Tencent Makes An Offer For Sogou
So Tencent wants to take out Sogou. Smart move.
https://techcrunch.com/2020/07/27/tencent-wants-to-take-full-control-of-long-time-search-ally-sogou/
Let's remember who Tencent is. While it would be hard to describe all that the company represents, understand that Tencent (TCEHY) is the leading game producer in the world and the parent company to China's dominant social platform (and increasingly fintech payments platform). It is also China's tech champion who is part of the B-A-T (Bidu, Alibaba, Tencent) club, which have long symbolized the Big 3 tech companies leading China. One can argue that this term is outdated at this point, but the three companies have dominant platforms leading search, online marketplace, and social among other categories. Each company has also fought hard to position themselves against each other.
For example, in Tencent bought stakes in promising platforms like JD.com (JD) and Pinduoduo (PDD) in years past to attack Alibaba's core business as an online marketplace. In the same manner, seven years ago Tencent bought a meaningful stake in runner-up search platform Sogou to defend itself against Baidu, the dominant online search platform behind China's Great Firewall.
Yet in some sense, Tencent has never really been entirely threatened by Baidu. Unlike in America where search has dominated the internet landscape, the fact that China in essence bypassed the PC landscape and first went mainstream into Mobile environment allowed for dominant apps such as WeChat to rule over the hours spent online.
But that's not to say that they couldn't better position themselves better by having better access to data and provide a gateway into competing with Baidu more directly. After all, Baidu remains the dominant player when it comes to Search:
So what's the play here. Well, shares of Sogou (SOGO) have already more-or-less reached their tipping point if the $9 bid goes through as they're now adjusted to a current price of $8.48. The same can be said of Sohu.com, which is the parent company of Sogou.
By and large it would appear that Tencent itself remains the company to acquire for the long-term as it continues to maneuver withing striking range to fend off potential threats in a race for tech dominance within China that it arguably already leads.
Posted Using LeoFinance