows.~~consideration. See Note 4 – Fair Value Measurements.

As used in this report, references to “us,” “we,” “our,” “our company,” “our Group,” the ~~“Group,”~~ “Sohu Group,” the ~~“Sohu Group,~~“Group,” and “Sohu.com” are to Sohu.com Inc. and, except where the context requires otherwise, our wholly-owned and majority-owned subsidiaries and variable interest entities (“VIEs”) Sohu.com Limited, Sohu.com (Hong Kong) Limited (“Sohu Hong Kong”), All Honest International Limited (“All Honest”), Sohu.com (Game) Limited (“Sohu Game”), Go2Map Inc., Sohu.com (Search) Limited (“Sohu Search”), Sogou Inc. (“Sogou”), Sogou (BVI) Limited (“Sogou BVI”), Sogou Hong Kong Limited (“Sogou HK”), Vast Creation Advertising Media Services Limited (“Vast Creation”), Sogou Technology Hong Kong Limited, Fox Video Investment Holding Limited (“Video Investment”), Fox Video Limited (“Sohu Video”), Fox Video (HK) Limited (“Video HK”), Focus Investment Holding Limited, ~~(“Focus Investment”),~~ Sohu Focus Limited, ~~(“Sohu Focus”),~~ Sohu Focus (HK) Limited, ~~(“Focus HK”),~~ Beijing Sohu New Era Information Technology Co., Ltd. (“Sohu Era”), Beijing Sohu Software Technology Co., Ltd. ~~(“New Software”)~~, Beijing Sohu Interactive Software Co., Ltd. ~~(“Sohu Software”)~~, Go2Map Software (Beijing) Co., Ltd. ~~(“Go2Map Software”)~~, Beijing Sogou Technology Development Co., Ltd. (“Sogou Technology”), Beijing Sogou Network Technology Co., Ltd (“Sogou Network”), Fox Information Technology (Tianjin) Limited (“Video Tianjin”), Beijing Sohu New Media Information Technology Co., Ltd. (“Sohu Media”), Beijing Focus Time Advertising Media Co., Ltd. ~~(“Focus Time”)~~, Beijing Sohu New Momentum Information Technology Co., Ltd. (“Sohu New Momentum”), Beijing Century High Tech Investment Co., Ltd. (“High Century”), Beijing Heng Da Yi Tong Information Technology Co., Ltd. (“Heng Da Yi Tong”, formerly known as Beijing Sohu Entertainment Culture Media Co., Ltd. ~~or “Sohu Entertainment”~~), Beijing Sohu Internet Information Service Co., Ltd. (“Sohu Internet”), Beijing GoodFeel Technology Co., Ltd. ~~(“GoodFeel”)~~, Beijing Sogou Information Service Co., Ltd. (“Sogou Information”), Beijing 21 East Culture Development Co., Ltd. ~~(“21 East Beijing”)~~, Beijing Sohu Donglin Advertising Co., Ltd.(“Donglin”), Beijing Pilot New Era Advertising Co., Ltd. (“Pilot New Era”), Beijing Focus Yiju Network Information Technology Co., Ltd. ~~(“Focus Yiju”)~~, SohuPay Science and Technology Co., Ltd. ~~(“SohuPay”)~~, Beijing Sohu Dianjin Information Technology Co., Ltd., Beijing Yi He Jia Xun Information Technology Co., Ltd. ~~(“Yi He Jia Xun”)~~, Tianjin Jinhu Culture Development Co., Ltd. (“Tianjin Jinhu”), Guangzhou Qianjun Network Technology Co., Ltd. (“Guangzhou Qianjun”), Shenzhen Shi Ji Guang Su Information Technology Co., Ltd. (“, Chengdu Sogou Easypay Technology Co., Ltd., Beijing Shi Ji ~~Guang Su”)~~Si Su Technology Co., Ltd., Beijing Intelligence World Network Technology Co., Ltd. ~~(“Intelligence World”)~~, Chongqing Qogir Enterprise Management Consulting Co., Ltd., SendCloud Technology Co., Ltd., Beijing Focus Interactive Information Service Co., Ltd. ~~(“Focus Interactive”)~~, Beijing Focus Xin Gan Xian Information Technology Co., Ltd. ~~(“Focus Technology”)~~, Beijing Focus Real Estate Agency Co., Ltd. ~~(“Focus Real Estate”)~~ and our independently-listed majority-owned subsidiary Changyou.com Limited (“Changyou,” formerly known as TL Age Limited) as well as the following direct and indirect subsidiaries and VIEs of Changyou: Changyou.com HK(HK) Limited (“Changyou ~~HK,”~~HK”) formerly known as TL Age Hong Kong Limited), Changyou.com Webgames (HK) Limited (“Changyou HK Webgames”), Changyou.com Gamepower (HK) Limited, ~~(“Changyou HK Gamepower”),~~ ICE Entertainment (HK) Limited (“ICE HK”), Changyou.com Gamestar (HK) Limited, ~~(“Changyou HK Gamestar”),~~ Changyou.com (US) LLC. (formerly known as AmazGame Entertainment (US) Inc.), Changyou.com ~~(UK) Company Limited (“Changyou UK”), ChangyouMy Sdn. Bhd (“Changyou Malaysia”), Changyou.com~~ Korea Limited, ~~(“Changyou Korea”),~~ Changyou.com India Private Limited, ~~(“Changyou India”),~~ Changyou BİLİŞİM HİZMETLERİ TİCARET LİMİTED ŞİRKETİ ~~(“Changyou Turkey”)~~, Kylie Enterprises Limited, Mobogarden Enterprises Limited, Heroic Vision Holdings Limited, ~~(“Heroic”),~~ TalkTalk Limited, ~~(“TalkTalk”),~~ RaidCall (HK) Limited, ~~(“RaidCall HK”),~~ 7Road.com Limited (“7Road”), 7Road.com HK Limited (“7Road HK”), Changyou.com (TH) Limited, ~~(“Changyou Thai”),~~ Changyou.com Rus Limited, ~~(“Changyou Rus”),~~ PT.CHANGYOU TECHNOLOGY INDONESIA, ~~(“Changyou Indonesia”),~~ Changyou Middle East FZ-LLC, ~~(“Changyou AUE”),~~ Changyou.com Technology Brazil Desenvolvimento De Programas LTDA, ~~(“Changyou Brazil”),~~Greative Entertainment Limited (formerly known as Greative Digital ~~Limited,~~Limited), Glory Loop Limited (“Glory Loop”), MoboTap Inc. (“MoboTap”~~) (a~~, a Cayman Islands company), MoboTap Inc. Limited (“MoboTap HK”), MoboTap Inc. (a Delaware corporation), Dolphin Browser Inc., TMobi Limited (formerly known as Muse Entertainment ~~Limited,~~Limited), Dstore Technology Limited, Mobo Information Technology Pte. Ltd., Global Cool Limited, Changyou Mobo Glint Limited, Beijing AmazGame Age Internet Technology Co., Ltd. (“AmazGame”), Beijing Changyou Skyline Property Management Co., Ltd, Beijing Cruise stars Technology Co., Ltd., Beijing Changyou Gamespace Software Technology Co., Ltd. (“Gamespace”), ICE Information Technology (Shanghai) Co., Ltd. (“ICE Information”), Beijing Changyou RaidCall Internet Technology Co., Ltd. (“RaidCall”), Beijing Yang Fan Jing He Information Consulting Co., Ltd. (“Yang Fan Jing He”), Shanghai Jingmao Culture Communication Co., Ltd. (“Shanghai Jingmao”), Shanghai Hejin Data Consulting Co., Ltd. ~~(“Shanghai Hejin”)~~, Beijing Changyou Jingmao Film & Culture Communication Co., Ltd. (“Beijing Jingmao”), Beijing Gamease Age Digital Technology Co., Ltd. (“Gamease”), Beijing Guanyou Gamespace Digital Technology Co., Ltd. (“Guanyou Gamespace”), Beijing Doyo Internet Technology Co., Ltd. ~~(“Doyo Internet”)~~, Beijing Zhi Hui You Information Technology Co., Ltd. ~~(“Zhi Hui You”)~~, Shanghai ICE Information Technology Co., Ltd. (“Shanghai ICE”), Shenzhen 7Road Network Technologies Co., Ltd. (“7Road Technology”), ~~Shenzhen 7Road~~Beijing Changyou Star Digital Technology Co., Ltd (“Changyou Star”), Beijing Changyou Creation Information Technology Co., Ltd. ~~(“Shenzhen 7Road”),~~(formerly known as Beijing Changyou e-pay Co. Ltd. ~~(“Changyou e-pay”~~), Beijing Changyou Aishouxin Ecological Technology Co., Ltd. ~~(“Aishouxin Ecological Technology”)~~, Shenzhen Brilliant Imagination Technologies Co., Ltd., Fujian Changyou Heguang Electronic Technology Co., Ltd., Beijing Baina Information Technology Co., Ltd., Baina Zhiyuan (Beijing) Technology Co., Ltd. (“Beijing Baina Technology”), Beijing Anzhuoxing Technology Co., Ltd., Baina Zhiyuan (Chengdu) Technology Co., Ltd., Chengdu Xingyu Technology Co., Ltd., Baina (Wuhan) Information Technology Co., Ltd. (“Wuhan Baina Information”), Wuhan Xingyu Technology Co., Ltd., ~~and~~ Wuhan Hualian Chuangke Technology Co., Ltd., Beijing Changyou Ledong Internet Technology Co., Ltd., and Beijing Global Cool Technology Co., Ltd., and these references should be interpreted accordingly. Unless otherwise specified, references to “China” or “PRC” refer to the People’s Republic of China and do not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014 filed with the Securities and Exchange Commission (“SEC”) on ~~February 28, 2014,~~March 2, 2015, as updated by Part II Item 1A of this report. Readers are cautioned not to place undue reliance on these forward-looking statements.

~~Sohu~~Sohu.com Inc. (NASDAQ: SOHU), a Delaware corporation organized in 1996, is a leading Chinese online media, search and game ~~and~~ service group providing comprehensive online products and services on PCs and mobile ~~devices. We operate one~~devices in the People’s Republic of China (the “PRC” or “China”). Our businesses are conducted by Sohu.com Inc. and its subsidiaries and variable interest entities (“VIEs”) (collectively referred to as the ~~most comprehensive matrices~~“Sohu Group” or “the Group”). The Sohu Group consists of Sohu, which when referred to in this report, unless the context requires otherwise, excludes the businesses and the corresponding subsidiaries and VIEs of Sogou Inc. (“Sogou”) and Changyou.com Limited (“Changyou”), Sogou and Changyou. Sogou and Changyou are indirect controlled subsidiaries of Sohu.com Inc. Sohu is a leading Chinese language online media content and services provider. Sogou is a leading online search, client software and ~~developed~~mobile Internet product provider in China. Changyou is a leading online game developer and ~~operate~~operator in China ~~one~~as measured by the popularity of its PC game TLBB and its mobile game TLBB 3D, and engages primarily in the ~~most popular Chinese search engines, one~~development, operation and licensing of ~~the most popular massively multiplayer~~ online games ~~(“MMOGs”)~~for PCs and ~~two popular Web games.~~mobile devices. Most of our operations are conducted through our indirect wholly-owned and majority-owned China-based subsidiaries and ~~variable interest entities (“VIEs”).~~

Our businesses consist of the online advertising business, which consists of the brand advertising business as well as the search and others business, the online game business and the others business, of which online advertising and online games are our core businesses.VIEs.

With the accelerated shift in user activities from desktop computers (“PCs”) to mobile devices and an increase in the number of Internet users, ~~in the third quarter,~~ the usage of various kinds of mobile Internet services continued to accelerate at a fast pace asduring the ~~mobile penetration rate grew.~~third quarter of 2015. At Sohu, we focused our efforts on developing a portfolio of leading mobile products across our business lines that we believed our users would like. Our key products continued to gain ~~traction in terms of traffic.~~traction. For example, during the month ended September 30, 2015, mobile traffic for our online video business contributed more than 60% of our total traffic. Sogou maintained rapid growth in search traffic and as of the end of September ~~30, 2014, mobile video views of our video programs and~~2015 mobile search ~~queries on Sogou~~traffic had ~~increased by approximately 169% and 88%, respectively, compared to~~surpassed PC search traffic for the ~~beginning of 2014.~~first time. The monetization of ~~growing~~ mobile traffic is also progressing well, as ~~advertiser customers~~advertisers have ~~begun~~recognized the value of the mobile Internet.

For the third quarter of 2015, the soft Chinese macro economy impacted our brand advertising business, as traditional brand advertisers shrank their marketing budgets. The depreciation of the RMB against the U.S. dollar also had an adverse effect on our reported financial results, which are denominated in the U.S. dollar.

For Sohu Media Portal, the transition from a PC portal to ~~increase their budgets allocated to this area.~~a leading mobile news platform is well on track. We focused our efforts on enhancing the features within our leading mobile news App and improving the overall content quality. Our lean but highly efficient editorial team now mainly focuses on reporting general and business news, while we invited a vast number of outside contributors, who generated hundreds of articles on a daily basis.

Online video is one of the top Internet services in China, and Sohu Video is a leading video service ~~provider.~~provider in China. We noted an accelerating trend away from television toward streaming video, which is important specifically to Sohu’s online video business, as advertising dollars shift from television to online video. In the ~~third quarter, we saw continuous user base expansion and increased advertising revenues generated on our video platforms. In the~~ meantime, as competition intensified, the major players stepped up their content spending to attract viewers. The average licensing fee offor premium content grew significantly as compared to ~~the same period of 2013. As a result, despite solid revenue growth, our online video business continued to incur operating losses.~~2014. We expect that the industry-wide unfavorable cost structure will continue to overshadow the profitability outlook for the entire industry, including us, in the near term. ~~However,~~The recent slowdown in the growth of the Chinese economy also had an impact on our video business. Big advertisers became more conservative as they tended to prioritize their reduced budgets to the best-known traditional programs, a category in which we have consciously scaled down investment given unacceptable price inflation. As a result, for the third quarter of 2015, our video advertising revenues decelerated. We remain optimistic about the long-term prospects of the online video business, which is a strategic key business line for Sohu. ~~As such,~~For 2015, our content strategy has been to rationalize our spending on licensed content while we ~~will continue to invest in content in order to maintain our leading position in the industry.~~focus more on original and professionally-generated content.

On September 16, 2013, we entered into a strategic cooperation with Tencent ~~Holdings~~Holding Limited (Tencent ~~Holdings~~Holding Limited together with its subsidiaries, “Tencent”), for our search and Web directory business, in connection with which Tencent invested in ~~our search subsidiary~~ Sogou. We believe that this strategic cooperation has reinforced Sogou as a leader in the large and fast-growing China market for search and Internet services, particularly for the mobile ~~platform.~~end. In the online search sector, Sogou is one of the top three PC search players in China, and we have demonstrated ~~strengthened competitiveness~~greater potential in mobile search. In the third quarter, ~~of 2014, with~~we further differentiated our ~~consistent efforts to improve~~mobile search ~~quality and user experience, overall search traffic~~services while we continued to ~~grow quickly. In particular, mobile search traffic increased by approximately 20% compared to the prior quarter.~~deepen our cooperation with Tencent’s social platforms, connecting with more unique and high-quality content. In the third quarter of ~~2014,~~2015, aggregate paid clicks and cost-per-click continued to grow, ~~which improved~~with improving mobile monetization. ~~We expect our search and others business to sustain healthy growth through 2014.~~

For ~~our online games~~Changyou’s PC game business, ~~conducted by Changyou,~~ Tian Long Ba Bu (“TLBB”), a PC game which we developed and currently operate in China, continued to deliver solid revenues and profitability, although it slowed consistent with its status as a mature game. Revenue contribution from PC games launched recently offset declines in Changyou’s older PC games in the third quarter of 2015. However, as market demand for new PC games continues to ~~account for a majority of our online~~fall, Changyou will shift more resources towards mobile game ~~revenues. Our two popular web games, Wartune and DDTank, have entered into a relatively mature phase and their~~development. For Changyou’s mobile game business, revenues are trending down. Licensed games that we operate, such as Huan Xiang Shen Yu, have become the new growth points of our online games revenues. We expect to launch a number of new MMOGs, Web games and mobile gamesfrom TLBB 3D, which was launched in the fourth quarter of 2014, ~~to diversify our offering~~declined sequentially by roughly 30%. A new expansion pack is planned for launch in the fourth quarter, which Changyou management hopes will slow down the decline in revenue and extend the game’s life span. Two new in-house developed mobile games are at the final stage of beta-testing and are scheduled for launch in the fourth quarter of 2015 or the first quarter of 2016. For the three months ended September 30, 2015, the PC games and ~~revenues. With more Internet users playing~~mobile games across multiple devices on PCs and mobile devices, in order to capture new business opportunities arising from this trend and strengthen our capabilities to distribute and promote games across various devices,that Changyou ~~is investing heavily in the development and marketing of new software applications. Such investment has led to a decline in Changyou’s profitability. In the third quarter of 2014,~~operates had approximately 6.5 million total average monthly active ~~users~~accounts and approximately 1.9 million total average monthly active paying accounts.

Through the operation of Sohu, Sogou and Changyou, we generate online advertising revenues (including brand advertising revenues and search and search-related revenues (which we formerly referred to as search and Web directory revenues), online games revenues and others revenues. Online advertising and online games are our core businesses. For the three months ended September 30, 2015, total revenues generated by Sohu, Sogou and Changyou were approximately $522.1 million, including:

~~In November 2014, Mr. Tao Wang resigned as Changyou’s Chief Executive Officer for personal reasons. Changyou’s Board of Directors appointed Ms. Carol Yu, President~~For the three months ended September 30, 2015, our total brand advertising revenues were $151.5 million, total search and ~~Chief Financial Officer of Sohu.com Inc.,~~search-related revenues were $147.9 million, total online game revenues were $152.5 million, and Mr. Dewen Chen, Changyou’s President, to be Co-Chief Executive Officers. Ms. Yu will maintain her position as President and Chief Financial Officer of Sohu in addition to her new role with Changyou. Mr. Wang will continue to serve as a member of the Board of Directors of Changyou.

~~Our~~Sohu’s main business is the brand advertising business, which offers to users, over our matrices of Chinese language online media, various content, ~~and services, various~~ products and services across multiple Internet-enabled devices, such as PCs, mobile phones and tablets. ~~It also offers advertisements on Sohu Group Web properties to companies seeking to increase their brand awareness online.~~

The majority of our products and services are provided ~~on the following platforms:~~through Sohu Media Portal, Sohu Video and Focus.

~~For~~Revenues generated by the ~~three and nine months ended September 30, 2014,~~brand advertising business are classified as brand advertising revenues ~~were $148.8 million~~in our consolidated statements of comprehensive income.

Sohu also engages in the others business, which includes the filming business, mobile-related services, sub-licensing of purchased video content to third parties, and ~~$393.3 million, respectively, which represented 35% and 33%, respectively,~~paid subscription services. Revenues generated by Sohu from the others business are classified as others revenues in the Sohu Group’s consolidated statements of ~~our total revenues, of which $16.7 million and $40.7 million, respectively, was attributable to 17173.com.~~comprehensive income.

~~Our~~The search and ~~others~~search-related business ~~operated by our search subsidiary Sogou,~~ primarily offers ~~customers~~advertisers pay-for-click services, as well as online marketing services on ~~the Sogou~~ Web ~~Directory.~~directories operated by Sogou. Pay-for-click services enable ~~our~~ advertisers’ promotional links to be displayed on the Sogou search result pages and Sogou Website Alliance members’ Websites where the links are relevant to the subject and content of such Web pages. Both pay-for-click services and online marketing services on ~~the~~Web directories operated by Sogou ~~Web Directory~~ expand distribution of our advertisers’ Website links and advertisements by leveraging traffic on Sogou Website Alliance members’ Websites.

~~For the three and nine months ended September 30, 2014, our~~ Our search and search-related business benefits significantly from our collaboration with Tencent, which provides us access to traffic generated from users of products and services provided by Tencent.

Revenues generated by the search and search-related business are classified as search and search-related revenues in our consolidated statements of comprehensive income.

