Qihoo Sees Share of China Search Ads Rising to Match Web Traffic

Qihoo 360 Technology Co., operator of China’s second-largest search engine, expects its share of advertising sales to rise closer to its proportion of web query traffic as it steps up competition with Baidu Inc.

Qihoo, which doubled revenue in the second quarter, gets about 1 percent of China’s $7 billion online advertising market while it has 18 percent of search traffic, Chief Financial Officer Alex Xu said in an interview in Beijing today.

While the company’s systems for generating revenue from search aren’t as comprehensive as market leader Baidu, it is boosting its customer base, Xu said. Qihoo last month said it was in initial talks to buy Sohu.com Inc.’s Sogou unit, China’s third-largest search engine, to help it compete with Baidu.

“The percentage of revenue share will get closer and closer to the traffic share over time,” Xu said, declining to comment on how long it will take to close the gap. Improved efficiency and an increase in customers will “basically narrow the gap,” he said.

Xu declined to comment on the status of talks with Sohu.

Qihoo will also continue to look for acquisitions to add technology and products related to mobile Internet, Xu said, declining to elaborate.

American depositary receipts of Qihoo climbed 7.8 percent to $78.80 yesterday and have surged 165 percent this year.

Baidu, whose ADRs have gained 39 percent this year, had 81 percent of search-engine queries in China during the June quarter, according to data compiled by Bloomberg. Qihoo’s share rose to 10 percent from 9 percent a year earlier while Sogou accounted for 4.8 percent.

— With assistance by Edmond Lococo

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