Top Chinese Web Browsers in China

Sogou’s search-related revenues were $237.6 million, a 1% increase year-over-year. The auction-based pay-per-click services continued to increase year-over-year, accounting for 91.0% of search and search-related revenues, compared to 87.2% in the corresponding period in 2019.

Other revenues were $19.7 million, a 6% increase year-over-year. The increase was primarily due to increased revenues from sales of smart hardware products.

Net loss attributable to Sogou Inc. was $31.6 million, compared to a net loss of $3.9 million in Q1 2019. Non-GAAP net loss attributable to Sogou Inc. was $31.1 million, compared to a net loss of $2.7 million in the corresponding period in 2019.

Sogou Mobile Keyboard had 482 million DAUs (daily average users), up 9% year-over-year. As China’s largest voice recognition app, it processed up to 1.4 billion daily voice requests.

Sogou released its Sogou Mobile Keyboard 10.8 in April 2020, the latest version of the Sogou Mobile Keyboard. Powered by its AI technologies, the latest upgrade features new multilingual voice-based transcription and translation services, supports language input in four more languages, and offers improved accuracy rates for voice inputs.

For the second quarter of 2020, Sogou expects total revenues to be in the range of $260 million to $280 million, representing a decrease of 8% to 14% year-over-year, or a decrease of 4% to 11% year-over-year in RMB terms.

China’s mobile search market overview 2020

Sogou Financial Results in Q4 2019

Total revenues were $301.0 million, a 1% increase year-over-year.

• Search and search-related revenues were $274.6 million, down 1% year-over-year. However, auction-based pay-for-click services continued to increase year-over-year, accounting for 88.2% of search and search-related revenues, compared to 84.8% in the corresponding period in 2018.
• Other revenues were $26.4 million, a 26% increase year-over-year. The increase was primarily due to increased revenues from sales of smart hardware products.

Cost of revenues was $168.7 million, a 9% decrease year-over-year. Traffic acquisition cost, a primary driver of cost of revenues, was $129.0 million, a 14% decrease year-over-year, representing 42.8% of total revenues, compared to 50.3% in the corresponding period in 2018.

Gross profit was $132.4 million, an 18% increase year-over-year. Non-GAAP gross profit was $132.6 million, a 19% increase year-over-year.

Total operating expenses were $95.0 million, a 4% decrease year-over-year.

• Research and development expenses were $48.7 million, a 1% increase year-over-year, representing 16.2% of total revenues, largely flat with the corresponding period in 2018.
• Sales and marketing expenses were $34.9 million, a 16% decrease year-over-year, representing 11.6% of total revenues, compared to 14.0% in the corresponding period in 2018. The decrease was primarily attributable to a decrease in marketing and promotional spending.
• General and administrative expenses were $11.3 million, a 21% increase year-over-year, representing 3.8% of total revenues, compared to 3.1% in the corresponding period in 2018. The increase was primarily due to an increase in professional fees.

Operating income was $37.4 million, a 202% increase year-over-year, compared to $12.4 million in the corresponding period in 2018. Non-GAAP operating income was $41.5 million, a 216% increase year-over-year, compared to $13.1 million in the corresponding period in 2018.

Other income, net was $0.5 million, compared to $9.6 million in the corresponding period in 2018. The decrease was primarily due to a $9.1 million impairment loss on certain equity investments of Sogou in 2019.

Income tax expense was $2.0 million, compared to an income tax benefit of $3.6 million in the corresponding period of 2018.

Net income attributable to Sogou Inc. was $35.0 million, a 33% increase year-over-year, compared to net income of $26.4 million in the corresponding period in 2018. Non-GAAP net income attributable to Sogou Inc. was $39.0 million, a 44% increase year-over-year, compared to net income of $27.1 million in the corresponding period in 2018.

Basic and diluted earnings per ADS were $0.09. Non-GAAP basic and diluted earnings per ADS were $0.10.

As of December 31, 2019, it had cash and cash equivalents and short-term investments of $1.1 billion, compared to $1.0 billion as of December 31, 2018.

Net operating cash inflow for the fourth quarter of 2019 was $52.0 million. Capital expenditures for the fourth quarter of 2019 were $9.1 million.

Sogou Financial Results for Full Year 2019

Total revenues were $1.17 billion, a 4% increase from 2018.