Sogou also engages in the others business by primarily offering IVAS with respect to the operation of Web games and mobile games developed by third parties as well as other services and products provided to users. Revenues generated by Sogou from the others business are classified as others revenues ~~were $98.4 million~~in our consolidated statements of comprehensive income.

Changyou has three businesses, consisting of the online game business, the platform channel business and ~~$247.8 million, respectively, which represented 23%and 21%, respectively, of our total revenues.~~the others business.

~~Our~~Changyou’s online game business ~~is conducted by our majority-owned subsidiary Changyou. Changyou is a leading~~offers to game players PC games which are online ~~game developer~~games designed primarily for playing on PCs; mobile games, which are played on mobile devices with an Internet connection; and ~~operator in China as measured by the popularity of its MMOG TLBB and its~~ Web games, ~~DDTank and Wartune,~~ which ~~Changyou developed in-house. Changyou engages in the development, operation and licensing of~~are online games ~~for PCs~~played over the Internet using a Web browser. Changyou’s PC games and mobile ~~devices. Changyou’s online~~ games ~~include~~are mainly MMOGs, which are interactive online games that may be played simultaneously by hundreds of thousands of game players. All of Changyou’s games are operated under the item-based revenue model, where game players play the games for free but can purchase virtual items to enhance the game-playing experience. Revenues derived from the operation of online games are classified as online game revenues in the Sohu Group’s consolidated statements of comprehensive income.

Changyou also owns and operates a number of Web ~~games, which are played over the Internet using a Web browser,~~properties and software applications for PCs and mobile ~~games,~~devices (collectively referred to as “platform channels”), including the 17173.com Website, one of the leading information portals for game players in China; RaidCall, which ~~are played~~provides online music and entertainment services, primarily in Taiwan; and the Dolphin Browser, a gateway to a host of user activities on mobile devices, with ~~an Internet connection.~~the majority of its users based in Europe, Russia and Japan. Changyou’s platform channels serve various needs of its users and help Changyou reach more user communities and conduct cross-promotions of its games and services. Revenues generated by 17173.com Website are classified as brand advertising revenues, and revenues generated by RaidCall and the Dolphin Browser are classified as others revenues in our consolidated statements of comprehensive income.

For the three and nine months ended September 30, 2014, our online game revenues were $150.3 million and $467.6 million, respectively, which represented 35% and 39%, respectively, of our total revenues.

~~Our others~~Changyou also operates a cinema advertising business, ~~revenues are primarily generated from our business~~which consists of offering Internet value-added services (“IVAS”) with respect to the operation of Web games and services provided to software application users; offering mobile-related services and mobile products, in cooperation with China mobile network operators, to mobile phone users and to China mobile network operators; andChangyou offering slots for advertisements to be shown in cinemas before the screening of movies.

~~On October 22, 2010, Sogou issued and sold 24.0 million, 14.4 million and 38.4 million, respectively,~~ Revenues generated by Changyou’s cinema advertising business are classified as others revenues in our consolidated statements of its newly-issued Series A Preferred Shares to Alibaba Investment Limited (“Alibaba”), a private investment subsidiary of Alibaba Group Holding Limited, China Web Search (HK) Limited (“China Web”), an investment vehicle of Yunfeng Capital, and Photon Group Limited (“Photon”), the investment vehicle of Sohu Group’s Chairman and Chief Executive Officer Dr. Charles Zhang, for $15 million, $9 million, and $24 million, respectively. On June 29, 2012, Sohu purchased Alibaba’s 24.0 million Sogou Series A Preferred Shares for a purchase price of $25.8 million.comprehensive income.

On September 16, 2013, pursuant to a Subscription Agreement entered into on that date by and among Sogou, Tencent, Sohu Search, and Photon, and a series of other contracts also entered into on that date between Sogou and Tencent, Tencent invested a net amount of $448 million in cash in Sogou and transferred its Soso search-related businesses and certain other assets to Sogou (collectively, the “Sogou-Tencent Transactions”).

On September 16, 2013, Sogou entered into (i) a Repurchase Option Agreement with Sohu Search, exercisable commencing March 16, 2014, granting to Sogou the right to purchase 24 million Series A Preferred Shares of Sogou held by Sohu Search for an aggregate purchase price of $78.8 million; (ii) a Repurchase Option Agreement with Photon, also exercisable commencing March 16, 2014, granting to Sogou the right to purchase 6.4 million Series A Preferred Shares of Sogou held by Photon for an aggregate purchase price of $21 million; and (iii) a Repurchase/Put Option Agreement with China Web, granting to Sogou the right to purchase at any time from March 16, 2014 to July 31, 2014, and granting to China Web the right to put to Sogou at any time prior to July 31, 2014, 14.4 million Series A Preferred Shares of Sogou held by China Web for an aggregate purchase price of $47.3 million.

~~On December 2, 2013, Tencent invested $1.5 million in cash in Sogou Information, which is a VIE of Sogou, as additional consideration in connection with the Sogou-Tencent Transactions.~~

In June 2014, Sogou repurchased approximately 4.2 million of its Class A Ordinary Shares from noncontrolling shareholders, some of whom are our employees, for an aggregate purchase price of $41.6 million.

Pursuant to the Shareholders Agreement, Sohu will hold approximately 52% of the total voting power for the election of the Board of Directors of Sogou, assuming that the remaining repurchase options are exercised, Tencent’s non-voting Class B Ordinary Shares are converted to voting shares, and all share options under the Sogou 2010 Share Incentive Plan and all share options under an arrangement providing for Sogou share-based awards to be available for grants to Sohu management and key employees are granted and exercised. As Sohu is the controlling shareholder of Sogou, we consolidate Sogou in the Sohu Group’s consolidated financial statements, and recognize noncontrolling interest reflecting economic interests in Sogou held by shareholders other than Sohu.

On July 16, 2014, Changyou, through a wholly-owned subsidiary, entered into an investment agreement with MoboTap, which is the mobile technology developer behind the Dolphin Browser, MoboTap’s subsidiaries and variable interest entities, and MoboTap’s shareholders pursuant to which Changyou agreed to purchase from existing shareholders of MoboTap shares of MoboTap representing 51% of the equity interests in MoboTap on a fully-diluted basis for approximately $91 million in cash.

Changyou and MoboTap also entered into a subscription agreement pursuant to which Changyou purchased $30 million in principal amount of a zero-coupon convertible bond issued by MoboTap that is due in five years. Changyou has the option, exercisable at any time when the bond is outstanding, to convert all or any part of the unpaid principal into shares of MoboTap at a conversion price that would result in Changyou’s interest in MoboTap increasing to 60% on a fully-diluted basis, measured as of the closing date under the investment agreement, if the option is exercised in full.

The noncontrolling shareholders of MoboTap, who are the founders of MoboTap, and MoboTap also entered into a shareholder agreement pursuant to which Changyou has the right to designate three of the five directors of MoboTap, including the chairman of the board; any proposed transfers of equity interests in MoboTap by the noncontrolling shareholders or Changyou are subject to approval of Changyou or the noncontrolling shareholders, as applicable; and Changyou is entitled to customary pre-emptive rights with respect to any new issuance of equity interests in MoboTap. In addition, Changyou has the right to purchase up to 10% of the equity interests in MoboTap from the noncontrolling shareholders, at a price of 20% below the initial public offering (“IPO”) price, before a qualified IPO of MoboTap. If MoboTap achieves specified performance milestones for 2016 and certain other conditions specified in the shareholder agreement, including the completion of an IPO, are not met, the noncontrolling shareholders of MoboTap will have a one-time right to put to Changyou shares of MoboTap held by them, representing up to 15% of the equity interests in MoboTap, for an aggregate price of up to $53 million. The Sohu Group began to consolidate MoboTap’s financial statements commencing with the acquisition.

Our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Identified below are the accounting policies that reflect our more significant estimates and judgments, and those that we believe are the most critical to fully understanding and evaluating our consolidated financial statements.

Our consolidated financial statements include the accounts of Sohu.com Inc. and its direct and indirect wholly-owned and majority-owned subsidiaries and consolidated VIEs. All intercompany transactions are eliminated.

Our ~~Group adopted the guidance~~VIEs are wholly or partially owned by certain of ~~accounting for VIEs, which requires VIEs to be consolidated by the primary beneficiary of the entity.~~our employees as nominee shareholders. For our consolidated VIEs, management made evaluations of the relationships between us and our VIEs and the economic benefit flow of contractual arrangements with the VIEs. In connection with such evaluation, management also took into account the fact that, as a result of such contractual arrangements, we control the shareholders’ voting interests in these VIEs. As a result of such evaluation, management concluded that we are the primary beneficiary of our consolidated VIEs. Our Group has ~~three~~two VIEs that are not consolidated, since we are not the primary beneficiary.

Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder. Currently, the noncontrolling interests in our consolidated financial statements primarily consist of noncontrolling interests for ~~Changyou~~Sogou and Changyou.

As we control the election of the Board of Directors of Sogou, we are Sogou’s controlling shareholder. Accordingly, we consolidate Sogou in our consolidated financial statements, and recognize noncontrolling interest reflecting economic interests in Sogou held by shareholders other than us. To reflect the economic interest in Sogou held by shareholders other than us (the “Sogou noncontrolling shareholders”), Sogou’s net income /(loss) attributable to the Sogou noncontrolling shareholders is recorded as noncontrolling interest in our consolidated statements of comprehensive income. Sogou’s cumulative results of operations attributable to the Sogou noncontrolling shareholders, along with changes in shareholders’ equity /(deficit) and adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and the Sogou noncontrolling shareholders’ investments in Sogou Preferred Shares and Ordinary Shares are accounted for as a noncontrolling interest classified as permanent equity in our consolidated balance sheets, as we have the right to reject a redemption requested by the noncontrolling interest. These treatments are based on the terms governing investment, and on the terms of the classes of Sogou shares held, by the noncontrolling shareholders in Sogou.

By virtue of these terms, Sogou’s losses have been and will be allocated in the following order:

(i) net losses were allocated to holders of Sogou Class A Ordinary Shares and the holder of Sogou Class B Ordinary Shares until their basis in Sogou decreased to zero;

(ii) additional net losses were allocated to holders of Sogou Series A Preferred Shares until their basis in Sogou decreased to zero;

(iii) additional net losses will be allocated to the holder of Sogou Series B Preferred Shares until its basis in Sogou decreases to zero; and

(iv) further net losses will be allocated between Sohu.com Inc. and noncontrolling shareholders based on their shareholding percentage in Sogou.

Net income from Sogou has been, and future net income from Sogou will be, allocated in the following order:

(i) net income will be allocated between Sohu.com Inc. and noncontrolling shareholders based on their shareholding percentage in Sogou until their basis in Sogou increases to zero;

(ii) additional net income will be allocated to the holder of Sogou Series B Preferred Shares to bring its basis back;

(iii) additional net income will be allocated to holders of Sogou Series A Preferred Shares to bring their basis back;

(iv) further net income will be allocated to holders of Sogou Class A Ordinary Shares and the holder of Sogou Class B Ordinary Shares to bring their basis back; and

(v) further net income will be allocated between Sohu.com Inc. and noncontrolling shareholders based on their shareholding percentage in Sogou.

As of September 30, ~~2014, Sohu~~2015, we held approximately ~~68%~~69% of the combined total of Changyou’s outstanding ordinary shares, and controlled approximately ~~83%~~96% of the total voting power in Changyou. As ~~Sohu is~~we are Changyou’s controlling shareholder, we consolidate Changyou in our consolidated financial statements, ~~but~~and recognize noncontrolling interest reflecting the economic interest in Changyou held by shareholders other than ~~Sohu.~~us.

To reflect the economic interest in Changyou held by shareholders other than ~~Sohu~~us (“Changyou noncontrolling shareholders”), Changyou’s net income /(loss) attributable to the Changyou noncontrolling shareholders is recorded as noncontrolling interest in ~~Sohu’s~~our consolidated statements of comprehensive income, based on their share of the economic interest in Changyou. Changyou’s cumulative results of operations attributable to the Changyou noncontrolling shareholders, along with changes in shareholders’ equity, adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and adjustment for changes in Sohu’s ownership in Changyou, are recorded as noncontrolling interest in our consolidated balance sheets.

Since Sohu controls the election of the Board of Directors of Sogou, Sohu is Sogou’s controlling shareholder. Therefore we consolidate Sogou in the Sohu Group’s consolidated financial statements, and recognize noncontrolling interest reflecting economic interests in Sogou held by shareholders other than Sohu. To reflect the economic interest in Sogou held by shareholders other than Sohu (the “Sogou noncontrolling shareholders”), Sogou’s net income /(loss) attributable to the Sogou noncontrolling shareholders is recorded as noncontrolling interest in the Sohu Group’s consolidated statements of comprehensive income. Sogou’s cumulative results of operations attributable to the Sogou noncontrolling shareholders, along with changes in shareholders’ equity /(deficit) and adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and the Sogou noncontrolling shareholders’ investments in Sogou Preferred Shares and Ordinary Shares are accounted for as a noncontrolling interest classified as permanent equity in the Sohu Group’s consolidated balance sheets, as redemption of the noncontrolling interest is solely within the control of Sohu. These treatments are based on the terms governing investment, and on the terms of the classes of Sogou shares held by the noncontrolling shareholders in Sogou.

~~By virtue of these terms, Sogou’s losses have been and will be allocated in the following order:~~

~~Net income from Sogou has been, and future net income from Sogou will be, allocated in the following order:~~

Our Group’s segments are business units that offer different services and are reviewed separately by the chief operating decision maker (the “CODM”), or the decision making group, in deciding how to allocate resources and in assessing performance. The CODM is Sohu.com Inc.’s Chief Executive Officer.

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The recognition of revenues involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates.

Barter trade transactions in which physical goods or services (other than advertising services) are received in exchange for advertising services are recorded based on the fair values of the goods and services received. For online advertising-for-online advertising barter transactions, no revenue or expense is recognized because the fair value of neither the advertising surrendered nor the advertising received is determinable.

Online advertising revenues include revenues from brand advertising services as well as search and ~~others~~search-related services.

We recognize ~~gross~~ revenue for the amount of fees we receive from our advertisers. Determining whether revenue should be reported gross or net is based on an assessment of various factors. The primary factor is whether we are acting as the principal in offering services to the customer or whether we are acting as an agent in the transaction. Whether we are serving as principal or agent in a transaction is judgmental in nature and is determined by evaluating the terms of the arrangement. Our revenues from online advertising services are recognized on a gross basis, as we have the primary responsibility for fulfillment and acceptability. These revenues are recognizedadvertisers, after deducting agent rebates and net of value-added tax (“VAT”) and related surcharges.

Through PCs and mobile devices, we provide advertisement placements to our advertisers on different Website channels and in different formats, which include ~~among other things,~~ banners, links, logos, buttons, full screen, pre-roll, mid-roll, post-roll video screens, ~~and~~ pause video screens, ~~as well as~~ loading page ads, ~~and~~ news feed ads ~~on our News App.~~and in-feed video infomercial ads.

Currently we have ~~three~~four main types of pricing models, consisting of the Fixed Price model, the Cost Per Impression (“CPM”) model, the E-commerce model, and the ~~E-commerce model.~~Cost Per click (“CPC”) model

Under the Fixed Price model, a contract is signed to establish a fixed price for the advertising services to be provided.

Under the CPM model, the unit price for each qualifying display is fixed, but there is no overall fixed price for the advertising services stated in the contract with the advertiser. A qualifying display is defined as the appearance of an advertisement, where the advertisement meets criteria specified in the contract. Advertising fees are charged to the advertisers based on the unit prices and the number of qualifying displays.

~~Our~~Under the e-commerce model, revenues ~~are primarily~~were mainly generated from ~~selling~~sales of membership cards towhich allow potential home ~~buyers. The membership card allows a buyer~~buyers to purchase specified properties from real estate developers at a discount greater than the price that ~~we charge~~Focus charges for the card. Membership fees are refundable until the potential home buyer uses the discounts to purchase properties. ~~We recognize~~Focus recognizes such ~~e-commerce~~ revenues upon obtaining confirmation that the membership card has been redeemed to purchase a property.

Under the CPC model, there is no overall fixed price for advertising services stated in the contract with the advertiser. We charge advertisers on a per-click basis when the users click on the advertisements. The unit price for each click is fixed or auction-based.

For brand advertising revenue recognition, prior to entering into contracts, we make a credit assessment of the ~~customer.~~advertiser. For contracts for which collectability is determined to be reasonably assured, we recognize revenue when all revenue recognition criteria are met. In other cases, we only recognize revenue when the cash is received and all ~~other revenue~~ recognition criteria are met.

In accordance with ASU No. 2009-13, we treat advertising contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes and to recognize revenue on a periodic basis during the contract when each deliverable service is provided. Since the contract price is for all deliverables, we allocate the arrangement consideration to all deliverables at the inception of the arrangement on the basis of their relative selling prices.

Search and ~~others~~search-related services ~~mainly~~primarily include pay-for-click services, as well as online marketing services on ~~the Sogou~~ Web ~~Directory.~~directories operated by Sogou.

Pay-for-click services are services that enable our advertisers’ promotional links to be displayed on Sogou search result pages and Sogou Website Alliance members’ Websites where the links are relevant to the subject and content of such Web pages. For pay-for-click services, we introduce Internet users to our advertisers through our auction-based pay-for-click systems and charge advertisers on a per-click basis when the users click on the displayed links. Revenue for pay-for-click services is recognized on a per-click basis when the users click on the displayed links.

Online Marketing Services on ~~the~~Web Directories Operated by Sogou ~~Web Directory~~

Online marketing services on ~~the~~Web directories operated by Sogou ~~Web Directory~~ mainly consist of displaying ~~advertiser~~advertisers’ Website links on the Web pages of ~~the Sogou~~ Web ~~Directory. The Sogou Web Directory is a Chinese Web directory navigation site which serves as a key access point to popular and preferred Websites and applications.~~directories. Revenue for online marketing services on ~~the~~Web directories operated by Sogou ~~Web Directory~~ is normally recognized on a straight-line basis over the contract period, provided our obligations under the contract have been met and all revenue recognition criteria have been met.

Both pay-for-click services and online marketing services on ~~the~~Web directories operated by Sogou ~~Web Directory~~ expand distribution of advertisers’ Website links or advertisements by leveraging traffic on Sogou Website Alliance members’ Websites. We recognize gross revenue for the amount of fees we receive from advertisers, as we have the primary responsibility for fulfillment and acceptability. Payments made to Sogou Website Alliance members are included in cost of search and ~~others~~search-related revenues as traffic acquisition costs. We pay Sogou Website Alliance members based on either revenue-sharing arrangements, under which we pay a percentage of pay-for-click revenues generated from clicks by users of their properties, or on a pre-agreed unit price.

~~Our~~Changyou’s online game ~~revenues~~business offers to game players PC games, mobile games and Web games. All of Changyou’s games are ~~generated from MMOG operation revenues, Web game revenues and overseas licensing revenues.~~

~~Revenues are recorded after deducting applicable Business Tax, discounts and rebates to distributors.~~

~~Online game revenues from Changyou’s operation of MMOGs are earned by providing online services to players pursuant to~~operated under the item-based revenue ~~model. Under the item-based revenue~~ model, where the basic game play functions are free of charge and players are charged for purchases of in-game virtual items, including those with a predetermined expiration time and perpetual virtual items. ~~Online~~Revenues that Changyou generates from self-operated and licensed out online games are included in online game revenues.

Changyou is the primary obligor of its self-operated games. Changyou hosts the games on its own servers and is responsible for the sale and marketing of the games as well as customer service. Accordingly, revenues are recorded gross of revenue sharing-payments to third-party developers and/or mobile app stores, but are net of business tax and discounts to game card distributors where applicable. Revenues obtained by Changyou from the sale of in-game virtual items are recognized over the estimated lives of the virtual items purchased by game players or as the virtual items are consumed. If different assumptions were used in deriving the estimated lives of the virtual items, the timing of ~~our~~the recording of the revenues would be impacted.

Proceeds from the self-operation of PC games are collected from players and third-party game card distributors through sales of Changyou’s game points on its online payment platform and prepaid game cards. Self-operated PC games are either developed in house or licensed from third-party developers. For licensed PC games, Changyou ~~began generating~~ remits a pre-agreed percentage of the proceeds to the third-party developers, and keeps the balance pursuant to revenue-sharing agreements. Such revenue-sharing amounts paid to third-party developers are recorded in Changyou’s cost of revenues.

