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Qihoo 360 Wins USD 2.7 Mln Settlement from Baidu

Sohu IT, 11/17/11

Zhou Hongyi, CEO of Chinese online security software developer Qihoo 360 (NYSE: QIHU), revealed during the company's Q3 2011 earnings call yesterday that the company received USD 2.7 mln from Chinese internet company Baidu (Nasdaq: BIDU) in an out-of-court settlement. Qihoo 360 had originally partnered with Baidu and Google to drive traffic via its browser and Personalized Start-up Pages, but when Baidu saw that Qihoo 360 was achieving very rapid growth and Qihoo 360 users were bypassing Baidu's homepage, Baidu felt threatened and ended the partnership in early 2010. Qihoo 360 then pursued legal means to recover several million USD in revenue share owed to it by Baidu.

Zhou said that 360 Safe Browser and Qihoo 360's start-up pages account for a significant portion of China's overall search traffic, and that the company has three main approaches to the search business: first, Qihoo 360 cannot imitate Baidu's search engine; second, personalized start-up pages can become recommendation engines offering relevant links based on users' browsing history; third, Qihoo 360 will explore certain types of vertical search.

Personalized start-up pages contributed approximately 73% of Qihoo 360's total online advertising revenue in Q3 2011, according to CFO Alex Xu, down from 75% in Q2 2011. Advertisers from the e-commerce sector accounted for 45-50% of total Qihoo 360's total advertising revenue in Q3 2011, while those from the group buy sector accounted for approximately 10%. Active users of personalized start-up pages grew 22% YoY, and clickthrough grew 34% YoY. Google is a major customer of Qihoo 360, added Xu, and Taobao contributed 10% of total revenue, while other customers each contributed no more than 3%.

Qihoo 360's total headcount is expected to reach between 1,700 and 1,900 by the end of this year, according to Zhou, with 75-80% in product R&D. Measured by total users or clickthrough, Qihoo 360's directory portal (hao.360.cn) has surpassed Baidu's Hao123, while 360 browser users now exceed Internet Explorer users in China.

Keywords: search advertising Internet traffic HR Zhou Hongyi Internet browser revenue online advertising Baidu vertical search active users revenue share BIDU Qihoo 360 Alex Xu QIHU Q3 2011 law litigation online web directory fiscal report online search

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