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A look at Sohu’s (SOHU) earnings for the last quarter shows how small and vulnerable China’s internet properties are compared with global operations like Google (GOOG) and Yahoo! (YHOO). It also indicates how much they may be overvalued.

Sohu is really not growing very quickly and its revenue is tiny. Total revenues for the quarter ended June 30, 2007 was $39.0 million, compared to revenues of $33.1 million for first quarter ended March 31, 2007, and $34.1 million for second quarter ended June 30, 2006. Net income for second quarter of 2007 was $5.7 million or $0.15 per fully diluted share.

The company estimated that total revenues for third quarter 2007 to be between $45 million to $47 million.

Sohu has a market cap of $1.25 billion and its stock is up 65% over the last year, while Google’s is up 40%.

Sohu’s shareholders have a problem. China may be large, but use of web portals is not financially significant. None of the Chinese internet companies including search leader Baidu (BIDU) have revenue that even approaches a company like Yahoo!.

But, the disadvantage is great than that. While Google and Yahoo! can come into the Chinese market and compete for market share by investing large sums in local operations or forming partnerships with existing online companies in the country, the Chinese firms do not have the capital or the means to expand their revenue base into the US or Europe. Those markets are probably permanently closed to them while China may be permanently open to the large US online companies.

That makes big valuations of Chinese internet firms a bit riskier.

Douglas A. McIntyre can be reached [email protected]. He does not own securities in companies that he writes about.