Sogou, established 13 years ago, is finally going public.
On Friday, Sogou filed a prospectus with the American stock Exchange, aiming to raise $600 million in a listing on the New York Stock Exchange at a valuation of about $5 billion. That’s about 1/5 of what weibo is today.
This is an important node for Sogou founder Wang Xiaochuan. He once said that he would not get married until the company went public.
Going public is not the end, and countless entrepreneurs have said so. And for sogou, it is really not the end. To go public, Sogou told a story similar to Baidu’s search advertising plus artificial intelligence.
By 2016, traffic costs were rising and Sogou’s profits were down more than 40 percent. That’s even if 38 percent of the search traffic comes from Tencent, its investor.
But it was still a symbolic moment, not just for Wang xiaochuan, who has always talked about going public, but for a particular generation of Chinese Internet companies.
Thunder, storm, sogou. They were born when portals were already listed, baidu, Tencent and Alibaba were already taking shape.
Their tail in the PC era grabbed millions of users with software, and they soon faced the painful transition from PC to mobile. They missed the Nasdaq dotcom bubble and did not wait for the rise of venture capital. They stand out with a great experience and become synonymous with bundled software in order to make money.
Sogou was the last to hit the market.
In the 2000s, the Internet spread rapidly, and software tools became the gateway to the Internet
At the beginning of 2000, sina, Sohu and netease, the three major web portals, were the largest Internet companies in China, with a combined market value of about $1 billion. That was during the rapid spread of personal computers and broadband Internet in China. For users who have just come into contact with the Internet, the portal is the first stop for most of them to get information online.
Mr. Li returned to China in 2000 to found Baidu inc., which initially provided search services for major web portals, charging a fee based on the number of visits. A year later, Baidu began to do a separate search engine, bidding rankings.
It didn’t take long for the portals to realize they had created a competitor in the online advertising market and pull the plug on Baidu. 3 big portals each started his search project, but only sohu search dog alive today.
Baidu, which went public in 2005, saw its shares rise 300% that day, making it worth more than the three portals combined. After Google pulled out of China, Baidu dominated the search market.
Sogou survived because it has a differentiated product with others, input method.
But Mr. Wang said sogou was already very passive, and Baidu’s successful listing had exhausted the enthusiasm of Sogou employees. Sogou, according to zhang Chaoyang’s view: the plane began to totter to fall to the ground.
That’s when they came up with an input method. Sogou already has search, knows what people like to type in the search box, and that information can eventually be reused into a thesaurus of input methods. This perception stems from Wang’s technical background. He won the Gold medal in The Mathematical Olympiad of information science in high school. After graduating from the computer department of Tsinghua University with a master’s degree, he went to work for Sohu and set up Sogou at the instruction of Zhang Chaoyang.
After the input method was made, Sogou also chose to cooperate with Tomato Garden, the largest pirated Windows distribution team in China, in order to expand the market as soon as possible.
Most people don’t have the habit of remembering urls. Today you can click on an app on your phone, but a dozen years ago the easiest way to start a new website was probably to just memorize a search engine, type a few words in the search box, and then jump to the destination page.
Baidu controls the entry point to search, while Sogou is increasingly dominating the Chinese input market, and you can almost always find it on the annual “must-have list”.
It features a large thesaurus, word frequency memory and associative functions, and is much better than the default Chinese input method on Windows XP. Google China’s Pinyin input method was also found to have stolen sogou thesaurus and later deleted. This shows the technical ability of sogou input method in a side.
Similar sogou so, solve the Windows system with software is too difficult to use the problem of thunder, storm, 360 and a series of software.
The feature of Baofeng video is that it supports multiple video formats and is easy to use. In the case of similar functions of other competitors, Baofeng has the advantage of being first. Whether it is RMVB, MP4 or any other audio package format, it has become the consensus of most people to download Storm video.
Zhou Hongyi’s Qihoo 360 is the latest of them all. In his early years, he was busy developing browser-based plug-ins, and a lot of rogue software was forced onto users’ computers without their knowledge or even their will.
After turning to companies like 3721, Yahoo China and IDG, Zhou took over Qihoo in 2006, launched a beta version of 360’s antivirus software a year later, and quickly conquered a market previously dominated by Kaspersky, Rising and Symantec by offering it free forever.
Sogou, Baofeng, Thunderbolt, 360, these companies provided the best products in their respective fields at that time.
But the best tool is not equal to can receive money directly, made rascal software then
Feng Xin is the founder of Storm technology, his early years in lei Jun’s Golden Hill software to do sales.
Feng quit his job in 2005 to start his own business and set up two companies. One is a hot video, do player, the other is a plug-in company, two or three months made 1 million. After getting more than $3 million in financing from CAI and IDG, Feng acquired Baofeng video and formed Baofeng Technology in 2007.
Haojie super resolver is a competitor of Baofeng, which entered the player market earlier than Feng xin’s company. The simple interface, few functions but small occupation of resources, and supported media formats are mostly users’ comments on the early years of Storm video. By contrast, super desktop has many functions, luxurious interface, but occupies many resources.
