Before the US stock market on March 9, Sogou announced its fourth quarter and full-year financial results for 2019. Affected by the strong financial report, US stocks continued to spread globally on Monday due to the New Coronavirus epidemic. At the same time, Saudi Arabia launched an oil price war after a collapse with Russia. The market panic surged sharply, triggering a blood collapse and triggering a meltdown. In the context, Sogou still achieved a sharp rise against the trend, and the stock price once rose more than 15% in early trading to touch $ 4.43. As of press time, it rose another 0.52% after the market to $ 3.90, with a total market value of $ 1.518 billion.
As the second largest search engine in China, in recent years, the market performance of Sogou search has been continuously released under the blessing of AI. From the financial report, we can see that Sogou has achieved a healthy and steady development of the overall business with its improvement and innovation in the fields of search, input method, intelligent hardware, and AI. The decline in revenue costs in the fourth quarter also demonstrated the company's good management capabilities. Why is Sogou able to achieve a 33% year-on-year surge in Q4 net profit against the backdrop of a global economic slowdown and continuing challenges facing the macro economy? And can it reach a record high of 1.17 billion US dollars in annual revenue, which is about 8 billion yuan? We may be able to interpret one or two from this latest financial report.
Annual revenue hits record high and growth rate leads industry level
The financial report shows that in the fourth quarter of 2019, Sogou's total revenue was US $ 301 million, an increase of 1% year-on-year. Looking at the entire year of 2019, revenue reached US $ 1.17 billion, a year-on-year increase of 4%, a record high, and the growth rate is ahead of the industry level.
In the fourth quarter, search and search-related business revenue reached US $ 274.6 million, of which search services based on pay-per-click continued to grow, accounting for 88.2% of search and search-related revenue, which was 84.8% in the same period last year . Demonstrates the strong market revenue fighting power of Sogou search business.
Other business revenue was 26.4 million US dollars, an increase of 26% over the same period last year, mainly due to the year-on-year increase in the company's sales of smart hardware products. Continuing the growth trend of this business last quarter, it also positively reflects the good market effect brought by Sogou hardware products. With the expansion of Sogou hardware layout, this sector will also have a good incremental space.
In terms of profitability, in the fourth quarter, the net profit attributable to Sogou was US $ 35 million, an increase of 33% from US $ 26.4 million in the same period last year. Not in accordance with US GAAP, the net profit attributable to Sogou in the fourth quarter was US $ 39 million, an increase of 44% from US $ 27.1 million in the same period last year. Continuing Sogou ’s growth in the first two quarters, its net profit for 2019 was US $ 89.1 million. While maintaining a steady increase in overall revenue, achieving an effective surge in net profit directly reflects the correctness of Sogou ’s current market strategy.
In the fourth quarter, Sogou ’s revenue cost was US $ 168.7 million, down 9% from the same period last year; during the period, traffic acquisition cost was US $ 129 million, down 14% from the same period last year, accounting for 42.8% of the company ’s total revenue. The proportion in the same period of the year was 50.3%. The decline in revenue costs reflects the company's good management capabilities.
In addition, the DAU of Sogou mobile phone input method was 464 million, an increase of 9% year-on-year, and the revenue of mobile phone input method increased by nearly 90% in 2019. The daily voice request of Sogou input method Q4 increased by 54% year-on-year. The peak value of the year reached 830 million times, a record high, and it continued to be the largest voice recognition application in China. Sogou input method is still a proud business of Sogou, and it is expected to provide continuous driving force for Sogou's revenue in the future.
In summary, Sogou's new quarter's financial performance is worthy of recognition. Not only did revenue grow steadily, but net profit continued to grow by 33% year-on-year from the previous quarter. In terms of business, corresponding breakthroughs have been made in input methods, smart hardware, AI technology, etc. It is worth mentioning that the AI recorder has not only greatly improved the user's experience, but also established Sogou as a leader in the era of recorder AI. status. It can be seen that Sogou's AI strategy with language as the core has achieved good market results through the landing of Sogou AI technology in its own product system and the empowerment of traditional industries.
Dual-engine strategy to build an efficient content service ecosystem AI intelligently drives Sogou's business model
Sogou can have a decent market performance, which is inseparable from its market strategy. Under the dual-engine AI strategy, Sogou has maintained steady growth in its core business and built an efficient content service ecosystem. At the same time, the business model of AI intelligent hardware is exerting positive effects. Through the integrated play of online and offline software and hardware, it is continuously releasing its potential.
1. The AI dual-engine strategy continues to exert its effects, and the search sector has achieved rapid development
Sogou's dual-engine strategy includes search and input method business. In the fourth quarter, search and search-related businesses achieved revenue of US $ 274.6 million, and still assumed the main role of Sogou's revenue. The dual-engine strategy is continuing to exert market effects.
We see that Sogou is building its own moat through differentiated content service ecology and AI intelligent service innovation. In terms of content construction, Sogou continues to deepen its cooperation with WeChat public accounts, improve the content of Sogou accounts and the cooperation of various platforms, and at the same time explore the opportunities of intelligent triage with medical as an entry point, and on this basis, the coverage of the first direct answers to intelligent questions The rate and accuracy are leading the industry. In fact, in the field of AI medical, as early as 2016, Sogou has created a search product "Sogou Mingyi" for vertical content such as health and medical treatment, which has formed a lot of differentiation from competitors. One of the few moats constructed by Sogou. The use of AI technology to improve user experience, which during the outbreak of the outbreak, Sogou adopted some measures can be shown, such as the launch of "AI anti-epidemic", has been widely recognized by users.
