Youku Tudou: 19% share of Chinese online video market and counting
Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s recent acquisition of PPS can be seen as a reaction to the merger between Youku and Tudou last year, which created one of the biggest online video content platforms in China. As of December 2012, Youku Tudou Inc (ADR) (NYSE:YOKU) had more than 4,500 movie titles, 2,700 television serial drama titles, relationships with 1,800 professional media content owners and over 900 variety shows. It’s also doing well with its monetized version, Youku Premium, which has processed more than 4.5 million paid orders since December 2010.
So how big is Youku Tudou Inc (ADR) (NYSE:YOKU)? In terms of mobile, it may be below Baidu in size: it had 100 million monthly mobile users and 80 million mobile apps installed at 2012. Since there was a 50% quarterly growth in mobile daily activity, the number of apps installed in mobiles should be much bigger by now. There should be at least 200 million monthly users by now. Now, Youku Tudou seems to be spending more money in content than Baidu. In 2012, Youku Tudou Inc (ADR) (NYSE:YOKU)’s content costs were roughly $118 million and Baidu’s content costs were roughly $35 million. But revenue may be higher (than iQiyi) as well, considering that Youku Tudou has a premium version active.
The strength of Youku Tudou Inc (ADR) (NYSE:YOKU) relies on its monthly unique visitors from home and office PC users: about 260 million for the Youku platform in December 2012. That being said, the company knows well the importance of mobile. In the first quarter earnings call, it was announced that mobile traffic increased 50% quarter-over-quarter to over 170 million daily video views.
Renren’s trying hard too, but…
Renren bought 56.com, a video streaming service, for $80 million in 2011. 56.com’s content is mostly user generated, so Renren doesn’t have to pay high content fees. Also, since Renren has one of the most popular social platforms in China with more than a 100 million registered users, I expect interesting synergies and cross marketing opportunities between 56.com and the social network, in order to drive more traffic and user engagement.
However, it should be noted that video for Renren is just another venture. The company is fighting to improve the growth of its gaming platform, group-buying site (nuomi.com), wedding site (jiexi.com) and professional network (jingwei.com).
The problem of Renren is not a lack of new ventures. They have too many projects. The real problem is that Renren is not showing signals of strong monetization know-how. In the latest earnings call, Renren reported that of the $46.6 million in revenue, online advertising revenues were $9.8 million. This is just a slight increase of 5% from the same period of 2012. In the next quarters, investors will demand more monetization and, specifically, more growth in advertisement revenue. Faced with this pressure, Renren might give more priority to Nuomi.com (which may be a cash cow in the making) and Renren.com (which has a consolidated and well engaged user base) in the medium run.
