Tencent Seals Search Deal With Sogou- What Does This Mean for Marketers?

Tencent has forked out $448 million to gain a minority stake (36.5 percent) on Sogou, China’s third largest search engine, in a strategic partnership to increase mobile search share in the country.

The partnership will see Sogou merging with Tencent’s Soso search and collaborate on data sharing, user insights, and search technology.

But how will Sogou and Tencent’s Soso partnership impact advertisers buying search marketing in China?

Initial reactions to the merger vary but most media execs agree that it’s business as usual with Baidu continuing to grab the lion’s share of search marketing dollars – for now.

Excerpts of the responses below:

Mandy Hou, Mediabrands Audience Platform, China Reprise director:

“Based on CNZZ’s August data, Sogou and Soso will have 14 percent market share in total, which is very close to Qihoo 360’s 18 percent.

From our point of view, 14 percent market share will make Sogou/Soso an important choice in search marketing for most clients, especially for those whose focus is ROI.

This merger may not increase bidding price on Sogou or Soso in short-term, but we expect to see more and more clients begin to invest on these two search engines, thus the bidding price may get higher in the future.

Baidu’s dominant position (70 percent market share) is not being seriously challenged yet while Qihoo will have to face more challenges from Sogou/Soso in the future.”

Antony Yiu, managing director for Key Clients, iProspect Asia Pacific:

“I think the partnership will definitely create a new dimension in search engine market in China. With the No.3 and No.4 players combining forces, the gap between them and Qihoo 360 will be narrowed. Also, with the technology being shared across the platforms, there is a potential that Baidu may see further erosion in their market share in China in the months to come.”

TR Harrington, chief executive at Darwin Marketing:

“Sogou provides a more matured search algorithm (due to Sogou running many more years in the China market vs. Tencent’s Soso) with better search result relevance than Tencent’s Soso.

Assuming Tencent combined these two entities, moving forward it would likely mean greater monetization for Soso in terms of share of advertiser dollars. Likewise, we think the potential tie-ins of Sogou’s Browser and Pinyin product could also be a driver of growing their share of search queries.

What will be most interesting is how this plays out in mobile, where Tencent has massive power based on QQ, WeChat and TenPay that could be combined in interesting and new ways on PinYin and browser products.

We also believe there could be even greater implications for online video where Sohu has been a very strong player but likely would struggle to compete with Baidu and Youku let alone Tencent. Now in conjunction with Tencent, this could have a relatively larger impact on online video vs. search.”

Mickey Zhang, general manager of GroupM Interaction in charge of search business:

In the short term, there won’t be a great impact to search marketing with Baidu currently receiving 90 percent of search marketing investment and very little for other search engines. The only impact we have is a few of our clients have invested in Soso and when Soso and Sogou merge, SoSo might not get any more investments.

Long term, if the search market share for the Chinese engines remain consistent for the rest of the year (based on CNZZ figures), then investment from brand advertisers for next year will continue to focus on Baidu and some experimental budgets for emerging search engines.”

Sohu states that Sogou Search and its Pinyin product will have direct access to Tencent’s “mobile social communities”, which suggests that Tencent might integrate Sogou’s properties to WeChat, its up and coming mobile social platform.

The Sohu deal on Monday has also quelled rumors from July that Qihoo 360, China’s second largest engine, will buy Sogou.

According to CNZZ August figures, Baidu continues to dominate China’s search share at 63.16 percent, followed by Qihoo 360 (18.23 percent), Sogou (10.35 percent), and Soso (3.62 percent).