April 12th, 2012
Qihoo 360 Technology Co.
This case was jointly prepared by Prof. Bingsheng, CKGSB YANG CKGSB Center. and Guchuan, Case TENG
On March 30th, 2011, Qihoo 360 Technology Co. (hereinafter referred as “Qihoo” or “Qihoo 360”), founded less than 6 years ago, started to trade on the New York Stock Exchange (NYSE: QIHU). On the first day of trading, Qihoo 360 opened at $27, a massive 86.2% above the issue price, and closed at $34, generating a first-day yield of 134.5% and raising $175 million. At the end of its first day of trading in the US, Qihoo 360 had a market capitalization of $3.96 billion and ranked 6th among all Chinese firms listed in the U.S., higher than New Oriental, Sohu, and Shanda.
…show more content…
The key players in China’s anti-virus market included Rising, Kaspersky and Kingsoft. These three companies had market shares of 37.59%, 24.40%, and 12.93%, respectively. All of them generated revenue by charging subscription fees to their users. However, Zhou pointed out that “Internet security is now becoming a basic service for Internet users, which should be free of charge, the same as other basic Internet services, such as search engines, instant messaging and email.” Before Qihoo developed its own anti-virus software, Zhou attempted to convince a few anti-virus developers to work with them to create a free anti-virus application. Finally, Qihoo and Kaspersky, a leading information security provider, joined hands. According to the partnership agreement, Qihoo would promote Kaspersky’s anti-virus software via 360 Safe Guard, free of charge in the first 6 months, and as a paid distributor afterwards. After a period of collaboration, Zhou realized that it had become a “renovation rather than revolution. In spite of the price cut from RMB200 to RMB30, many users were unwilling to spend the money. Security services should be absolutely free.” Nonetheless, Kaspersky did not concur with his idea and terminated its partnership with Qihoo. After the termination, Qihoo decided to develop its own anti-virus software. It extensively