• Search and search-related revenues were $1.07 billion, a 5% increase from 2018. The increase was primarily due to growth in auction-based pay-for-click services. Auction-based pay-for-click services accounted for 88.1% of search and search-related revenues, compared to 83.8% in 2018.
• Other revenues were $99.1 million, compared to $101.0 million in 2018.

Cost of revenues was $738.5 million, a 6% increase from 2018. Traffic acquisition cost, a primary driver of cost of revenues, was $562.2 million, a 6% increase from 2018, representing 48.0% of total revenues, compared to 47.4% in 2018.

Gross profit was $433.8 million, a 1% increase from 2018. Non-GAAP gross profit was $434.3 million, a 1% increase from 2018.

Total operating expenses were $369.4 million, a 4% decrease from 2018.

• Research and development expenses were $190.4 million, a 6% decrease from 2018, representing 16.2% of total revenues, compared to 17.9% in 2018.
• Sales and marketing expenses were $138.3 million, a 5% decrease from 2018, representing 11.8% of total revenues, compared to 13.0% in 2018.
• General and administrative expenses were $40.7 million, a 7% increase from 2018, representing 3.5% of total revenues, compared to 3.4% in 2018.

Operating income was $64.4 million, a 44% increase from 2018. Non-GAAP operating income was $80.3 million, a 36% increase from 2018.

Other income, net was $21.1 million, compared to $41.5 million in 2018. The decrease was primarily due to a $17.8 million gain from one of Sogou’s equity investments recognized in the third quarter of 2018.

Income tax expense was $2.7 million, compared to $1.2 million in 2018.

Net income attributable to Sogou Inc. was $89.1 million, compared to $98.8 million in 2018. Non-GAAP net income attributable to Sogou Inc. was $105.0 million, compared to $113.0 million in 2018.

Basic and diluted earnings per ADS were $0.23. Non-GAAP basic and diluted earnings per ADS were $0.27.

Sogou Outlook for Q1 2020

For the first quarter of 2020, Sogou expects total revenues to be in the range of $240 million to $260 million, representing a 5% decrease to 3% increase year-over-year, or a 1% decrease to 7% increase year-over-year in RMB terms.

In developing this guidance, Sogou has considered the potential impact of the COVID-19 outbreak, as well as other challenges in the macro-environment and the online advertising industry.

Given its Search business has navigated the situation relatively well, Sogou expects Search to remain resilient in the first quarter. The guidance represents its current and preliminary view, which is subject to substantial uncertainty, particularly as to the development and potential impact of the COVID-19 virus in China and elsewhere.

For the first quarter 2020 guidance, the Company has adopted a presumed exchange rate of RMB7.00 = $1.00, as compared with the actual exchange rate of approximately RMB6.74 = $1.00 for the first quarter of 2019, and RMB7.03 = $1.00 for the fourth quarter of 2019.

China’s second-largest search engine Sogou announced total revenues of $314.9 million in the third quarter, a 14% increase year-over-year, or a 17% increase in RMB terms.

Search and search-related revenues were $288.2 million, a 13% increase year-over-year and accounting for 91.5% of total revenues in Q3 2019.

The increase was primarily due to growth in auction-based pay-for-click services. Auction-based pay-for-click services accounted for 88.7% of search and search-related revenues, compared to 82.7% in Q3 2018.

Other revenues were $26.7 million, a 25% increase year-over-year. The increase was primarily due to increased revenues from sales of smart hardware products.

Net income attributable to Sogou was $36.6 million, a 53% increase year-over-year. Non-GAAP net income attributable to Sogou was $40.9 million, a 46% increase year-over-year.

Cost of revenues was $189.3 million, a 9% increase year-over-year. Traffic acquisition cost was $143.7 million, a 6% increase year-over-year, representing 45.6% of total revenues, compared to 48.9% in Q3 2018.

Gross profit was $125.6 million, a 22% increase year-over-year. Non-GAAP gross profit was $125.7 million, a 22% increase year-over-year.

Total operating expenses were $98.2 million, a 10% decrease year-over-year.

