Although the terms of the agreement have not been finalized, Sohu said in a statement Monday it planned to sell a 16 percent unit in its search engine Sogou Alibaba and funds belonging to its President Jack But another 16 percent would be sold to a fund managed by Sohu President Charles Zhang.
The Chinese search market is already dominated by Baidu, which controls 70 percent, according to research firm Analysys International in Beijing. Google is second at 24.2 percent, while search engine Sohu controls only 0.8 percent of the market.
But even if market share is low Sohu, the offer could make the company’s search engine better competitor against larger rivals, said Li, an analyst at Analysys. Alibaba resources with strong e-commerce businesses can help to develop search engine and to attract more users of their services, he added.
“At this stage it cannot compete with Baidu, Sogou,” he said. “But after That agreement will be able to compete with these other companies.”
Investing in search engine Sohu Alibaba could also provide greater exposure for their services and compete with Baidu, which has its own e-commerce activities. In January, Baidu announced that together we plan to build what would be the largest online shopping mall for Chinese users.
Alibaba is also the majority shareholder of Yahoo China, which offers search powered by Yahoo. The current Agreement with Sohu, however, has nothing to do with Yahoo in China, said a spokesman for Alibaba.