For self-operated mobile games, Changyou sells game points to its game players via third-party mobile app stores. The mobile app stores in turn pay Changyou proceeds after deducting their share of pre-agreed revenue-sharing amounts.

Self-operated mobile games are either developed in house or licensed from or jointly developed with third-party developers. For licensed and jointly developed mobile games, Changyou remits a pre-agreed percentage of the proceeds to the third-party developers, and keeps the balance pursuant to revenue-sharing agreements. Such revenue-sharing amounts paid to mobile app stores and third-party developers are recorded in Changyou’s cost of revenues.

Web ~~game revenue after its acquisition of a controlling interest in 7Road in May 2011. Revenues~~Games

Proceeds from self-operated Web games are ~~derived mainly~~collected from ~~revenue-sharing~~players through the sale of game points. All of Changyou’s self-operated Web games were developed in house.

Changyou also authorizes third-parties to operate its online games. Licensed out games include PC games, mobile games and Web games developed in house and mobile games jointly developed with third-party developers. Changyou receives monthly revenue-based royalty payments from ~~joint operators of Changyou’s games and~~all the third-party licensee operators. Changyou receives additional up-front license fees from certain ~~of these joint operators. Web~~third-party licensee operators who are entitled to an exclusive right to operate Changyou’s games in specified geographic areas. Since Changyou is obligated to provide post-sale services, the initial license fees are ~~operated primarily under~~recognized as revenue ratably over the ~~item-based revenue model, in which game players can access~~license period, and the ~~games free of charge, but may purchase consumable virtual items, including those with~~monthly revenue-based royalty payments are recognized when relevant services are delivered, provided that collectability is reasonably assured. Changyou views the third-party licensee operators as Changyou’s customers and recognizes revenues on a predetermined expiration time, or perpetual virtual items. Although the jointly operated Web games may be hosted either on the operators’ servers or on servers that Changyou owns or leases from Internet data centers, Changyou does not view itself as the primary obligor with respect to operation of these Web games,net basis, as Changyou does not have the primary responsibility for fulfillment and acceptability of the game services. ~~Accordingly,~~ Changyou remits to the third-party developers a pre-agreed percentage of revenues from jointly developed and licensed out mobile games, and recognizes ~~these~~ revenues on a net ~~basis according to its share of revenues.~~basis.

Changyou enters into licensing arrangements with third-party operators to operate its MMOGs in other countries and regions. These licensing agreements provide two revenue streams, consisting of an initial license fee and a monthly revenue-based royalty fee based on monthly revenue and sales from ancillary products related to the games. Since Changyou is obligated to provide post-sale services, the initial license fee is recognized as revenue ratably over the license period, and the monthly revenue-based royalty fee is recognized when relevant services are delivered, provided that collectability is reasonably assured.-54-

Others revenues attributable to Sogou are primarily ~~generated~~IVAS revenues derived from ~~our business of offering IVAS with respect to~~ the operation of Web games and ~~services provided to software application users; offering mobile-related~~mobile games of third-party developers as well as other services and ~~mobile~~ products ~~in cooperation with China mobile network operators,~~that Sogou provides to ~~mobile phone users and to China mobile network operators; and offering slots for advertisements to be shown in cinemas before the screening of movies.~~

Our IVAS revenues are currently derived from our operation of Web games and services we provide to users of our software applications. We offer Web games, including licensed and self-developed games on our Websites, collect payment from the end users, and pay a pre-agreed percentage of the proceeds to third-party developers for the licensed games. We provide online music and entertainment services to users of our software applications, such as RaidCall. We also provide download services for APPS and games for mobile devices.users. Revenues from IVAS are recognized when ~~our~~Sogou’s obligations under the agreements and all other revenue recognition criteria have been met.

Others revenues attributable to Changyou are primarily generated from ~~Mobile Products~~

~~Most~~its platform channel business and its others business. In its platform channel business, Changyou offers IVAS with respect to the operation of ~~our mobile revenues are contributed by~~Web games of third-party developers and services provided to ~~mobile phone users through products such as short messaging services (“SMS”), ring-back tones (“RBT”), and interactive voice response (“IVR”). We obtain fees for these services~~software application users. Revenues from the China mobile network operators, which charge users on a monthly or per message /download basis for mobile services we provide, and we make payments to third-party mobile service alliance members and content providers based on revenue-sharing arrangements. Such revenuesIVAS are recognized ~~on either a gross or a net basis, which is determined by evaluating~~when Changyou’s obligations under the ~~terms of~~agreements with the ~~arrangement to determine whether we are serving as principal or agent in a transaction.~~

~~We provide~~In its others business, Changyou provides advertisement placements in advertising slots to be shown in cinemas before the screening of movies. When all the recognition criteria are met, revenues from cinema advertising are recognized based on a percentage of the advertising slots actually delivered or on a straight-line basis over the contract period.

Product development expenses consist of personnel-related expenses incurred for enhancement and maintenance of our Websites, costs associated with new product development and maintenance and costs for enhancement of existing products and services, including the development costs of online games prior to the establishment of technological feasibility and maintenance costs after online games are available for marketing.

Advertising expenses are included in sales and marketing expenses, and generally represent the expenses of promotions to create or stimulate a positive image of the Sohu Group or a desire to subscribe for the Group’s products and services. Advertising expenses are expensed as incurred.

Sohu (excluding Fox Video Limited), Sogou, Changyou, ~~Sogou,~~ and Fox Video Limited (“Sohu ~~Video~~Video”) have incentive plans, and prior to June 28, 2013 7Road had an incentive plan, for the granting of share-based awards, including common stock or ordinary shares, share options, restricted shares and restricted share units, to ~~their executive officers,~~members of the boards of directors, management and other key employees.

For share-based awards for which a grant date has occurred, share-based compensation expense is recognized as costs and expenses in the consolidated statements of comprehensive income based on the fair value of the related share-based awards on their grant dates. For share-based awards for which the service inception date precedes the grant date, share-based compensation expense is recognized as costs and expenses in the consolidated statements of comprehensive income beginning on the service inception date and is re-measured on each subsequent reporting date before the grant date, based on the estimated fair value of the related share-based awards. Share-based compensation expense is charged to the shareholders’ equity or noncontrolling interest section in the consolidated balance sheets. The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. If factors change or different assumptions are used, our share-based compensation expense could be materially different for any period. Moreover, the estimates of fair value are not intended to predict actual future events or the value that ultimately will be realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us for accounting purposes.

Sohu ~~Changyou,~~(excluding Sohu Video), Sogou, and ~~Sogou~~Changyou Share-based Awards

In determining the fair value of share options granted by Sohu (excluding Sohu Video) as share-based awards before 2006, the Black-Scholes valuation model ~~is applied; in~~was applied. In determining the fair value of restricted share units granted, the public market price of the underlying shares on the grant dates iswas applied.

Options for the purchase of 1,068,000 shares of Sohu common stock contractually granted on February 7, 2015 are subject to vesting in four equal installments over a period of four years, with each installment vesting upon satisfaction of a service period requirement and certain subjective performance targets. For purposes ofASC 718-10-25, no grant date had occurred as of September 30, 2015, because no grant date could be established until a mutual understanding was reached between Sohu and the recipients clarifying the subjective performance requirements. In accordance withASC 718-10-55, as the service inception date preceded the grant date, compensation expense was accrued beginning on the service inception date and will be re-measured on each subsequent reporting date before the grant date is established, based on the then-current fair value of the awards. The estimate of the awards’ fair values will be fixed in the period in which the grant date occurs, and cumulative compensation expense will be adjusted based on the fair value at the grant date. In determining the fair value of ordinary shares and restricted share units granted by Changyou as share-based awards in 2008, the income approach /discounted cash flow method with a discount for lack of marketability was applied, given that the shares underlying the awards were not publicly traded at the time of grant. In determining the fair value of restricted share units granted in 2009 before Changyou’s initial public offering, the fair valuevalues of the ~~underlying shares was determined based on Changyou’s offering price for its initial public offering. In determining the fair value of restricted~~ share ~~units~~options granted, ~~after Changyou’s initial public offering,~~ the public market price of the underlying shares ~~on the grant dates is~~at each reporting date was used, and a binomial valuation model was applied.

In determining the fair value of share options granted by Sogou as share-based awards, the income approach /discounted cash flow method with a discount for lack of marketability was applied, given that the shares underlying the awards were not publicly traded at the time of grant. Certain persons who became Sogou employees when Tencent’s Soso search-related businesses were transferred to Sogou on September 16, 2013 had been granted restricted share units under Tencent’s share award arrangements prior to the transfer of the businesses to Sogou. These Tencent restricted share units will continue to vest under the original Tencent share award arrangements provided the transferred employees continue to be employed by Sogou during the requisite service period. After the transfer of the Soso search-related businesses to Sogou, Sogou applied the guidance in ASC 505-50 to measure the related compensation expense, based on the then-current fair value at each reporting date, which is deemed to have been incurred by Tencent as an investor on Sogou’s behalf. To determine the then-current fair value of the Tencent restricted share units granted to these employees, the public market price of the underlying shares at each reporting date was applied. Because Sogou is not required to reimburse Tencent for such share-based compensation expense, the related amount was recorded by Sogou as a capital contribution from Tencent.

In determining the fair value of ordinary shares and restricted share units granted by Changyou as share-based awards in 2008, the income approach /discounted cash flow method with a discount for lack of marketability was applied, given that the shares underlying the awards were not publicly traded at the time of grant. In determining the fair value of restricted share units granted in 2009 before Changyou’s initial public offering, the fair value of the underlying shares was determined based on Changyou’s offering price for its initial public offering. In determining the fair value of restricted share units granted after Changyou’s initial public offering, the public market price of the underlying shares on the grant dates was applied.

Options for the purchase of 2,400,000 Changyou ordinary shares that were converted to options from restricted share units on February 16, 2015 and options contractually granted on June 1, 2015 for the purchase of 1,998,000 Changyou ordinary shares awards are subject to vesting in four equal installments over a period of four years, with each installment vesting upon satisfaction of a service period requirement and certain subjective performance targets. For purposes ofASC 718-10-25, no grant date had occurred as of September 30, 2015, because no grant date could be established until a mutual understanding was reached between Changyou and the recipients clarifying the subjective performance requirements. In accordance withASC 718-10-55, as the service inception date preceded the grant date, compensation expense ~~for ordinary shares granted~~was accrued beginning on the service inception date and will be re-measured on each subsequent reporting date before the grant date is ~~fully recognized~~established, based on the then-current fair value of the awards. The estimate of the awards’ fair values will be fixed in the ~~quarter during~~period in which the ~~ordinary~~grant date occurs, and cumulative compensation expense will be adjusted based on the fair values at the grant date. In determining the fair values of share options granted, the public market price of the underlying shares ~~are granted.~~ at each reporting date was used, and a binomial valuation model was applied.

For share options, restricted shares and restricted share units granted with respect to Sohu (excluding Sohu Video) shares and Changyou shares, compensation expense is recognized on an accelerated basis over the requisite service period. For share options granted with respect to Sogou shares, compensation expense is recognized on a straight-line basis over the estimated period during which the service period requirement and performance target will be met. For Tencent restricted share units that Tencent had granted to employees who transferred to Sogou with the Soso search-related businesses, compensation expense is recognized by Sogou on an accelerated basis over the requisite service period, and the fair value of the share-based compensation is re-measured at each reporting date until a measurement date occurs. For Sogou Class A Ordinary Shares repurchased from our employees in the second quarter of 2014, share-based compensation expense is recognized by the Sohu Group in the consolidated statements of comprehensive income in an amount equal to the excess of the repurchase price over the fair value at the repurchase date of the Sogou Class A Ordinary Shares that we repurchased. The number of share-based awards for which the service is not expected to be rendered over the requisite period is estimated, and no compensation expense is recorded for the number of awards so estimated.

On January 4, 2012, Sohu Video, the holding entity of Sohu’s video division, adopted a 2011 Share Incentive Plan (the “Video 2011 Share Incentive Plan”) which provides for the issuance of up to 25,000,000 ordinary shares of Sohu Video (representing approximately 10% of the outstanding Sohu Video Shares on a fully-diluted basis) to management and key employees of the video division and to Sohu management. As of September 30, ~~2014,~~2015, grants of options for the purchase of 16,368,200 ordinary shares of Sohu Video had been contractually made, of which options for the purchase of 4,972,800 ordinary shares were vested.

For purposes ofASC 718-10-25, as of September 30, 2015, no grant date ~~may be established until a mutual understanding can be reached between Sohu Video~~had occurred, because the broader terms and ~~the recipients as to~~conditions of the option ~~awards’ key terms and conditions,~~awards had neither been finalized nor mutually agreed upon with the recipients, and such mutual understanding cannot be reached until the fair value of the awards is determinable and can be accounted for. ~~No grant date could be determined as of September 30, 2014, because the broader terms and conditions of the option awards had neither been finalized nor mutually agreed upon~~In accordance with ~~the recipients.~~

~~Under~~ASC 718-10-55, if the service inception date precedes the grant date for equity-classified awards, compensation expense should be accrued beginning on the service inception date and re-measured on each subsequent reporting date before the grant date, based on the estimated fair value of the awards. The estimate of the awards’ fair value would be fixed in the period in which the grant date occurs, and cumulative compensation expense should be adjusted based on the fair value at the grant date. Managementour management determined that the service inception date with respect to vested option awards for the purchase of 4,972,800 shares had preceded the grant date. Therefore, we began to recognize compensation expense for Sohu Video share-based awards in the second quarter of 2014 and re-measured, and will re-measure, the compensation expense on each subsequent reporting date based on the then-current fair values of the awards until the grant date is established.

In the third quarter of 2013, 7Road granted to an additional 48 7Road employees the right to receive an annual cash bonus under Scheme II with the same terms as described above.

On August 17, 2015, Changyou completed the sale of the 7Road business. As ~~the original awards~~ of ~~restricted share units made~~August 17, 2015, Changyou had recognized an aggregate of $4.2 million of compensation expense under the 7Road 2012 Share Incentive Plan ~~included as a vesting condition the completion~~for Scheme I and $0.7 million of ~~an initial public offering, which is not considered probable until it occurs, no share-based~~ compensation expense ~~was recognized~~ for Scheme II. In the ~~fair value of the original awards. Incremental~~future, there will be no compensation expense ~~which is not classified as share-based compensation expense, is equal to~~recognized under the ~~fair values of the two new compensation schemes included in the exchange program as of the date of the modification resulting from the exchange program.~~

Income taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred income taxes are determined based on the differences between the accounting basis and the tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced by a valuation allowance, if based on available evidence, it is considered that it is more likely than not that some portion of or all of the deferred tax assets will not be realized. In making such determination, we consider factors including future reversals of existing taxable temporary differences, future profitability, and tax planning strategies. If events were to occur in the future that would allow us to realize more of our deferred tax assets than the presently recorded net amount, an adjustment would be made to the deferred tax assets that would increase income for the period when those events occurred. If events were to occur in the future that would require us to realize less of our deferred tax assets than the presently recorded net amount, an adjustment would be made to the valuation allowance against deferred tax assets that would decrease income for the period when those events occurred. Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities.

Our deferred tax assets relate to net operating losses and temporary differences between accounting basis and tax basis for our ~~China-based subsidiaries~~China-Based Subsidiaries and VIEs, which are subject to corporate income tax in the PRC under the PRC Corporate Income Tax Law (the “CIT Law”).

The CIT Law applies an income tax rate of 25% to all enterprises but grants preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs can enjoy an income tax rate of 15% for three years, but need to re-apply after the end of the three-year period. If at any time during the three-year period the relevant tax bureau questions whether an enterprise continues to qualify as an HNTE, the enterprise can be subject to further tax examination and may not be able to continue to enjoy the preferential tax rate. In addition, the CIT Law and its implementing regulations provide that a “Software Enterprise” can enjoy an income tax exemption for two years beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years. An entity that qualifies as a “Key National Software Enterprise” can enjoy a further reduced preferential income tax rate of 10% for two years, but needs to re-apply after the end of the two-year period.

As of September 30, 2015, the following principal entities were qualified as HNTEs and were entitled to an income tax rate of 15%.

The CIT Law imposes a 10% withholding income tax on dividends distributed by ~~foreign invested~~foreign-invested enterprises in the PRC to their immediate holding companies outside ~~mainland~~Mainland China. A lower withholding tax rate may be applied if there is a tax treaty or other arrangement between ~~mainland~~Mainland China and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be subject to a 5% withholding tax rate under an arrangement between the PRC and the Hong Kong Special Administrative Region on the “Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital”, if such holding company is considered a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign invested enterprise distributing the dividends, subject to approval of the PRC local tax authority. However, if the Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to a withholding tax rate of 10%.

~~Effective September 1, 2012, a pilot program (the “Pilot Program”) for transition~~Revenues from brand advertising, revenues from the ~~imposition of PRC~~search and search-related business, tax (“Business Tax”) to the imposition of VAT for revenues from certain industries was expanded from Shanghai to eight other cities and provinces in China, including Beijing and Tianjin. Commencing August 1, 2013 the Pilot Program was expanded to all regions in the PRC. Our brand advertising and search revenues as well as certain online game revenues were subject to the Pilot Program.

~~VAT payable on advertising and search revenues as well as online game~~ revenues from Changyou’s Web ~~game operations~~games that were not developed in-house isand from licensed mobile games, as well as revenues from mobile related services, which are recorded as others revenues, are subject to VAT. To record VAT payable, we adopted the net presentation method, which presents the difference between the output VAT (at a rate of 6%) and available input VAT amount (at the rate applicable to the supplier). Other online game revenues ~~were not affected by~~from the ~~Pilot Program. Before~~operation of PC games and ~~after the Pilot Program, revenues from MMOG operations~~self-developed mobile games are subject to a 5% PRC business tax (“Business Tax, and revenues of 7Road that deemed to be derived from the sale of software are subject to VAT. VAT payable by 7Road is at a rate of 17%, with a 14% immediate tax refund irrespective of the availability of any input VAT, resulting in a net rate of 3%Tax”).

We adopted the net presentation method for our brand advertising and search businesses both before and after the implementation of the Pilot Program. We adopted the gross presentation method for revenues of 7Road deemed to be derived from the sale of software both before and after the implementation of the Pilot Program.

Sohu.com Inc. is a Delaware corporation that is subject to U.S. corporate income tax on its taxable income at a rate of ~~34% or~~up to 35%. To the extent that Sohu.com Inc. has U.S. taxable income, which generally arises mainly from our interest income, we accrue U.S. corporate income tax in our consolidated statements of comprehensive income and make estimated tax payments as and when required by U.S. law.

We are subject to various taxes in different jurisdictions, primarily the US and the PRC. Management reviews regularly the adequacy of the provisions for taxes as they relate to our income and transactions. In order to assess uncertain tax positions, we apply a more likely than not threshold and a two-step approach for tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. During its review in the third quarter of 2015, management determined that certain equity transactions that took place during the quarter may result in additional tax obligations under relevant tax rules. Accordingly, we recognized tax payable in the amount of $14.6 million and recognized tax expense in our consolidated statements of comprehensive income for the quarter ended September 30, 2015.

Basic net income /(loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income /(loss) per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise or settlement of share-based awards using the treasury stock method. The dilutive effect of share-based awards with performance requirements is not considered before the performance targets are actually met. The computation of diluted net income /(loss) per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect (i.e. an increase in earnings per share amounts or a decrease in loss per share amounts) on net income /(loss) per share. Additionally, for purposes of calculating the numerator of diluted net income /(loss) per share, the net income /(loss) attributable to the Sohu Group is adjusted as follows. The adjustment will not be made if there is an anti-dilutive effect.

In the calculation of the Sohu Group’s diluted net income /(loss) per share, assuming a dilutive effect, all of Changyou’s existing unvested restricted share units, and vested restricted share units that have not yet been settled, are treated as vested and settled by Changyou under the treasury stock method, causing the percentage of the weighted average number of shares held by Sohu in Changyou to decrease. As a result, Changyou’s net income /(loss) attributable to the Sohu Group on a diluted basis decreased accordingly. Assuming an anti-dilutive effect, all of these Changyou restricted share units are excluded from the calculation of the Sohu Group’s diluted net income /(loss) per share. As a result, Changyou’s net income /(loss) attributable to the Sohu Group on a diluted basis equals the number used for the calculation of the Sohu Group’s basic net income /(loss) per share.

