Qihoo 360 CEO: Our Mobile Business Model for Chinese Market Can Hardly Work Overseas

image: Qihoo 360
image: Qihoo 360

When asked about the overseas expansion on the earnings conference call for Q1 2014, Zhou Hongyi, the CEO of Qihoo, said he didn’t the mobile business model built for the domestic market can work in the overseas markets. He said the company would expand to several selected countries such as Brazil, where it has had a joint venture, and populous India.

An English version of Qihoo’s flagship security product was launched a little less than one year ago. A series of mobile apps has been in place too. Apart from a couple for mobile security, 360 Security and 360 Safe, there are another two, 360 Clean Droid (a cleanup app) and 360 Vault (a privacy protection app). The company also invested in and built a joint venture with a Brazilian anti-virus company.

Qihoo monetizes users of its mobile security app with a self ran Android app store, through advertising, revenue shares from third-party games, among others. Because of the absence of Google Play in China, the third-party Android stores like Qihoo’s became possible. Qihoo claims it’s the largest mobile game distributor in China — all the distributions are through the app store. Mr. Zhou admitted that without the app store they couldn’t monetize the user base so efficiently.

Cheetah Mobile (formerly a Kingsoft subsidiary), one of Qihoo’s major competitors in China, chose to start international expansion with other products. Fu Sheng, CEO of the company, claimed that Clean Master, a cleanup app, had had 100 million users overseas at the end of 2013 . With big numbers like that, the company launched IPO on the NYSE earlier this month. But some industry insiders think, no matter how large a user base it will have, it’d be very hard to monetize Clean Master, for you cannot show any ads or any other noisy information since the app is for eliminating what’s unneeded in the first place. Mr. Zhou said the same thing on the conference call.

Cheetah Mobile, of course, may figure our a way to convert the Clean Master users to its mobile security solution, CM Security. But how to monetize that then? According to Mr. Zhou, you need a third-party app store, but it cannot work well in the world where everyone has access to Google Play.

Zhou also thinks global marketing channels, who are more knowledgeable about different markets, are important for promoting self-developed apps overseas. He pointed out that’s why they’d partner with Sungy Mobile: leveraging the Android launcher, which is well-recognized by the Chinese tech industry as an “entry-point” service on Android, by Sungy Mobile — But there’s rumor that the major cause was instead that Cheetah Mobile had been in talks with Sungy Mobile on a similar partnership.

What’s true is Cheetah Mobile, who moved earlier than Qihoo in the overseas market, have paid much marketing dollars with those channels, such as mobile advertising networks, to acquire users.

Mr. Zhou concluded what will continue to drive Qihoo’s revenues will still be the domestic users. For the same number of users in China or in overseas markets, the Chinese can be easily monetized through existing monetization approaches while monetizing users in various markets cannot be so “efficient”.