• Research and development expenses were $50.0 million, relatively stable year-over-year, representing 15.9% of total revenues, compared to 18.3% in Q3 2018.
• Sales and marketing expenses were $37.5 million, a 14% decrease year-over-year, representing 11.9% of total revenues, compared to 15.8% in Q3 2018. The decrease was primarily attributable to a decrease in marketing and promotional spending.
• General and administrative expenses were $10.7 million, a 31% decrease year-over-year, representing 3.4% of total revenues, compared to 5.6% in Q3 2018. The decrease was primarily due to a decrease in expenses related to non-core business initiatives.

Sogou’s operating income was $27.4 million, compared to an operating loss of $6.8 million in Q3 2018. Non-GAAP operating income was $31.6 million, compared to non-GAAP operating loss of $2.7 million.

Income tax expense was $2.4 million, compared to an income tax benefit of $0.4 million in the corresponding period of 2018.

Net income attributable to Sogou was $36.6 million, a 53% increase year-over-year, compared to net income of $23.9 million in Q3 2018. Non-GAAP net income attributable to Sogou was $40.9 million, a 46% increase year-over-year, compared to net income of $28.0 million in Q3 2018.

Basic and diluted earnings per ADS were $0.09. Non-GAAP basic and diluted earnings per ADS were $0.10.

As of September 30, 2019, ogouS had cash and cash equivalents and short-term investments of $1.1 billion, compared with $1.0 billion as of December 31, 2018. Net operating cash inflow for Q3 2019 was $19.6 million. Capital expenditures for Q3 2019 were $0.7 million.

Sogou Mobile Keyboard had 464 million daily average users, up 14% year-over-year. Claiming to be China’s largest voice app, it processed up to 830 million daily voice requests.

Chinese search engine Sogou’s search-related revenues totaled $276 million in Q2 2019, accounting for 91% of total revenues according to its announced financial results.

Sogou Performance Highlights in Q2 2019

• Total revenues were $303.6 million, a 1% increase year-over-year, or an 8% increase in RMB terms.
• Net income attributable to Sogou Inc. was $21.3 million. Non-GAAP net income attributable to Sogou Inc. was $27.8 million.
• Sogou Mobile Keyboard had 453 million DAUs (daily average users), up 17% year-over-year. As China’s largest voice app, it processed up to 680 million daily voice requests.

During the second quarter, our business maintained steady growth and we made important progress in key areas,” said Xiaochuan Wang, CEO of Sogou. “Search revenues continued to grow faster than the industry average. At the same time, by leveraging the large user bases for both Search and Mobile Keyboard, we have gradually built up our big data and recommendation service at a company level and are focusing on unlocking its commercial value.”

Mr. Wang added,

We also geared up our efforts to drive innovation in language-centric AI technologies and continued to advance our leadership in voice and computer vision. Moreover, leveraging our core AI capabilities, we made significant progress in upgrading the smart hardware business, with new AI-enabled products launched and more in the pipeline. Going forward, we believe the steady growth in our core search business, coupled with the solid progress in the big data and recommendation service and smart hardware, will support sustainable expansion across our businesses.

Joe Zhou, CFO of Sogou, said, “We continued to drive top-line growth during the second quarter. Notably, revenues generated from the big data and recommendation service ramped up quickly year-over-year. Although we anticipate the external environment will remain challenging in the second half of 2019, we expect to experience positive momentum from our new growth drivers.”

Financial Results in Q2 2019

Total revenues were $303.6 million, a 1% increase year-over-year.

Search and search-related revenues were $276.2 million, a 2% increase year-over-year. The increase was primarily due to growth in auction-based pay-per-click services. Auction-based pay-for-click services accounted for 88.2% of search and search-related revenues, compared to 84.7% in the corresponding period in 2018.

Other revenues were $27.5 million, an 11% decrease year-over-year. The decrease was primarily due to lower sales of smart hardware products as a result of Sogou’s continued efforts to upgrade its smart hardware strategy.

Cost of revenues was $195.9 million, a 9% increase year-over-year. Traffic acquisition cost, a primary driver of the cost of revenues, was $146.3 million, an 8% increase year-over-year, representing 48.2% of total revenues, compared to 45.0% in the corresponding period in 2018. The increase was driven by price inflation.

Gross profit was $107.8 million, an 11% decrease year-over-year. Non-GAAP gross profit was $107.9 million, a 12% decrease year-over-year.