In the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s diluted net income /(loss) per share, assuming a dilutive effect, the percentage of the ~~Sohu Group’s~~Sohu.com Inc.’s shareholding in Sogou was calculated by treating convertible preferred shares issued by Sogou as having been converted at the beginning of the period and unvested share options with the performance targets achieved as well as vested but unexercised share options as having been exercised during the period. The dilutive effect of share-based awards with a performance requirement was not considered before the performance targets were actually met. Assuming an anti-dilutive effect, all of these Sogou shares and share options are excluded from the calculation of ~~the Sohu Group’s~~Sohu.com Inc.’s diluted income /(loss) per share. As a result, Sogou’s net income /(loss) attributable to ~~the Sohu Group~~Sohu.com Inc. on a diluted basis equals the number used for the calculation of Sohu.com Inc.’s basic net income /(loss) per share.

In the ~~Sohu Group’s~~calculation of Sohu.com Inc.’s diluted net income /(loss) per share, assuming a dilutive effect, all of Changyou’s existing unvested restricted share units, and vested restricted share units that have not yet been settled, are treated as vested and settled by Changyou under the treasury stock method, causing the percentage of the weighted average number of shares held by Sohu.com Inc. in Changyou to decrease. As a result, Changyou’s net income /(loss) attributable to Sohu.com Inc. on a diluted basis decreased accordingly. Assuming an anti-dilutive effect, all of these Changyou restricted share units are excluded from the calculation of Sohu.com Inc.’s diluted net income /(loss) per share. As a result, Changyou’s net income /(loss) attributable to Sohu.com Inc. on a diluted basis equals the number used for the calculation of Sohu.com Inc.’s basic net income /(loss) per share.

Level 1 -– observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 -– include other inputs that are directly or indirectly observable in the market place.

Level 3 -– unobservable inputs which are supported by little or no market activity.

Our financial instruments mainly include cash equivalents, restricted time deposits, short-term investments, accounts receivable, prepaid and other current assets, held-for-sale assets, available-for-sale securities under long-term investments, accounts payable, accrued liabilities, receipts in advance and deferred revenue, short-term bank loans, other short-term liabilities, held-for-sale liabilities, long-term accounts payable and long-term bank loans.

Our cash equivalents mainly consist of time deposits and money market funds with original maturities of three months or less.

Restricted time deposits are valued based on the prevailing interest rates in the market using the discounted cash flow method.

In February 2013, we deposited $9.0 million in cash into restricted time deposit accounts at a bank as collateral for credit facilities provided by the bank to certain Sogou employees. The facilities were intended to fund the employees’ early exercise of Sogou share options and related PRC individual income tax. We are not subject to any additional potential payments other than the restricted time deposit amounts, and believe that the fair value of our guarantee liability is immaterial.

As of September 30, ~~2014~~2015, we had, through Changyou, loans from offshore banks secured by RMB deposits in onshore branches of those banks. The loans from the offshore branches of the lending banks are classified as short-term bank loans or long-term bank loans based on their repayment period. The rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market. The RMB onshore deposits securing the offshore loans are treated as restricted time deposits on our consolidated balance sheets.

In February 2013, we deposited $9 million in cash into restricted time deposit accounts at a bank as collateral for credit facilities provided by the bank to certain Sogou employees. The facilities were intended to fund the employees’ early exercise of Sogou share options and related PRC individual income tax. We are not subject to any additional potential payments other than the restricted time deposit amounts, and believe that the fair value of our guarantee liability is immaterial.

For investments in financial instruments with a variable interest rate indexed to the performance of underlying assets, we elected the fair value method at the date of initial recognition and carried these investments subsequently at fair value. Changes in fair values are reflected in the consolidated statements of comprehensive income.

The carrying value of accounts receivable is reduced by an allowance that reflects our best estimate of the amounts that will not be collected. We make estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends. Additional allowance for specific doubtful accounts might be made if the financial conditions of our customers or the China mobile network operators deteriorate or the China mobile network operators are unable to collect fees from their end customers, resulting in their inability to make payments due to us.

Investments in debt securities and equity securities that have readily determinable fair values not classified as trading securities or as held-to-maturity securities are classified as available-for-sale securities. Available-for-sale securities are reported at fair value, with unrealized gains or losses recorded in other comprehensive income or losses in the consolidated balance sheets. Realized gains or losses are included in the consolidated statements of comprehensive income during the period in which the gain or loss is realized. An impairment loss on the available-for-sale securities is recognized in the consolidated statements of comprehensive income when the decline in value is determined to be other-than-temporary.

On August 12, 2014, Sohu acquired approximately 6% of the total outstanding common shares of Keyeast Co. Ltd., a Korean-listed company, for a purchase price of ~~$14.9~~$15.1 million. We classified this investment as available-for-sale equity securities and reported it at fair value.

Investments in entities are recorded as equity investments. For entities over which we do not have significant influence, the cost method is applied; for entities over which we can exercise significant influence but do not own a majority equity interest or control, the equity method is applied. For cost method investments, we carry the investment at historical cost after the date of investment. For equity method investments, we adjust the carrying amount of an investment and recognize investment income or loss for our share of the earnings or loss of the investee after the date of investment.

~~As discussed in “Business Transactions - Sogou Transactions,” in~~In September 2013, Sogou entered into Repurchase Option Agreements with Sohu.com (Search) Limited (“Sohu ~~Search~~Search”) and Photon Group Limited, the investment vehicle of the Sohu Group’s Chairman and Chief Executive Officer Dr. Charles Zhang (“Photon”), and a Repurchase/Put Option Agreement with China Web Search (HK) Limited (“China Web”), with respect to Series A Preferred Shares of Sogou held by them. On March 24, 2014, Sogou purchased from China Web, pursuant to the Repurchase/Put Option Agreement between Sogou and China Web, 14.4 million Series A Preferred Shares of Sogou, for an aggregate purchase price of $47.3 million.

Management determined the fair values of the repurchase options ~~with Photon and China Web~~ when the agreements were signed, and of the put option ~~with China Web~~ before Sogou exercised the repurchase option, using the binominal model, with a discount for lack of marketability, given that the repurchase options and the put option were not publicly traded at the time of grant. Management made the determination ~~with the assistance of a qualified professional appraiser~~ using management’s estimates and assumptions. We classify the valuation techniques that use these inputs as Level 3 of fair value measurements.

Long-lived assets include fixed assets, intangible assets and prepaid non-current assets.

Fixed assets mainly comprise office buildings, ~~building~~leasehold improvements, ~~leasehold~~building improvements, vehicles, office furniture, and computer equipment and hardware. Fixed assets are recorded at cost less accumulated depreciation with no residual value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

The gain or loss on the disposal of fixed assets is the difference between the net sales proceeds and the lower of the carrying value or fair value less cost to sell the relevant assets and is recognized in operating expenses in the consolidated statements of comprehensive income.

Intangible assets mainly comprise ~~video content and license, customer lists, developed technologies,~~ domain names and trademarks, developed technologies, computer software, purchased video content, cinema advertising slot rights, and operating rights for licensed ~~games and computer software purchased from unrelated third parties or acquired from business combinations.~~games. Intangible assets are recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets other than ~~licensed~~purchased video content is computed using the straight-line method over their estimated useful lives. ~~Commencing in~~

Purchased video content is recognized as intangible assets. Amortization of purchased video content is computed based on the ~~first quarter of 2014, in order to match the current~~ trend in viewership ~~accumulation, we adopted an accelerated amortization pattern~~accumulation. For self-produced video content, the production costs incurred in excess of the amount of revenue contracted are expensed as incurred, instead of being recorded as intangible assets.

Sohu Video enters into nonmonetary transactions to exchange online broadcasting rights for ~~certain of our~~ purchased video ~~content.~~

content with other online video broadcasting companies. Under~~Prepaid Non-current Assets~~ASC 845

~~Prepaid non-current assets primarily include prepaid PRC income tax arising from~~, the ~~sale~~cost of ~~certain assets associated with~~a nonmonetary asset acquired in exchange for another nonmonetary asset is the ~~17173 Business by Sohu to Changyou. The prepaid PRC income tax will be amortized over the period~~fair value of the ~~weighted average remaining life~~asset surrendered to obtain the acquired nonmonetary asset, and a gain or loss should be recognized on the exchange. The fair value of the ~~17173 Business-related assets sold~~asset received should be used to ~~Changyou.~~measure the cost if the fair value of the asset received is more reliable than the fair value of the asset surrendered. We record these nonmonetary exchanges at the fair values of the online broadcasting rights for purchased video content and recognize any gain or loss from such exchange transactions.

In accordance withASC 360-10-35, we review the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, we measure any impairment of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on our historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in our business model is determined by our management. An impairment loss would be recorded if we determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets.

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of our acquisitions of interests in our subsidiaries and consolidated VIEs. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, we report in our financial statements provisional amounts for the items for which the accounting is incomplete. If a measurement period adjustment is identified, we recognize the adjustment as part of the acquisition accounting. We increase or decrease the provisional amounts of identifiable assets or liabilities by means of increases or decreases in goodwill for measurement period adjustments.

In accordance withASC 350, we do not amortize goodwill, but test it for impairment. Goodwill is not deductible for tax purposes. We test goodwill for impairment at the reporting unit level on an annual basis as of October 1, and between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. Commencing in September 2011, we adopted the Financial Accounting Standards Board (“FASB”) revised guidance on “Testing of Goodwill for Impairment.” Under this guidance, we have the option to choose whether we will apply the qualitative assessment first and then the quantitative assessment, if necessary, or to apply the quantitative assessment directly. For reporting units applying a qualitative assessment first, we start the goodwill impairment test by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is more-likely-than-not the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of goodwill with its carrying value. For reporting units directly applying the quantitative assessment, we perform the goodwill impairment test by quantitatively comparing the fair values of those reporting units to their carrying amounts.

Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

~~Contingent consideration consists of the fair value of potential payments related to two acquisitions made by Changyou.~~

Changyou’s acquisition of Beijing Doyo Internet Technology Co., Ltd. (“Doyo”), included a contingent consideration arrangement that requires additional consideration to be paid by Changyou based on the ~~achievement~~financial performance of ~~specified performance milestones by~~ Doyo for the fiscal years 2013 through 2015. The fair value of the contingent consideration was recognized on the acquisition date ~~of the acquisition with~~using the income ~~approach~~approach/ discounted cash flow method with a scenario analysis applied. There were no indemnification assets involved.

~~Changyou’s acquisition of~~ In March 2015, as Doyo’s performance had exceeded the ~~RaidCall business, included a~~relevant performance milestone, Changyou re-classified such contingent consideration ~~arrangement that gives Changyou the right~~ to acquire additional shares of TalkTalk Limited (“TalkTalk”) at no cost if specified conditions occur through the 2014 fiscal year. The fair value of the right, which was nil, was recognized as contingent consideration on the date of the acquisition.

~~Mezzanine Equity consisted of the noncontrolling interest~~other short-term liabilities in 7Road and a put option pursuant to which the noncontrolling shareholders would have had the right to put their ordinary shares in 7Road to Changyou at a pre-determined price if 7Road achieved specified performance milestones before the expiration of the put option and 7Road did not complete an IPO on NASDAQ, the New York Stock Exchange (the “NYSE”) or the Stock Exchange of Hong Kong (the “HKEX”). The put option was due to expire in 2014. Since the occurrence of the sale was not solely within the control of Changyou, the noncontrolling interest was classified as mezzanine equity instead of permanent equity in the Sohu Group’s and Changyou’s consolidated financial statements.

~~Under~~~~ASC 480-10~~~~, we calculated, on an accumulative basis from the acquisition date, (i)~~ the amount of ~~accretion that would increase~~$6.0 million in the consolidated balance of noncontrolling interest to its estimated redemption value over the period from the date of the Shenzhen 7Road acquisition to the earliest redemption date of the noncontrolling interest in 7Road and (ii) the amount of net profit attributable to noncontrolling shareholders of 7Road based on their ownership percentage. The carrying value of the noncontrolling interest as mezzanine equity was adjusted by an accumulative amount equal to the higher of (i) and (ii).

~~On May 1, 2013,~~sheet. In September 2015, Changyou entered into an agreement to ~~acquire~~sell all of the ~~ordinary shares~~equity interests of ~~7Road held by~~Doyo. The aggregate consideration under the ~~noncontrolling shareholders. The acquisition closed on June 5, 2013,~~agreement includes cash consideration of approximately $2.9 million, and ~~7Road~~forgiveness, upon the completion of the sale, of the $6.0 million contingent consideration payable. As of the date of this report, this sale has been ~~a wholly-owned subsidiary of~~completed and Changyou ~~since then. As the put option held by the owners~~has received most of the noncontrolling interest lapsed upon the closing of Changyou’s acquisition of their shares in 7Road, there was no associated accretion and no mezzanine equity during and after the third quarter of 2013.cash consideration.

Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented on our consolidated balance sheets, includes a cumulative foreign currency translation adjustment.

An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The functional currency of Sohu.com Inc. is the U.S. dollar. The functional currency of our subsidiaries in the U.S., the Cayman Islands, the British Virgin Islands and Hong Kong is the U.S. dollar. The functional currencies of our subsidiaries and VIEs in other countries are the national currencies of those counties, rather than the U.S. dollar.

Assets and liabilities of our subsidiaries and VIEs whose functional currencies are not the U.S. dollar are translated into U.S. dollars, our reporting currency, at the exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average exchange rates in effect during the reporting period. Foreign currency translation adjustments are not included in determining net income for the period but are accumulated in a separate component of equity in our consolidated balance sheets.

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the consolidated statements of comprehensive income.

Commencing in the first quarter of 2014, we reclassified the mobile business and mobile segment to the others business and the others segment, respectively, because we did not consider the mobile business to be significant enough to constitute a separate business and the CODM no longer reviewed the mobile business as a separate segment. The mobile business offers mobile-related services and mobile products, in cooperation with China mobile network operators, to mobile phone users and to China mobile network operators. Most of our mobile revenues are contributed by services provided to mobile phone users through products such as SMS, RBT, and IVR. To conform to current period presentations, the relevant amounts for prior periods have been reclassified accordingly. Such reclassifications amounted to $14.5 million and $43.2 million, respectively, for revenues and $8.1 million and $26.3 million, respectively, for costs for the three and nine months ended September 30, 2013.

The following table presents our revenues by revenue source and by proportion for the periods indicated (in thousands, except percentages):


																							Three Months Ended September 30,															Nine Months Ended September 30,
	Three Months Ended September 30,											Nine Months Ended September 30,											2014					2015					2015 vs 2014					2014					2015					2015 vs 2014
	2014				2013				2014 vs 2013			2014				2013				2014 vs 2013			Amount		Percentage of the total revenue			Amount		Percentage of the total revenue			Amount		Incremental ratio			Amount		Percentage of the total revenue			Amount		Percentage of the total revenue			Amount		Incremental ratio
Revenues
Online advertising:
Brand advertising	$	148,823	35	%	$	124,780	34	%	$	24,043		$	393,334	33	%	$	305,208	30	%	$	88,126		$	148,823		35	%	$	151,517		29	%	$	2,694		2	%	$	393,334		33	%	$	436,187		30	%	$	42,853		11	%
Search and others		98,437	22	%		52,305	14	%		46,132			247,810	21	%		134,528	13	%		113,282
Search and search-related																								98,437		22	%		147,938		28	%		49,501		50	%		247,810		21	%		388,270		26	%		140,460		57	%

Subtotal of online advertising revenues		247,260	57	%		177,085	48	%		70,175			641,144	54	%		439,736	43	%		201,408			247,260		57	%		299,455		57	%		52,195		21	%		641,144		54	%		824,457		56	%		183,313		29	%

Online game		150,338	35	%		161,494	44	%		(11,156	)		467,603	39	%		497,210	49	%		(29,607	)		150,338		35	%		152,501		29	%		2,163		1	%		467,603		39	%		509,845		35	%		42,242		9	%
Others		32,817	8	%		29,744	8	%		3,073			87,134	7	%		77,877	8	%		9,257			32,817		8	%		70,134		14	%		37,317		114	%		87,134		7	%		136,686		9	%		49,552		57	%

Total revenues	$	430,415	100	%	$	368,323	100	%	$	62,092		$	1,195,881	100	%	$	1,014,823	100	%	$	181,058		$	430,415		100	%	$	522,090		100	%	$	91,675		21	%	$	1,195,881		100	%	$	1,470,988		100	%	$	275,107		23	%

Total revenues were $430.4 million and $1.2 billion, respectively, for the three and nine months ended September 30, 2014, compared to $368.3 million and $1.0 billion, respectively, for the corresponding periods in 2013. The increase in total revenues from the three months ended September 30, 2013 to the three months ended September 30, 2014 was $62.1 million, and the increase from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 was $181.1 million. The increases were mainly attributable to increases in online advertising revenues, which were offset in part by decreases in online game revenues.

Online advertising revenues were ~~$247.3~~$299.5 million and ~~$641.1~~$824.5 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$177.1~~$247.3 million and ~~$439.7~~$641.1 million, respectively, for the corresponding periods in ~~2013.~~2014. The increase in online advertising revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$70.2~~$52.2 million, representing a year-on-year growth rate of 21%, and the increase from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$201.4 million. The increases were mainly attributable to increases in search and others revenues.~~$183.3 million, representing a year-on-year growth rate of 29%.

Brand advertising revenues were ~~$148.8~~$151.5 million and ~~$393.3~~$436.2 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$124.8~~$148.8 million and ~~$305.2~~$393.3 million, respectively, for the corresponding periods in ~~2013.~~2014. The increase in brand advertising revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$24.0~~$2.7 million, representing a year-on-year growth rate of 2%, and the increase from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$88.1 million.~~$42.9 million, representing a year-on-year growth rate of 11%. The year-on-year increases in brand advertising revenues were mainly ~~attributable to increases in revenues~~ from ~~the online video and real estate businesses.~~Sohu Video.

Revenues from ~~the online video business increased $14.2~~Sohu Media Portal were $51.2 million and ~~$46.8~~$148.6 million, respectively, for the three and nine months ended September 30, 2015, compared to $54.4 million and $148.9 million, respectively, for the corresponding periods in 2014. Revenues from Sohu Media Portal for the three months and nine months ended September 30, ~~2014,~~2015 were generally stable when compared to the corresponding periods in ~~2013.~~2014. In the third quarter, we continued to refine the mobile news App interface to improve users’ experience. In the meantime, we strived to enhance our content offerings, providing users high quality news and reliable information. The ~~increase~~number of advertisers for Sohu Media Portal was ~~driven by our strategy of providing high-quality differentiated content~~1,597 and increasing the base of daily unique visitors and daily video views, which in turn resulted in higher revenues and also attracted larger numbers of advertisers. The average daily unique visitors and average daily video views for our online video business increased 48% and 128%,2,987, respectively, for the three and nine months ended September 30, 2015, compared to 1,519 and 2,392, respectively, for the corresponding periods in 2014.

Revenues from Sohu Video were $55.4 million for the three months ended September 30, 2015, compared to $51.2 million for the corresponding periods in 2014, an increase of $4.2 million, representing year-on-year growth of 8%, as we increased monetization. For the month of September ~~2014,~~2015 compared to the month of September ~~2013.~~2014, the average daily unique visitors for Sohu Video increased 20%, mainly from visitors contributed by a company that we acquired in late 2014 that focuses primarily on original and professionally-generated content. For the month of September 2015 compared to the month of September 2014, the average daily video views for Sohu Video decreased 12%, which mainly resulted from the rationalization of our spending on licensed content. The number of advertisers on ~~our~~Sohu Video was 291 for the three months ended September 30, 2015, compared to 306 for the corresponding periods in 2014. The pricing for online video ~~sites increased to 306 as of~~has generally been stable.

Revenues from Sohu Video were and $161.8 million for the nine months ended September 30, 2015, compared to $125.2 million for the corresponding periods in 2014, ~~from 188 as~~an increase of $36.6 million, representing year-on-year growth of 29%. The number of advertisers on Sohu Video was 492 for the nine months ended September 30, ~~2013.~~ 2015, compared to 487 for the corresponding periods in 2014.

