Chinese video website Youku.com is riding the Chinese online video bubble with an announcement that it has just completed its latest round of financing and gained USD40 million from private equity firms.
These private equity firms include Chengwei Ventures, Brookside Capital, Maverick Capital, and Sutter Hill Ventures. In addition, Youku.com is reportedly talking with other investors with the aim of gaining additional USD40 million funds. So far, Youku.com has received total investments of USD110 million from private equity firms.
According to Gu Yongqiang, founder and CEO of Youku.com, the company will use the financed capital for professional media cooperation, Internet content creation, and research and development of PC and mobile phone-related technologies to further improve user experiences.
Eric Li, general manager of Chengwei Ventures, told local media that Youku.com enhanced its leading position in the industry in 2009 and it has a successful profit-making strategy. However Li has not stated if that strategy has actually translated into any profitability yet for the company. Chengwei Ventures will reportedly continue to ensure Youku.com's financial power to help it maintain and expand its leading position.
Youku.com reportedly currently has over 1,500 cooperative partners and 350 advertising clients. It reportedly made total revenue of over CNY200 million in 2009.
Chinese online video service Ku6.com was just purchased by Shanda's wireless subsidiary Hurray! Holding Company Ltd three weeks ago. In the all stock transaction, all of the outstanding capital shares of Ku6 will be sold to Hurray and all of the outstanding employee stock options of Ku6 will be cancelled, in exchange for an aggregate of 723,684,204 Hurray ordinary shares, of which 44,438,100 will be represented by American Depositary Shares of Hurray, each representing 100 ordinary shares of Hurray. After the completion of the merger, Ku6 will retain its brand name and become a wholly-owned subsidiary of Hurray. The transaction is expected to close in the first quarter of 2010.
Youku.com and Shanda are both competing against government-financed online video operations too. Chinese telecom operator China Telecom set up a video center in Shanghai in November 2009 to develop its online and mobile video businesses. The new video center will operate China Telecom's IPTV, mobile phone video, and Internet video services; and it will be responsible for the operation of China Telecom's nationwide video central platforms to support the development of the video business in various provinces. At the same time, the center will be committed to the construction of a social media video industry chain and establish Shanghai's video industry with the joint effort of the local government.
Chinese media is strictly monitored by both the national and local governments. In July 2009, CCTV.com, one of the most influential online video service providers and a branch of China's central media organ, began to take action against privately-run businesses by suing six online video service providers including Ku6.com and 6.cn, asking these defendants to pay a total of CNY16.2 million in compensation.