November 2010 CHANGYOU.COM LIMITED (NASDAQ: CYOU) Safe Harbor - PowerPoint PPT Presentation

November 2010 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Safe Harbor Statement This announcement contains forward-looking statements. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. The Company cautions that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, the current global financial and credit markets crisis and its potential impact on the Chinese economy, the slower growth the Chinese economy experienced during the latter half of 2008 and in 2009, which could return at some point in the future, the uncertain regulatory landscape in the People's Republic of China, fluctuations in Changyou's quarterly operating results, and the Company's reliance on Tian Long Ba Bu as its major revenue source. Further information regarding these and other risks is included in Changyou's Annual Report on Form 20-F filed on February 26, 2010, and other filings with the Securities and Exchange Commission. 2 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Industry Update 3 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

China’s Growing Online Game Market Internet user growth drives the expansion of the online game market in China China – world’s largest Internet market and still growing Macro trends driving robust online game revenue growth (In RMB billions) (In millions) 420.0 450 18.0 15.6 384.0 14.4 400 16.0 338.0 350 298.0 14.0 11.7 300 253.0 12.0 9.8 210.0 8.5 250 10.0 162.0 200 6.3 8.0 5.7 137.0 150 6.0 3.8 100 4.0 50 2.0 0 0.0 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 Internet users in China China online game revenue Government strengthens online games management, encourages creativity and focuses on healthy and sustainable development of the industry On July 28, 2010, Chinese government officials stated that the government will: • Introduce policies related to online gaming in China to provide a solid foundation for the sustainable o growth of the industry Explore ways to effectively protect intellectual property rights o Encourage innovation and support domestic online games companies to expand overseas o We believe the formalization of a standard set of regulations will help the sustained development of the • industry. Changyou will continue to strongly support the work of the regulators and join in the formulation and implementation of these regulations and make greater contributions to the industry’s development. Source: CNNIC, Analysys 4 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Financial Overview 5 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Strong Financial Track Record 2010 Q4 2010 Q3 2010 Q2 2009 Q3 QoQ YoY Guidance Total revenues $85.6m $77.7m $68.7m 10% 25% $86.0m~89.0m Game operation revenues $83.6m $75.6m $66.9m 11% 25% N/A Overseas licensing revenues $2.0m $2.1m $1.8m -7% 11% N/A Gross margin (non-GAAP)* 90% 91% 93% N/A N/A N/A Operating margin (non-GAAP)* 64% 63% 67% N/A N/A N/A Net income (non-GAAP)* $47.1 m $44.1 m $41.3m 7% 14% $46.5m~48.0m Diluted EPS (non-GAAP)* $0.88 $0.82 $0.77 7% 14% $0.87~0.90 Cash Balance $292.0m $294.5m $312.9m -1% -7% N/A Debt Balance $0 $0 $0 N/A N/A N/A Cash inflow from operations $55.5m $49.2m $46.2m 13% 20% N/A * Non-GAAP numbers exclude share-based compensation costs. Please refer to our earnings release, which is posted on the IR section of Changyou’s website at http://www.changyou.com/ir/ for GAAP numbers. Changyou is a highly profitable online game developer with a strong, debt-free balance sheet and rich cash flows. 6 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Business Highlights 7 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

1 Solid Growth Momentum in Existing Games TLBB Remains Our Flagship Game Diversified Portfolio of Games Adding Incremental Growth Tian Long Ba Bu (“TLBB”) : • • We are also adding incremental growth from our growing portfolio Latest upgrades include new content introduced in July and October of differentiated games, including Blade Online, Blade Hero 2, Da featuring new in-game events and more customization options for avatar and in- game chat to cater to the social needs of today’s youngsters Hua Shui Hu, Zhong Hua Ying Xiong and the newly released • Immortal Faith Plan to launch TLBB 3, another major expansion pack, in 2011 to further enrich the in- game experience of users and extend the game’s lifespan • We’ll continue to update the games based on user feedback Regular game content updates drives steady expansion of user base with potential for further upside growth in ARPU ARPU * * as a Percentage of Peers’ Aggregate Registered Accounts * Aggregate APA * (In thousands) (In millions) 120 3,000 150% 100 2,500 125% Average:73% 80 2,000 100% 60 1,500 75% 40 1,000 50% 25% 20 500 0% 0 0 User-centric game development model incorporating extensive feedback and solid operating strategy deliver organic growth and maintain healthy game portfolio * Comprises the following games operated in China: Tian Long Ba Bu (“TLBB”), Blade Online, Blade Hero 2, Da Hua Shui Hu, Zhong Hua Ying Xiong and Immortal Faith 8 * * Based on company filings and research CHANGYOU.COM LIMITED (NASDAQ: CYOU)