Revenues from ~~the real estate business increased $3.7~~Focus were $27.0 million and ~~$15.6~~$83.6 million, respectively, for the three ~~months~~ and nine months ended September 30, ~~2014,~~2015, compared to $26.6 million and $78.6 million, respectively, for the corresponding periods in ~~2013. This~~2014. The increase in revenues from Focus from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $0.5 million, representing a year-on-year growth rate of 2%, and the increase from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $5.0 million, representing a year-on-year growth rate of 6%.

Revenues from Focus were generated through the Fixed Price model and the E-commerce model.

For the Fixed Price model, revenues were $12.7 million and $41.6 million, respectively, for the three and nine months ended September 30, 2015, compared to $16.4 million and $47.4 million, respectively, for the corresponding periods in 2014, representing decreases of $3.7 million and $5.8 million, respectively, from the three months ended September 30, 2014 to the three months ended September 30, 2015 and from the nine months ended September 30, 2014 to the nine months ended September 30, 2015. In the currently soft Chinese macro economy, advertisers are more willing to adopt the E-commerce model than the Fixed Price model, which caused our revenues from the Fixed Price model to decrease.

For the E-commerce model, revenues were $14.4 million and $42.0 million, respectively, for the three and nine months ended September 30, 2015, compared to $10.2 million and $31.2 million, respectively, for the corresponding periods in 2014. The increase was mainly driven by ~~our subscription membership services and our brand advertising services. The quicker growth of~~ our subscription membership services offered to prospective purchasers of real estate ~~was~~as a result of the expansion of the Focus business ~~expansion~~ through ~~cooperation~~our establishment of more partnerships with property developers. The number of ~~property~~ developers with which we had cooperation arrangements ~~increased to 593 as of~~was 431 and 838, respectively, for the three and nine months ended September 30, ~~2014 from 262 as~~2015, compared to 348 and 588, respectively, for the corresponding periods in 2014. The number of paying subscribers for the membership services was 24,043 and 68,103, respectively, for the three and nine months ended September 30, ~~2013.~~

~~We expect brand advertising revenues to be stable in the fourth quarter of 2014,~~2015, compared to 17,202 and 48,264, respectively, for the ~~third quarter of~~corresponding periods in 2014.

Revenues from the 17173.com Website were ~~$98.4~~$17.9 million and ~~$247.8~~$42.3 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$52.3~~$16.7 million and ~~$134.5~~$40.7 million, respectively, for the corresponding periods in ~~2013.~~2014. Revenues from the 17173.com Website were stable for the three and nine months ended September 30, 2015. The number of advertisers on the 17173.com Website was 89 and 171, respectively, for the three and nine months ended September 30, 2015, compared to 93 and 132, respectively, for the corresponding periods in 2014.

Revenues from search and search-related services were $147.9million and $388.3 million, respectively, for the three and nine months ended September 30, 2015, compared to $98.4 million and $247.8 million, respectively, for the corresponding periods in 2014. The increase in revenues from search and ~~others revenues~~search-related services from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$46.1~~$49.5 million, representing a year-on-year growth rate of 50%, and the increase from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$113.3 million.~~ $140.5 million, representing a year-on-year growth rate of 57%.

The increase in revenues from search and search-related services was mainly ~~contributed by~~attributable to an increase in revenues from pay-for-click services.

Revenues from pay-for-click services accounted for approximately 82% of the total search and search-related revenues for both the three and the nine months ended September 30, 2015, compared to 82% and 79%, respectively, for the corresponding periods in 2014. The ~~revenue~~ growth ofin revenues from pay-for-click ~~service~~services was principally attributable to an increase in the number of paid clicks and a higher average ~~cost-per-click, as paid~~cost-per-click. Paid clicks increased by approximately ~~83%~~35% and ~~53%, respectively, and average cost-per-click increased by approximately 19% and 29%~~40%, respectively, for the three and nine months ended September 30, ~~2014~~2015, compared to the corresponding periods in ~~2013.~~

~~We expect search~~2014. Average cost-per-click increased by approximately 10% and ~~others revenues to increase in~~13%, respectively, for the ~~fourth quarter of 2014,~~three and nine months ended September 30, 2015, compared to the ~~third quarter of~~corresponding periods in 2014.

~~Online~~Revenues from the online game ~~revenues~~business were ~~$150.3~~$152.5 million and ~~$467.6~~$509.8 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$161.5~~$150.3 million and ~~$497.2~~$467.6 million, respectively, for the corresponding periods in ~~2013. The decrease in online game revenues~~2014.

Revenues from ~~the three months ended September 30, 2013 to the three months ended September 30, 2014 was $11.2~~PC games were $100.1 million and the decrease from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 was $29.6 million. The decrease was mainly due to decreased revenues from Changyou’s Web games Wartune and DDTank in China, which have reached a relatively mature phase in their operation, and decreased revenues from Changyou’s flagship MMOG, TLBB, following the strategic decision to reduce the game’s difficulty.

~~We expect online game revenues to be stable in the fourth quarter of 2014, compared to the third quarter of 2014.~~

~~Revenues for other services were $32.8 million and $87.1~~298.2 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$29.7~~$122.7 million and ~~$77.9~~$379.9 million, respectively, for the corresponding periods in ~~2013.~~2014. The ~~increase~~decrease in ~~others~~ revenues from PC games from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, 2015 was $22.6 million, representing a year-on-year decrease rate of 18%, and the decrease from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was ~~$3.1~~$81.7 million, representing a year-on-year decrease rate of 22%. The year-on-year decrease in revenues from PC games was mainly due to decreased revenues from TLBB, resulting from the strategic decision to reduce the level of promotional activities within TLBB to achieve an in-game balance and a sustainable environment for game players and the game’s maturity. For the three and nine months ended September 30, 2015, revenues from the PC game TLBB were $77.8 million and $244.9 million, respectively, accounting for approximately 51% and 48%, respectively, of Changyou’s online game revenues, approximately 41% of Changyou’s total revenues for both periods and approximately 15% and 17%, respectively, of the Sohu Group’s total revenues.

Revenues from mobile games were $42.8 million and $167.3 million, respectively, for the three and nine months ended September 30, 2015, compared to $4.8 million and $8.3 million, respectively, for the corresponding periods in 2014. The increase in revenues from mobile games from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $38.0 million, representing a year-on-year growth rate of 792%, and the increase from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$9.3 million.~~$159.0 million, representing a year-on-year growth rate of 1916%. The increase was mainly due to ~~increased~~ revenues from ~~IVAS~~Changyou’s mobile game TLBB 3D, which was launched in the fourth quarter of 2014.

The following table sets forth certain operating data for Changyou’s PC games and ~~cinema advertising.~~mobile games for the periods indicated:

Revenues from Web games were $9.5 million and $44.3 million, respectively, for the three and nine months ended September 30, 2015, compared to $22.8 million and $79.4 million, respectively, for the corresponding periods in 2014. The decrease was mainly due to decreased revenues from the Web games Wartune and DDTank and Changyou’s sale of the 7Road business , which operates Wartune and DDTank, on August 17, 2015.

Revenues from others services were $70.1 million and $136.7 million, respectively, for the three and nine months ended September 30, 2015, compared to $32.8 million and $87.1 million, respectively, for the corresponding periods in 2014. The increase was mainly due to revenue of $28.7 million from the film “Jian Bing Man” that was produced by us and released in the third quarter of 2015.

The following table presents our cost of revenues by source and by proportion for the periods indicated (in thousands, except percentages):


																					Three Months Ended September 30,															Nine Months Ended September 30,
	Three Months Ended September 30,										Nine Months Ended September 30,										2014					2015					2015 vs 2014					2014					2015					2015 vs 2014
	2014				2013				2014 vs 2013		2014				2013				2014 vs 2013		Amount		Percentage of the total cost			Amount		Percentage of the total cost			Amount		Incremental ratio			Amount		Percentage of the total cost			Amount		Percentage of the total cost			Amount		Incremental ratio
Cost of revenues:
Online advertising:
Brand advertising	$	83,424	46	%	$	63,780	51	%	$	19,644	$	230,462	47	%	$	160,214	47	%	$	70,248	$	83,424		46	%	$	91,163		43	%	$	7,739		9	%	$	230,462		47	%	$	295,562		45	%	$	65,100		28	%
Search and others		46,375	26	%		26,785	21	%		19,590		118,532	24	%		72,075	21	%		46,457
Search and search-related																						46,375		26	%		62,365		29	%		15,990		34	%		118,532		24	%		170,836		26	%		52,304		44	%

Subtotal of cost of online advertising revenues		129,799	72	%		90,565	72	%		39,234		348,994	71	%		232,289	68	%		116,705		129,799		72	%		153,528		72	%		23,729		18	%		348,994		71	%		466,398		71	%		117,404		34	%

Online game		33,949	19	%		21,750	17	%		12,199		90,798	19	%		67,381	20	%		23,417		33,949		19	%		34,635		16	%		686		2	%		90,798		19	%		128,049		19	%		37,251		41	%
Others		17,912	9	%		13,175	11	%		4,737		50,252	10	%		42,994	12	%		7,258		17,912		9	%		25,996		12	%		8,084		45	%		50,252		10	%		63,066		10	%		12,814		25	%

Total cost of revenues	$	181,660	100	%	$	125,490	100	%	$	56,170	$	490,044	100	%	$	342,664	100	%	$	147,380	$	181,660		100	%	$	214,159		100	%	$	32,499		18	%	$	490,044		100	%	$	657,513		100	%	$	167,469		34	%

Total cost of revenues was $181.7 million and $490.0 million, respectively, for the three and nine months ended September 30, 2014, compared to $125.5 million and $342.7 million, respectively, for the corresponding periods in 2013. The increase in cost of revenues from the three months ended September 30, 2013 to the three months ended September 30, 2014 was $56.2 million, and the increase from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 was $147.4 million. The increase was mainly attributable to increases in cost of online advertising revenues.

Cost of online advertising revenues was ~~$129.8~~$153.5 million and ~~$349.0~~$466.4 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$90.6~~$129.8 million and ~~$232.3~~$349.0 million, respectively, for the corresponding periods in ~~2013.~~2014. The increase in cost of online advertising revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$39.2~~$23.7 million, representing a year-on-year growth rate of 18%, and the increase from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$116.7 million. The increase was mainly attributable to increases in cost~~$117.4 million, representing a year-on-year growth rate of ~~brand advertising revenues.~~34%.

Cost of brand advertising revenues mainly consists of content and license costs, bandwidth leasing costs, salary and benefits ~~expense,~~expenses, and depreciation ~~expense.~~expenses.

Cost of brand advertising revenues was ~~$83.4~~$91.2 million and ~~$230.5~~$295.6 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$63.8~~$83.4 million and ~~$160.2~~$230.5 million, respectively, for the corresponding periods in ~~2013.~~2014.

The increase in cost of brand advertising revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$19.6 million.~~$7.7 million, representing a year-on-year growth rate of 9%. The increase mainly consisted of ~~an $11.8~~a $5.4 million increase in content and license costs and a ~~$4.4~~$1.5 million increase in ~~bandwidth leasing costs.~~salary and benefits expense.

The increase in cost of brand advertising revenues from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$70.2 million.~~$65.1 million, representing a year-on-year growth rate of 28%. The increase mainly consisted of a ~~$38.8~~$48.1 million increase in content and license costs, a ~~$20.9 million increase in bandwidth leasing costs, a $3.4~~$7.4 million increase in salary and benefits expense, and a $3.3 million increase in ~~depreciation expense.~~bandwidth leasing costs.

Our brand advertising gross margin was ~~44%~~40% and ~~41%~~32%, respectively, for the three and nine months ended September 30, ~~2014,~~2015, as compared to ~~49%~~44% and ~~48%~~41%, respectively, for the corresponding periods in ~~2013.~~2014. The decrease in our brand advertising gross margin was ~~mainly~~primarily due to ~~the~~an increase in content ~~and license~~ costs, ~~and in bandwidth leasing costs.~~which outpaced revenue growth.

Cost of search and ~~others~~search-related revenues mainly consists of traffic acquisition costs, bandwidth leasing costs, ~~and~~ depreciation ~~expense,~~expenses, as well as salary and benefits ~~expense.~~expenses.

Cost of search and ~~others~~search-related revenues were ~~$46.4~~$62.4 million and ~~$118.5~~$170.8 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$26.8~~$46.4 million and ~~$72.1~~$118.5 million, respectively, for the corresponding periods in ~~2013.~~2014.

The increase in cost of search and ~~others~~search-related revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$19.6 million.~~$16.0 million, representing a year-on-year growth rate of 34%. The increase mainly consisted of a ~~$14.0~~$11.1 million increase in traffic acquisition costs, a ~~$2.7 million increase in depreciation expense, and a $2.7~~$3.1 million increase in bandwidth leasing ~~costs.~~costs and a $1.6 million increase in depreciation expenses.

The increase in cost of search and ~~others~~search-related revenues from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$46.5 million.~~$52.3 million, representing a year-on-year growth rate of 44%. The increase mainly consisted of a ~~$27.3~~$38.2 million increase in traffic acquisition costs, a ~~$9.6 million increase in depreciation expense, and an $8.4~~$10.5 million increase in bandwidth leasing ~~costs.~~costs and a $3.3 million increase in depreciation expenses.

Our search and ~~others~~search-related gross margin was ~~53%~~58% and ~~52%~~56%, respectively, for the three and nine months ended September 30, ~~2014,~~2015, as compared to ~~49%~~53% and ~~46%~~52%, respectively, for the corresponding periods in ~~2013.~~2014. The increase in our search and ~~others~~search-related gross margin was mainly due to ~~higher~~increased revenues, ~~from increased paid clicks and~~combined with lower costs as a ~~higher average cost-per-click, as well as traffic acquisition costs and bandwidth costs constituting a lower~~ percentage of search and ~~others~~search-related revenues.

Cost of online game revenues mainly consists of revenue-sharing payments, salary and benefits ~~expense, revenue-based royalty payments to game developers,~~expenses, bandwidth leasing costs, and depreciation and amortization ~~expense.~~expenses.

Cost of online game revenues was ~~$33.9~~$34.6 million and ~~$90.8~~$128.0 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$21.8~~$33.9 million and ~~$67.4~~$90.8 million, respectively, for the corresponding periods in ~~2013.~~2014.

The increase in cost of online game revenues from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$12.2 million.~~$0.7 million, representing a year-on-year growth rate of 2%. The increase ~~mainly~~ included a ~~$4.7~~$11.6 million increase in ~~revenue-based royalty~~revenue-sharing payments to ~~game developers,~~mobile app stores, which was offset by a ~~$3.9~~$6.7 million ~~increase~~decrease in salary and benefits ~~expense,~~expenses, a $2.7 million decrease in depreciation and amortization expenses and a ~~$1.5~~$1.7 million ~~increase~~decrease in bandwidth leasing costs.

The increase in cost of online game revenues from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$23.4 million.~~$37.3 million, representing a year-on-year growth rate of 41%. The increase included a ~~$7.9~~$63.0 million increase in ~~revenue-based royalty~~revenue-sharing payments to ~~game developers, and~~mobile app stores, which was offset by a ~~$7.5~~$14.4 million ~~increase~~decrease in salary and benefits ~~expense.~~expenses, a $4.4 million decrease in bandwidth leasing costs and a $4.9 million decrease in depreciation and amortization expenses.

Our online game gross margin was 77% and ~~81%~~75%, respectively, for the three and nine months ended September 30, ~~2014, as~~2015, compared to ~~87%~~77% and ~~86%~~81%, respectively, for the corresponding periods in ~~2013. The decreases in our online game gross margin were mainly due to additional costs of licensed MMO and mobile games that were launched in the third quarter of~~ 2014.

Cost of revenues for other services mainly consists of revenue-sharing payments related to the IVAS business, revenue-sharing payments paid to China mobile network operators, and payments to theatres and film production companies for pre-film screening advertisement slots.

~~Cost of revenues for other~~others services was ~~$17.9~~$26.0 million and ~~$50.3~~$63.1 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$13.2~~$17.9 million and ~~$43.0~~$50.3 million, respectively, for the corresponding periods in ~~2013.~~2014. The increase ~~in cost of revenues for other services from the three and nine months ended September 30, 2013 to the three and nine months ended September 30, 2014~~ was ~~$4.7 million and $7.3 million, respectively. The increases were~~ mainly due to ~~revenue-sharing payments related to~~$5.7 million in film production costs for “Jian Bing Man” that were recognized concurrently with revenue in the ~~IVAS business.~~third quarter of 2015.

The following table presents our operating expenses by nature and by proportion for the periods indicated (in thousands, except percentages):


																					Three Months Ended September 30,																Nine Months Ended September 30,
	Three Months Ended September 30,										Nine Months Ended September 30,										2014					2015					2015 vs 2014						2014					2015					2015 vs 2014
	2014				2013				2014 vs 2013		2014				2013				2014 vs 2013		Amount		Percentage of the total expense			Amount		Percentage of the total expense			Amount			Incremental ratio			Amount		Percentage of the total expense			Amount		Percentage of the total expense			Amount			Incremental ratio
Operating expenses:
Product development	$	107,971	37	%	$	70,551	37	%	$	37,420	$	327,911	37	%	$	185,731	38	%	$	142,180	$	107,971		37	%	$	92,779		35	%	$	(15,192	)		-14	%	$	327,911		37	%	$	295,741		40	%	$	(32,170	)		-10	%
Sales and marketing		131,742	46	%		90,728	48	%		41,014		410,702	47	%		221,129	46	%		189,573		131,742		46	%		98,596		37	%		(33,146	)		-25	%		410,702		47	%		285,701		38	%		(125,001	)		-30	%
General and administrative		49,730	17	%		29,365	15	%		20,365		138,330	16	%		77,726	16	%		60,604		49,730		17	%		33,330		13	%		(16,400	)		-33	%		138,330		16	%		128,214		17	%		(10,116	)		-7	%
Goodwill impairment and impairment of intangible assets acquired as part of a business acquisition																						0		0	%		40,324		15	%		40,324			N/A			0		0	%		40,324		5	%		40,324			N/A

Total operating expenses	$	289,443	100	%	$	190,644	100	%	$	98,799	$	876,943	100	%	$	484,586	100	%	$	392,357	$	289,443		100	%	$	265,029		100	%	$	(24,414	)		-8	%	$	876,943		100	%	$	749,980		100	%	$	(126,963	)		-14	%

Product development expenses mainly consist of salary and benefits expenses, depreciation and amortization expenses, facilities expenses, and technical service fees.

Product development expenses were ~~$289.4~~$92.8 million and ~~$876.9~~$295.7 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to $190.6 million and $484.6 million, respectively, for the corresponding periods in 2013. The increase in operating expenses from the three months ended September 30, 2013 to the three months ended September 30, 2014 was $98.8 million, and the increase from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 was $392.4 million. The increase was mainly due to increases in sales and marketing expenses and product development expenses.

Product development expenses mainly consist of personnel-related expenses incurred for enhancement and maintenance of our Websites, and costs associated with new product development and maintenance, as well as enhancement of existing products and services, which mainly include the development costs of online games prior to the establishment of technological feasibility and maintenance costs after the online games are available for marketing.

~~Product development expenses were~~ $108.0 million and $327.9 million, respectively, for the ~~three and nine months ended September 30, 2014, compared to $70.6 million and $185.7 million, respectively, for the~~ corresponding periods in ~~2013.~~2014.

The ~~increase~~decrease in product development expenses from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$37.4 million.~~$15.2 million, representing a year-on-year decrease rate of 14%. The ~~increase~~decrease mainly consisted of a ~~$28.6~~$7.4 million ~~increase~~decrease in share-based compensation expense, a $7.3 million decrease in salary and benefits expense, ~~which was mainly attributable to increased headcount~~ and ~~increased average compensation,~~a $4.5 million decrease in content and license costs, offset by a $3.7 million increase in ~~content and license expenses,~~impairment related to game copyrights of Changyou and a ~~$3.0~~$0.3 million increase in depreciation and amortization expense.

