Sohu, Alibaba Reach Agreement on Joint Venture Company

Chinese internet and e-commerce firm Alibaba on August 8 has announced that it will acquire a 16 per cent stake in Sohu's search engine Sogou.

Alibaba and Sogou will set up a joint venture, Xiao-Chuan Wang,Sohu CTO,will serve on the CEO of the new company.

The detail terms of the deal have not been finalized.This is the first cooperation between Charles Zhang and Jack Ma.

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.Alibaba's resources with its strong e-commerce business can help develop the search engine and draw more users to its services.

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.