Produced by Radar Finance Hongtu | Written by Li Yihui | Edited by Shenhai

Qihoo 360, led by Zhou Hongyi, has suffered another loss.

On the evening of July 9, Qihoo 360 disclosed its performance forecast, predicting a net profit attributable to shareholders of the parent company for the first half of 2024 to range from a loss of 240 million yuan to 350 million yuan, compared to a loss of 231 million yuan in the same period last year; the net profit excluding non-recurring gains and losses is expected to range from a loss of 430 million yuan to 640 million yuan, compared to a loss of 255 million yuan in the same period last year.

Qihoo 360 stated that the main reason for the expected loss during the reporting period was the decrease in operating revenue compared to the same period last year, resulting in a certain decrease in overall gross profit compared to the same period last year.

In the first quarter, Qihoo 360 suffered a loss of 110 million yuan. Based on this calculation, the company's second-quarter loss amounted to 130 million yuan to 240 million yuan.

Radar Finance notes that this marks the ninth consecutive quarter that the company has recorded a net profit loss attributable to shareholders. According to Tonghuashun iFinD data, Qihoo 360's net profit attributable to shareholders was a loss of 620 million yuan in the second quarter of 2022, and the company has been incurring losses ever since, accumulating a loss of over 3 billion yuan as of the first quarter of this year.

At the same time, Qihoo 360's revenue has also declined continuously from a high of 13.129 billion yuan in 2018 to 9.055 billion yuan in 2023.

In terms of revenue composition, internet advertising and services remain the main revenue driver for Qihoo 360, contributing nearly half of the total, but this segment has been gradually declining in recent years due to the decline of PC-based advertising.

It is worth mentioning that many market participants believe that Qihoo 360's continuous losses are partly related to its investment in Nezha Automobile.

Despite Qihoo 360's poor performance, it has not stopped Chairman Zhou Hongyi from being a high-profile internet celebrity. Notably, Zhou Hongyi, who recently encouraged entrepreneurs to become internet celebrities, announced that he would break his past promise of not engaging in livestream selling and would personally promote his own products.

Revenue Decline and Continuous Losses

On the evening of July 9, Qihoo 360 disclosed its 2024 semi-annual performance forecast. The announcement showed that the net profit attributable to shareholders of the parent company for the first half of 2024 is expected to be approximately -350 million yuan to -240 million yuan; the net profit excluding non-recurring gains and losses is expected to be approximately -640 million yuan to -430 million yuan.

In comparison, the net profit attributable to shareholders of the parent company for the first half of last year was -231 million yuan; the net profit excluding non-recurring gains and losses was -255 million yuan.

Regarding this, Qihoo 360 stated that the main reason for the expected loss during the reporting period was the decrease in operating revenue compared to the same period last year, resulting in a certain decrease in overall gross profit compared to the same period last year.

Losses have become the norm for Qihoo 360 in recent years. On April 19 this year, the company released its 2023 annual report and first-quarter report for 2024.

The financial report showed that the company achieved operating revenue of 9.055 billion yuan in 2023, a year-on-year decrease of 4.89%; the net profit attributable to shareholders of the parent company was -492 million yuan, a significant reduction of 77.65% compared to the loss of 2.204 billion yuan in 2022.

Regarding the decline in annual revenue, Qihoo 360 explained that the internet advertising and services business was squeezed by the rapid growth of advertising revenue on video platforms, resulting in hindered revenue growth; the smart hardware business experienced reduced revenue due to decreased investments in non-cloud hardware business.

In terms of individual businesses, the internet business, including value-added services and advertising, generated a total revenue of 5.62 billion yuan in 2023, a year-on-year decrease of 2.95%. Research reports from Northeast Securities noted that the company's internet business has gradually shifted its passive advertising revenue structure towards a user-driven paid model, effectively resisting the industry trend of declining PC-based advertising revenue.

Last year's losses at Qihoo 360 were partly related to its investment in Hozon Auto, the parent company of Nezha Automobile.

The financial report showed that Qihoo 360's investment income losses amounted to 708 million yuan over the past year. Among them, the company holds a shareholding ratio of approximately 9.37% in Hozon Auto, which should be accounted for as a long-term equity investment using the equity method. Therefore, in 2023, Qihoo 360's investment loss recognized under the equity method for Hozon Auto was -687 million yuan.

In the first quarter of 2024, Qihoo 360 achieved operating revenue of 1.719 billion yuan, a year-on-year decrease of 12.53%; the net profit attributable to shareholders of the parent company was a loss of 110 million yuan, with a year-on-year reduction in losses. Among the approximately 110 million yuan in losses, the net loss from associated enterprises and joint ventures still amounted to 128 million yuan.

Radar Finance notes that Qihoo 360's quarterly net profit loss attributable to shareholders began in the second quarter of 2022 and has continued until now. Including the expected loss for the second quarter of this year, the company has been in a loss state for nine consecutive quarters.

Some analysts believe that the main reason for Qihoo 360's difficulty in achieving profitability in recent years is that Hozon Auto has been "dragging its feet." In terms of timing, in October 2021, Qihoo 360 announced that it planned to invest a total of 2.9 billion yuan in Hozon Auto, indirectly holding a total of 16.59% equity, becoming the second-largest shareholder of Hozon Auto.

After Qihoo 360's investment, Hozon Auto has suffered consecutive losses. Its prospectus submitted to the Hong Kong Stock Exchange in June showed that the company incurred losses of 4.84 billion yuan, 6.666 billion yuan, and 6.867 billion yuan from 2021 to 2023, respectively, totaling over 18.3 billion yuan in losses over three years.