The ~~increase~~decrease in product development expenses from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2013~~2015 was ~~$142.2 million.~~$32.2 million, representing a year-on-year decrease rate of 10%. The ~~increase~~decrease mainly consisted of a ~~$73.6~~$30.1 million ~~increase~~decrease in salary and benefits expense, ~~which was mainly attributable to increased headcount~~a $6.3 million decrease in share-based compensation expense, and ~~increased average compensation,~~ a ~~$30.2~~$5.5 million decrease in content and license expense, offset by a $6.9 million increase in impairment related to game copyrights of Changyou and a $4.4 million increase in depreciation and amortization expense. The decrease in salary and benefits expenses resulted primarily from an accrual for estimated compensation expense ~~related to Changyou’s~~associated with three ~~new~~ employee incentive plans ~~most of which was~~that had been recognized by Changyou in the first quarter of 2014. The accrual was reversed in the fourth quarter of 2014 ~~a $9.3 million increase~~due to lowered estimates based on management’s reassessment of the estimated compensation liabilities for the three employee incentive plans. The three employee incentive plans were cancelled during the first quarter of 2015, and therefore no such accrual was made in content and license expenses, a $8.3 million increase in share-based compensation expense, a $7.0 million increase in depreciation expense, and a $4.6 million increase in professional service expenses.the first quarter of 2015.

Sales and marketing expenses mainly consist of advertising and promotional expenditures, salary and benefits ~~expense,~~expenses, travel expenses, and facility expenses.

Sales and marketing expenses were ~~$131.7~~$98.6 million and ~~$410.7~~$285.7 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$90.7~~$131.7 million and ~~$221.1~~$410.7 million, respectively, for the corresponding periods in ~~2013.~~2014.

The ~~increase~~decrease in sales and marketing expenses from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$41.0 million.~~$33.1 million, representing a year-on-year decrease rate of 25%. The ~~increase~~decrease mainly consisted of a ~~$28.4~~$27.5 million ~~increase~~decrease in advertising and promotional expenditures, which ~~primarily resulted from higher advertising costs~~was mainly due to Changyou’s reduction in marketing and promotional spending for ~~the promotion of~~ mobile ~~applications as part of Changyou’s initiative to develop its platform business, and~~Internet products, a ~~$10.7~~$2.9 million ~~increase~~decrease in salary and benefits ~~expense.~~expenses and a $1.5 million decrease in facility expenses.

The ~~increase~~decrease in sales and marketing expenses from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$189.6~~$125.0 million. The ~~increase~~decrease mainly consisted of a ~~$144.5~~$114.9 million ~~increase~~decrease in advertising and promotional expenditures, which ~~primarily resulted from higher advertising costs~~was mainly due to Changyou’s reduction in marketing and promotional spending for ~~the promotion of~~ mobile ~~applications as part of Changyou’s initiative to develop its platform business,~~Internet products, a ~~$32.5~~$3.4 million ~~increase~~decrease in facility expenses and a $3.2 million decrease in salary and benefits ~~expense, which was mainly attributable to increased headcount and increased average compensation, a $4.0 million increase in travel expenses, and a $2.2 million increase in facility~~ expenses.

General and administrative expenses mainly consist of salary and benefits ~~expense,~~expenses, professional service ~~expenses,~~fees, facility expenses, travel expenses and ~~travel~~depreciation and amortization expenses.

General and administrative expenses were ~~$49.7~~$33.3 million and ~~$138.3~~$128.2 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$29.4~~$49.7 million and ~~$77.7~~$138.3 million, respectively, for the corresponding periods in ~~2013.~~2014.

The ~~increase~~decrease in general and administrative expenses from the three months ended September 30, ~~2013~~2014 to the three months ended September 30, ~~2014~~2015 was ~~$20.4 million.~~$16.4 million, representing a year-on-year decrease rate of 33%. The ~~increase~~decrease mainly consisted of a ~~$16.8~~$8.9 million ~~increase~~decrease in salary and benefits ~~expense, which was mainly attributable to increased headcount and increased average compensation,~~expenses, and a ~~$2.6~~$8.8 million decrease in share-based compensation expense, offset by a $0.7 million increase in professional service fees, and a $0.7 million increase in facility ~~and office~~ expenses.

The ~~increase~~decrease in general and administrative expenses from the nine months ended September 30, ~~2013~~2014 to the nine months ended September 30, ~~2014~~2015 was ~~$60.6 million.~~$10.1 million, representing a year-on-year decrease rate of 7%. The ~~increase~~decrease mainly consisted of a ~~$31.7~~$13.6 million ~~increase~~decrease in salary and benefits ~~expense, which was mainly attributable to increased headcount~~expenses, and ~~increased average compensation,~~ a ~~$16.2~~$9.1 million ~~increase~~decrease in share-based compensation expense, offset by a ~~$4.0~~$7.4 million increase in professional service fees, a $3.6 million increase in facility expenses, and a ~~$3.2~~$2.0 million increase in depreciation ~~expense.~~and amortization expenses.

Goodwill Impairment and Impairment of Intangibles Acquired as Part of A Business Acquisition

In the third quarter of 2015, we recognized $40.3 million of goodwill impairment and impairment of intangibles acquired as part of a business acquisition. This $40.3 million impairment loss consisted primarily of a $29.6 million goodwill impairment loss and a $8.9 million intangible assets impairment loss related to the MoboTap business, as Changyou management determined that MoboTap was unable to provide expected synergies with Changyou’s platform business.

For the three and nine months ended September 30, 2014, there was no goodwill impairment or impairment of intangibles acquired as part of business acquisitions.

Share-based compensation expense was recognized in costs and expenses for the three and nine months ended September 30, 2014 and September 30, ~~2013,~~2015, respectively, as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,					Nine Months Ended September 30,
Share-based compensation expense	2014		2013		2014		2013		2014		2015			2014		2015
Cost of revenues	$	469	$	128	$	1,454	$	296	$	469	$	99		$	1,454	$	957
Product development expenses(1)		6,052		912		15,999		1,670		6,052		(1,331	)		15,999		9,680
Sales and marketing expenses		937		359		3,751		732		937		466			3,751		1,573
General and administrative expenses(1)		7,342		1,799		25,402		2,825		7,342		(1,536	)		25,402		16,255

	$	14,800	$	3,198	$	46,606	$	5,523	$	14,800	$	(2,302	)	$	46,606	$	28,465

Share-based compensation expense recognized for share awards of Sohu (excluding Sohu Video), Sogou, Changyou ~~Sogou~~ and Sohu Video was as follows (in thousands):

Note (1): ~~Includes~~The negative amount resulted from re-measured compensation expense based on the then-current fair value of the awards on September 30, 2015 as well as a true-up of share-based compensation expense for forfeited Sogou and Changyou share-based awards.

Note (2): Sogou share-based awards also include compensation expense for Tencent restricted share units that Tencent had granted to employees who transferred to Sogou with the Soso search-related businesses, and compensation expense equal to the excess of the repurchase price paid to employees over the fair value at the repurchase date of ~~the~~ Sogou Class A Ordinary Shares that ~~we repurchased.~~Sogou repurchased in the second quarter of 2014.

There was no capitalized share-based compensation expense for the three and nine months ended September 30, 2014 and 2015.

As of September 30, ~~2014,~~2015, unrecognized share-based compensation expense for Sohu ~~Changyou~~(excluding Sohu Video), Sogou and ~~Sogou~~Changyou share-based awards was as follows (in thousands):


Unrecognized share-based compensation expense	As of September 30, 2014		As of September 30, 2015
For Sohu share-based awards	$	4,927
For Sohu (excluding Sohu Video) share-based awards			$	1,707
For Sogou share-based awards (3)				5,482
For Changyou share-based awards		2,224		21,940
For Sogou share-based awards (2)		32,795

	$	39,946	$	29,129

Note ~~(2)~~(3): Includes the unrecognized compensation expense for employees who transferred from Tencent with Soso search-related businesses.

For the three and nine months ended September 30, ~~2014,~~2015, we had an operating profit of $42.9 million and $63.5 million, respectively, compared to an operating loss of $40.7 million and $171.1 million, respectively, ~~compared to an operating profit of $52.2 million and $187.6 million, respectively,~~ for the corresponding periods in ~~2013. These changes from~~2014. The increases were mainly due to Changyou’s and Sogou’s having incurred operating losses in the earlier periods and generating operating profits in the later periods. Changyou generated an operating profit ~~to operating loss~~ of ~~$92.9~~$23.6 million and ~~$358.7~~$121.3 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~the corresponding periods in 2013, were mainly due to Changyou. Changyou’s~~an operating loss ~~resulted primarily from higher advertising costs for the promotion~~ of software applications for mobile devices as part of Changyou’s initiative to develop its platform business, increased salary and benefits expense and higher licensing fees associated with new games to be launched later this year.

~~Other income was $0.9~~$2.6 million and ~~$5.3~~$39.6 million, respectively, for the three and nine months ended September 30, ~~2014, compared to other income~~2014. Sogou generated an operating profit of ~~$1.5~~$36.2 million and ~~$5.6 million, respectively, for the corresponding periods in 2013.~~

~~Net interest income was $7.5 million and $24.7~~$74.0 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to ~~$7.6~~an operating loss of $7.5 million and ~~$19.8 million, respectively, for the corresponding periods in 2013.~~

~~Income tax benefit was $1.0 million and $2.6~~$22.2 million, respectively, for the three and nine months ended September 30, ~~2014,~~2014.

We had other income of $70.2 million and $72.9 million, respectively, for the three and nine months ended September 30, 2015, compared to other income ~~tax expense~~ of ~~$18.9~~$0.9 million and ~~$55.2~~$5.3 million, respectively, for the corresponding periods in ~~2013.~~2014. The increase was mainly due to disposal gain of $55.1 million recognized from Changyou’s sale of the 7Road business and certain Changyou subsidiaries on August 17, 2015.

Net interest income was $5.2 million and $17.5 million, respectively, for the three and nine months ended September 30, 2015, compared to $7.5 million and $24.7 million, respectively, for the corresponding periods in 2014.

Income tax expense was $29.5 million and $57.3 million, respectively, for the three and nine months ended September 30, 2015, compared to an income tax benefit of $1.0 million and $2.6 million, respectively, for the corresponding periods in ~~the third quarter of 2014 consisted of a net $1.3 million~~2014.

The change from an income tax benefit ~~recognized by Sohu businesses other than Changyou, offset by $0.3 million of~~to income tax expense ~~recognized by~~was mainly due to Changyou. Changyou incurred income tax expense of $25.8 million and $45.7 million, respectively, for the three and nine months ended September 30, 2015, compared to an income tax expense of $0.3 million and income tax benefit of $4.6 million, respectively, for the three and nine months ended September 30, 2014.

For the three and nine months ended September 30, ~~2014,~~2015, we had net income of $93.2 million and $100.1 million, respectively, compared to net loss of $31.9 million and $138.5 million, respectively, ~~compared to net income of $41.1 million and $152.5 million, respectively,~~ for the corresponding periods in ~~2013.~~2014.

Net ~~loss~~income attributable to noncontrolling interest was ~~$4.8~~$42.1 million and ~~$19.1~~$107.3 million, respectively, for the three and nine months ended September 30, ~~2014,~~2015, compared to net ~~income~~loss attributable to noncontrolling interest of ~~$22.9~~$4.8 million and ~~$70.4~~$19.1 million, respectively, for the corresponding periods in ~~2013.~~2014.

Deemed ~~dividend~~dividends to noncontrolling Sogou Series A Preferred shareholders ~~was nil and $27.7 million for the three and nine months ended September 30, 2014, compared to $82.4~~were $11.9 million for both the three months and the nine months ended September 30, ~~2013.~~

~~For~~2015, compared to nil and $27.7 million, respectively, for the three and the nine months ended September 30, 2014.

In March 2014 ~~the deemed dividend resulted from Sogou’s repurchase of 14.4 million~~and September 2015, Sogou purchased Sogou Series A Preferred Shares from ~~China Web,~~noncontrolling shareholders, which gave rise to deemed dividends of $27.7 million and ~~was~~$11.9 million, respectively. The deemed dividends were deemed to have been contributed by ~~Sohu,~~Sohu.com Inc., as a holder of ordinary shares of Sogou, ~~in an amount equal to~~representing a portion of the ~~proportionate difference~~differences between the ~~price~~prices Sogou paid to China Web and Photon for the Series A Preferred Shares and the carrying ~~amount~~amounts of these ~~14.4 million~~ Series A Preferred Shares in ~~our~~the Group’s consolidated financial statements.

For both the three months and the nine months ended September 30, 2013, the deemed dividend resulted from the special dividend paid by Sogou on September 17, 2013 to holders of Series A Preferred Shares of Sogou other than Sohu, in the amount of $139.7 million, of which Sohu, as a holder of ordinary shares of Sogou, is deemed to have contributed $82.4 million.

As a result of the foregoing, we had net income of $39.1 million attributable to Sohu.com Inc. for the three months ended September 30, 2015, and a net loss of $19.2 million attributable to Sohu.com Inc. for the nine months ended September 30, 2015, compared to a net loss attributable to Sohu.com Inc. of $27.1 million and $147.1 million, respectively, for the ~~three and nine months ended September 30, 2014, compared to net loss attributable to Sohu.com Inc. of $64.2 million and $18.1 million, respectively, for the~~ corresponding periods in ~~2013.~~2014.

Our principal sources of liquidity are cash and cash equivalents, short-term investments, and cash flows generated from our operations. Cash equivalents primarily comprise time deposits and money market funds. Short-term investments comprise investment instruments issued by commercial banks in China, with a variable interest rate indexed to performance of underlying assets and ~~the~~ maturity dates within one year.

As of September 30, ~~2014,~~2015, we had cash and cash equivalents of approximately ~~$840.9 million,~~$1.1 billion, and short-term investments of ~~$209.5~~$260.4 million. Of our cash and cash equivalents, ~~$354.7~~$547.9 million was held in financial institutions inside Mainland China and ~~$486.2~~$526.0 million was held in financial institutions outside of Mainland China. Our VIEs held ~~$28.6~~$114.0 million of our cash and cash equivalents and ~~$812.3~~$959.9 million was held outside of our VIEs. In addition, as of September 30, ~~2014,~~2015, we had, through Changyou, loans from offshore banks in the principal amount of ~~$370.0~~$344.5 million. These loans were secured by RMB deposits in onshore branches of those banks in the total amount as of ~~September 30, 2014 of $434.4~~$371.8 million, which ~~deposits~~ are recognized as restricted time deposits. ~~See Item 3 ‘Quantitative and Qualitative Disclosure About Market Risk - Foreign Currency Exchange Rate Risk’.~~

We believe our current liquidity and capital resources are sufficient to meet anticipated working capital needs (net cash used in operating activities), commitments, capital expenditures, and investment activities over the next twelve months. We may, however, require additional cash resources due to changes in business conditions and other future developments, or changes in general economic conditions.

See “Restrictions and Limitations on Cash Available to Sohu.com Inc.” below and Item 3 “Quantitative and Qualitative Disclosure About Market Risk – Foreign Currency Exchange Rate Risk.”

AsThe following table sets forth our contractual obligations as of September 30, 2014, we also had commitments for bandwidth purchases in the amount of $62.9 million, commitments for video content purchases in the amount of $52.0 million, commitments for purchases of games developed by third-parties in the amount of $43.7 million, commitments for purchases of cinema advertisement slot rights in the amount of $40.1 million, commitments for operating leases in the amount of $39.7 million, and commitments for other content and service purchases in the amount of $22.9 million.2015 (in thousands):

In September 2015, Sogou purchased from ~~China Web,~~Sohu Search (a wholly-owned subsidiary of Sohu) and Photon, pursuant to ~~the~~ Repurchase ~~/Put~~ Option ~~Agreement between Sogou~~Agreements entered into in September 2013, 24.0 million and ~~China Web, 14.4~~6.4 million Series A Preferred Shares of Sogou, for aggregate purchase prices of $78.8 million and $21.0 million, respectively.

In the third quarter of 2015, pursuant to a share repurchase program approved by Changyou’s Board of Directors in July 2013, Changyou repurchased 557,600 ADSs, representing 1,115,200 ordinary shares, at an aggregate ~~purchase price~~cost of ~~$47.3~~approximately $13.2 million.

~~In June 2014, Sogou~~ The share repurchase program expired on July 26, 2015. As of that date, Changyou had repurchased ~~approximately 4.2 million of its Class A Ordinary Shares from noncontrolling shareholders, some of whom are our employees, for~~under the program an aggregate ~~purchase price~~ of ~~$41.6~~1,364,846 Changyou ADSs, representing 2,729,692 ordinary shares, at an aggregate cost of approximately $35.0 million.

On ~~July 16, 2014,~~August 17, 2015, (i) Changyou’s VIE Beijing Gamease Age Digital Technology Co., Ltd. (“Gamease”), a PRC company that is a VIE of Changyou, ~~through~~completed the sale to Shanghai Yong Chong Investment Center LP, a ~~wholly-owned subsidiary, entered into an investment agreement with MoboTap and its subsidiaries and VIEs, and MoboTap’s shareholders to purchase 51%~~PRC limited partnership, of all of the equity interests in ~~MoboTap on~~Shenzhen 7Road Technology Co., Ltd., a ~~fully-diluted basis~~PRC company primarily engaged in the Web game business, and (ii) Changyou.com (HK) Limited, a Hong Kong company that is a wholly-owned subsidiary of Changyou, completed the sale to Supermax Holdings Group Limited, a British Virgin Islands company, of all of the equity capital of Changyou My Sdn. Bhd, a Malaysia company, and Changyou.com (UK) Company Limited, a United Kingdom company, which are engaged in the online game business in Malaysia and the United Kingdom, respectively. The aggregate consideration for ~~approximately $91~~these transactions was $205.0 million in cash. All of the consideration had been paid to Changyou ~~also entered into a subscription agreement with MoboTap to purchase $30 million in principal amount~~as of ~~a zero-coupon convertible bond issued by MoboTap that will be due in five years.~~September 30, 2015.


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2015
Net cash provided by operating activities	$	94,785		$	275,386		$	94,785		$	357,463
Net cash used in investing activities		(418,097	)		(309,203	)		(418,097	)		(108,492	)
Net cash provided by /(used in) financing activities		(118,888	)		426,295
Net cash used in financing activities								(118,888	)		(43,146	)
Effect of exchange rate change on cash and cash equivalents		(4,192	)		14,829			(4,192	)		(8,220	)
Reclassification of cash and cash equivalents to held-for-sale assets								0			(66	)

Net increase /(decrease) in cash and cash equivalents		(446,392	)		407,307			(446,392	)		197,539
Cash and cash equivalents at beginning of period		1,287,288			833,535			1,287,288			876,340

Cash and cash equivalents at end of period	$	840,896		$	1,240,842		$	840,896		$	1,073,879

For the nine months ended September 30, 2015, $357.5 million net cash provided by operating activities was primarily attributable to our net income of $100.1 million, adjusted by (i) the add back of non-cash items consisting of $190.3 million depreciation and amortization expense, $40.3 million goodwill impairment and impairment of intangible assets acquired as part of a business acquisition, $28.5 million share-based compensation expense, $12.0 million impairment of intangible assets, $3.8 million investment loss from an equity investment, and $3.9 million other items, (ii) offset by $55.1 million of disposal gain from the sale of the 7Road business and certain Changyou subsidiaries, $13.0 million disposal gain from sale of investments, and a $1.1 million change in the fair value of short-term investments. The increase in cash from $47.8 million working capital items is also included in operating cash flow.

For the nine months ended September 30, 2014, $94.8 million net cash provided by operating activities was primarily attributable to our net loss of $138.5 million, adjusted by (i) the add back of non-cash items consisting of $158.3 million depreciation and amortization ~~of $158.3~~expense, $29.5 million share-based compensation expense, ~~of $29.5~~and $3.2 million other ~~non-cash~~ items, ~~of $3.2 million, and an increase in cash from working capital items of $46.4 million,~~(ii) offset by a ~~non-cash item of~~$2.3 million change in the fair value of a put option, ~~of $2.3~~$1.4 million in income from investments in debt securities, ~~of $1.4~~and a $0.4 million ~~and~~ change in the fair value of short-term ~~investments of $0.4 million.~~

For the nine months ended September 30, 2013, $275.4 million net cash provided by operating activities was primarily attributable to our net income of $152.5 million, adjusted by non-cash items of depreciation and amortization of $91.4 million, share-based compensation expense of $5.5 million, impairment of intangible assets of $1.5 million, other non-cash items of $0.4 million, and aninvestments. The increase in cash from $46.4 million working capital items ~~of $30.5 million, offset by a non-cash item of investment income from investments~~is also included in ~~debt securities of $4.1 million and change in fair value of short-term investments of $2.3 million.~~operating cash flow.

