Sogou, Chinese search company and a subsidiary of Sohu, is getting acquired by Tencent. 

The company announced late last month that the board had received a letter from Tencent, which is seeking to acquire all of its shares at $9 a share. 

Sogou's stock price is currently sitting at $8.61. The deal could value the company at about $3.5 billion, making Sogou actually three times as valuable as Sohu.

"Thanks to Tencent's recognition of Sogou's value technical capability, and product innovation ability. We will carefully discuss relevant issues so that Sogou will be able to create greater value for users," Sogou CEO Wang Xiaochuan said in a post on his personal WeChat account.

Generally speaking, search has become less of an important portal after China entered the mobile internet era. Apps that serve as both information portal and content platform for individual sectors prospered, and gradually replaced search engines as users' first stop for getting new information. Some best examples are Weibo for social media, Zhihu for questions and answers, Douyin for entertainment, Toutiao for news, etc.

Those apps cut users off from their connections with search engine, and are constantly putting in more effort to retain them on the platform, instead of sending them off elsewhere on the internet.

China's mobile internet industry is also uniquely fragmented, in the sense that bigger companies originally from totally non-competing sectors eventually build up their own ecosystems of subsidiaries and portfolio companies that compete fiercely for market dominance. 

One such rival ecosystem that Tencent's is facing is ByteDance's, complete with a matrix of apps that encompass a wide variety of content categories and social media forms, the latest addition of which is called Toutiao Search.

The search portal allows users to search for nearly all content within ByteDance's ecosystem, from news articles and topics, to video content on Douyin and Xigua Video, etc., as well as information on the internet. It could make it easier for users, often on one or two products, to discover more content from ByteDance's 20-plus product portfolio, and make the company better at keeping those users inside its ecosystem.

Besides ByteDance, Alibaba, another long time rival of Tencent's, is also working on a new search product called Quark that had achieved top rank on the Chinese App Store on July 25. Besides regular search function and niche features such as academic paper search, the Quark app also contains a number of AI-powered quirks such as object classification, height measurement, and AI optometrist, etc.

With Baidu, often referred to as the Google of China, falling out of the league of three top Chinese internet giants, both Alibaba and Tencent, plus ByteDance the new and powerful contender, are seeing new opportunities to invest in search and its related businesses. In a country with about a billion mobile internet users and only a handful of major internet companies fighting in just about every sector, digital traffic has never been given more value. The better a company is at dispatching users (traffic, essentially) within its own ecosystem, the better its defense against competitors.

Sogou was primarily known for its search engine, browser, and Hanyu Pinyin input method product. The company also increased its research and development in artificial intelligence technologies, such as voice recognition. In a sense, it is more like China's Google than Baidu, the biggest search engine company in China, which had been putting its attention elsewhere, such as food delivery and e-commerce live streaming.

The company has long been a trusted ally of Tencent, which owns approximately 39.2% of Sogou prior to the acquisition. Sogou is also the only search engine operator to have been granted access by Tencent back in 2014 to build a search engine for hundreds of millions of articles on WeChat Official Account, the most popular social-reading platform built into WeChat.

With Sogou fully welcomed in as a direct subsidiary, Tencent could drastically improve on its search and content discovery capabilities, and retain users as much as possible.