Sohu.com, Tencent form combined search engine

NASDAQ-listed Sohu.com Inc Monday announced a strategic tie-up with Internet company Tencent Holdings Ltd, in hopes of boosting Sohu's subsidiary Sogou's chances of becoming a leading search engine, particularly in the mobile Internet market.

In order to implement this cooperation, Tencent has invested $448 million in Sogou and merged its Soso search engine with Sogou, according to a e-mail Sohu sent to the Global Times on Monday.

Upon the completion of the transaction, Tencent will hold a 36.5 percent stake in Sogou, with Tencent's president Liu Zhiping and COO Ren Yuxin joining Sogou's board of directors.

Sohu will continue controlling Sogou and its chairman Zhang Chaoyang will remain Sogou's chairman, while Wang Xiaochuan will continue leading Sogou as its CEO.

"This partnership will immediately expand Sogou's market presence and significantly elevate its position in the highly competitive PC search market, and even more so in the rapidly evolving mobile search market," Zhang said in the press release.

"We believe Sogou is the ideal partner for Tencent to further develop search opportunities within China," said Ma Huateng, chairman of Tencent.

Data from Beijing-based market research firm Analysys International indicated that Baidu still led the domestic Web page search engine industry in July with a market share of 65.14 percent of page views, Qihoo 360's search engine came in second with 15.4 percent, and Sogou ranked third with 9.16 percent. Soso was in fourth place with 3.92 percent.

Media reports in May said that Qihoo 360 was also considering buying into Sogou.

Dong Xu, an industry analyst with Analysys International, said that the combined market shares may help the merger get more advertising income, which is determined by the amounts of page views.

Their combination may also create a threat to Baidu in terms of Web page searching, given that Sogou will get direct access to Tencent's vast user base, said Dong. "Baidu has yet to develop its own browser for PC users who may intend to be more loyal to Sogou after installing the latter's browser," she noted.

Baidu has no official comment on the matter right now, Kaiser Kuo, director of International Communications at Baidu, told the Global Times on Monday.

Besides, Soso has lots of experience in search services on the mobile front, which will help Sogou make a grand entrance into the mobile Internet world and even have a chance to become the leader in the sector, Dong said, adding that there is no predominant leader in the mobile search market now.