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IT turf war escalates between Qihoo, Baidu

By Adam Skuse (Global Times)

10:05, June 27, 2013

Last week saw another salvo fired in the bitter war between China's leading search engine, Baidu, and security-and-gaming brawler Qihoo, after the latter posted impressive first quarter results following its incursion into Baidu's core search market.

Baidu responded with announcements that it would launch an antivirus suite for PC, then a few days later launched a beta version of a firewall program, Baidu Guard. Both are a direct attack on Qihoo's security software, whose popularity gives it a purported penetration of 95.8 percent, or some 457 million users.

The launch of the software has been largely seen as a swipe against Qihoo, with Baidu making much of the fact it will respect user privacy - Qihoo has come under attack in the past because of unfair practices, such as unauthorized collection of user data.

It also comes shortly after Qihoo posted impressive results that saw revenue up nearly 60 percent to $109.9 million for the first three months. The subsequent jump in Qihoo's stock price in New York pushed Qihoo's founder, Zhou Hongyi, into the ranks of China's billionaires.

Qihoo very publicly stepped on Baidu's toes last year with the launch of its own search engine. Its market share currently stands just over 10 percent, and Zhou aims to increase that to 20 percent this year. Qihoo recently announced a search partnership with e-commerce giant Alibaba, which could significantly help it achieve this goal, especially since Alibaba blocks Baidu searches of its product pages.

It is not just Baidu that is muscling in on Qihoo's territory. Qihoo arch-rival Tencent recently announced that the next update of its popular WeChat mobile messaging app will include security components. Zhou Hongyi responded with a thinly-veiled and bizarre attack on Tencent, saying how he would like to shoot penguins in the style of Keanu Reeves' character in The Matrix (Tencent's mascot happens to be a penguin).

This all follow the loss by Qihoo of two separate high-profile lawsuits brought against it by Tencent and Baidu respectively over unfair practices.

However, while Zhou's pugnacious nature is seen by many as a big part of the company's success - at least in its early years - his love of sticking his finger in the eyes of competitors may point to the company's lack of a mobile strategy. This is dangerous at a time when IT rivals are expanding into each others' territory, while Internet users are increasingly moving from desktops to mobile devices.

It is true that Qihoo has defended itself from attacks on its home turf before. Baidu once launched its own Web browser, which made no impact on Qihoo's own browser - which has a user base at 332 million and counting.

But the challenge for Qihoo is proving it has a defensible user base that will stick with its security and browser products on mobile so it can maintain its revenues from advertising and gaming.

However, the company's mobile products so far have struggled to take hold - its mobile browser has just 4 percent market share, compared to Tencent's 40 percent. Qihoo is also lacking core 'sticky' products that translate well to mobile - Sina has Weibo, Tencent has WeChat, Baidu has search and maps, and Alibaba has its various shopping platforms. Zhou would be better to resist his urge to pick fights, and instead focus on future-proofing his firm's products.

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