Another user tag for Storm video is Omnipotent. Because it can broadcast almost any format of audio and video. For users who don’t want to mess with their software, Stormwind video meets their core needs and gives them a sense of its breakthrough.
One thing that probably tells you a lot about the scale of the storm video. On the night of May 19, 2009, China Telecom’s broadband network suffered a nationwide failure. Officials announced the cause of the failure the next day, believing that The storm sent too many requests to telecom’s DNS server, which caused the failure.
But being the best tool doesn’t mean a company can take money directly from users. Video players don’t have the ability of portals and search engines to sell ads directly based on traffic. Therefore, in the process of commercialization, Baofeng chose to compromise the product experience to the advertising revenue. They added a lot of pop-up ads to the product, which slowed down the software. When the user chooses another player as the default application, Storm will change the file association to its own without the user’s knowledge.
This behavior against the will of the user becomes the common denominator of that class of utility applications. Advertising, for example, was originally the main source of Revenue for Xunlei. It tries its best to cover all its services and programs with pop-ups and page ads – Xunlei main program, dog search, Xunlei look, web games, security assistant and so on.
Sogou’s practice is in user installation input method default binding installation sogou browser. And, when the user inputs some words in other search engines, sogou input method often appears to have associated the results, but it is not displayed in the candidate words, but the drop-down bar shows the associated results, click the results will jump to Sogou search.
This is Wang Xiaochuan “three rocket” theory, namely input method with browser, and then drive search, finally in the search cash. Each of them is to induce users to use other sogou products.
Given the choice between chasing growth and remaining a good tool, each of these companies chose growth at the expense of user experience.
In the wave of mobile Internet, most tool companies are facing serious transformation problems, 360 has gone furthest
Today the world’s biggest Internet companies have solved the biggest problems in their respective fields – Google provides the best search engine, Amazon and Alibaba are the biggest retail platforms in the world and China respectively.
The same was true of the Internet in its early years. The period from 2000 to 2005 saw the rapid spread of personal computers and broadband Internet in China, with the total number of Internet users rising from about 22 million to 120 million and the number of connected computers jumping from 9 million to 50 million. Over the past five years, portal sites have attracted users curious about the unknown Internet, and search and social networking have gradually taken over the attention of users.
Then, in the gap before the mobile Internet took off, computer-tool companies caught up with a huge opportunity for the poor Windows user experience. They were so successful because of their affinity with PCS that Qihoo 360 was able to directly fight Tencent in a battle over computer security software.
In 2010, the “3Q war” between Tencent and 360 broke out. The battle began in February 2010 when Tencent launched QQ Doctor, a computer security product with nearly identical functions to 360’s Security Guard. In response, 360 launched “QQ Bodyguard” to remove advertising blocking and other changes to QQ software.
On the night of November 3, 2010, Tencent asked users to stop running QQ on computers equipped with 360’s security software and asked them to “choose one of two options”. The purpose was to take advantage of the social relationship control they had developed over the years and stop compatible with 360’s security software. Later, the Ministry of Industry and Information Technology intervened and coordinated the software of the two enterprises to restore compatibility.
The two sides stopped fighting at the business level, but started a new battle at the judicial level. They are suing each other for unfair competition and anti-trust. Among them, Tencent sued 360 for two unfair competition cases, winning compensation of more than 5 million yuan. In October 2014, China’s Supreme Court rejected 360’s claim against Tencent for unfair competition. The 3Q war is officially over.
But the year of the 3Q war also coincided with the rise of the smartphone in China. IPhone 4 was a hot seller in China that year. Samsung and HTC quickly took over half of the middle and high-end Android smartphone market in that year. Xiaomi led a group of Chinese smartphone brands to seize the 1000 yuan smartphone market, and mobile phone manufacturers let Android system occupy more than 80% of the market share of China’s smartphone market.
Users are also shifting their attention from computers to mobile phones, and countless Internet companies are starting to find life there.
In 2011 and 2012, The number of Android phones sold in China grew from 50 million to 200 million. But Google had already pulled out of China by then, and fast-growing Android phones lost their official app store.
In 2012, 360 launched mobile assistant. Then Baidu, Tencent giant also began to enter this market strongly. In 2013, Baidu bought 91 Wireless for $1.9 billion, pushing 360 from the top spot in the app store market to second place. A year later, qihoo 360, which had been pushed into third place by Tencent’s app store, launched its own phone.
Tencent is the only global PC software company to maintain a monopoly in the original sector in the transition to Internet services. The new 360 is still relevant to users, but it doesn’t have Tencent’s 90 minutes of apps a day.
Even after the ipo, the operation will not be easy
Download software played an important role in the early days of the Internet in China, delivering the web’s vast array of resources to millions of personal computers. At that time, the Internet speed of most Chinese homes was still at 512K-2m, unlike today when most people’s networks have been upgraded to 50M or 100M.
