Monetizing the opportunity
The daily video views of Youku Tudou Inc (ADR) (NYSE:YOKU)‘s mobile application reached 150 million by the end of March 2013 and is expected to exceed 300 million by the end of 2014. Due to the rise in the mobile video traffic, the company plans to monetize this opportunity and had rolled out advertisements on mobile devices in the first quarter of 2013. Youku Tudou Inc (ADR) (NYSE:YOKU) is testing mobile advertisements on iPads and has been successful in receiving positive feedback from clients.
Advertisers like Apple Inc. (NASDAQ:AAPL), The Coca-Cola Company (NYSE:KO), P&G, and China Mobile are now finding mobile video advertisements to be more effective than traditional advertisements on TV. From mobile advertisements, Youku Tudou Inc (ADR) (NYSE:YOKU) is anticipating revenue of $16.3 million (RMB 100 million) by the end of 2013 and $81 million (RMB 500 million) by the end of 2014. Looking at the monetization opportunity, the company is likely to see an increase in its revenue.
Youku announced a two year agreement with Hong Kong’s Television Broadcast, or TVB, in March 2013. This deal will bring 2,500 hours of new and classic TV shows from TVB onto Youku Tudou Inc (ADR) (NYSE:YOKU)’s website and its mobile application. This will help the company increase its advertiser base, which witnessed a 62% year over year rise to 480 advertisers in December 2012.
Youku Tudou Inc (ADR) (NYSE:YOKU) is in a good position to capitalize on the advertisement market and should perform well going forward.
Sogou Pinyin a hit!
Sogou.com, a subsidiary of Sohu.com Inc (NASDAQ:SOHU), reported a 73% year over year growth in revenue to $39 million in the first quarter of 2013, which was driven by income from online advertisements. As per iResearch, the company has over 450 million customers who use its news, video, Pinyin, games, and other services on a monthly basis. The Sogou “Pinyin” product, a tool for writing Mandarin Chinese using the English alphabet, posted 88% penetration in the Chinese market for the quarter ending in March 2013.
Recently, Sogou launched the upgraded 6.2 version of the product, where users can see matching search results and suggestions below the input bar when words are entered, which was a missing feature in the 6.1 version. This will turn the product from just a typical typing tool into a search tool. The 6.2 version has an improved intelligent error correction feature and additional skin download options, making it even more user friendly. With high market penetration of the product, the company is expecting a revenue of $180 million by the end 2013 from the online advertisements placed on this product.
The online video advertisement business rose 70% year over year and is expected to rise by another 70% in 2013 as Sohu.com Inc (NASDAQ:SOHU) has acquired the online broadcasting rights of ”Voice of China Season 2.” Voice of China is a reality talent show to be aired in September 2013. The company is anticipating earnings of more than $100 million from online video advertisements aired during this event. Additionally, Sohu.com Inc (NASDAQ:SOHU) has approached Samsung to work on the pre-installation of the mobile application and also approached China Unicom for special data package allowance to promote the video application.
Sohu.com Inc (NASDAQ:SOHU) is keen on monetizing the event by generating revenue from online advertisement.
Growth in usage of mobile internet devices
Yahoo! Inc. (NASDAQ:YHOO) witnessed an increase in total unique mobile visitors to 300 million in the first quarter of 2013, which was 200 million in December 2012. The rise in mobile visitors was due to the revamp of ”Yahoo! Mail” and ”Flickr” on mobile devices. This revamp includes a new look for the Yahoo! Inc. (NASDAQ:YHOO) Mail homepage, which made it 25% more interactive to users, and one terabyte data storage capacity for Flickr users.
The mobile platform is one of the main drivers of Yahoo! Inc. (NASDAQ:YHOO)’s revenue because the number of mobile internet users around the world is increasing drastically. The weather, email, and finance applications, which are mostly powered by Yahoo! for iPhones and iPads were also a crucial factor for the increasing number of Yahoo! users. With this, the company is expecting to attain a considerable portion of the global mobile advertising market, which is expected to be $26.6 billion by 2016, according to the research by eMarketers.
China’s Alibaba Group, in which Yahoo! Inc. (NASDAQ:YHOO) holds 24% stake, posted a profit of $642 million, which was $236 million in the last quarter of 2012. Alibaba is a Chinese e-commerce giant that operates websites like Alibaba.com, Taobao, and Tmall. It claims that two sites, Taobao and Tmall, crossed the $160 billion mark in terms of total transaction of products sold online in 2012. Yahoo! Inc. (NASDAQ:YHOO) is expecting a fair amount of profit from Alibaba as the market for online retail sales in China is expected to be $328 billion by the end of 2014.
Conclusion
Youku Tudou Inc (ADR) (NYSE:YOKU) has an excellent opportunity to grow, looking at the huge upsurge in mobile video views and the agreement with TVB. The company is likely to increase its customer base with context to the rise in the number of mobile internet users.
The Pinyin product is expected be a big hit for Sohu.com Inc (NASDAQ:SOHU), especially with its new upgrade. Customers will prefer the product over its competitors, which will result in an increase in the user base and revenue for the company.
With the increase in people using mobile devices, Yahoo! Inc. (NASDAQ:YHOO) has a good opportunity to make profit. Returns from the investment in Alibaba is also expected to increase because of the boom in the China’s online retail market.
Looking at the prospects of these companies, I see an uptrend in their performance, which will benefit them and investors going forward.
The article A Few Ways to Make Money From Chinese Internet originally appeared on Fool.com and is written by Madhu Dube.
Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Sohu.com. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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