Total operating expenses were $96.1 million, largely flat year-over-year.

• Research and development expenses were $50.6 million, a 10% decrease year-over-year, representing 16.7% of total revenues, compared to 18.7% in the corresponding period in 2018. The decrease was primarily due to a decrease in professional fees.
• Sales and marketing expenses were $36.7 million, an 8% increase year-over-year, representing 12.1% of total revenues, compared to 11.2% in the corresponding period in 2018. The increase was primarily attributable to an increase in personnel-related expenses.
• General and administrative expenses were $8.8 million, a 31% increase year-over-year, representing 2.9% of total revenues, compared to 2.2% in the corresponding period in 2018. The increase was primarily due to an increase in expenses related to non-core business initiatives.
• Operating income was $11.6 million, compared to operating income of $24.8 million in the corresponding period in 2018. Non-GAAP operating income was $18.1 million, compared to non-GAAP operating income of $29.9 million in the corresponding period in 2018.
• Other income $4.2 million, compared to $3.4 million in the corresponding period in 2018.

The income tax benefit was $1.4 million, compared to income tax expense of $3.0 million in the corresponding period of 2018. The income tax benefit resulted from a tax filing adjustment of income tax expense previously recognized, which was due to a reduction in taxable income related to Chinese government initiatives to encourage investment in R&D.

Net income attributable to Sogou Inc. was $21.3 million, compared to net income of $33.2 million in the corresponding period in 2018. Non-GAAP net income attributable to Sogou Inc. was $27.8 million, compared to net income of $38.2 million in the corresponding period in 2018.

Basic and diluted earnings per ADS were $0.05. Non-GAAP basic and diluted earnings per ADS were $0.07.

As of June 30, 2019, Sogou had cash and cash equivalents and short-term investments of $1.1 billion, compared with $1.0 billion as of December 31, 2018. Net operating cash inflow for the second quarter of 2019 was $56.2 million. Capital expenditures for the second quarter of 2019 were $12.1 million.

China’s mobile internet users overview for the first half of 2019

Sogou achieved solid results in Q2 2018 with revenue increasing 43% year-on-year to US$301.4 million and non-GAAP net income up by 58% to US$38.2 million, according to its financial results. That was greatly driven by the twin growth engines – search and mobile keyboard – and AI-focused strategy.

Search and search-related revenues were $270.6 million, a 45% increase year-on-year. The increase was primarily due to the strong growth in auction-based pay-for-click services, driven by improved monetization and continued traffic growth in mobile search.

Auction-based pay-for-click services accounted for 84.7% of search and search-related revenues, compared to 83.0% in the corresponding period in 2017.

In search, Sogou differentiated services from Baidu in key verticals, such as healthcare. It also deepened its partnership with WeChat by providing more search services such as the encyclopedia and interactive Q&A platform.

Its AI-powered innovations drove broader adoption of the Sogou Mobile Keyboard, with DAU increasing by 36% year-on-year to 380 million in Q2 2018. Especially in June, Sogou Mobile Keyboard handled approximately 300 million voice inputs on average per day, up 54% year-on-year, and remained China’s largest voice mobile application.

Meanwhile, Sogou also applied its AI capabilities to enhance the competitiveness of the recently launched hardware products, such as Sogou Travel Translator and Sogou Smart Recording Translator.

Baidu also had a good quarter in Q2 2018. Check out China mobile internet market forecast 2018-2020 here.

One China’s top search engine company, Sogou’s Total revenues were $908.4 million in 2017, a 38% increase from 2016.

• Search and search-related revenues were $801.6 million, a 34% increase from 2016. The increase was primarily due to solid growth in auction-based pay-for-click services, which accounted for 83.0% of search and search-related revenues, compared to 77.6% in 2016.
• Other revenues were $106.8 million, a 69% increase from 2016. The growth was primarily due to increased revenues from Internet value-added services (or “IVAS”) and sales of smart hardware products.

Cost of revenues was $457.4 million, a 51% increase from 2016. Traffic acquisition cost, a primary driver of cost of revenues, increased by 50% to $303.6 million, representing 33.4% of total revenues compared to 30.7% in 2016.

Gross profit was $451.0 million, a 26% increase from 2016. Non-GAAP gross profit was $451.5 million, a 26% increase from 2016.

