A source from investment industry told Sina Tech that Sohu looked to sell Sogou. Baidu, Qihoo and Tencent showed interest with Qihoo being the most eager and Baidu offering more favorable a price. Qihoo offers cash and stock and values it at US$1.4 billion (Update: it is reported that Qihoo offered $400 mn cash and $1 bn worth of stock (in Chinese)) while Baidu is able to offer more cash. (in Chinese)
Some think the rumor is way far from possible considering the US$1.4 billion price. The reasoning is that Sogou was valued at only US$237 million when it bought back the stake Alibaba was holding in mid-2012.
So another possibility is Sogou intends to raise a series of funding before the long-planned IPO. It was reported that Sohu board hoped to see Sogou go public at a valuation of US$2 billion — close to US$1.4 billion.
Either way, Wang Xiaochuan, CEO of Sogou, prefers Qihoo while Charles Zhang, CEO of Sohu and boss of Wang, likes Baidu, according to the Sina Tech article.
Sogou, like Baidu, started as a search service. But it gained hundreds of millions of users through Sogou Chinese Input Method and managed to monetize the user pool by adopting Qihoo’s business model — channeling users to a browser developed in-house and monetizing the traffic through directories and the search service. Sogou generated US$39 million in revenue in Q1 2013, up 73% year-over-year and down 4% quarter-over-quarter.
Although Sogou saw significant increases in revenues in recent years, its search market share has never been more than 10%. By contrast, Qihoo, with a similar size of user pool to Sogou’s, caught on quickly. Launched as recently as last August, Qihoo search service So.com now has an approximately 15% market share, according to CNZZ, an independent Web data service. Qihoo’s So.com aims to take more than 40% of China’s search market to 2015, president of Qihoo declared early this year. Now Baidu’s share has decreased to less than 70%, CNZZ shows.
Updated: Wang Xiaochuan, CEO of Sohu, admitted that they were in talks with Qihoo on potential financing, but no written agreement was reached on May 11th.