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The Art of War: Tencent vs Qihoo 360

According to Sun Tzu (The art of war), as well as war being of vital importance to laissez-faire and the shift towards “freer business”, competition between companies is one of the necessary conditions which, in addition to improving economical situation, brings better and more enjoyable civil and political circumstances for the citizens.

Despite the success around the world of this market mechanism, the role of state still plays a major part in China’s business, with their recent intervention being decisive in melting the cold war between two Chinese leading software companies: Tencent, whose instant messenger QQ connects more than a million users, and Qihoo 360, who provide Internet security services, protecting the majority of Chinese netizens (globaltimes.cn. November 1^st, 2010). The dispute: “Tencent vs Qihoo”, begun as an ordinary competition for reaching market share, and became a real war between two giants when Tencent launched QQ Doctor 1.0, a small anti-Trojan tool which made the company gain a substantial market share in the Sino market. Then later in September, after the launch of a new QQ Doctor version (with an interface that assembles 360 safeguard in a similar manner to its rival), Oihoo 360 first accused, and then proved, that Tencent had been spying on the online behavior of its software users through spyware. Nevertheless Qihoo themselves are hardly saints with an untarnished corporate image and, after Tencent’s spyware fiasco, they have been under investigation for ads involving pornographic web sites (China daily, November 3^rd, 2010). After this accusation phase between the two parties, the situation has degenerated into childish reactions. Qihoo updated the privacy guard to block ads in QQ, while Tencent blocked its products from running with 360 Safeguard installed, technically forcing users to choose between using the instant messenger and its portal services, or the anti-virus.

Thousands of users have shown their displeasure with the two companies, signing online petitions and saying that their behavior disregarded users’ needs. “I support fair competition, but unfair play turns online users and others into victims” said a user of both QQ messenger and 360 anti-virus software during an interview with Global Times (November, 2010). As a result of these public protests a decision was made by the head of the Ministry of Industry and Information Technology, Li Yizhong ,to intervene in the interests of concerned netizens, conducting an investigation into the actions of both parties, which have been branded as “immoral and irresponsible”(China National Radio, November 01th, 2010).

The condition has been cooling down since the intervention of State, but the battle has already affected the companies’ performance. According to enbar.net (November 11^th, 2010), Qihoo 360’ s browser software fell from 19.9 percent to 3 per cent from the end of October and Tencent’ s losses, even if more difficult to estimate, are reflected on the success of MSN which has gone “from tens of thousands signups per day, to millions” since the dispute between Tencent and Qihoo 360.

In China’s business today, it seems nothing is more true than what Sun Tzu wrote: “He who knows when he can fight and when he cannot, will be victorious (The art of war)”.

To find out more about Tencent and Qihoo 360 in China:

http://www.tencent.com/en-us/at/abouttencent.shtml (En)

http://www.360.cn/ (Cn)

http://en.wikipedia.org/wiki/360_Safeguard (En)