On July 27, according to foreign media reports, Tencent issued a preliminary non-binding tender offer to Sogou. It is reported that Tencent plans to acquire Sogou's remaining shares at a cash price of US$9 per share. Once the transaction is concluded, Sogou will become a private indirect wholly-owned subsidiary of Tencent, and Sogou will be delisted from the New York Stock Exchange. After this news came out, Sogou's closing price that day was 8.51 US dollars, an increase of nearly 50%.
Sogou was originally a search engine platform launched by Sohu and a subsidiary of Sohu, dedicated to providing users with efficient and fast search services. Sogou's main business includes products such as search engines, browsers, and input methods. In 2004, Sogou was spun off from Sohu. On November 9, 2017, Sogou was listed on the New York Stock Exchange with an issue price of US$13. It closed at US$13.50 on the first trading day, an increase of 3.85% and a market value of 5.29 billion. US dollars .
According to industry insiders, Tencent's "love" for Sogou has a long history .
In September 2013, in order to consolidate and strengthen Sogou’s position in the Chinese search market and mobile Internet, Sogou and Tencent reached a strategic cooperation. Tencent invested US$448 million in Sogou and merged its Tencent Soso business and other related assets into Sogou. Sogou.
After the transaction was completed, Tencent immediately acquired a 36.5% diluted stake in Sogou. After Tencent's investment, Sohu and its related parties are still Sogou's controlling shareholders, and Sogou will continue to operate independently as a subsidiary of Sohu. After the capital injection, the cooperation between the two companies at the business level also kicked off.
On June 10, 2014, Sogou Search announced that it had officially accessed WeChat official account data. Users can query and browse WeChat official account articles on the Sogou search page, which is an important source of traffic for Sogou Search.
As of press time, Sogou's market value has soared to 3.353 billion US dollars. According to Tencent's planned acquisition at a cash price of 9 US dollars per share, Tencent will pay more than 10 billion yuan for the acquisition of Sogou.
What does Tencent map?
Tencent has always been obsessed with search .
In March 2006, Tencent Soso (SOSO) was officially released and started operations. It is mainly responsible for all Tencent's search business and is an important part of Tencent's overall online life strategy. Tencent's co-CTO Xiong Minghua once said when launching Soso, "We are a green commercial platform, and there will be no advertisement in Soso's search results."
Tencent initially reached a cooperation with Google China, and Google provided technical support for Soso. However, in 2009, Tencent launched its self-developed web search engine and no longer continued to cooperate with Google. The following year, Tencent announced the establishment of the SOSO Search Division, which already has multiple search and client product lines. After several years of development, Soso has not achieved any amazing results in Tencent's business map.
In May 2012, Tencent announced the adjustment of the group's organizational structure, and the Soso department was split. After Tencent invested in Sogou in September 2013, Soso was merged into Sogou Search, and the SOSO brand disappeared.
Aside from traditional search engines, the rise of some emerging search engines also puts Tencent under pressure in this area. At the end of February this year, after half a year of testing, Bytedance launched the "Headline Search" independent app.
The search business in China is developing rapidly and competition is fierce. After many tossings, Tencent is nothing more than trying to get a share of the "profitable" search business .
In addition, some analysts believe that Sogou has always had its own advantages in technology, and its technical capabilities such as Sogou input method and AI are also at a relatively high level in the industry.
As early as September 16, 2013, when Tencent invested US$448 million in Sogou, Ma Huateng once said that Sogou has strong commercial liquidity and large traffic, and has a large scale effect. Tencent competes viciously with Sogou in related fields. , It’s better to join forces to expand the market; Tencent’s Soso and desktop browsers are weaker than Sogou, but the mobile phone QQ browser is very strong, and the search on mobile phones ranks second in China. The cooperation between the two parties can open up each other’s strongest platform. In the end, the effect of 1+1 is greater than 2 will be achieved, and the linkage of PCs and mobile phones will be more significant and the market share will be more significant.
A business where no one loses money
In May 2020, Sogou released its unaudited financial report for the first quarter of 2020. According to the report, Sogou's revenue in the first quarter was 1.79 billion yuan, a year-on-year increase of 5%. Among them, search and search-related revenue was 1.658 billion yuan (238 million US dollars), a year-on-year increase of 1%. Auction-style pay-per-click services continued to grow year-on-year, accounting for 91.0% of search and search-related revenue, compared with 87.2% in the same period in 2019 ; Other income was 138 million yuan (20 million U.S. dollars), an increase of 6% year-on-year, mainly due to the increase in sales revenue of smart hardware products.
Some analysts believe that if the acquisition is successfully completed, it will be a win-win transaction for Tencent and Sogou. Sogou’s three major business sectors are search, input method and AI. Financial report data shows that the input method business is currently Sogou’s main source of income. After the wholly-owned acquisition, the two are expected to achieve better business coordination in AI and other aspects; in addition, Sogou can also be privatized and transferred to the science and technology innovation board to obtain higher valuation and capital operation space.
Sogou’s head Wang Xiaochuan also reposted the acquisition-related news in WeChat Moments, and wrote, “Thanks to Tencent for its recognition of Sogou’s value, technical capabilities, and product innovation capabilities. Next, we will conduct serious discussions and discussions on related matters. Measurement, so that Sogou can continue to create greater value for users." From his words, it can be seen that he is also looking forward to this acquisition.
According to Sogou insiders, this acquisition is almost a certainty. Almost 7 years have passed since Tencent's last capital injection into Sogou, and the "inexhaustible" connection between the two companies should have a result.