Tencents 3.5 billion acquisition of Sogou giant search war?

 Tencents 3.5 billion acquisition of Sogou giant search war?

Tencent sent out the invitation in midsummer. On the evening of July 27, Sogou announced that the companys board of directors had received a preliminary non binding proposal letter from Tencent. At that time, Sogou CEO Wang Xiaochuan also forwarded the message for the first time, saying, next, we will discuss and measure the relevant issues..

At that time, the capital market was boiling. The shares of Sogou and Sohu soared, with closing prices up 48% and 39.96% respectively. The privatization agreement was finalized, and the market sentiment returned to calm. Sogou shares closed up 2.31% to $8.87 per share, with a market value of $3399 million; Sohu shares closed up 11.4% to $20.1 per share, with a market value of $789 million.

Tencent was already Sogous largest shareholder a few years ago, with the former holding 39.2% of the latter by the first quarter of 2020. In terms of financial investment, the return of Tencent, which is good at investment, is almost negligible. However, in the context of the new search engine upgrade iteration, the strategic significance can not be underestimated.

Search opportunities

In the current search war, the competition between zitiao and Baidu is becoming more and more intense. The former not only excavates Baidus many search generals, but also tries to launch search ads, which directly points to Baidus revenue hinterland.

In this context, Tencent and Sogou signed a privatization agreement, which also gave the search war new variables.

Back in 2013, Tencent packaged the non core business of search into Sogou, and invested $448 million to invest in Sogou, holding 36.5% of the shares.

Tencent is more open-minded than before. Many of our businesses dont need to be 100% owned by ourselves. We can build them through cooperation and joint ventures. Tencent CEO Ma Huateng said when announcing the capital injection of Sogou.

Now Tencent has spent another $3.5 billion on Sogou, and the biggest trigger point is the huge opportunity in the field of search engine.

Zitiao, Huawei and Alibaba have all increased their power to launch headline search, Huawei search and quark search respectively. Among them, word hopping, which takes the lead in short video and information services, is particularly active. Of course, wechat with 1 billion traffic is not an ordinary person, and has been in the layout for a long time.

Users who use wechat search for a long time will find that if the previous search content was more limited in Tencent ecology, now the search results are more and more rich, and the granularity is getting smaller and smaller.

In addition, referring to the application of search in word hopping information and short video products, Tencent PCG department also needs a search system to serve users. The divisions products include news, long video, short video, etc.

Today, baidu still occupies the majority of the search market share. However, although the share of Sogou is small, it has been wandering between big men and giants.

In 2003, Wang Xiaochuan, the then senior technical manager of Sohu, set up Sohu R & D center and began to develop search engine. In August 2004, Sohu launched the third generation of interactive Chinese search engine Sogou search. In 2010, Google pulled out of China, and Baidu has no two in the Chinese market.

Also in 2010, Sogou experienced the trouble of selling oneself. At that time, Zhou Hongyi, the founder of 360, and Zhang Chaoyang, the founder of Sohu, had a good conversation and were interested in buying Sogou. But Wang Xiaochuan refused to accept, but through the communication with Ma Yun, let Ali successfully become a shareholder, thus repelled 360. In August of the same year, Sogou team was separated from Sohu and established an independent Sogou company, which was injected with capital by Ali and strategic investors including Ma Yun.

In 2013, a similar scene was staged again. 360 still wanted to buy Sogou, but Wang Xiaochuan was still reluctant. But this time, Wang Xiaochuan pulled Tencent to save the soldiers.

In May of that year, Wang Xiaochuan clarified to Tencent that 360 would buy Sogou for 1.4 billion US dollars, saying that there were only some oral agreements between the two sides, no paper-based things have been settled.. Sogou said that the company is indeed communicating with some Internet companies, but not for sale, but for cooperation at the capital level. In the end, Wang Xiaochuan used one hour after he got off the plane to return to the company and communicated with Ma Huateng by telephone. Finally, he convinced the latter to buy shares in 40 minutes and successfully defeated the barbarian 360.

In November 2017, Sogou went to the U.S. for listing. According to the prospectus, Sogou provides default general search engines for Tencents various products, such as mobile QQ browser, Tencent website, QQ navigation and Internet navigation. According to Sogous annual report, about 35% of Sogous total search traffic, measured by page views, comes from Tencent users.

Now, Sogou is holding hands with Tencent again, which seems to be a natural result. On the other hand, Tencent has changed its strategy from publicly saying that it is not necessary to fully own the search business to wholly-owned acquisition.

The article Tencent has no dream once put Tencent at the target of public opinion, pointing out that Tencent started to release mananshan after taking the first-class ship ticket of wechat and holding the cash printing machine of games in hand. Due to insufficient product innovation, Tencent completely relies on flow and capital to paddle. However, as far as the investment business of Tencent is concerned, its investment in the subject matter is more financial investment, and it is not fully controlling. It is a big shareholder. This federalism is praised by people, which is also the origin of Tencent Buddhism.

However, the missing short video traffic highland, in the content of this core radius and word jump fighting is also visible to the naked eye. The competition in the business world has always been cruel. The giants body is still hot when he falls down. Tencent Ma Huateng has more than once said to the outside world, sometimes can not understand what young people like, feel like walking on thin ice.

Tencent may have had a comfortable life, but this is also the last stage of the Jiangshan. At a new stage, Tencent can no longer be a Buddhist. The structure has been adjusted, and the development direction and keynote have also been determined - left hand consumer Internet, right hand industrial Internet, and the rest is fighting. So since this year, Tencent has chosen to firmly control the investment related to its core business.

There are some popular services like live broadcasting. Tencent once spent more than $1 billion in one day to invest in two head players of the game, namely, fighting fish and tiger teeth, to bring the war to an end. After successive capital actions, Tencent became the major shareholder of both. But thats not enough.

Because there are variables in the industry, word jumping is also being broadcast live, and at the same time, the game is being attacked. The fast Kwai has not yet been accepted as the largest live broadcasting platform, so there is news that Tencent has promoted the merger of fighting fish and tiger teeth. Maybe only by integrating music industry resources like TME and becoming the first, Tencent can put its heart in its stomach.

After some consideration, Tencent decided to change the team, and Cheng Wu, vice president of Tencent group and CEO of Tencent pictures, replaced Wu Wenhui and Liang Xiaodong, CO CEOs of yuewenyuan. Tencent wants to explore a new model, but many authors who are good at the payment model do not accept it. The two sides have launched a long tug of war, and the storm is constant, so far it has not been completely resolved. However, Tencent is determined to take back the online business and explore a new model. It believes that the adjustment of reading is consistent with the companys strategy, we should obtain customers through the mode of free subscription and member subscription, so as to bring more added value to digital content.

After a lot of trial and error, Tencent may be able to separate the business that it did not do well as it did at the beginning. However, it is absolutely impossible for the Buddhism department to exist in the future.