China’s Qihoo bets on old software and new hardware to crack global markets

When it comes to Chinese companies looking abroad for growth, most industry observers keep their eyes firmly on Baidu, Alibaba, and Tencent – the so-called BAT companies. The three internet giants have each stretched beyond their borders and are making high-profile investments in US-based companies. While Qihoo 360 isn’t as well-known internationally as BAT, it’s just as serious about winning over users outside of its backyard.

Qihoo executives have expressed a tentative commitment to expanding abroad, particularly to fast-growing developing nations. Over time, Qihoo’s vision for international growth has become a bit clearer. In a conversation with Tech in Asia at Asia Beat in December, Tiger Shen, VP at Qihoo, elaborated on the company’s structure and vision for international expansion.

Old software, new markets

Founded by Zhou Hongyi in 2005, Qihoo became best known for its PC security software. Using aggressive user acquisition tactics, the company fought its way onto 95 percent of all desktops in China. Its reckless approach to growth and penchant for lawsuits earned it the ire of China’s longer-established internet giants. But the strategy paid off, and the company ultimately leveraged its market reach to launch a search engine, a browser, and a mobile app store. All of those products make excellent touch points for advertising and app distribution, and that’s how the company earns its revenue.

Outside of China, however, Qihoo faces several challenges. How can a company borne out of China’s insular internet capture users in a world where Google and Facebook, not Baidu and Tencent, reign supreme? How can a company borne out of the PC era jump right over to mobile abroad?

As Shen describes Qihoo’s operations outside of China, it’s clear that there are two components to its international strategy. The first involves exporting its competency in utility apps – things like antivirus software – and distribution into markets where it can add value, specifically in Taiwan, Brazil, and Japan.

Qihoo’s strategy for Taiwan more-or-less mirrors its strategy for China, but Shen claims that its PC software isn’t as important as mobile. Its team in Taipei localizes Qihoo’s mobile security app and promotes it aggressively. Ads can be seen inside taxi cabs around Taipei right now.

“Smartphone penetration is extremely high in Taiwan, and there are many Android phones. So we feel that it’s a perfect market for our security app. We also promote our PC security app here, but we believe that it will gradually become just a base to promote other products in the future.”

A screenshot of Qihoo’s security app for Taiwan. One of the ways Qihoo monetizes is by facilitating installs of other apps through its own properties.

In Japan, Qihoo owns a 2.6 percent stake in KLabs, which it partners with to publish China-made games.

“We originally wanted to [publish PC security software] in Japan, but we realized that PCs had already died out. We then decided to use our security app as an entry point onto users’ smartphones, but we also gave up on that. [We realized that] smartphone games in Japan had potential, so we considered how we could make a difference in this space,” Shen explains.

In Brazil, Qihoo has a joint venture with PSafe, which it invested US$25 million a year ago. True to its partner’s origins, PSafe offers antivirus software for desktop and mobile that’s free to download, and has an install base in the tens of millions.

“Brazil, in my opinion, is more similar to China,” says Shen. “We’ll start from the PC there, and then do smartphone security. We might even do an app store. We can maybe cover more ground there because our Brazil team is pretty big.”

Qihoo at home