Solid Growth Momentum in Existing Games (Cont’d) 1 - Franchise Games are Cornerstone of Growth • To date, we have released 16 expansion Formed a large community packs based on a vast Continued to grow user base Year 4 amount of user Launched a hit game • Major expansion pack feedback Year 2-3 TLBB 2 launched in April Year 1 • We will continue to • Continued to grow user 2010 with important • Launched a hit game that release expansion base by releasing regular upgrades, boosting PCU game updates and surpassed 400,000 peak packs regularly to to a record high expansion packs concurrent users during grow the community the first month of its and build TLBB into an • Another major expansion • The game has become a launch even more valuable pack in development for leading 2.5D martial arts 2011 to further grow the • Introduced the first 2.5D franchise MMORPG in China’s game’s community game that combines both online game market martial arts and community-building features in China The Most- installed MMORPGs in China’s Internet Café * An Award-winning Game 1 Fantasy Westward Journey NetEase The Most-liked Online Game by Game Players by ChinaJoy for five consecutive Wendao Netdragon 2 years from 2006 to 2010 3 TLBB Changyou World’s Top Five Most Profitable Game Dragon Nest Shanda Games Franchises in 2009 by Forbes 4 World of Warcraft NetEase 5 TLBB remains our flagship title and a testament to our ability to create a sustained blockbuster 9 * Data from barchina.net for the period Oct 18-24, 2010 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

2 Delivering Growth with New Inhouse-developed Games Duke of Mount Deer Unique features to differentiate game from others on the market Social interactive game-play Multiple graphic modes Cartoonish graphic style • The first in the industry to allow players • Target a wide range of people, across • Adorable exaggerations of characters to freely switch between multiple different genders and nationalities • Visually attractive scenery and realistic graphic modes • Various forms of social activities to weather effects • Vivid graphics and 360 degree viewing foster larger community and enhance angles gamer stickiness Dawn in the main city Team-based activities Adorable characters Moon and stars in the sky Team-based cooking game Realistic snow view Content development for the game has been completed and we are evaluating marketing proposals for the game’s launch 10 CHANGYOU.COM LIMITED (NASDAQ: CYOU)

3 Diversify Game Portfolio through Licensing New games put in operation in 2010 Upcoming games Da Hua Shui Hu Zhong Hua Ying Xiong Immortal Faith San Jie Qi Yuan Legend of Ancient World Game title (“DHSH”) (“SJQY”) (“LAW”) (“ZHYX”) (“IF”) 2D turn-based, 3D martial arts 2D mystical 2D turn-based, 2.5D fantasy game      Theme cartoon-style game game adventure game cartoon-style game Began open beta Began open Began open Under close beta Under close beta      testing on March 18 beta testing on beta testing on testing testing Development May 20 September 9 Continue to collect Released the first   Progress user feedback and expansion pack in data to fine-tune the July game Plan to introduce Continue to work Plan to introduce Plan to launch the Plan to launch the      expansion pack in with developer to new content game in December game in 2011 2010Q4 to further launch new virtual in- based on user Plan stimulate interest game items and feedback in the from students and localize the game for coming quarters casual gamers hardcore domestic gamers Continue to bring new games to market that complement our portfolio and attract different types and demographics of users 11 CHANGYOU.COM LIMITED (NASDAQ: CYOU)