and, along with about a dozen competitors, are known as the Chinese versions of YouTube. But beyond the common ability for users to upload videos to,, and YouTube, the Chinese and Western business models face different futures. and are now, seemingly in tandem, hours and days away from offering their shares to the public, giving their early investors either a chance to flee or grow with their respective companies. In the United States, YouTube is a leader without equal; while and count sites like,, and many others as close competitors (note: has already been blocked in China for many months). Tudou and Youku will continue to both nip at each others' heels and ride each others' waves.

And that coexistence will remain unchanged, no matter how hard the management at Youku and Tudou claim able to defeat the other. But maybe they do not want to defeat each other; there is safety in numbers.

Unlike Western Internet content business models, wherein giants like Yahoo, Google, MSN, eBay, and Amazon hold strong within their respective dominions, in China the players within the content business models have learned to get along. Web portals like,, Sina,com, and all provide similar services, yet are all safely entrenched in building their businesses. Social networking sites like and live harmoniously together in China; in America, Facebook dominates. For online travel,, and oxymoronically dominate together in China. For wireless value-added services, Chinese firms Hurray, Linktone, and KongZhong coexisted for a few years. The list goes on, and investors need to be prepared for supporting multiple "number one" firms when they pepper Chinese business sectors with money.

As for the future of the online video sites in China, the past near-fortunes of the wireless value-added services aspirants Hurray, Linktone, and KongZhong are good stories at which to look. Goaded by post-SARS fever in 2003, money flowed into the WVAS sector as investors believed that mobile services were the future in China. Mobile was/is the future, but only for the goliath government-funded telecom companies China Mobile, China Unicom, and China Telecom, who slowly picked off the wireless services of companies like,,, Hurray, KongZhong, and Linktone with a combination of more direct services to consumers, legal sanctions, and fines. Five years ago, Internet companies' press releases heaped praise upon their wireless revenues; now, for the few Chinese companies who even break-out the wireless segment of their revenue, few see any upswings. Moral of that story: do not launch a business anywhere in the world where your competitor has strong government ties.

The same thing is likely to happen to the online video websites in China. They are playing in a game whose final scores are fairly easy to see; they are engaged in a media business model that is directly competing with government-funded and government-run activities. It's not a matter of time for when the government will loosen its hold on its agents of propaganda, but instead a matter of when legislation will make life even harder for Tudou and Youku. Chinese government-run groups have already recently launched initiatives to bring China Central Television and online, and the last year has seen new regulations that make licensing of online video companies more difficult. Tudou and Youku might spin these new regulations as barriers to entry that can work in their favor, but these regulations are almost certainly the first salvo in a string of rules governing how they do business. The same thing happened in the Chinese WVAS sector.

And knows there will be challenges. In its prospectus issued last month, it subtly stated "comply with applicable regulations and government policies" and "protect third-party intellectual property rights" as two of its main challenges. And's prospectus, also issued last month, ominously states, "We depend on a limited number of advertising customers for a significant portion of our revenues. Our top 10 advertising customers accounted for approximately 53.0%, 32.3%, 29.6% and 24.6% of our net revenues in 2007, 2008, 2009 and the nine months ended September 30, 2010, respectively." Not only do Tudou and Youku concentrate their revenue generation via one channel (e.g. advertising), they rely wholeheartedly on advertising agencies, who are notorious late payers and will give headaches to the online video companies' bookkeepers with accounts receivable. And what happens if their advertising revenue swells and starts eating into CCTV's ad income?

Online video websites are fantastic media for casual netizens around the world, and they will not go away soon. However, in China, who will own the online video channels over the longterm?


Please enter your comment!
Please enter your name here