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Tencent Beats Qihoo and Baidu to the Punch

http://www.fool.com/investing/general/2013/09/16/tencent-beats-qihoo-and-baidu-to-the-punch.aspx

Rick Munarriz
September 16, 2013

The Chinese search engine market just got a lot more interesting.

Mobile gaming and online chat giant Tencent is shelling out $448 million for a 36.5% stake in Sohu.com's (NASDAQ: SOHU) majority-owned Sogou platform.

Sogou is a distant third in China's search market, but it was widely assumed that Qihoo 360 (NYSE: QIHU) would be the one gobbling it up to have a clearer shot at market giant Baidu (NASDAQ: BIDU).

Sohu's stock naturally opened higher on the news. Qihoo's shares opened lower. The moves make sense. Rumors were swirling earlier this summer that Qihoo would pay up for Sogou, and now Sohu's scoring a major investment without having to give up majority control. Qihoo will now be destined to remain a distant second in this race.

The only marginal surprise here is that Baidu opened slightly higher on the news. It's true that Qihoo becomes a weaker competitor without Sogou to leverage its recent monetization initiatives. However, won't Sogou become a force to reckon with here?

Qihoo was able to get up to speed so quickly in search -- from zero when it launched last summer to as much as 15% of the market by som