For the nine months ended September 30, 2015, $108.5 million net cash used in investing activities was primarily attributable to (i) $190.7 million used in the purchase of fixed assets and intangible assets, $76.6 million used in the purchase of short-term investments, $37.8 million used in the purchase of long-term investments (mainly composed by Sohu’s investment of $16.3 million in SoEasy Internet Finance Group Limited in April 2015 and Sogou’s investment of $12.0 million in Zhihu Technology Limited in September 2015), $20.0 million in loans to a third party, and $13.1 million of funds deposited by Changyou, (ii) offset by $183.1 million in consideration received from Changyou’s sale of the 7Road business (net of cash in 7Road upon its disposition) and certain Changyou subsidiaries, $11.9 million in consideration received from the sale of an equity investment, the withdrawal of $30.8 million in restricted time deposits originally used as collateral for Changyou loans from offshore banks, and $3.9 million in proceeds from other investing activities.

For the nine months ended September 30, 2014, $418.1 million net cash used in investing activities was primarily attributable to ~~purchase of~~(i) $206.7 million used in short-term investments, ~~of $206.7~~$172.1 million used in the purchase of fixed assets and intangible assets, ~~of $172.1~~$86.5 million used as consideration for the acquisition of MoboTap (net of cash acquired) ~~of $86.5~~, $24.6 million ~~purchase of~~used for long-term investments, ~~of $24.6~~and $13.6 million ~~and cash paid related to~~of restricted time deposits ~~of $13.6 million~~made as collateral for Changyou loans from offshore banks, offset by (ii) $82.0 million in proceeds ~~received from~~of debt securities at maturity, ~~of $82.0~~and $3.4 million ~~and~~in proceeds from other investing ~~activities of $3.4 million.~~activities.

For the nine months ended September 30, ~~2013, $309.2 million~~2015, $43.1 net cash used in ~~investing~~financing activities was primarily attributable to ~~$145.9~~(i) $25.5 million used to acquire fixed assets and intangible assets (including a $3.2 million payment for an office building acquired by Sohu and a $35.0 million payment for an office building acquired by Changyou), $112.7 million in ~~restricted time deposits used as collateral for Changyou~~Changyou’s repayment of loans from offshore banks, ~~$76.0~~$21.0 million used in ~~the purchase~~Sogou’s repurchase of ~~the noncontrolling interest~~Series A Preferred Shares of Sogou from Photon, and $14.5 million used in ~~7Road, $9.0~~Changyou’s repurchase of its ADSs, offset by (ii) $12.9 million in ~~restricted time deposits used as collateral for credit facilities provided by banks to certain Sogou employees~~loan proceeds from Changyou, $2.1 million received from the exercise of share-based awards, and ~~$2.6~~$2.9 million ~~used for investments related to~~in proceeds from other ~~investing activities, offset by matured short-term investments of $32.9 million and investment income from investments in debt securities of $4.1 million.~~

~~Net Cash Provided by /(Used in) Financing Activities~~financing activities.

For the nine months ended September 30, 2014, $118.9 million net cash used in financing activities was primarily attributable to (i) Changyou’s repayment of $410.2 million of loans to offshore banks, $47.3 million used in Sogou’s repurchase of Series A Preferred Shares of Sogou from China Web, $24.6 million used in Sogou’s repurchase of its Class A Ordinary Shares from ~~its~~ noncontrolling shareholders, $2.8 million used in payment of contingent consideration by Changyou, and $4.9 million used in other investing activities, (ii) offset by proceeds of loans from offshore banks of $370 million and $0.9 million received from the exercise of share-based awards.

For the nine months ended September 30, 2013, $426.3 million net cash provided by financing activities was primarily attributable to $475.5 million in cash received from Tencent in connection with Tencent’s investment in and business collaboration with Sogou, $111.5 million proceeds of Changyou loans from offshore banks, $8.0 million received from the exercise of share-based awards, offset by $139.7 million used for a dividend distributed by Sogou to holders of Sogou Series A Preferred Shares other than Sohu Search, $19.7 million used for contingent consideration paid by Changyou to 7Road’s noncontrolling shareholders, $9.0 million used for the repurchase of ADSs of Changyou and $0.3 million used for other cash payments related to financing activities.

To fund any cash requirements it may have, Sohu.com Inc. may need to rely on dividends and other distributions on equity paid by our wholly-owned subsidiary Sohu.com Limited or our majority-owned subsidiary Changyou.com Limited. Since substantially all of our operations are conducted through our indirect wholly-owned and majority-owned China-based subsidiaries and VIEs, Sohu.com Limited and Changyou.com Limited may need to rely on dividends, loans or advances made by our PRC subsidiaries in order to make dividends and other distributions to us.

The ability of Sohu.com Limited and Changyou.com Limited to receive dividends and distributions from our China-based subsidiaries and VIEs, and the amount of cash available for distribution to, and use by, Sohu.com Inc., are subject to certain restrictions and limitations related to PRC law, our VIE structure and U.S. corporate income tax. We do not expect any of such restrictions or taxes to have a material impact on our ability to meet our cash obligations.

PRC Profit Appropriation, Withholding Tax on Dividends and Regulation of Foreign Currency Exchange

Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Our China-based subsidiaries, which are wholly foreign-owned enterprises (“~~WFOEs”)~~WFOE”s) under PRC law, are also required to set aside each year to their general reserves at least 10% of their after-tax profit based on PRC accounting standards, until the cumulative amount reaches 50% of their paid-in capital. These reserves may not be distributed as cash dividends, or as loans or advances. Our WFOEs may also allocate a portion of their after-tax profits, at the discretion of their Boards of Directors, to their staff welfare and bonus funds. Any amounts so allocated may not be distributed to Sohu.com Limited or Changyou.com Limited and, accordingly, would not be available for distribution to Sohu.com Inc.

The ~~PRC~~ CIT Law ~~generally~~ imposes a 10% withholding income tax onfor dividends distributed by ~~WFOEs~~foreign-invested enterprises in the PRC to their immediate holding companies outside ~~mainland China, provided that~~Mainland China. A lower withholding tax rate will be applied if there is a ~~lower rate may apply under~~ tax ~~treaties~~treaty arrangement between ~~mainland~~Mainland China and ~~other jurisdictions. For example, withholding tax for dividends to a~~the jurisdiction of the foreign holding company. A holding company in Hong Kong, ~~may,~~for example, will be subject to a 5% withholding tax rate under ~~certain circumstances, be 5% rather than 10%. As~~an arrangement between the PRC and the Hong Kong Special Administrative Region on the “Avoidance of ~~September 30, 2014, we had accrued deferred tax liabilities~~Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital” if such holding company is considered a non-PRC resident enterprise and holds at least 25% of the equity interests in the ~~amount~~PRC foreign invested enterprise distributing the dividends, subject to approval of ~~$21.5 million for withholding taxes associated with dividends paid by Changyou’s mainland China-based WFOEs to Changyou’s~~the PRC local tax authority. However, if the Hong Kong ~~subsidiary.~~holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to a withholding tax rate of 10%.

Under regulations of the PRC State Administration of Foreign Exchange (“SAFE”), the RMB is not convertible into foreign currencies for capital account items, such as loans, repatriation of investments and investments outside of ~~mainland~~Mainland China, unless prior approval of the SAFE is obtained and prior registration with the SAFE is made.

While generally ~~our~~Sohu.com Inc.’s VIEs generate revenues and cash, most of ~~our~~those VIEs, other than those which are VIEs of Changyou.com Limited, incurred deficits as a result of significant costs involved in their operations for the three and nine months ended September 30, ~~2014.~~2015.

Substantially all of ~~Changyou’s~~Changyou.com Limited’s operations are conducted through its VIEs, which generate most of Changyou’s online game revenues. Although Changyou’s subsidiaries received or absorbed a majority of the VIEs’ profits or losses pursuant to contractual agreements between the VIEs and Changyou’s PRC subsidiaries providing for payments to the subsidiaries in return for services provided to the VIEs by the PRC subsidiaries, significant cash balances remained in Changyou’s VIEs as of September 30, ~~2014.~~2015. As Changyou’s VIEs are not owned by Changyou’s PRC subsidiaries, the VIEs are not able to make dividend payments to the subsidiaries. Therefore, in order for Sohu.com Inc. or our subsidiaries outside of ~~mainland~~Mainland China to receive any dividends, loans or advances from Changyou’s PRC subsidiaries, we will need to rely on these contractual payments made by Changyou’s VIEs to Changyou’s PRC subsidiaries. Depending on the nature of services provided by Changyou’s PRC subsidiaries to their corresponding VIEs, certain of these payments will subject to PRC taxes, including Business Tax and VAT, which will effectively reduce the amount that the PRC subsidiary receives from its corresponding VIE. In addition, the PRC government could impose restrictions on such payments or change the tax rates applicable to such payments.

Sohu.com Inc. is a Delaware corporation and is subject to corporate income tax in the United States. Although in the past Sohu.com Inc. has been able to use NOLs to offset a portion of its U.S. taxable income, at the end of its 2012 taxable year it had no further NOLs available for offsetting any U.S. taxable income. The majority of our subsidiaries and VIEs are based in China and are subject to income taxes in the PRC. These China-based subsidiaries and VIEs conduct substantially all of our operations and, as a result, we generate most of our consolidated income or losses in China. The amount of cash derived from our operations that can be used to buy back our shares of common stock in the market, paid as dividends to Sohu.com Inc.’s shareholders or used for other corporate purposes of Sohu.com Inc. may be limited by the imposition of U.S. corporate income tax on Sohu.com Inc.’s income.

In accordance with U.S. GAAP, we do not provide for U.S. federal income taxes or tax benefits on the undistributed earnings or losses of our non-U.S. subsidiaries or consolidated VIEs because, for the foreseeable future, we do not have the intention to repatriate those undistributed earnings or losses to the U.S. However, certain activities conducted in the PRC may give rise to U.S. corporate income tax, even if there are no distributions to Sohu.com Inc. U.S. corporate income taxes would be imposed on Sohu.com Inc. when its subsidiaries that are controlled foreign corporations (“CFCs”) generate income that is subject to Subpart F of the U.S. Internal Revenue Code (“Subpart F”). Passive income, such as rents, royalties, interest and dividends, is among the types of income subject to taxation under Subpart F. Any income taxable under Subpart F is taxable in the U.S. at federal corporate income tax rates of ~~34% or~~up to 35%. Subpart F income also includes certain income from intercompany transactions between Sohu.com Inc.’s non-U.S. subsidiaries and VIEs and Changyou’s non-U.S. subsidiaries and VIEs, or where Sohu.com Inc.’s non-U.S. subsidiaries or VIEs make an “investment in U.S. property,” such as holding the stock in, or making a loan to, a U.S. corporation. Under a temporary provision of the U.S. tax code commonly referred to as the CFC look-through rule, Sohu.com Inc. has not had to treat dividends received by its CFC subsidiaries as Subpart F income includible in Sohu.com Inc.’s taxable income in the U.S. The CFC look-through rule, which is currently scheduled to expire for taxable years beginning after December 31, ~~2013,~~2014, has been extended several times by the U.S. Congress. Unless further extended, the CFC look-through rule will be available for Sohu.com Inc.’s CFC subsidiaries and their VIEs only through their taxable years ending November 30, ~~2014.~~2015.

The Sohu Group intends to retain all available funds and any future earnings for use in the operation and expansion of its own business, and does not anticipate paying any cash dividends on Sohu.com Inc.’s common stock or causing Changyou to pay any dividends on Changyou.com Limited’s ordinary shares, including ordinary shares represented by Changyou.com Limited’s ADSs, or causing Sogou to pay any dividends on Sogou.com Inc.’s ordinary shares and preferred shares, for the foreseeable future. Future cash dividends distributed by Sohu.com Inc., Changyou.com Limited, or Sogou.com Inc., if any, will be declared at the discretion of their respective Boards of Directors and will depend upon their future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and such other factors as their respective Boards of Directors may deem relevant.

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties, except for a $9$9.0 million restricted time deposit acting as collateral for credit facilities provided by a bank to certain Sogou employees. We are not subject to any additional potential payments other than the restricted time deposit amount, and believe that the fair value of our guarantee liability is immaterial. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or product development services with us.

~~The~~In February 2015, the FASB issued~~Reporting Discontinued Operations~~Consolidation (Topic 810) – Amendments to the Consolidation Analysis. The amendments in Topic 810 respond to stakeholders’ concerns about the current accounting for consolidation of variable interest entities, by changing aspects of the analysis that a reporting entity must perform to determine whether it should consolidate such entities. Under the amendments, all reporting entities are within the scope of Subtopic810-10, Consolidation – Overall, including limited partnerships and ~~Disclosures of Disposals of Components of an Entity, which changes the threshold for reporting discontinued operations and adds new disclosures.~~similar legal entities, unless a scope exception applies. The new guidance defines a discontinued operation as a disposal that “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The standard is requiredamendments are intended to be ~~adopted by public business entities in annual periods~~an improvement to current U.S. GAAP, as they simplify the codification of FASB Statement No. 167,Amendments to FASB Interpretation No. 46(R), with changes including reducing the number of consolidation models through the elimination of the indefinite deferral of Statement 167 and placing more emphasis on risk of loss when determining a controlling financial interest. The amendments are effective for publicly-traded companies for fiscal years beginning ~~on or~~ after December 15, ~~2014,~~2015, and for interim periods within those ~~annual periods. Entities may “early adopt” the guidance for new disposals. We are currently evaluating the impact on our consolidated financial statements of adopting this guidance.~~

On May 28, 2014, the FASB and IASB issued their long-awaited converged standard on the recognition of revenue from contracts with customers. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. The FASB is amending the FASB~~Accounting Standards Codification~~ ~~and creating a new Topic 606,~~~~Revenue from Contracts with Customers~~~~, to supersede the revenue recognition requirements in Topic 605,~~~~Revenue Recognition~~~~, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the amendments supersede some cost guidance included in Subtopic 605-35,~~~~Revenue Recognition—Construction-Type and Production-Type Contracts~~. For a public entity, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact on its consolidated financial statements of adopting this guidance.

~~In June 2014, under~~~~ASC 718, Compensation—Stock Compensation~~~~, the FASB issued~~~~Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period~~. These amendments apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015.fiscal years. Earlier adoption is permitted. We are currently evaluating the impact on our consolidated financial statements of adopting this guidance.

In September 2015, the FASB issuedASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, an acquirer must recognize measurement-period adjustments during the period in which it determines the amounts, including the effect on earnings of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. This update is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. The implementation of this update is not expected to have any material impact on our condensed consolidated financial statements.

While our reporting currency is the U.S. dollar, to date the majority of our revenues and costs are denominated in RMB and a significant portion of our assets and liabilities are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues and assets as expressed in our U.S. dollar financial statements will decline. We do not hold any derivative or other financial instruments that expose us to substantial market risk.

The RMB is currently freely convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment. In addition, commencing on July 21, 2005, China reformed its exchange rate regime by changing to a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Under the managed floating exchange rate regime, the RMB is no longer pegged to the U.S. dollar. The exchange rate of the RMB against the U.S. dollar was adjusted to RMB8.11 per U.S. dollar as of July 21, 2005, representing an appreciation of about 2%. The People’s Bank of China will announce the closing prices of foreign currencies such as the U.S. dollar traded against the RMB in the inter-bank foreign exchange market after the closing of the market on each business day, and will make such prices the central parity for trading against the RMB on the following business day. On May 19, 2007, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices against the U.S. dollar in the inter-bank spot foreign exchange market from 0.3% to 0.5%. While the international reactions to the RMB revaluation and widening of the RMB’s daily trading band have generally been positive, with the increased floating range of the RMB’s value against foreign currencies, the RMB may appreciate or depreciate significantly in value against the U.S. dollar or other foreign currencies in the long term, depending on the fluctuation of the basket of currencies against which it is currently valued. On June 19, 2010, the People’s Bank of China announced that it has decided to proceed further with the reform of the RMB exchange rate regime to enhance the flexibility of the RMB exchange rate and that emphasis would be placed on reflecting market supply and demand with reference to a basket of currencies. While so indicating its intention to make the RMB’s exchange rate more flexible, the People’s Bank of China ruled out any sharp fluctuations in the currency or a one-off adjustment. On April 16, 2012, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices against the U.S. dollar in the inter-bank spot foreign exchange market from 0.5% to 1%. On March 17, 2014, the People’s Bank of China announced a policy to further expand the maximum daily floating range of RMB trading prices against the U.S. dollar in the inter-bank spot foreign exchange market to 2%. In the long term, the RMB may appreciate or depreciate more significantly in value against the U.S. dollar or other foreign currencies, depending on the market supply and demand with reference to a basket of currencies.

To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure. Accordingly, we may incur economic losses in the future due to foreign exchange rate fluctuations, which could have a negative impact on our financial condition and results of operations.

The following table sets forth a summary of our foreign currency sensitive financial instruments as of September 30, 2014, which consisted of cash and cash equivalents, restricted time deposits, short-term investments, accounts receivable, prepaid and other current assets, available-for-sale securities, current liabilities, long-term accounts payable and long-term bank loans.2015. These financial instruments are recorded at their fair value.


	Denominated in (in thousands)										Denominated in (in thousands)
	US$		RMB		HK$		Others		Total		US$		RMB		HK$		Others		Total
Cash and cash equivalents		458,531		375,891		1,448		5,026		840,896	$	310,401	$	746,957	$	14,479	$	2,042	$	1,073,879
Restricted time deposits		9,305		434,381		0		0		443,686		9,303		371,784		0		0		381,087
Short-term investments		0		209,508		0		0		209,508		0		260,431		0		0		260,431
Accounts receivable		1,866		177,831		6		291		179,994		5,974		278,410		912		0		285,296
Prepaid and other current assets		2,940		117,899		1,279		942		123,060		15,009		145,962		19		774		161,764
Held-for-sale assets												0		10,080		0		0		10,080
Available-for-sale securities		15,550		0		0		0		15,550		17,933		0		0		0		17,933
Current liabilities		12,115		734,641		0		0		746,756
Short-term bank loans												25,500		0		0		0		25,500
Held-for-sale liabilities												0		1,251		0		0		1,251
Other current liabilities												32,066		870,050		0		0		902,116
Long-term accounts payable		0		5,211		0		0		5,211		0		4,257		0		0		4,257
Long-term bank loans		370,000		0		0		0		370,000	$	319,000	$	0	$	0	$	0	$	319,000

The basic objectives of our investment program are to protect the invested funds from excessive risk and to provide for liquidity that is sufficient to meet operating and investment cash requirements. Under the investment policy, our excess cash is invested in high-quality securities which are limited as to length of time to maturity and the amount of credit exposure.

Our exposure to interest rate risk primarily relates to the interest income generated from excess cash invested in demand deposits, and interest expense generated from loans to Changyou from offshore banks. We have not used derivative financial instruments in our investment portfolio in order to reduce this risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.

According to the National Bureau of Statistics of China, the consumer price index grew 1.4% in the nine months ended September 30, 2015, compared to an increase of 2.1% in the nine months ended September 30, ~~2014,~~2014. While the increase in 2015 represented a decline in the rate of inflation compared to ~~the growth rate for~~ the corresponding period in ~~2013. While this rate of inflation declined,~~2014, there may be ~~further increased~~increases in the rate of inflation in the future, which could have a material adverse effect on our business.

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report (the “Evaluation Date”), have concluded that as of the Evaluation Date our disclosure controls and procedures were effective and designed to ensure that all material information relating to ~~Sohu~~Sohu.com Inc. required to be included in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

During the period covered by this quarterly report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material developments in the legal proceedings reported in our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014 filed with the SEC on ~~February 28, 2014.~~March 2, 2015.

A notice issued on September 2014 by the State Administration of Press, Publication, Radio, Film and Television (“SAPPRFT”) could have an adverse effect on the results of operations and prospects of our online video business.