At the same time, Qihoo 360 also experienced a significant decline in performance in 2021, achieving a net profit attributable to shareholders of 902 million yuan, a year-on-year decrease of 69.02%; in 2022, the company suffered its first annual loss since returning to the A-share market, with a huge net loss attributable to shareholders of 2.2 billion yuan.

In addition, the declining performance of the company's main businesses, such as internet advertising and security, has also led to a continuous decline in Qihoo 360's revenue since 2019.

AI Layout Has Not Yet Brought Significant Performance Improvement

Qihoo 360 was once a core target of the "large model concept" in the A-share market. When the OpenAI large model trend swept the A-share market last year, Qihoo 360 saw a short-term surge, with its share price rising from around 7 yuan to break through the 20 yuan mark in less than two months.

Amid the AI frenzy, Qihoo 360 followed market trends and entered the large model arena, launching its self-developed 100 billion-parameter cognitive general large model, "360 Brain," which it claimed could cover all scenarios of large model applications.

Last year's annual report showed that the company launched a tax large model, a security knowledge large model, a medical large model, an insurance industry knowledge large model, and a government affairs large model based on the underlying capabilities of "360 Brain," with question recognition accuracy and answer accuracy rates both exceeding 95%.

Among them, the tax large model passed the Certified Tax Agent Examination, theoretically obtaining the qualification to practice tax, significantly enhancing the "reliability" of work usage requirements and receiving high recognition from customers.

At the same time, leveraging the capabilities of 360 Brain, the company revolutionized its two dominant scenarios, "360 Browser" and "360 Search," into "360 AI Browser" and "360 AI Search," receiving strong market response.

However, the financial report did not explicitly mention the commercialization results of these AI products or whether they have begun contributing to profits. On May 23, 2023, Qihoo 360 responded to investors' questions about whether AI applications had generated performance on an interactive platform, stating that the subsequent implementation of the company's AI strategy at the city, government, industry, enterprise, and individual levels is expected to bring improvements to the company's operating performance.

On June 6 this year, the 360 AI New Product Launch & Developer Communication Conference was held in Beijing, and the membership system "360 AI Premium" was officially launched. The 360 AI Premium system adopts a subscription model, covering more than 100 practical tools across five scenarios: images, writing, documents, videos, and document templates. Users can unlock all applications by subscribing to "360 AI Premium" through multiple 360 browsers.

Qihoo 360 stated that the company's introduction of a subscription-based membership service that includes all AI features is gradually transforming the passive advertising revenue structure towards a user-driven paid model, effectively resisting the industry trend of declining PC-based advertising revenue.

In addition, it is understood that 360 AI Search ranks second in terms of user visits in China, outperforming Kimi and ERNIE Bot, becoming one of the top three global AI search engine products, second only to Microsoft's New Bing and Perplexity.ai.

Meanwhile, the newly upgraded 360 AI Browser has an average daily usage time of over 5 hours, becoming a new growth point for 360 products.

These data are undoubtedly encouraging results for Qihoo 360, which has made earlier layouts in areas such as AI large models. However, judging from the latest performance forecast, it may take some time for the AI business to help the company reverse its declining performance.

Nonetheless, as reported in the media, Qihoo 360's AI layout has still made certain progress. For example, the 360 AI Premium service has grown rapidly since its launch, attracting nearly 100,000 paying users in its first month, forming a new AI business model. In response, the company stated, "This is expected to improve the revenue structure."

Zhou Hongyi to Enter Livestream Selling

In the era of short videos, the internet celebrity economy is booming, and some entrepreneurs have started to follow the trend and transform themselves into internet celebrities, with Qihoo 360 Chairman Zhou Hongyi being a representative among them.

Looking back to the beginning of this year, Zhou Hongyi was still learning how to become an internet celebrity. In a short video posted on January 21, he said that he was evolving towards becoming an internet celebrity, and that the trait of internet celebrities is to have many fans, so he needed to seize every opportunity to attract followers.

In a recent livestream, he explained why he wanted to become an internet celebrity. In Zhou Hongyi's view, if possible, entrepreneurs should all become internet celebrities. For a company, either the boss should be an internet celebrity or several internet celebrities should be cultivated, otherwise, no one would know about a new product launch. Because "people's brains have been formatted by short videos and livestreams, and no one would know about a product launch without an internet celebrity from the company."

Guided by this theory, Zhou Hongyi has frequently appeared at various events and forums, even at new energy auto shows, becoming a bona fide "entrepreneur internet celebrity" over the course of half a year.

It is worth mentioning that as Zhou Hongyi successfully transitioned into an internet celebrity, he also refuted his previous statement about not engaging in livestream selling.

In early February this year, Zhou Hongyi responded to rumors that Qihoo 360 would engage in livestream selling, stating that Qihoo 360 had no plans for livestream selling, and that his research into the internet celebrity economy was because the way users receive information has changed, and that he needed to immerse himself in the field to understand it better and create better products. He also said, "I want to learn from legendary entrepreneur internet celebrities and speak up for Qihoo 360, saving advertising costs for the company."

But now, Zhou Hongyi's mindset has changed. According to media reports, on July 8, Zhou Hongyi, while introducing 360 children's smartwatches, said, "I said I wouldn't do livestream selling. I'm breaking (that plan) and will promote my own products," and sought tips from education blogger Zhang Xuefeng on livestreaming and livestream selling during the press conference.

Immediately afterwards, on July 9, while attending the China Internet Conference, Zhou Hongyi shared his experiences and views on entrepreneurs building their personal IPs with Zhang Chaoyang, the founder of SOHU.com, such as avoiding an arrogant attitude and speaking without a "dad vibe"; promotions should not be all advertising content, which might be unappealing to the general public, so some lifestyle sharing is needed.