Qihoo Threatens to Cut into Baidu's Chinese Search Pie

Chinese search engines Qihoo and Baidu battled it out on the stock market on Thursday, when Qihoo 360 Technology threatened to cut into a piece of the Baidu pie. Some predict that this will pose a major threat, while others think that the threat is not as great as it is perceived to be.

Qihoo is a Chinese provider of browser software and security and with 272 million users of its software, launching its own search engine is making Baidu and its investors uneasy, for good reason. The big question seems to be whether or not Qihoo will be able to convert those 272 million software users into search engine users; if they do, Baidu’s stocks will be taking a major plunge.

The difference between the two search engines, according to analyst at Beijing-based T.H. Capital, Tian X. Hou, is that Qihoo has a results page that is “clean cut without any advertisements”. He went on to state that T.H. capital believes that this clean format “could draw users and eventually accomplish monetization”. So far, Qihoo has attracted more users than third-place competitor, Sohu.

On Sunday, Bloomberg Businessweek reported that Baidu lost four to eight percentage points of the search market share to Qihoo. Analyst at Deutsche Bank AG, Alan Hellawell predicts that this trend will continue over the next two quarters and changed the Baidu recommendation from buy to hold; however, analyst at ThinkEquity LLC offered some different insight, noting that “While Qihoo’s launch of search is a negative for Baidu, investors overestimate its potential negative impact”.

How the competition between the two Chinese search engines will play out is anyone’s guess. There are qualified financial analysts on each side of the debate, all strongly defending their own predictions. At this time, Baidu remains the largest search engine in China.

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