AI Expands The Imagination of Online Search Market in China

Source:iResearch November 10,20172:54 PM

On November 9th (EST), Sogou (stock code: SOGO) successfully got listed on the New York Stock Exchange. On the first day, its opening price was $13 and its market value exceeded $5 billion. Sogou is a leader in the search market and the internet market in China. iResearch provided professional consulting services for Sogou to assist it in getting listed.

When providing the advisory services, iResearch helped Sogou to understand the basic situation of the industry, sort out the major players in the market and learn the company's status in the industry. It displayed the advantages of the company and the trends of the industry through rich data and in-depth analysis. Together with the company and investment bank, iResearch helps investors to have a more comprehensive and clearer understanding of the company. With the help of iResearch, Sogou got listed successfully and entered a new stage of development.

According to iResearch’s data, in 2016, the China's search advertising market GMV reached 76.51 billion yuan. iResearch points out that since the big data, artificial intelligence, Internet of Things and other new technologies bring better user experience, wider use, and stronger connectivity, China’s search market will have more commercialization opportunities and achieve higher monetization. In the next three years, the dividend of the new technologies mentioned above will be initially shown. It is expected that the CAGR of China’s search advertising market GMV will reach 21.7% from 2016 to 2021.

According to iResearch, more and more advertisers will place advertising online. The online advertising market accounted for 44.7% of the overall advertising market in 2016. This proportion is estimated to reach 75.3% in 2021. At the same time, with the rapid growth of household consumption expenditure in the vertical areas such as education, e-commerce, games, financial services and health care services, the advertisers’ demand for search advertising in these sectors will further increase. The two factors above will contribute to the continuous growth of the search market.
Thanks to its record-high revenue and profits, high revenue and rapid growth, Sogou has noticeable business value.

According to the IPO prospectus of Sogou, in Q3 2017, its revenue was 257 million USD (about 1,710 million Yuan), a year-on-year growth of 55%. In accordance with US GAAP, the net profit was 31.30 million USD, a year-on-year growth of 56.5%. In addition, the overall revenue of Sogou in 2016 was 660 million USD (4,350 million Yuan), of which 90.6% was contributed by search and search-related advertising. Relying on its own products such as and Sogou input method, as well as the products and ecosystems of content of its significant shareholders such as Sohu and Tencent,Sogou will see rapid growth of overall revenue on the base of huge scale, making its business value more noticeable. 
Concentrating on artificial intelligence, Sogou will face both opportunities and challenges. 

Artificial intelligence is not something new. In fact, it has been applied in the field of internet services. Search engine is one of the earliest and leading fields that artificial intelligence is applied. In terms of knowledge graph, natural language processing, machine translation, speech recognition, image recognition and other fields that application of artificial intelligence is well developed, search companies have accumulated mass data, a large pool of talents, technologies and commercialization capability to effectively apply artificial intelligence and have gained some first-mover advantages. 

In the IPO prospectus, Sogou refers to artificial intelligence many times and sees development of search market, exploration of the value of big data, in-depth study of artificial intelligence and promotion of commercialized operation as the core strategies for future development. With obvious advantages and a clearly defined strategy, Sogou will face both opportunities and challenges. 

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