Total operating expenses were $357.1 million, a 25% increase from 2016.

• Research and development expenses were $172.8 million, a 25% increase from 2016, representing 19.0% of total revenues compared to 21.0% in 2016.
• Sales and marketing expenses were $156.4 million, a 27% increase from 2016, representing 17.2% of total revenues compared to 18.6% in 2016.
• General and administrative expenses were $27.9 million, a 13% increase from 2016, representing 3.1% of total revenues compared to 3.7% in 2016.

Operating income was $93.9 million, a 31% increase from 2016. Non-GAAP operating income was $117.6 million, a 39% increase from 2016.

Income tax expense was $14.4 million, compared to $27,000 in 2016. The increase was primarily due to an increase in taxable income, and a relatively smaller tax benefit related to the preferential tax rate of one of the Company’s subsidiaries that is qualified as a “Key National Software Enterprise.”

Net income attributable to Sogou Inc. was $82.2 million, an increase of 46% from 2016. Non-GAAP net income attributable to Sogou Inc. was $105.9 million, an increase of 54% from 2016.

Basic earnings per ADS were $0.22 and diluted earnings per ADS were $0.20. Non-GAAP basic earnings per ADS were $0.32 and non-GAAP diluted earnings per ADS were $0.29.

For the first quarter of 2018, Sogou expects total revenues to range from $218 million to $228 million, representing a 35% to 41% increase year-over-year.

Meet Shanghai’s new consumers 2017

Sogou, one of the top Chinese search engines, revenues reached US$257 million in Q3 2017, up 55% year-over-year and 22% quarter-over-quarter.

In Q3 2017, Sogou continued to expand market share in mobile search, propelled by robust traffic growth. Mobile search traffic grew by 38% year-over-year, driving a 24% increase in total search traffic.

Total revenue reached $257 million, an increase of 55% a year ago and 22% from the previous quarter, continuously outpacing industry growth.

Related: Baidu delivered solid financial results in the third quarter of 2017 with top line increasing 29% year over year

Sogou made new progress with its product collaboration with Tencent. Specifically, Tencent began testing the integration of Sogou Search into WeChat, which allows its users to access all internet information through Sogou’s general search function from within WeChat.

Sogou has also advanced its AI technology research and product applications. Its technologies in natural language processing continued to enable the transition from search into Q&A.

As Sogou has filed a registration statement on Form F-1 with the U.S. Securities and Exchange Committee relating to a proposed initial public offering.

Baidu has 78.2% share of China’s mobile search market by the total number of mobile search queries in the first quarter of 2017.

Sogou had 7.9% mobile search market share, followed by Easou (4.9%).

China search engine market overview Q1 2017

Baidu had about 23% less active online marketing customers (451,000) in Q1 2017 compared to Q1 2016. But, its revenue per online marketing customer increased by 27% to 32,200 yuan ($4,678).

WeChat, launched by Sogou in 2014, is testing with external sources in its search results. Is it going to be a threat in China’s mobile search market? Share your thoughts in the comments.

StatCounter data shows Baidu’s market share was 76.05% in China search engines market in April 2017, followed by Shenma (8.78%), 360 Search (7.87%), Sogou (3.31%), and Google (1.84%).

Baidu is more dominant in China’s mobile search market with over 82% market share, followed by Shenma (13.79%) according to StatCounter.

China search engine market overview Q1 2017

Shenma search was a co-founded mobile search engine by UCWeb and Alibaba in 2013; and, Alibaba acquired UCWeb in 2014.

China search engines market totaled 18.76 billion yuan (US$2.72 bn) in Q1 2017, with a decrease of 8.6% compared to Q4 2016 and an increase of 5.3% YoY.

Baidu still leads China’s search engine market in Q1 2017 with 75.88% market share by total revenues (including overseas revenues and channel revenues), followed by Google China (10.24%) and Sogou (8.41%).

Baidu’s market share is the highest at 83.93% if excluding overseas revenues and channel revenues.

Baidu had less active online marketing customers in Q1 2017, representing a 23.2% decrease from Q1 2016. But, its revenues per online marketing customer saw a 26.8% increase from Q1 2016.

