Deals

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Qihoo 360, a Chinese internet-security and search-engine provider now going private in New York, in partnership with the Beijing-based buyer of the Grindr gay dating app, are behind the $1.93 billion purchase of the Opera browser. Even at a 46 percent premium to the Norwegian company's Feb. 5 price, they seem to have a good deal.

Qihoo, Beijing Kunlun Tech and Chinese-backed private-equity firms are acquiring  a service with 350 million users, 277 million of whom are on mobile, and browsers in Samsung and Xiaomi smartphones. Opera was known for its mobile-surfing speed a decade ago, and still has a 7.3 percent share of the mobile market, according to data from NetMarketShare.com.

The Norwegian browser remains the world's fifth most popular, but the ascent of Google and Apple's Safari have driven it down to an overall share of less than 2 percent of the global market.

Going Online
Top browsers globally on desktop, tablet and console (%)
Source: StatsCounter Global Stats

After two years of losses and a yawning gap with Google Chrome's 42 percent mobile market share, the Chinese players can give Opera the ``ecosystem" that Chairman Sverre Munck says it needs.  Despite those losses, the Norwegian company has made mobile advertising work: In the fourth quarter, it posted $145 million of mobile advertising revenue, up from $96 million in the third quarter. 

Opera, still dependent on its browser for revenue, is an anachronism in a world where platform owners develop driverless cars (Google parent Alphabet) or are tied in with mobile-phone sales (Safari parent Apple).

With Kunlun, which helped bring the Angry Birds game to China, and Qihoo, the second-biggest search and browsing provider in the fast-expanding Chinese market, Opera has a future. 

Web Savvy
Percentage of population using the Internet (%)
Source: Euromonitor

Qihoo still makes the bulk of its revenue from advertising on its free security software. It moved into browsing a couple of years ago and still lags far behind Alibaba-owned UCWeb in China and overseas.  The company also trails Baidu in China for search. Qihoo launched its QIKU smartphones last year and a mobile search engine in June 2014, but Baidu still controlled more than 80 percent of China's search queries.

Claiming the Search Market
Search queries in China per month in millions
Sources: Bloomberg Intelligence, IResearch

So the benefits work both ways: Qihoo gets a still-weighty player in mobile search and, crucially, mobile video advertising, and a chance to close the gap with UCWeb and Baidu. Kunlun adds a platform for California-based Grindr, which is increasing membership and has more than 2 million daily users who are a prime target for advertising. (Grindr reckons its users spend 54 minutes a day on the app, compared with 42.1 minutes on Facebook and 34.2 minutes on Tumblr.)

What appears at first to be the rescue of a fading brand could turn out to be a an all-round winner.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net