Youku and Tudou: leading with profession content

• Source: Global Times
• [07:43 July 13 2009]
• Comments

By Sherman So and J. Christopher Westland

Editor’s note:
This article has been adapted from the book Red Wired: China’s Internet Revolution co-authored by Sherman So and J. Christopher Westland. The to-be-published book is aimed at helping readers gain firsthand understanding of how the Chinese combined successful components from their Western counterparts with innovation, to accommodate the unique characteristics of the Chinese market.
 

While US-based Youtube is derived from homemade videos, Chinese video-sharing sites, such as Youku and Tudou decided to focus on professional content such as TV shows and movies. They were able to do so because the TV and film industry in China is highly fragmented. With close to 300 TV stations and over 1,000 production houses, finding partners is not difficult.

The added benefit is that it is easier for them to attract advertisers. Whereas most of Youtube’s ads come from Google’s AdSense network, brand advertising accounts for most of Youku’s and Tudou’s revenue. Advertisers were reassured, because most of their content was from the mainstream media.

By 2005, the Internet had been popular in the West for over a decade. A new wave of applications began to emerge focusing on user-generated content. Entrepreneurs saw that people were not content to be merely passive consumers of online content – they also wanted to put their own content on the web, sharing it with friends and strangers.

The trend was named Web 2.0, suggesting a new version of the World Wide Web¹.  It did not imply any update to technical specifications – many of the technologies used were already available; rather the term referred to cumulative changes in the ways that end-users utilized the web.

One of the earliest Web 2.0 applications was the blog, which allows people to publish their writing online. As network capacity increased and bandwidth limitations eased, video sharing became popular. 

Youtube was founded by three early employees of Paypal, Chad Hurley, Steve Chen and Jawed Karim, in early 2005. The service quickly became a hit with youngsters who wanted to share movie and TV clips and music videos, as well as their own short amateur videos.

As popular as Web 2.0 applications have become, especially among the young, their business models have yet to be totally proven.

The crux of the problem is that revenue comes from advertising. But for bandwidth-intensive applications, such as video sharing, it is doubtful whether advertising income is enough to cover the cost of bandwidth and servers.  

¹ The term was first used by Dale Dougherty and Craig Cline and became notable after the O'Reilly Media Web 2.0 conference in 2004.