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The end of the PC era series: Sogou finally "married" Tencent after seven years of love

via:博客园     time:2020/7/28 17:46:27     readed:759


Text / Yimin

Source: capital detective (ID: deep)_ insights)

In September 2013, on a Tuesday afternoon without warning, Ma Huateng, Zhang Chaoyang and Wang Xiaochuan jointly appeared in the Sohu media building in Wudaokou, announcing that Tencent had injected $448 million into Sogou, and packaged Tencent's Sogou business and other related assets to Sogou, bringing to an end the Sogou trading case, the largest trading soap opera on the Internet in China that year.

Seven years later, Tencent and Sogou chose to be the real family


Wang Xiaochuan circle of friends, map source 36 krypton

The story of Sogou and Tencent is a super long series from the PC era.

Before Tencent became a shareholder in Sogou in 2013, Zhou Hongyi and Zhang Chaoyang had already sat at the negotiation table. In order to strive for the opportunity of independent development, Wang Xiaochuan went to Shenzhen to meet with Tencent's senior management, opened the negotiation window of both sides, and finally turned the corner.

Seven years ago, the tide of mobile Internet has just risen, the influence has not been completely released, search as an important traffic entrance in the PC era, the status is still pivotal, become the goal of various Internet giants.

At that time, Tencent was investing heavily in search, but failed to make a big breakthrough for various reasons. And Sogou joint attack 360, through mergers and acquisitions to expand the scale, but also for Tencent's search business to find a new solution. This is a capital marriage with more than one stroke, leaving a lot of money in the history of China's Internet.

However, seven years later, the rise of mobile Internet has greatly weakened the entry function of search. Baidu, the largest search market in China, is in a bad situation. 360 and Sogou, which are in the second echelon of the industry, are not immune. The highlight time of search has passed, but Tencent and Sogou choose to go closer.

The shadow of valuation

Listing was once a thorn in the heart of Sogou CEO Wang Xiaochuan.

In November 2017 After landing on the New York Stock Exchange in May, Wang Xiaochuan took off his guard and was frank with the outside world: before Sogou went public, he had a lot of responsibility. In the company, at the beginning, employees would be very anxious when they left the company, and they felt that they were trusted to come. Sogou was disappointed and left. Later, he thought it was normal to leave, but the new anxiety was the people who continued to stay and continue to believe in themselves People can't let them down.

Although landing on the capital market has solved Wang Xiaochuan's worries, the development fundamentals of Sogou have not been improved. Since its listing, Sogou's performance in the capital market is not satisfactory.

Since its listing, Sogou's share price has gone through a downward curve, which is related to the pricing standards encountered by Sogou in the US stock market.


Sogou stock price trend, source snowball

Baidu landed on NASDAQ as early as 2005, and Sogou, a company whose model is very similar to Baidu, can not escape the value judgment dimension set by Baidu for Chinese search engine companies in American capital markets

However, in this pricing dimension, Sogou's performance is not satisfactory.

Search market share is far lower than Baidu's reality, locking Sogou search advertising revenue ceiling. In the whole year of 2019, Baidu's revenue is 107.4 billion yuan, while Sogou's revenue is only 8.9 billion yuan. Sogou's revenue is less than one tenth of Baidu's, so the market value also shows an equal proportion of shrinkage.

In an attempt to break the ceiling, Wang had given the expectation after Sogou launched its first report:


But as the search industry itself steps downhill, competition for traffic is more intense, with Sogou in the shadow of Baidu

And compared with Baidu's suppression, Sogou faced greater constraints in the industry situation

Awkward Sogou

In order to solve the negative situation, Sogou has made many attempts in recent years.

In addition to seizing shares in the stock market, Sogou places higher growth expectations on its own traffic. In Sogou's story framework, the growth of its own traffic is closely related to its AI strategy.

The growth of self owned traffic comes from two aspects, one is through the breakthrough of search business, the other is the upgrade of input method business. The breakthrough of search business refers to the use of AI technology to optimize the search experience, while the upgrade of input method business refers to the ability of input method to carry information acquisition and even traffic distribution.

This means that Sogou has changed from the original three-stage rocket mode of input method browser search to two service forms of dialogue and question and answer based on search and input method.

In September 2018, Sogou entered the content ecology field and officially launched a content open platform. According to the introduction at that time, Sogou has launched Sogou search app and Sogou browser app in terms of traffic entrance In terms of pushing content for end users, Sogou will push the information on Sogou to the target users by using algorithm recommendation based on Sogou big data and artificial intelligence technology. In terms of platform, Sogou will create multiple services for content creators, including content publishing, content management, data statistics, account revenue, etc.

However, the attempt did not go well.

