Exclusive Interview with the Chairman of Qihoo - Zhou Hongyi

By Yang Yang
Published: 2010-11-11

Economic Observer Online
November 9, 2010
Translated by Chen Ximeng
Original Chinese:

The Beijing Chaoyang District People's Court recently accepted an unfair competition lawsuit that Tencent filed against Qihoo. The dispute dates back to around the October National Holidays, when many users of Qihoo's 360 antivirus software received messages informing them to install a piece of software called "360 Privacy Protector" on to their computers.

Qihoo also published a notice on its official website which accused an unspecified instant messaging application of copying the private files and data of users without their consent. Qi Xiangdong, the chairman of Qihoo 360, denounced this invasion of users' privacy saying that, "the act of spying on users and the act of using malware are one and the same," they both severely infringe upon the interests of users.

On September 27, Tencent responded, noting that the mesage that had appeared on Qihoo's site implied that QQ was spying on users, Tencent released an official statement that said Qihoo does not understand QQ's security functions and that QQ routinely checks its security.

On October 11, Tencent issued another statement declaring that, "360 is intentionally smearing Tencent," and announced that Tencent would, "take legal actions to defend their interests." This ratcheting up of Tencent's attitude from "not understanding" to "intentional smearing," lifted the dispute to a higher level and over the proceeding weeks, the two companies engaged in a very public war of words.

However, the situation became even more tense when on the night of November 3, Tencent decided to stop providing QQ services to users who had installed Qihoo's 360 antivirus software.

One hour after that announcement, Qihoo publicly accused Tencent of threatening its users and assured the public that they had already made preparations and that they would be able to ensure that users would still be able to use both Tencent's QQ and Qihoo's 360 at the same time. 

Ma Huateng, the CEO of Tencent, accepted an interview with the Economic Observer on Thursday, November 5.

Following that interview, EO reporter Yang Yang was contacted by Qihoo and informed that Zhou Hongyi, the chairman of the company, would also be willing to talk to her.

On Monday, Yang Yang went to the Qihoo's Beijing offices and conducted a telephone interview with Mr. Zhou who was in Hong Kong.

Below is an edited translation of the Chinese transcript of that interview which was first published on the Economic Observer's Chinese-language site on Tuesday November 9.
The Interview

Economic Observer: Is it true that you asked Ma Huateng, the CEO of Tencent, to invest in 360 and that he refused?

Zhou Hongyi: Ma and I often used to chat and text each other, and these kind of ideas came up in conversation.

I asked him what level of development have you reached today? I know that you have the ability to block the path of any startups involved in the Internet business. In reality, no one can shake the status quo of you as No. 1; but you should no longer grow by beating others then stepping over their corpses.

From my experience as an investor I said, why don't you change your methods and support startups.

For example, faced with a well-matched competitor, Thunder, which specialized in downloading, Tencent insisted on launching a war against it by using "QQ Downloads." Similarly, 360 stood out in security protection, and Tencent tried to catch up with us with the recently released Diannao Guanjia (电脑管家). Consequently, both sides were weakened by the war.

You can completely integrate startups with strategic investments rather than by strangling them all. And in this way, in the future, successful Chinese companies will want to cooperate with you; this is a good ecosystem. While you may still be mighty, it is not you that is annihilating companies, but your investment which has helped them to develop.

Li Xueling, the CEO of Duowan, an online gaming website can back me up on this. Li and I came up with this idea over tea in Guangzhou, and afterwards I retold it to Tencent's Ma, but Ma thought that the startups did not have any value.

Economic Observer: Have you thought of uniting with Tencent to beat Baidu?

Zhou Hongyi: It's clear why Baidu holds a grudge against us: our network shield blocked users from some bad Baidu advertisements. 

I'm the only one in China who has battled with Baidu. Whoever wants to dabble in the search engine industry always asks me for my experience and I am kind enough to confide my approach to them.

Do you not think Tencent wants to enter the search engine field? Ma's biggest investment this year has been in search engine related fields, and he has taken many people from Google, Tencent's coming war with Baidu is only a matter of time.

Economic Observer: Ma said that Qihoo's Koukou Bodyguard (扣扣保镖) [a program developed by Qihoo 360 that is able to block QQ advertisements from popping up and that can also disable other QQ services] posed a threat to Tencent; that the reason you required users to backup their buddy lists was so that when you launch your own instant messaging application, you can transfer the information of Tencent users and include a copy of their buddy lists. He thinks you will launch an instant messaging service, like QQ, very soon.

Zhou Hongyi: This is a big lie. He is trying to divert attention from the fact that his instant messaging application is not safe. He developed all types of client software to undermine the growth of similar software and is afraid that other people will develop succesful instant messaging applications.

I hadn't planned on developing an IM service in the past and I'm not planning on developing one now. If I wanted to do so, I could have created one with the advantages that Tencent is lacking. You might wonder about my motives for launching Koukou Bodyguard which appears to promote QQ's service and encourage users to remain loyal to QQ.

Additionally, if the taking of a user's buddy list was advantageous, wouldn't MSN and other IM software providers already have worked out a way to transfer the lists?

Third, I'm serious when I tell you that we have never taken advantage of any our users' data, including the records of users' conversations and their buddy lists.

Economic Observer: How long did it take for you to develop Koukou Bodyguard? Ma believes that Koukou Bodyguard was not a short-term development but was part of a well-though out plan aimed at bringing down QQ.

Zhou Hongyi: Several of our programmers created the software in less than a month. We mainly used technology from Safebox (保险箱) and Cloud Anti-virus (云查杀) and added a few supplementary functions. I think if Tencent wanted to provide the management tools that Koukou Bodyguard can provide, including the ad blocking function, they could have made it within days; however, they're just not interested in doing it.

Economic Observer: Prior to the release of Koukou Bodyguard, did Tencent's own security manager software threaten 360?

Zhou Hongyi: If you insist in presenting it in such an obscure way, let me put it to you like this, if they produde a software that competes with mine, than I am in competition with Tencent and fighting to protect my patch, and given Tencent's monopoly position, that definitely puts pressure on me. What were my strategic options at that point? My decision was to produce some new products that will appeal to users and that they will continue to use. This approach was aimed at killing off 360 Safeguard.

To save time, we decided not to translate Mr. Zhou's response to two more questions about Qihoo's Koukou Bodyguard software - those who are interested in the full interview can read the full Chinese text of the interview here.

Economic Observer: You said before that you had never had any plans to develop an IM application, that you're not planning one now, I wonder, is it possible that you might develop one in the future?

Zhou Hongyi: My words have been misinterpreted by everyone; I do not like to plagiarize the work of others. People do not understand the things I do. I slowly walk my own path, so of course I would never copy QQ's instant messaging application and I would not compete against Tencent by copying their application. But in the future there could be a new service resembling Twitter and not IM. If we have an innovative idea we will contemplate investment, but we absolutely will never copy QQ's instant messaging application, we won't develop an IM application in the future. 

Links and Sources
Economic Observer:
Exclusive Interview with the CEO of Tencent - Ma Huateng