We should recall that Sogou's TAC accounted for 78% of its cost of revenues during the quarter, which doesn't leave it much room to develop new hardware products. Sogou's growth in search revenue looks decent, but its traffic acquisition costs (TAC) surged 58% annually to $135 million (49% of its revenue) due to price inflation and tougher competition. Sogou's TAC stayed roughly flat from the second quarter , but its total number of advertisers slipped 2% sequentially to 81,000 as its average revenue per advertiser fell 6% to $2,600.