A few days ago, the news emerged that Chinese search engine Sogou (搜狗) is aiming to raise up to $585 million in a U.S. Initial Public Offering.
Sogou, which is owned by internet company Sohu, Inc., announced the terms for its proposed IPO on Friday.
The news has caused a stir among those keeping an eye on the Chinese tech space, as Sogou is backed by Chinese tech giant Tencent, the company behind the hugely popular messaging apps WeChat and QQ.
But for those of us who might not be up on the state of search in China, what do you need to know about Sogou, and how does its IPO play into the wider search landscape? And could there be any potential knock-on effects for the rest of the industry?
What is Sogou?
Sogou (whose name, 搜狗, literally translates as “searching dog”) is a Chinese search engine that was launched in 2004, and is currently the third-largest search engine in China.
Well, depending on who you ask. As tends to be the case with all things China, the statistics can vary from source to source.
Baidu, China’s largest search engine, is the undisputed king of search in China, but lower down the rankings things get a little murkier. In a January article, Bloomberg stated that “some surveys” have Sogou as China’s second-largest search engine, and it is often referred to as China’s second-largest mobile search engine, with 16.9% market share based on mobile queries (iResearch – Chinese-language source).
Meanwhile, statistics from China Internet Watch put Sogou’s overall share of the Chinese search market at just 3.31% as of May 2017 – fourth behind competitors Baidu, Shenma, and Haosou.
Baidu is the undisputed king of search in China
But regardless of its exact ranking, Sogou is still widely agreed to be a key contender in the contest for Chinese search dominance. Crucially, it’s backed by Tencent, the world’s fifth-largest internet company in terms of revenue, and is the default search engine for Tencent’s QQ mobile browser and on QQ.com, giving it prime access to QQ’s close to 900 million active users.
Other Sogou facts are that it has a web browser, launched in 2008, and is the company behind Sogou Pinyin, China’s most popular pinyin input software. (Pinyin is the official romanization system for Chinese characters).
Sogou Pinyin makes use of Sogou’s search techniques to analyze and categorize the most popular words and phrases, and could be a major advantage in Sogou’s future plans for getting the edge in search – more on that later.
So is Sogou the Bing to Baidu’s Google?
If Baidu is the top dog in Chinese search, and Sogou is a smaller contender (albeit with the backing of a huge tech company) trying to make its mark, does that make Sogou the Bing to Baidu’s Google?
Well, not exactly. As you’ll have gathered from the previous section, things are a little more complicated than that.
While the Chinese search market is as unequivocally dominated by Baidu as the western search market is by Google, there are several contenders for the number two spot. These include Shenma, a “mobile-first” search engine by the titan of Chinese ecommerce, Alibaba; and Haosou (formerly known as 360), a search engine by Chinese security company Qihoo 360.
(If you’re wondering where the heck Google itself is in all this, it holds a paltry 1.84% search market share in China, according to China Internet Watch. Google and China do not have the happiest of histories).
Baidu, Alibaba and Tencent are three of leading internet companies in China – as well as the world – which means that the battle for search dominance for China has become a face-off between some of the biggest players in its tech industry.
This is not unlike the way in which the voice search and visual search spaces have become a battleground between major tech companies such as Google, Apple, Amazon, Microsoft and Pinterest.
And while Qihoo 360, with an annual revenue of $1.39bn as of 2014, may not be in the same league as three of the world’s largest internet companies, it’s still a force to be reckoned with. Qihoo 360 led a group of investors which purchased most of Opera Software, the company behind the Opera browser, in 2016.
It has also entered into strategic partnerships with Sina (the company behind Chinese social media platform Sina Weibo), Google, and even Alibaba at different times, and in 2013 reportedly considered purchasing Sogou for around $1.4 billion.
So how does Sogou plan on setting itself apart against its heavyweight competitors in the Chinese search market – and can it succeed?
Artificial intelligence and natural language search
Sogou announced in August that it was planning to focus on artificial intelligence and natural language processing in its bid to build a next-generation search engine, with the aim of becoming an “innovator and pioneer in artificial intelligence in China”.
It also plans to shift its emphasis from more traditional keyword-based search to answering questions, in line with the trend towards natural language search prompted by the rise of voice search and digital assistants.
Sogou has joined major search players such as Bing/Microsoft, Baidu and of course Google in investing in artificial intelligence, but its small size may put it at a disadvantage. A huge search engine like Baidu, with an average of more than 583 million searches per day according to SmartInsights, has access to reams more data with which to teach its machine learning algorithms.
But Sogou has an ace up its sleeve: it is the only search engine formally allowed to access public messages on WeChat – a massive source of data that will be particularly beneficial for natural language processing.
Plus, as I touched on earlier, language is something of a specialty area for Sogou, as Sogou Pinyin gives it a huge store of language data with which to work.
Sogou also has ambitious plans to bring foreign-language results to Chinese audiences via its translation technology, which will allow consumers to search the English-speaking web using Mandarin search terms. These will be automatically translated by Sogou, and the resulting content translated back into Chinese for the user.
What this all means for the Chinese search market
Sogou has reportedly been flirting with the possibility of an IPO since 2015. So what’s significant about its timing in seeking an IPO now, and what could it mean for the wider search industry in China?
While Baidu may unquestionably be the dominant force in Chinese search, the company is not immune to scandal, and last year it was hit by a big one. A 21-year-old college student named Wei Zixi died after pursuing an unsuccessful cancer treatment at a hospital which was promoted to him on Baidu, sparking outrage over Baidu’s perceived valuing of profit over safety.
Baidu’s shares dropped almost 14% following the scandal, and regulators quickly clamped down on medical advertising in search results pages, which accounts for some 30% of Baidu’s online ad revenue.
This was by no means the first time that Baidu had come under fire for the commercialization of healthcare. Baidu’s history with dodgy medical advertising dates back as far as 2008, and includes a number of controversies in which Baidu sold off several of its health support communities to private hospitals, leading to a widespread public backlash and an apology by Baidu’s CEO.
The Baidu support forum for hemophilia, which Baidu was accused of selling off to a private hospital, sparkling public outcry and a public apology from the search engine’s CEO in January 2017.
Up until now, disaffected users haven’t had any viable alternatives for search engines to use if they want to boycott Baidu, which is increasingly gaining a reputation for being untrustworthy and profit-driven.
But search engines like Haosou and Sogou have been slowly but surely eating into Baidu’s market share, and if Sogou’s investment into AI and natural language pays off, it could shape up into a serious competitor.
How could a Sogou IPO affect search outside China?
What do these shifts in the Chinese search market mean for the world outside of China?
At the moment, unless you’re a business looking to invest in or optimize for search in China, not a whole lot. Even if you are looking for a way into the Chinese market, optimizing for Baidu is still your best bet, as Baidu is unlikely to lose its total market dominance overnight.
But these developments are worth keeping an eye on. A successful IPO for Sogou could be a big win for Tencent in the war for supremacy over rivals Baidu and Alibaba, all three of whom are global powerhouses with investments in media, entertainment, ecommerce, gaming, social networking and more.
And with a reported 731 million internet users in China, any search engine which can capture a significant portion of that market wields some serious clout.
So keep Sogou on your radar; it will be worth seeing how this one plays out.
Source:: Search Engine Watch RSS