Alibaba to Buy Stake in Chinese Search Engine

In a move that could heighten the competition in China's search market, Chinese e-commerce company Alibaba Group has agreed to buy a stake in a search engine operated by one of the country's major online portals, Sohu.com Inc.

Although the terms of the deal have not been finalized, Sohu said in a statement on Monday that it plans to sell a 16 percent stake in its Sogou search engine unit to Alibaba and a fund owned by its chairman, Jack Ma. Another 16 percent would be sold to a fund operated by Sohu Chairman Charles Zhang.

China's search market is already dominated by Baidu, which controls a 70 percent share according to Beijing research firm Analysys International. Googles comes in second at 24.2 percent, while Sohu's search engine controls only 0.8 percent of the market.

But even as Sohu's market share is small, the deal could make the company's search engine a better competitor against its larger rivals said Li Zhi, an analyst with Analysys. Alibaba's resources with its strong e-commerce business can help develop the search engine and draw more users to its services, she added.

"Right now Sogou can't compete with Baidu," she said. "But after this deal, it will be able to compete with these other companies."

By investing in Sohu's search engine, Alibaba could also bring more exposure to its services and compete with Baidu, which already has its own e-commerce business. In January, Baidu announced it would jointly build what it anticipated would be the largest online shopping mall for Chinese users.

Alibaba is also the majority owner of Yahoo China, which features searches powered by Yahoo. The current deal with Sohu, however, has nothing to do with Yahoo China said an Alibaba spokesman.

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