Search in China has largely been a one player game. Baidu has been the reining champion of the sector with 75-80% market share since early 2009. But the August 2012 launch of Qihoo has provided the first real challenger in a while.

Qihoo 360, the China-based Internet software provider, has shaken up the search market by developing it’s own search site (www.so.com) which became the second most used browser in China within the first week of launch and captured 10% of the market in its first month. How is that possible you ask? Within Qihoo’s portfolio is one of the most popular internet browsers in China, used by a reported 272 million Chinese netizen, giving Qihoo 360 a direct line to the address bar of the majority of Chinese internet users.

By setting the new 360 search engine as the browser’s default, Qihoo was able to gain a huge market share in a rapid timeframe– mostly at the cost of rival Baidu. And Qihoo shows no signs of slowing down. In a recent Chinese media interview, Zhou Hongyi, CEO of Qihoo 360 stated that, “based on our strong traffic and browser coverage, we hope to take a reasonable portion of China’s PC search market, namely around 15%-20%.

He went on further to explain how Qihoo would accomplish this: focusing on user experience. He stated that to make its search engine successful, Qihoo 360 would not “over-commercialize the market, and would instead put an emphasis on user experience, control the amount of banner ads per page, differentiate paid results from natural results with different colors, and filter out links for Trojan horses and phishing sites,” a direct jab at Badu which has been accused of doing all of these.

As a part of Qihoo 360’s user experience focus, a mobile experience is at the top. More agile and innovative than corporate Baidu, Qihoo has been able to jump into the mobile arena with great success. Earlier this year Baidu said that approximately 20% of it’s traffic was coming from mobile devices, which is less than would be expected and can be attributed to poor mobile interface. With Baidu not having found a solid offer in mobile, they stand to lose at least part of this market to Qihoo’s new compatible browser.

While this is a big change for the industry landscape, Qihoo 360 still has quite a gap to close with Baidu. 360 is young and in it’s early stages of understanding large ad spenders- it needs to establish a strong technology platform and have proper sales support to monetize the traffic it gets in order to get returns on investments.

And to keep things interesting, Baidu recently Baidu filed a lawsuit against Qihoo 360 for improper practices such as mining Baidu’s data. Qiohoo then accused Baidu of attempting to block their entrance to the market by launching a smear campaign through a prominent blogger. This all lead to a summit agreement of self-regulation by the top 12 industry competitiors… that has no definable terms… and no consequences… so will doubtfully have any impact on the war.

For Qihoo 360 it will be an uphill battle with a giant but as a brand it is certainly a fight worth keeping an eye on.

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