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Tencent
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Tencent’s US$2.1 billion buyout of online search service Sogou could supercharge WeChat, analysts say

  • The proposed deal follows Tencent plan to invest around US$70 billion over the next five years in new digital infrastructure
  • Tencent, which runs the world’s largest video games business and China’s biggest social media platform, has moved to raise fresh capital up to US$20 billion

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Sogou had a 22 per cent share of China’s online search market at the end of June this year, behind the 66 per cent share of long-standing industry leader Baidu. Photo: Shutterstock
Iris Deng

Internet giant Tencent Holdings’ proposed US$2.1 billion buyout of Sogou, China’s second-largest online search service, could help supercharge its WeChat app, while shaking up a market long dominated by Baidu and fending off potential competition from ByteDance, according to industry analysts.

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Tencent, currently Sogou’s biggest shareholder, on Monday made a preliminary offer to take the company private, proposing to pay US$9 a share for 61 per cent of the search engine operator it does not yet own. Beijing-based Sogou said in a statement on Monday that it had not made any decisions regarding the offer, while its Nasdaq-listed parent Sohu said in a separate statement on the same day that it has not reviewed or evaluated the buyout deal.
The offer seems to indicate aggressive plans to further integrate Sogou’s search engine into Tencent’s multipurpose messaging and social media platform WeChat, according to Mark Natkin, managing director of Marbridge Consulting in Beijing. Super app WeChat, which has more than 1.2 billion monthly active users, has long been using Sogou as its default search service.

“WeChat is probably the first app most Chinese internet users open in the morning, and the last one they check before bedtime, so it has the potential to be an extremely effective channel for search queries,” Natkin said. He added that Tencent’s full control of Sogou would make integration easier and allow the internet giant to enjoy all the profits that such combination of resources might generate.

Shenzhen-based Tencent declined further comment beyond Sogou’s statement on Monday. A Sohu representative said it did not have more information beyond its recent public statement.

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