Sogou announced that it has reached a final agreement on the privatization transaction and will become an indirect wholly-owned subsidiary of Tencent Holdings. The transaction is expected to be completed in the fourth quarter of this year.
If the transaction is completed, Sogou’s ADS will no longer be listed on the New York Stock Exchange, and the ADS plan will be terminated.
It can be seen from the announcement that Sogou is a transaction agreement signed with three companies, namely THL A21 Limited, TitanSupernova Limited, Tencent Mobile Co., Ltd., and all three companies are currently directly or indirectly wholly-owned subsidiaries of Tencent Holdings Co., Ltd. .
Tencent will trade with Sogou in an all-cash transaction, with an estimated overall price of US$3.5 billion.
After the transaction is completed, Sogou will change the surname to "Ma".
Rejecting the 360 olive branch, Sogou finally married Tencent
Seven years ago, Sogou might not have expected this ending. At the beginning, it was pulled with various forces for independence, but now it has become a wholly-owned subsidiary of others.
But in fact, the first Sogou idea was not Tencent, but 360.
2010 was a year of changes in the domestic search engine landscape.
Prior to this, the domestic search engine market was firmly occupied by Baidu and Google for a long time. Data show that Baidu's market share in 2009 was 56%, while Google's market share reached 43%.
In the early morning of March 23 this year, Google officially closed the Chinese version of its search service. Domestic companies realize that this is a good opportunity to occupy a base. Zhou Hongyi and Zhang Chaoyang both have this idea.
Zhou Hongyi approached Zhang Chaoyang (the major shareholder of Sogou) and said that they should work together to give full play to their respective strengths and cannibalize the search market share left by Google and fight against Baidu.
As for how to give play to his strengths, Zhou Hongyi also has ideas. 360 has strong import and technical aspects such as the Sogou search engine, so the two can establish a joint venture company, with 360 accounting for 30% of the share. Sogou will do pure search, Sogou browser will be transferred to 360, 360 will do the browser.
At first glance, this business might sound like a win-win situation, but Wang Xiaochuan is not happy.
Therefore, Wang Xiaochuan went to Ma Yun secretly.
In this way, Alibaba became a shareholder of Sogou, and 360's hookup with Sogou was disturbed for the first time.
On August 9, 2010, through the introduction of Alibaba, Yunfeng Fund and Sohu CEO Zhang Chaoyang's private fund, Sogou was separated from Sohu independently, and Wang Xiaochuan served as CEO.
But in just two years, Ali and Sogou parted ways.
After breaking up with Ali, Zhou Hongyi found Zhang Chaoyang again, hoping to "continue the front line", but this time Baidu and Tencent came to Zhang Chaoyang.
Sogou naturally would not cooperate with Baidu, and finally chose Tencent.
As for why not choose 360, Wang Xiaochuan said:
Selling to 360 is to crush Sogou to nourish 360 to thrive.
In September 2013, Tencent issued an announcement on the Hong Kong Stock Exchange, announcing that it had signed a subscription agreement with Sohu and other independent third parties, injected US$448 million in Sogou, and merged Sogou and QQ input method business with Sogou's existing business.
Since then, Sogou has officially become the "godson" of Tencent.
But what the outside world did not expect was that after 7 years, Tencent also started to take Sogou's idea, wanting to acquire Sogou wholly and become Tencent's "pro son".
However, this time, Zhang Chaoyang and Wang Xiaochuan were very happy.
On July 27, Sogou announced that its board of directors has received Tencent's preliminary non-binding proposal-the purpose of this proposal is to acquire.
In response to the proposal given by Tencent, Sogou CEO Wang Xiaochuan said when reposting comments in Moments:
Thank Tencent for its recognition of Sogou's value, technical capabilities, and product innovation capabilities. Next, relevant matters will be carefully discussed and measured, so that Sogou can continue to create greater value for users.
On September 29, the acquisition was finally settled.
Tencent's search ambitions
From the perspective of the industry, it is inevitable and correct for Tencent to acquire Sogou wholly-owned at the moment.
On the one hand, Tencent needs Sogou.
As early as 2006, Tencent launched Soso to enter the search market, and in the second year cooperated with Kuxun.com to launch Tencent Soso classified search, providing life search for housing, train ticket and other life classification information.
In 2009, Tencent acquired the life search website Aibang. Baidu's first CTO and Aibang founder Liu Jianguo also joined Soso. After Google withdrew from China, Tencent also recruited many former Google talents, including Wu Jun, the former vice president of Tencent, and established the SOSO Search Division that year.
It can be said that Tencent has invested a lot of resources in Soso. In 2011, Tencent's former CTO Xiong Minghua stated that he had invested 1.2 billion yuan in research and development on Soso, and will continue to invest nearly 1 billion yuan in the next year.
But in return for such a return, SouSou was still stunned. In 2012, Tencent initiated the second organizational structure adjustment in history. In this adjustment, the Tencent e-commerce team was disbanded and the entire search department was broken up and reorganized.
The acquisition of Sogou can make up for Tencent's lost search business, while also maximizing the rational use of the resources of both parties.
In addition, Tencent has its own abacus in its search business.
In December 2019, WeChat search was upgraded to "Sou Yi Sou". Based on WeChat's own open ecology, "Sou Yi Sou" realized further content integration, connected to the content of the mini program, and launched the "service search" function and "brand direct" function.
In thinking about WeChat search, Zhang Xiaolong mentioned in the 2020 WeChat Open Class Pro speech:
Compared with the Web Internet, the mobile Internet apps are more fragmented, and information is difficult to connect and search. When we make small programs, we have a dream. We hope that search can enter every small program, so that a large number of small programs can support various long-tailed search needs.
Therefore, WeChat "Sou Yisou" intends to use the WeChat ecology as the chassis, using Tencent's external cooperation ecology and WeChat's internal open ecology to break the state of information islands and fully cover user search needs.
The addition of Sogou will make Tencent's search ecosystem a qualitative leap.
On the other hand, from Sogou's point of view, this is also a decision that has to be made.
A very important reason is that Sogou itself has encountered a bottleneck.
In the domestic search market, Baidu is still in an absolute monopoly. At the same time, Sogou's revenue is too dependent on search advertising, and its search business is too dependent on Tencent.
In the first quarter of 2020, Sogou's revenue was US$257 million, an increase of 2% year-on-year; the loss expanded to US$31.6 million, becoming the largest single-quarter loss since its listing.
Corresponding to this, Sogou's stock price has also been down for a long time. When it landed on the New York Stock Exchange in November 2017, the opening price reached US$13. Since then, the stock price has fallen continuously. In 2020, the stock price was only US$2.95 at its lowest, and the market value has shrunk significantly.
From the external environment, Sogou is still not easy. In the past few years in the domestic search market, Sogou still has not been able to compete with Baidu, and there are more new followers such as Toutiao and Ali.
Although Sogou input method occupies a considerable market share, as a tool-based APP, the monetization channels are quite limited. But if it is included in Tencent's huge ecosystem, the way to measure the value of this product will not only be limited to how much money it can make, but how much synergy it can generate with Tencent's other C-side businesses.
This is undoubtedly Sogou's best ending.
With Tencent's acceptance of Sogou, a new round of search wars among BATs also started.