YouKu-Tudou – Huge Potential in Mobile Videos

YouKu-MobileYouku attracts 30%+ of its traffic from mobile devices, yet it has not effectively monetized this traffic. According to Analysys, Youku ranks in the top two in both iOS and Android for cumulative downloads among online video mobile applications in China.

In addition, while the company continues to secure premium video content (e.g., exclusive partnership with TVB), it has also turned more aggressive in promoting user-generated and in-house-produced content. Notably, the recent Tudou video festival attracted ~18,000 video submissions and recorded over 230mn video views. Self-produced content should allow the company to expand its advertising inventory and offer more soft advertising solutions, such as sponsorship and in-program brand promotions, which have been a very successful advertising model for traditional TV stations.

Competition in online video remains intense. Acquiring PPS will make Baidu the second-largest online video platform in China and help deepen its user penetration.

Based on the data published by iResearch, in January, online video services captured the largest share of user time spent on PC and iPad, with ~38% and ~41%, respectively. It also captured ~11% of user time spent on smartphones, behind only instant messaging, mobile browser, and the time spent on smartphone personalization software.

Advertising on Youku / TuDou Platform
Currently, the company generates ~58% of its advertising sales from fast-moving consumer goods (FMCG) clients, followed by transportation and finance (combined for ~14% of total), telecoms (~8%) and IT services (~8%). To date, ~60% of Youku’s total advertising sales come from international clients. According to the company, only ~15% of its FMCG advertising sales are from domestic clients, and almost all of its automobile clients are international brands.

According to the company, there was only a ~50% overlap between Youku and Tudou for their top 100 customers before the merger.