Sina and Tencent are dominating the micro-blogging space in China, and rival Sohu has admitted as much. CEO Charles Zhang said during a recent earnings conference call that his company has lost the battle for control of China’s micro-blog industry over the past two years.

Sohu’s main product is an Internet portal, though the company has expanded into gaming, advertising and search. In early 2010, the company released a beta version of its Sohu Weibo micro-blogging service before opening it up to the public in April of that year.

“We did lose the battle of the micro-blog battlefield for the last two years,” Zhang said (via Seeking Alpha), adding that he expects the company to “come back” in the social networking field through a combination of content, search, video and software.

“It all depends on whether we can maintain or become a more innovative organization,” he said.

Sohu doesn’t publish user numbers for its Weibo service, but its competitors likely dwarf it. Tencent Weibo, which piggybacked off its popular QQ chat service, had 425 million users as of May, while Sina Weibo has over 300 million users.

The good news, according to Zhang, is that Sohu continues to be “the leading news provider” in China and has “very good growth” in mobile.

For its most recent quarter, Sohu posted better-than-expected revenue of $256 million, up 29 percent year over year. Net income stood at $34 million (GAAP) and $41 million (non-GAAP). Revenue from Sogou, the company’s search engine, was $30 million, up 123 percent year over year.

Shares of Sohu soared 17.75 percent to $40.86 on Monday on the strength of its earnings. The company’s second-quarter results were an improvement upon the $227 million in revenue and $24 million in net income from the first quarter.

Chinese video giants Tudou and Youku also released earnings results earlier this week. Both companies, which are scheduled to merge in the third quarter, had net losses in the millions.

Image via Flickr / Nestosjp