On September 2, 2014, the SAPPRFT issued a Notice on Further Strengthening the Administration of Online Foreign Audiovisual Content (the “September 2014 SAPPRFT Notice”), which requires that operators of audiovisual Websites obtain from the SAPPRFT a Film Public Screening Permit, TV Drama Distribution Permit, or TV Animation Distribution Permit for all foreign films and TV dramas before they are transmitted via the Internet in China. The September 2014 SAPPRFT Notice further stipulates that before any foreign films or TV dramas for transmission exclusively via the Internet are purchased after the promulgation of the September 2014 SAPPRFT Notice, operators of audiovisual Websites must declare their annual purchasing plans with the SAPPRFT before the end of the year preceding the year of the intended broadcast and obtain the SAPPRFT’s approval. The September 2014 SAPPRFT Notice also states that the number of foreign films and TV dramas to be purchased by an operator and transmitted via its Website in a single year may not exceed 30% of the total amount of the Chinese films and TV dramas purchased and transmitted by the same Website in the previous year.

We rely heavily on foreign films and TV dramas to attract users and advertisers to our online video Website and, accordingly, the promulgation of the September 2014 SAPPRFT Notice could have an adverse impact on our online video business. We believe that the September 2014 SAPPRFT Notice requirement of a minimum ratio of domestic video content to foreign-sourced content will have the effect of requiring that we purchase more domestic video content in order to maintain our existing position and reputation as one of the leading providers of online foreign films and TV dramas in China. As competing operators in China will also be required to maintain such a minimum ratio, the September 2014 SAPPRFT Notice is also likely to have the effect of driving up the price for Chinese films and TV dramas, which would cause our expenses for video content to increase, as we will be required to both increase the amount of domestic content that we purchase and pay higher prices for the domestic content that we purchase. If, on the other hand, we respond to the minimum ratio requirement of the September 2014 SAPPRFT Notice by reducing our purchases of foreign films and TV dramas, our attraction to users and traffic on or online video Website could be reduced, resulting in a decrease in our advertising revenues.

~~With the exception of the foregoing, there~~There are no material changes or updates to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014 filed with the SEC on ~~February 28, 2014.~~March 2, 2015.

On July 17, 2000, ~~Sohu~~Sohu.com Inc. completed an underwritten initial public offering of its common stock pursuant to a Registration Statement on Form S-1 (SEC file No. 333-96137), which became effective on July 10, 2000. Public trading of the common stock offered in the initial public offering commenced on July 12, 2000. ~~Sohu~~Sohu.com Inc. sold an aggregate of 4,600,000 shares of common stock in the offering at a price to the public of $13 per share, resulting in gross proceeds of $59.8 million. ~~Sohu’s~~Sohu.com Inc.’s net proceeds, after deduction of the underwriting discount of $4.2 million and other offering expenses of $3.2 million, were approximately $52.4 million. All shares sold in the offering were sold by ~~Sohu.~~Sohu.com Inc.

During the nine months ended September 30, ~~2014, Sohu~~2015, Sohu.com Inc. did not use any proceeds from the offering. The remaining net proceeds from the offering have been invested in cash and cash equivalents. The use of the proceeds from the offering does not represent a material change in the use of proceeds described in the prospectus contained in the Registration Statement on Form S-1 described above.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Class		Outstanding at September 30, ~~2014~~2015
Common stock, $.001 par value		~~38,486,906~~38,637,052


		PAGE

PART I	FINANCIAL INFORMATION	~~FINANCIAL INFORMATION~~		3
Item 1	Condensed Consolidated Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets as of December 31, 2014 and September 30, ~~2014 and December 31, 2013~~2015		3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and ~~2013~~2015		5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and ~~2013~~2015		7
	Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2014 and ~~2013~~2015		9
	Notes to Condensed Consolidated Financial Statements		11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		5047
Item 3	Quantitative and Qualitative Disclosures about Market Risk		7681
Item 4	Controls and Procedures		7782

PART II	OTHER INFORMATION		78
Item 1	Legal Proceedings		7882
Item 1A	Risk Factors		7883
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		7883
Item 3	Defaults Upon Senior Securities		7883
Item 4	Mine Safety Disclosures		7983
Item 5	Other Information		7983
Item 6	Exhibits		7983
	Signatures		8084
	Exhibit Index		8185


				Sohu.com Inc. Shareholders’ Equity
	Total			Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Noncontrolling Interest
Beginning balance	$	1,315,217		$	44	$	378,311		$	(143,858	)	$	79,542	$	770,184		$	230,994
Issuance of common stock		964			0		964			0			0		0			0
Repurchase of Changyou ADSs		(9,048	)		0		(6,116	)		0			0		0			(2,932	)
Share-based compensation expense		5,464			0		(836	)		0			0		0			6,300
Purchase of noncontrolling interest in 7Road		2,257			0		1,517			0			0		0			740
Consideration received for the issuance of Sogou shares to Tencent, net of transaction expenses		470,662			0		146,798			0			0		0			323,864
Direct tax impact of Sogou-Tencent Transactions		(21,420	)		0		(21,420	)		0			0		0			0
Special dividend paid to noncontrolling Sogou Series A Preferred shareholders		(139,700	)		0		86,335			0			0		(82,423	)		(143,612	)
Repurchase /put options for Sogou Series A Preferred Shares		(6,048	)		0		(3,744	)		0			0		(2,304	)		0
Settlement of share-based awards in subsidiary		1,793			0		13,003			0			0		0			(11,210	)
Net income /(loss) attributable to Sohu.com Inc. and noncontrolling interest shareholders		134,717			0		0			0			0		64,291			70,426
Accumulated other comprehensive income /(loss)		33,481			0		0			0			26,226		0			7,255

Ending balance	$	1,788,339		$	44	$	594,812		$	(143,858	)	$	105,768	$	749,748		$	481,825


	Nine Months Ended September 30, 2014
	Sohu			Sogou			Changyou			Eliminations			Consolidated
Revenues (1)	$	400,695		$	267,081		$	539,353		$	(11,248	)	$	1,195,881
Segment cost of revenues		(238,617	)		(118,152	)		(132,941	)		1,120			(488,590	)
Segment gross profit		162,078			148,929			406,412			(10,128	)		707,291
SBC (2) in cost of revenues		(562	)		(706	)		(186	)		0			(1,454	)

Gross profit		161,516			148,223			406,226			(10,128	)		705,837

Operating expenses:
Product development		(68,099	)		(75,582	)		(171,362	)		3,131			(311,912	)
Sales and marketing		(165,408	)		(49,919	)		(202,890	)		11,266			(406,951	)
General and administrative		(33,549	)		(8,395	)		(70,452	)		(533	)		(112,929	)
SBC (2) in operating expenses		(8,437	)		(36,523	)		(1,093	)		902			(45,151	)

Total operating expenses		(275,493	)		(170,419	)		(445,797	)		14,766			(876,943	)

Operating loss		(113,977	)		(22,196	)		(39,571	)		4,638			(171,106	)

Other income		5,287			2,455			1,334			(3,736	)		5,340


Comprehensive income /(loss)		(32,903	)		49,338			(152,557	)		185,978

Less: Comprehensive income attributable to the mezzanine-classified noncontrolling interest shareholders		0			0			0			17,780
Comprehensive income /(loss) attributable to noncontrolling interest shareholders		(4,607	)		24,749			(22,718	)		77,681
Deemed dividend to noncontrolling Sogou Series A Preferred shareholders		0			82,423			27,747			82,423

Comprehensive income /(loss) attributable to Sohu.com Inc.	$	(28,296	)	$	(57,834	)	$	(157,586	)	$	8,094

Basic net loss per share attributable to Sohu.com Inc.	$	(0.71	)	$	(1.68	)	$	(3.82	)	$	(0.47	)

Shares used in computing basic net loss per share attributable to Sohu.com Inc.		38,485			38,288			38,457			38,239

Diluted net loss per share attributable to Sohu.com Inc.	$	(0.74	)	$	(1.69	)	$	(3.91	)	$	(0.53	)

Shares used in computing diluted net loss per share attributable to Sohu.com Inc.		38,485			38,522			38,457			38,481


Less: Comprehensive income /(loss) attributable to noncontrolling interest shareholders		(4,607	)		23,215			(22,718	)		89,065
Deemed dividend to noncontrolling Sogou Series A Preferred shareholders		0			11,911			27,747			11,911

Comprehensive loss attributable to Sohu.com Inc.	$	(28,296	)	$	(9,551	)	$	(157,586	)	$	(55,732	)

Basic net income /(loss) per share attributable to Sohu.com Inc.	$	(0.71	)	$	1.01		$	(3.82	)	$	(0.50	)

Shares used in computing basic net income /(loss) per share attributable to Sohu.com Inc.		38,485			38,633			38,457			38,582

Diluted net income /(loss) per share attributable to Sohu.com Inc.	$	(0.74	)	$	1.00		$	(3.91	)	$	(0.52	)

Shares used in computing diluted net income /(loss) per share attributable to Sohu.com Inc.		38,485			38,665			38,457			38,582


Net interest income		6,515			1,714			16,475			0		24,704
Exchange difference		(103	)		(159	)		289			0		27

Loss before income tax benefit/ (expense)		(102,278	)		(18,186	)		(21,473	)		902		(141,035	)

Income tax benefit/(expense)		(2,022	)		0			4,584			0		2,562

Net loss	$	(104,300	)	$	(18,186	)	$	(16,889	)	$	902	$	(138,473	)


	As of December 31, 2013
	Brand Advertising and Others		Sogou		Changyou		Eliminations			Consolidated
Cash and cash equivalents	$	498,058	$	240,746	$	548,484	$	0		$	1,287,288
Accounts receivable, net		102,823		15,705		35,996		(182	)		154,342
Fixed assets, net		257,307		60,461		246,674		0			564,442
Total assets (1)	$	1,221,003	$	350,256	$	1,585,212	$	(157,756	)	$	2,998,715


			As of September 30, 2015
	Sohu		Sogou		Changyou		Eliminations			Consolidated
Cash and cash equivalents	$	424,276	$	219,094	$	430,509	$	0		$	1,073,879
Accounts receivable, net		192,264		28,386		64,735		(89	)		285,296
Fixed assets, net		232,758		69,867		221,242		0			523,867
Total assets (1)	$	1,376,726	$	350,691	$	1,735,738	$	(444,021	)	$	3,019,134


			Fair value measurements at reporting date using
Items	As of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	583,160	$	0	$	583,160	$	0
Restricted time deposits		426,748		0		426,748		0
Short-term investments		191,577		0		191,577		0
Available-for-sale equity securities		11,273		11,273		0		0

Total	$	1,212,758	$	11,273	$	1,201,485	$	0


			Fair value measurements at reporting date using
Items	As of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	359,289	$	0	$	359,289	$	0
Restricted time deposits		434,048		0		434,048		0
Short-term investments		2,827		0		2,827		0
Investments in debt securities		82,009		0		0		82,009

Total	$	878,173	$	0	$	796,164	$	82,009

Put option recognized as other short-term liability	$	3,888	$	0	$	0	$	3,888


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Investments in Debt Securities			Put Option
Beginning balance at December 31, 2013	$	82,009		$	3,888
Transactions:
Initial recognition		0			0
Change in fair value		0			(2,304	)
Currency translation adjustment		(736	)		0
Financial instruments matured /exercised		(81,273	)		(1,584	)

Ending balance at September 30, 2014	$	0		$	0


	Brand Advertising and others			Sogou			Changyou			Total
Balance as of December 31, 2013
Goodwill	$	58,042		$	6,290		$	185,452		$	249,784
Accumulated impairment losses		(35,788	)		0			(5,201	)		(40,989	)

	$	22,254		$	6,290		$	180,251		$	208,795
Transactions in 2014
Acquisition of MoboTap		0			0			113,040			113,040
Measurement period adjustment of goodwill for the acquisition of Soso search-related businesses from Tencent		0			42			0			42
Foreign currency translation adjustment		(2	)		(58	)		(1,231	)		(1,291	)

Balance as of September 30, 2014	$	22,252		$	6,274		$	292,060		$	320,586

Balance as of September 30, 2014
Goodwill	$	58,040		$	6,274		$	297,261		$	361,575
Accumulated impairment losses		(35,788	)		0			(5,201	)		(40,989	)

	$	22,252		$	6,274		$	292,060		$	320,586


As of September 30, 2015	Contractual Obligation
Repayment of principal of bank loans	$	344,500
Purchase of content and services – video		149,737
Purchase of bandwidth		64,719
Purchase of cinema advertisement slot rights		54,849
Operating lease obligations		31,241
Expenditures for operating rights for licensed games with technological feasibility – PC games		24,984
Purchase of content and services – others		14,192
Interest payment commitment		11,819
Fees for operating rights for licensed games in development – mobile games		3,086
Expenditures for operating rights for licensed games with technological feasibility – mobile games		2,911
Fees for operating rights for licensed games in development – PC games		1,520
Others		8,078

Total	$	711,636


Cash flows of Sohu’s VIEs	Nine months ended September 30,
	2014			2015
Net cash provided by operating activities	$	15,751		$	17,450
Net cash used in investing activities		(2,795	)		(11,182	)
Net cash provided by financing activities	$	0		$	2,286


Cash flows of Changyou’s VIEs	Nine months ended September 30,
	2014			2015
Net cash provided by /(used in) operating activities	$	16,970		$	(34,119	)
Net cash provided by /(used in) investing activities		(112,013	)		17,389
Net cash used in financing activities	$	(793	)	$	0


Options	Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (1) (in thousands)
Outstanding at January 1, 2014		147		$	18.87		1.39	$	7,958
Exercised		(28	)		18.31
Forfeited or expired		(2	)		16.81

Outstanding at September 30, 2014		117			19.04		0.68		3,643

Vested at September 30, 2014		117			19.04		0.68		3,643

Exercisable at September 30, 2014		117			19.04		0.68		3,643


Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2014		218		$	14.46
Granted		160			13.80
Vested		(29	)		16.32
Forfeited		(5	)		17.19

Unvested at September 30, 2014		344			13.96

Expected to vest thereafter		331			13.97


Granted to Employees	~~2014~~	2015
Average risk-free interest rate		~~2.62%-3.05%~~	2.48%~2.77%
Exercise multiple		2~3
Expected forfeiture rate (post-vesting)		0%1%~12%
Weighted average expected option life		~~7.37~~	8
Volatility rate		~~52%-54%~~	47%~51%
Dividend yield		0%
Fair value		~~5.85~~	3.58


Granted to Employees	~~2014~~2015
Average risk-free interest rate		~~2.62%-2.93%~~3.01	%
Exercise multiple		2~3
Expected forfeiture rate (post-vesting)		~~0%-8%~~0	%
Weighted average expected option life		~~6.79~~10
Volatility rate		~~52%-54%~~53	%
Dividend yield		0%0	%
Fair value		~~5.23~~7.03


Assumptions Adopted	~~2014~~2015
Average risk-free interest rate		~~2.81%~~2.24	%
Exercise multiple		2.8
Expected forfeiture rate (post-vesting)		~~10%~~10	%
Weighted average expected option life		~~7.3~~6.3
Volatility rate		~~61%~~58	%
Dividend yield		0%0
Fair value		~~0.82~~0.85


	As of July 31, 2014
Cash consideration	$	90,830

Repurchase option		793
Identifiable intangible assets acquired		27,000
Goodwill		113,040
Other assets		6,714
Put option		(298	)
Liabilities assumed		(2,995	)
Noncontrolling interest		(53,424	)

Total	$	90,830


	As of
	September 30, 2014 (in thousands)		December 31, 2013 (in thousands)
Changyou	$	351,703	$	307,898
Sogou		120,743		199,059
Others		0		3,058

Total	$	472,446	$	510,015


	As of
	December 31, 2014 (in thousands)		September 30, 2015 (in thousands)
Sogou	$	145,538	$	96,561
Changyou		341,707		353,435

Total	$	487,245	$	449,996


Fixed Assets		Estimated Useful Lives (years)
Office buildings		36-47
Leasehold improvements		Lesser of term of the lease or the estimated useful lives of the assets
Building improvements		10
Vehicles		4-10
Office furniture		5
Computer equipment and hardware		2-5


Intangible Assets		Estimated Useful Lives (years)
Domain names and trademarks		4-30
Developed technologies		3-10
Computer software		1-5
Purchased video content		4 months to 2 years, or over the applicable licensing period
Cinema advertising slot rights		over the contract terms
Operating rights for licensed games		over the contract terms


Average Monthly Active Accounts (1)	Three Months Ended March 31		Three Months Ended June 30		Three Months Ended September 30
(in millions)	PC games	PC games and mobile games	PC games	PC games and mobile games	PC games	PC games and mobile games
2014	6.5	9.1	6.9	8.2	10.7	12.1
2015	4.9	9.3	4.4	10.1	4.1	6.5

Quarterly Aggregate Active Paying Accounts (2)	Three Months Ended March 31		Three Months Ended June 30		Three Months Ended September 30
(in millions)	PC games	PC games and mobile games	PC games	PC games and mobile games	PC games	PC games and mobile games
2014	1.5	1.5	1.4	1.5	1.5	1.6
2015	1.1	2.0	1.1	2.5	1.3	1.9


SOHU.COM INC.

By:		/s/ Carol Yu
		Carol Yu
		President and Chief Financial Officer



10.1		~~English Translation of Convertible Bond Subscription~~Loan and Share Pledge Agreement, dated July ~~16, 2014, between MoboTap Inc.~~1, 2015, among Sohu Media, Charles Zhang and ~~Glory Loop Limited.~~Wei Li.

10.2		~~English Translation of Investment~~Loan and Share Pledge Agreement, dated July ~~31, 2014,~~1, 2015, among ~~Glory Loop Limited, Beijing Gamease Age Internet Technology Co., Ltd, Baina, Forest, Matrix, Sequoia, Qualcomm, Yongzhi Yang, Tiefeng Liu, Youyang Xie, Na Zeng, Zhou Yu~~Focus HK, Charles Zhang and Sen Li, MoboTap Inc. (Cayman Islands), MoboTap Inc. Limited, MoboTap Inc.(US), Dolphin Browser Inc., Muse Entertainment Limited, Dstore Technology Limited, Baina Zhiyuan (Chengdu) Technology Co., Ltd., Baina Zhiyuan (Beijing) Technology Co., Ltd, Beijing Baina Information Technology Co., Ltd, Baina (Wuhan) Information Technology Co., Ltd, Chengdu Xingyu Science and Technology Co., Ltd, Wuhan Xingyu Science and Technology Co., Ltd, Wuhan Hualian Chuangke Science and Technology Co., Ltd, Beijing Anzhuoxing Science and Technology Co., Ltd and Shanghai Andepurui Network Science and Technology Co., Ltd. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment, and the omitted information has been filed separately with the Securities and Exchange Commission)

~~10.3~~		English Translation of Shareholder Agreement, dated July 31, 2014, among Glory Loop Limited, Beijing Gamease Age Internet Technology Co., Ltd, Baina Inc., Yongzhi Yang, MoboTap Inc. (Cayman Islands), MoboTap Inc. Limited, MoboTap Inc. (US), Baina Zhiyuan (Chengdu) Technology Co., Ltd, Baina Zhiyuan (Beijing) Technology Co., Ltd, Beijing Baina Information Technology Co., Ltd, Baina (Wuhan) Information Technology Co., Ltd, Chengdu Xingyu Science and Technology Co., Ltd, Wuhan Xingyu Science and Technology Co., Ltd, Wuhan Hualian Chuangke Science and Technology Co., Ltd and Beijing Anzhuoxing Science and Technology Co., Ltd. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment, and the omitted information has been filed separately with the Securities and Exchange Commission)Wei Li.

31.1		Rule 13a-14(a)/15d-14(a) Certification of Charles Zhang

31.2		Rule 13a-14(a)/15d-14(a) Certification of Carol Yu

32.1		Section 1350 Certification of Charles Zhang

32.2		Section 1350 Certification of Carol Yu

101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of December 31, 2014 and September 30, ~~2014 and December 31, 2013;~~2015 ; (ii) Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and ~~2013;~~2015; (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and ~~2013;~~2015; (iv) Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2014 and ~~2013;~~2015; and (v) Notes to Condensed Consolidated Financial Statements, tagged using four different levels of detail.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company