Qihoo Takes on Baidu in Search 奇虎360搜索低调上线 或挑战百度龙头地位

I’ve been watching with interest these last couple of weeks as Internet software security specialist Qihoo 360 (NYSE: QIHU) takes an uncharacteristically low-profile approach to its new online search service, in a clear and interesting challenge to industry titan Baidu (Nasdaq: BIDU). Qihoo’s controversial founder Zhou Hongwei has been mostly quiet since the service’s recent debut, even as media reported the company quietly severed its long-standing relationship with Google (Nasdaq: GOOG) in launching its own technology. Now it seems that Zhou, who seems to thrive on controversy, is challenging Baidu itself, though not in the way that most people might think.

Media are reporting that Qihoo, as part of its new search initiative, has launched a search aggregating system, which includes results from other search engines alongside Qihoo’s own results. Baidu is understandably displeased with having its results included in the new service, and has said it is looking into the legality of what Qihoo is doing. (English article)

There are quite a few things I could say about this initiative, so let’s start with the legality issue and then we’ll look at the broader strategic implications. Qihoo is no stranger to legal disputes and has been sued numerous times by many other major Internet companies including Alibaba and Tencent (HKEx: 700), most often for its aggressive and often questionable business practices. Qihoo has also launched a number of its own lawsuits, most notably a case now being heard in Guangdong province accusing Tencent of unfairly using its status as China’s biggest Internet company to engage in monopoly-like behavior. (previous post)

In this latest instance, I suspect that Baidu probably will discover it has little or no legal grounds to stop results from its own search engine being published on Qihoo’s new aggregating service. More broadly speaking, many Internet sites frequently include links to other companies’ services, and usually such links are a welcome way to help drive traffic between web sites. This case would be slightly different, but I think the same principle would still apply and Baidu will quickly realize it must take other action if it really wants to block its search results from appearing on Qihoo’s site. In the meantime, we can probably expect another war of words to break out between Qihoo and Baidu, and other big search names like Sohu’s (Nasdaq: SOHU) Sogou could join in the bickering as well.

In terms of strategy, I have to say that I quite like this new approach to search that Qihoo is taking as it combines the strengths of many different search engines into a single site that can clearly provide better results for web surfers. Investors seem to like the new initiative also, bidding up Qihoo shares some 35 percent over the last 2 weeks following the launch of the service.

I’m not a huge fan of Qihoo due to the underhanded nature of many of its business practices, and I think that this latest initiative also falls into the problematic category. But that said, I do have to applaud Zhou for finally doing something interesting and new in the search space, with an initiative that could challenge Baidu’s dominance and will probably produce a colorful and entertaining war of words.

Bottom line: Qihoo’s new search initiative looks legally questionable but will probably ultimately succeed, posing an interesting challenge to dominant player Baidu.

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