I Admit It: Qihoo 360 Technology Co Ltd (QIHU) Is a Real Threat to Baidu.com, Inc. (BIDU)

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I don’t like Qihoo 360 Technology Co Ltd (NYSE:QIHU), but I do realize when a company is here to stay.

If you’ve followed Qihoo over the past year, you may have heard how it seems to be more of a marketing company with inferior products rather than a serious tech competitor. Well, once you read its most recent earnings report, you may change your mind like I did. The fact is, Qihoo 360 Technology Co Ltd (NYSE:QIHU) seems to be making profitable strides in the search market.

Before you invest in China’s tech scene, here’s how to think about Qihoo’s long-term prospects.

Qihoo 360 Technology

Why I did not and do not like Qihoo
I’ve written two articles about Qihoo’s poor copy-cat products and six  “anti-competitive” marketing tactics before. To get you up to speed, let me recap a few key points.

(1) Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s flagship anti-virus software essentially rates your computer as less “safe” if you haven’t downloaded the company’s 360 Browser. (2) In addition, the company prevents you from installing competitors’ software by noting (fake) incompatibility.

While you may think this isn’t a big deal, the Chinese government does. In February, it issued a public statement reprimanding Qihoo and warning it to stop. As Beijing doesn’t seem to have issued any other statement, Qihoo seems to have stopped.

Although this could be a sign that Qihoo 360 Technology Co Ltd (NYSE:QIHU) has changed, I don’t think the company has. It seems embedded into Qihoo’s DNA to skirt fair competition.

As far back as 2008 — three years after the company’s founding — Qihoo decided that it would play the game differently. When transitioning into the browser space, Qihoo essentially stole Microsoft Corporation (NASDAQ:MSFT)‘s Internet Explorer logo — by simply adding a touch of green. Basically, the company was trying to trick users to download the 360 Browser.

Nonetheless, there are positives worth acknowledging about Qihoo’s stock prospects.

How Qihoo is taking on Baidu
In its recent earnings report, Qihoo 360 Technology Co Ltd (NYSE:QIHU) is estimated to have raked in $6 million from search advertising. This may seem small given that some reports say that Qihoo has about 12% of the search market, but you have to recognize two things.

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