Sougou + So.com: Don’t Bet On It 搜狗和360搜索联合：不要指望
Interesting new rumors are appearing in the media about a possible alliance between 2 of China’s most up-and-coming search engines, Sohu’s (Nasdaq: SOHU) Sogou and Qihoo 360′s (NYSE: QIHU) So.com. While such an alliance looks very smart and could mount a serious challenge to longtime industry leader Baidu (Nasdaq: BIDU), I would be seriously skeptical that anything will ever happen. The main obstacle is simple, and is the same obstacle that prevents mergers and other strategic tie-ups from happening more broadly in China’s Internet world: big egos. In this case, we’re talking about 2 of the Chinese Internet world’s biggest egos who are notoriously difficult collaborators, namely Sohu’s chairman chief executive Charles Zhang and Qihoo’s founder and chief executive Zhou Hongyi.
Before I explore the obstacles any further, let’s have a look at the latest news that has Chinese media reporting that Zhou held a secret meeting with Sogou CEO Wang Xiaochuan. (Chinese article) The reports contain plenty of speculation about the potential for a tie-up, but lack any real details about what was said or happened at the meeting.
An outright merger or other close tie-up between Sogou and So.com would certainly create a very solid second-largest online search company to challenge Baidu. According to the latest industry data, Qihoo had about 10 percent of the online search market at the end of 2012, while Sogou had about 8 percent, making them China’s second and third largest search engines. That means a combination of these 2 would create a company with 18 percent of the market, way behind Baidu’s dominant 72 percent but still one of the biggest players in the market since Google’s (Nasdaq: GOOG) high-profile withdrawal from China in 2010.
So, now that we’ve looked at the potential of a tie-up, let’s return to my original point of why this alliance will never happen. As I said before, both Charles Zhang and Zhou Hongyi are fiercely proud men, neither of whom likes to cede control of any of his businesses to another party. Sogou was actually 10 percent owned by e-commerce leader Alibaba in the past, but Alibaba sold its stake in the company last year. No reason was ever given, but I suspect that Alibaba’s equally strong-willed founder Jack Ma didn’t like being a minority partner in Sogou with little or no say in how the company was run.
Meantime, Zhou Hongyi is an even harder person to work with, as reflected by the fact that he and his company are constantly being sued by other Internet firms for slander and Qihoo’s often questionable business tactics. What’s more, Zhou is the master of creating industry speculation, which was reflected by market rumors last month that Qihoo was in talks for a tie-up with Google. (previous post)
In this latest case, it’s quite possible that Zhou pushed hard to set up the meeting with Sogou’s Wang simply to create industry buzz and draw more attention to So.com. At the end of the day, anything could happen and it’s still possible we could see a search alliance between Qihoo and Sohu. But if I were betting, I would say the chances for such an alliance are 10 percent at best or more likely closer to zero, and that these latest rumors are probably just a publicity stunt by Qihoo, Sohu or both.
Bottom line: The chances for a tie-up between the search businesses of Qihoo and Sohu are 10 percent or less, and any meetings between the 2 sides are more likely a publicity stunt.
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