The AI-supported Sogou input method, the average daily voice request in Q4 increased by 54% year-on-year, and the peak value of the year was up to 830 million times, a record high, and continued to be the largest voice recognition application in China. The DAU of Sogou mobile phone input method is 464 million, an increase of 9% year-on-year, and the revenue of mobile phone input method increased by nearly 90% year-on-year in 2019. It is not difficult to see that AI provides strong support for the efficient implementation of Sogou's dual-engine strategy. In the future, with the continuous improvement and improvement of technology, it will also bring more possibilities for Sogou's revenue.
2. The rapid development of intelligent hardware leads the voice recorder industry to upgrade to the AI era
Due to the increase in sales of smart hardware products, Sogou ’s other revenue in the fourth quarter increased by 26% year-on-year. In other words, intelligent hardware directly drives the revenue of Sogou ’s other business segments. Behind this, we also see the rapid development of Sogou intelligent hardware supported by AI technology.
In March 2019, the AI recorders C1 and C1 Pro launched by Sogou became the mainstream e-commerce platform sales champions in a short time. Although there is a view that the market for voice recorders is very small, perhaps the capacity is insufficient. In this regard, Sogou CEO Wang Xiaochuan said that compared to mobile phones, the recording pen is indeed a professional niche, but with the injection of AI, it will become different and the industry will be redefined and rejuvenated. .
Public data shows that after several years of development, in the first quarter of 2020, the AI voice recorder category has accounted for 35% of the overall voice recorder market, and the trend of AI in the voice recorder category is obvious. In our view, the current smart hardware market is still in the early stages, and there will be a lot of room for growth in the future.
In addition, it is worth noting that Sogou has also opened Sogou dictation services to the industry, and has established AI innovation alliances with Sony recorder pens, Patriot, Newman and other recorder pen hardware manufacturers to explore business models based on AI services and lead the entire recording The pen industry has been upgraded to the AI era. This will help Sogou to accumulate more development experience in the field of AI intelligence in the early days of AI intelligence hardware.
3. AI technology continues to break through Sogou and continues to strengthen ecological barriers
The role of AI in the development of the entire Sogou business is becoming more and more obvious. While achieving a steady development of the core search business, Sogou is constantly empowering the industry through AI technology. As mentioned above, in search, through differentiated content service ecological exploration cooperation, at the same time, Sogou also uses medical as an entry point to explore intelligent triage opportunities, on this basis, through AI Sogou is accelerating the implementation of language-centric AI strategy.
Sogou has made comprehensive breakthroughs in language-centric technologies such as speech, vision, translation and question answering. On the one hand, Sogou's unique avatar technology has ushered in a major upgrade of real-time conversational virtual humans, which has been applied in media, law, finance, and arts. On the other hand, Sogou simultaneous interpretation technology introduced OCR recognition technology for the first time in the industry, which greatly improved its influence in the industry. At present, Sogou simultaneous interpretation has become the designated translator for dozens of large conferences such as T-EDGE Innovation Conference and World Internet Conference.
It can be seen that Sogou has opened up all business lines through AI, and achieved a comprehensive connection between online and offline, constantly strengthening its own ecological barriers. For example, the practice in AI medicine is a good example. There is no doubt that AI is becoming a strong competitive advantage for Sogou in the future.
Under the development trend of 5G + AI, the "soft and hard integration" strategy has sustained growth momentum
Whether it is at the moment or in the future, we cannot deny that AI is becoming an important role in the development of all walks of life. With the collision of 5G and AI, more sparks are destined.
Data show that the scale of China's artificial intelligence market in 2018 was about 33.9 billion yuan, with a growth rate of 56.2%. It is predicted that China's artificial intelligence market will exceed 70 billion yuan in 2020. After the 5G commercial gradually landed, it will also create more conditions for the realization of AI scenarios. This is a natural advantage for Sogou. Sogou's "soft and hard integration" strategy is a good fit for the development of the AI era, as it turns out.
Data shows that while Sogou maintains steady growth in its core business, it has maintained a growth rate of over 20% for hardware products for two consecutive quarters. It is undeniable that smart hardware has become Sogou ’s third pole beyond search and input methods. Sogou brings new growth points. The more crucial point is that Sogou's layout in terms of intelligent hardware. Sogou CEO Wang Xiaochuan said that the AI recorder is just the starting point of Sogou in the field of intelligent hardware. Sogou will pay attention to all traditional hardware products that may be enabled by AI. This means that AI smart hardware is just getting started for Sogou. It is at the stage of continuously making its own cake. As the model is continuously verified by the market, smart hardware will definitely bring more revenue to Sogou in the future.
At a time when Internet medical care is becoming more and more important, actively improving the vertical medical scene will continue to improve the user experience, thereby increasing user stickiness and achieving a virtuous circle. During the epidemic, Sogou innovated in search, information flow, and AI medical services. The dozens of network services launched have achieved immediate results, and this is well verified. At present, the total number of visits of these products has exceeded 560 million times. At the same time, the search volume of Sogou Medical has increased by approximately 100% year-on-year, and the online consultation of its own intelligent triage system has increased by approximately 400%. As the number of visits increases, not only the AI medical field is increasing, but the search is also feeding back in this process, forming an effective cycle and providing continuous development momentum for the search and the layout of the medical field.
In general, under the future development trend of 5G + AI, Sogou ’s search and intelligent hardware business are being given more possibilities. At the same time, the current financial data also proves that Sogou ’s "soft and hard integration" strategy is available. With sustained growth momentum, the future upside is worth looking forward to. AI is gradually becoming the core driving force of Sogou. Perhaps this is also the best answer to why Sogou can go against the trend against the backdrop of a macroeconomic slowdown.
Source of this article: American Stock Research Institute, please indicate the copyright