China’s Mobile Search Market in Q1 2017

Baidu has 78.2% share of China’s mobile search market by the total number of mobile search queries in the first quarter of 2017, followed by Sogou and Easou.

Baidu is making efforts in China’s rising news feed advertising market, promoting a “search + recommend” model to advertisers. The news feed ad is displayed after every six news items on Baidu mobile.

Easou is a technology company based in Shenzhen; and, it focuses on mobile search and a fiction mobile app.

The number of mobile search users in China reached 628 million in Q3 2016, an increase of 1.29% QoQ according to iiMedia Research.

Baidu still led mobile search market in China with 44.5% usage ratio, followed by Shenma (sm.cn; 20.8%), Sogou (16.2%), 360 (11.8%). Shenma search is a joint venture set up by Alibaba and UC in 2013.

66.8% China online users conducted mobile search on mobile browsers; 24.6% on mobile search apps according to iiMedia. 35.3% and 33.9% users are interested in voice search and image search respectively.

Sogou, one of the top three search engines in China after Baidu and Qihoo 360, announced their cooperation with Microsoft Bing with the launch of two new products: Sogou English Search and Sogou Scholar Search.

While conducting academic research online, a lot of Chinese are more inclined to use Google search which for the reasons we all know can not be easily accessed. The new vertical search products from Sogou specifically target this segment of users, who have higher education and income levels.

Sogou English Search users can also type in Chinese to search for English content.

Also read: Baidu Mobile Search Users Reached 663 Mn in March 2016

Total revenues of all Chinese search engine companies reached 80.76 billion (US$12.48 billion) in 2015 with an increase of 34.7% according to iResearch.

China’s search engine advertising revenues totaled 68.26 billion yuan (US$10.55 billion) in 2015, an increase of 32.2% YoY.

Baidu continued to dominate China search engine market with over 80% market share by advertising revenues, followed by Google China (9.2%), Qihoo 360 (4.9%) and Sogou (4%). Qihoo 360 has been growing fast, whose revenues were still behind Sogou at the end of Q2 2015.

Qihoo 360 announced the launch in Hong Kong of Shangyi on 31 March 2016, which is a set of integrated data and marketing analytics tools designed to help local and overseas marketers and advertisers identify the unique characteristics of Chinese netizens in order to optimize their marketing strategies and enhance business growth.

Read more: China’s Mobile Search Market Insights

The number of China mobile search engine users reached 590 million in Q3 2015 and the ratio of lower educated users have increased.

China mobile search engine users reached 590 million, a YoY increase of 19.9% and QoQ increase of 3.9% according to iiMedia Research.

The penetration rate of smartphone search users in China reached 88.3%.

With high penetration of smartphones and different mobile categories of apps among the young generation, 26 years old to 35 years old users account for 56.8% of the total, followed by users between 18 to 25 years old (16.5%).

Junior high school and college graduates account for the majority of mobile search engines users. Junior high school students account for 26.3%; and users of primary school and below 10.4%. Mobile search users with low education are gradually increasing, due to the growing popularity of smartphones, integrated functions of the mobile search and simpler operation.

About 76.5% users search on mobile phones every day, of which 65.0% of users search once to five times each day and 21.7% search six to ten times.

Search engines on the mobile end help users get whatever they need any time and any place which provides convenience. Increasing functions and interfaces of the mobile search engine are also main factors for many users. Mobile web browser remains the primary search entry point as adopted by 58.8% mobile search users.

Most users have a specific brand preference when searching on mobile. Baidu still has the largest share, accounting for 44.1%; Shenma, with strong traffic from UC browser, accounts for 17.4%, followed by Easou, Sogou and Haosou. About 40.7% users wouldn’t use other search engines.

71.6% users search for news through smartphones. Local affairs, novels, websites, Question & Answer are also frequently-searched content.

Scanning the QR code to search for information is a widely used mobile search method that 56.8% of users used once due to high accuracy and convenience. 32.1% of users still search by inputting words.

Ads, less optimized websites, slow network and low integration between search words and search content are major existing problems against better user experience.

The rapid development of China mobile search engine industry has formed a relatively complete industrial structure. The popularity of smartphones and technology further promotes the development of mobile search market. How to meet the needs of individual users and properly manage ads placement become main problems of mobile search engine providers.

Also read: China Mobile Apps Market Insights in H1 2015