On the one hand, the growth of Sogou input method itself has peaked. In the fourth quarter of 2019, the average number of active daily users of Sogou input method was 464 million, showing no growth compared with the previous quarter; while the average daily living level of Sogou input method showed a continuous downward trend in the past two years. At the same time, because of its strong tool attributes and weak content attributes, Sogou input method is difficult to obtain the retention of content users. Therefore, it is difficult to form a large-scale source of revenue growth through the introduction of Sogou input method.

In the existing traffic accidents, Sogou also places its breakthrough on the artificial intelligence business, and its direction is intelligent hardware.

Wang Xiaochuan once said,

Since then, Sogou has successively released household intelligent robots, recorders, translators and other hardware products, but the investment in hardware has not been able to translate into actual revenue. According to Sogou's financial reports over the years, search related advertising revenue is still its most important source of revenue. In 2019, Sogou's other business income was only $99.1 million, even slightly lower than that in 2018.


Just as the search for established players fell into a growth bottleneck, today's headlines, native to the mobile Internet era, were also online, hoping to search for the user's strong demand product through layout and tear through the existing ceiling. This is even worse news for Sogou

Under the attack of multiple factors, Sogou, which once had the power to stir up the industry pattern, has rapidly declined. Fortunately, it still holds the good card of Tencent.

The three parties take what they need

The transaction between Sogou and Tencent is a game of interests involving Sohu, Sogou and Tencent.

In 2013, Sogou stepped on the transformation node of Tencent as an open platform, and obtained Tencent's search business and other related assets as well as Tencent's $448 million capital injection.

The image of Tencent is not only

After the capital cooperation was reached, Sogou search announced that it was officially connected to WeChat official account in June 2014. Users can browse the WeChat official account and all articles related to the query on Sogou search results page. Tencent system traffic has become a major source of traffic for Sogou.

In this transaction, Sohu got financial support and retained control of Sogou; Sogou got traffic support from Tencent, which enhanced competitiveness and maintained the possibility of independent development; while Tencent obtained Sogou's search technology, improved the search experience in the system, and successfully stripped off the search business which invested a lot but was difficult to improve.

Seven years later, the relationship between Tencent and Sogou has gone further. In this transaction, the positions and demands of the three parties have changed. The only thing that remains unchanged is that it is still a win-win situation for all parties to the transaction.

In recent years, Sohu has fallen into the situation of saturated products and stagnant income. In his public speech, Zhang Chaoyang is still passionate about leading Sohu back to the central stage of China's Internet. In order to explore and layout new business, Sohu needs more financial support.

However, according to the financial report, in terms of cash reserves, due to the continuous losses in the past several quarters, Sohu's book cash reserves showed a continuous downward trend, from $2.17 billion at the end of the first quarter of 2018 to $1.51 billion at the end of 19 years, with a net decrease of $660 million.

Although Sogou's income accounts for more than half of Sohu's total income, Sogou's performance is poor. The offer issued by Tencent is a premium purchase. Sogou's announcement points out that Zhang Chaoyang used all his voting rights to support the transaction and sold all his shares to Tencent. It can be seen that Sohu is very welcome to sell Sogou.

For Sogou, after the business development has fallen into a bottleneck, the traffic and products from Tencent can bring more support for it.

At the same time, once Tencent's acquisition is successful, Sogou will delist from the U.S. stock market. In the context of major changes in the global capital market, it is not bad for Sogou to leave the U.S. stock market. Moreover, without the pressure of the capital market on profits and growth, Sogou may be able to focus more strategically and focus more on the polishing of products and technologies, which is beneficial for Sogou Long term development.

For Tencent, in the to C product and business side, it also needs better search technology to improve the matching degree of information and connection efficiency. For example, for wechat with more complicated information and relationship chain, providing better search service has become a necessity. On the outside, Tencent also needs to be defensive in the face of the layout of today's headline online search.

After the acquisition of Sogou, how Tencent's internal product and technical departments can cooperate with Sogou and how the synergy effect is still need to be continuously observed. However, Tencent's wholly-owned acquisition of Sogou is a good thing for the three parties.

In the course of Sogou's development, born out of Sohu, Sogou has been in the awkward situation of looking for a backer to fight against external competition in the early stage: in August 2010, in order to counter the acquisition plan of 360, Wang Xiaochuan went to Hangzhou to introduce Alibaba strategic investment. After officially breaking up with aribaba, in 2013, it was still in order to fight against 360 Wang Xiaochuan went to Shenzhen to pry Tencent, rewriting the direction of the story.

Because of this, Sogou's image always has a trace of juvenile heroism of bearing pressure, holding one breath, and singling out Baidu and 360.

However, due to various factors, the legend created by Sogou has not continued to be brilliant today. Today, Tencent's decision to purchase a wholly-owned company has also written a happy ending for Sogou. It is just the legend of Wang Xiaochuan, the goalkeeper of Tsinghua University's east gate.

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