Seized the rapid popularity of broadband Internet in China, relying on faster download speed to become one of the preferred applications installed.
Thunderbolt technology advantage is to use the Internet resources offered by other server to download, such as the users to download A software, the software on A website, users downloaded from A website, B sites in the same resources at the same time, the thunder can download it from B site, thunderbolt automatically matching the fastest download server for the user. From the user’s use results, is to improve the download speed.
The leader at that time, Internet Express, was said to have stopped updating for a year because its founder was addicted to World of Warcraft, and its market share was quickly occupied by Thunderbolt. By August 2006, the three-year-old company announced that it had more than 100 million users and set the goal of going public in 2008.
In 2008, Thunderbolt obtained $11.86 million in advertising revenue, accounting for 70%. A year later Xunlei launched its own membership system, officially starting a payment plan for xunlei’s system — paying users enjoy faster download speeds and can remove ads. After the member system is online, Xunlei has the most direct business model, subscription income from members has gradually replaced advertising to become the most important source of income.
But the failure of the 2011 IPO was a major blow to Xunlei.
“There was a lot of interest in Thunder capital, but very little willing to buy.” Cheng Hao said.
Zou Shenglong, another founder, says xunlei began considering an IPO in late 2010. In February 2011, xunlei’s pre-roadshow was valued at $1.5 billion to $2 billion, in line with the company’s expectations, so it began to formally plan to list on nasdaq.
But then a series of events took place that sparked capital markets’ trust in Chinese concept stocks. For example, the financial scandal of Longtop and the credit crisis caused by Ma Yun’s private transfer of Alipay equity from Alibaba to his personal company. Xunlei itself has faced film and television copyright lawsuits and investor confusion over its business model, with capital markets assuming it is an online video company.
The underwriters of the offering also said at that time whether they would delay the offering. Finally, many things focused on a time to break out, prompting the withdrawal of Thunder listing application. Thunder because of the concept of the stock market cold abandoned the listing, and its decision has become the Chinese concept of the stock listing cold landmark event.
After 2011, in order to go public, Xunlei began to deal with copyright issues and filter pornographic content, some of the most demanding and sensitive users for download speed began to flow to competitors or alternative services, such as QQ whirlwind or network disk, online streaming media services. After three years of waiting, Xunlei fixed the remaining problems and successfully listed on NASDAQ.
Subscription services, which allow users to speed up downloads, remain Xunlei’s main source of revenue. But the business story That Xunlei wants to tell is cloud computing and short video services for mobile phones.
Similarly, baofeng technology and 360 listed operation are not easy.
Baofeng, which also considered going public in 2010, opted for a domestic listing. According to baofeng’s investors, the reason for this is that the users of Baofeng are in China, so only domestic investors know about Baofeng, but americans do not. Second, at the beginning of gem, the valuation of listed companies was very high; Third, Baofeng was profitable at that time and reached the standard of domestic listing.
After deciding to go public in China, Baofeng adjusted its shareholding structure to meet the requirements of the China Securities Regulatory Commission. But after Feng filed for an IPO, the CSRC suspended all ipos in 2012. Storm has to wait, and continue to make sure profits grow every year.
Then Baofeng’s earnings fell in 2013. They wouldn’t have been able to go public under the old rules. But the requirement for continuous profit growth was lifted at the end of 2014 and Baofeng was able to list on chinext in 2015.
Zhou Hongyi’s 360 has been listed and delisted in the US. “Qihoo’s current market value of $8bn does not fully reflect qihoo’s corporate value,” Mr Zhou said in an internal email to employees.
$8 billion is about 60% of 360’s market cap at its peak, which is a lot lower. At that time, however, the Internet had already shifted to mobile phones, and in addition to giants such as Tencent and Baidu competing with 360 for the app store business, other mobile phone manufacturers were also operating as both app stores and security centers. 360’s business model has really run into big problems on mobile phones.
Today, they tell a new story
Now these companies have new stories of their own.
“No one doubts Sogou’s survival. The only question is whether Sogou can revolutionize search and lead major innovations in artificial intelligence.” Wang xiaochuan said in an internal letter.
This is too similar to baidu’s story, except for its size.
Baidu has been touting its investments in artificial intelligence, O2O and autonomous driving in recent years. But these stories have not changed the market’s view of it, once because of the advertising growth crisis shares plunged. Only when its advertising revenue rebounded and its cash flow stabilized did the market begin to accept its story.
Sogou is far behind Baidu in terms of the number of advertisers and the amount of money each customer puts in.
Storm video software is still updating, but the company is already talking about transforming into an Internet TV company. Like LeEco, it also invests in virtual reality, film and television rights, wealth management products and small loans through a series of unlisted affiliates. Another ecological story.
Xunlei is talking about the popular cloud computing and mobile short video services. Its share price is a third of what it was when it went public.
Less than a week after Sogou’s prospectus was issued, qudian, a three-year-old campus loan company, went public on Nasdaq, raising half as much money as Sogou and now worth 30 times Xunlei’s.