Internet companies slug it out

08:34, November 10, 2010      

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The high-profile spat between Chinese Internet companies Tencent and Qihoo 360 has not only angered millions of domestic users online, but also senior government officials.

Li Yizhong, minister of industry and information technology, on Tuesday criticized the companies' recent moves as "immoral" and "irresponsible". He said China's leaders are aware of the dispute and they hope the situation will be resolved soon.

"Entrepreneurs should have basic morals and always take care of the benefits of ordinary consumers," said Li during an interview on Tuesday. He said the Ministry of Industry and Information Technology (MIIT) has asked both sides to take a step back, adding that "any market competition should be made under the framework of laws and regulations".

Li's remarks, the first official response, came after Tencent announced last week that its popular instant messaging service, known as QQ, will not function on computers with Qihoo 360's software.

That triggered heated discussion and dissatisfaction among Chinese Internet users, especially those using both companies' software.

Tencent said that QQ has more than 600 million active users, while Qihoo 360 said its user numbers had surpassed 300 million.

Tencent's share price in Hong Kong fell by 3.1 percent to HK$181.3 ($23.39) on Nov 4 after the announcement that QQ is incompatible with the security provider's software. Its stock rebounded to HK$181.50 on Tuesday, 1.45 percent higher than Monday.

Liu Chang, vice-president of Tencent, told China Daily that she hopes government involvement will quickly bring an end to the dispute.

She said Tencent's peak number of simultaneous users did not decline after the spat, but noted that the company may suffer "intangible losses" due to "misunderstanding from users".

Tu Jianlu, spokesman for Qihoo 360, could not be reached for comment on Tuesday.

The tension can be traced back to September when Tencent encouraged users to download its upgraded security product, which Qihoo 360 sees as a threat to its anti-virus software.

Qihoo 360 later accused Tencent of allowing QQ software to scan its users' computers for personal data, and issued tools to block QQ components.

Tencent fought back saying that the 360 software was maliciously interfering with users' QQ accounts, and then, along with other four Internet companies, issued a statement criticizing Qihoo.

Li Zhi, an analyst from the Beijing-based research firm Analysys International, said it is unclear whether this unprecedented conflict in China's Internet industry will end quickly after involvement from the top.

"Although government involvement may ease the tension for a while, the battle between Tencent and Qihoo may continue in some other ways," said Li. But she said a long and tedious dispute may not benefit either company.

Last week, lawyers filed an anti-monopoly complaint against Tencent.

Zhou Hongyi, president of Qihoo, also said on Nov 6 that the tension with Tencent has resulted in Qihoo 360 losing about 20 percent of its users.

Li said that the timescale for the end of the dispute depends on how much the government intervenes.

Source:China Daily


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