The Most Popular Chinese Input Software Sogou Sees The Next Opportunity in Hardware

Sogou, the Chinese software developer under Sohu, turned ten earlier this month. Sogou was a search engine when it launched ten years ago, but would become a household name as a Chinese language input application, Sogou Pinyin which was launched in 2006. The company now is venture-backed by Tencent. Both Sogou CEO and Sohu CEO mentioned they wanted to bring Sogou public in the U.S..

The company rolled out a web browser in late 2008, channeling Sogou Pinyin users to it, and monetize users and traffic through advertising on the start-up page of the browser, search marketing (Browser users are more likely to use the default search service on it.) and gaming (revenue shares from third-party games listed on its browser).

In the second quarter of 2014, Sogou made US$91 million in total revenue, an 82% year-over-year increase. The company has turned profitable since the first quarter this year.

Qihoo 360 is another Chinese Internet company that has successfully monetize a user base gained through a free software product with this approach — Almost all Internet security products were sold at prices that were pretty high to Chinese consumers when Qihoo decided to stop charging its own service.

Before Qihoo launched its own search engine in 2012, Sogou touted that its monetization approach was a combination of Baidu’s (search marketing+hao123 browser start-up page) and Qihoo’s (browser landing page + gaming). But Qihoo would surpass Sogou in search immediately after So.cn was launched later that year thanks to its dominance in browser market — Yes, in short, the monetization approach well-recognized in China is all about taking advantage of users’ insensitivity to, or ignorance about, which Internet products they’re using.

Anyway, Sogou Search, then the third-largest in China, performed better than Soso, the search brand under Chinese Internet giant Tencent, in both traffic and monetization. Tencent finally decided to make a strategic investment in Sogou last year and let the latter take over Soso. Two months ago, WeChat content, including public accounts and articles, became available with Sogou. It is expected Sogou Search will be on more Tencent’s social services.

According to CNZZ, an online data service, Sogou Search and Soso had a combined 15% market share and Sogou browser had a 6% share as of July 2014.

The next battlefield is mobile. Sogou released a mobile search app in May this year.

Also, the company has been developing more technologically advanced input method. Sogou has been developing voice input since 2011, for the traditional input method cannot work with the newly emerging devices which have smaller screens or don’t have screens at all.

Wang Xiaochuan, CEO of the company, said at 2014 TechCrunch China/TechNode event today that the next big opportunity for the company may be in health hardware.