China’s Tencent beefs up search prowess with $448M stake in rival Sogou

Tencent, China’s largest web company, announced today that it has poured $448 million into rival Chinese search engine Sugou, a move that further consolidates China’s big Internet firms.

The deal gives Tencent a 36.5 percent stake in Sugou, the search arm of Chinese web portal Sohu. The Wall Street Journal reports that Tencent plans to merge its smaller Soso search engine with Sogou. The two engines have a 3 percent and 9 percent market share in China, respectively. In comparison, competitor Baidu holds more than 80 percent of China’s search market.

At this point, all of China’s big web companies, including e-commerce giant Alibaba, are trying to diversify their businesses. The deal not only gives Tencent a gateway into Sohu’s search business, it also keeps others from snapping up Sugou, Forrester Research analyst Bryan Wang told the WSJ.

Tencent has also matured into one of the gaming industry’s biggest investors, thanks to its stakes in Activision, Epic Games, and Riot Games. The company also led the recent $150 million funding round in NYC’s Fab.com.