Youku Tudou, a leading multi-screen video entertainment and media company in China, has announced its unaudited financial results for the second quarter of 2015. The results are overwhelmingly positive; Youku (akin to the American YouTube) has proved to be a landmark digital success story in China.
Youku is a large-scale video-sharing website under the Alibaba Group. The website was initially established very similar to YouTube and appeared as a video sharing platform.
However, it has gradually transformed into an online media platform, especially holding a large number of videos and audio copyrights and other special broadcasting rights, and involved in the production of movies and TV series. There is already a big difference in the business direction of YouTube.
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‘Youku’ is China’s leading Internet television platform, enabling users to search, view and share high-quality video content quickly and easily across multiple devices. The brand is among the most recognized online video brands in China.
The third-largest Chinese online media platform
From the perspective of the market penetration rate, Tencent Video is still the highest, reaching 44% (penetration rate = number of users / total market users). Followed by Iqiyi and Youku. Youku is the third-largest online media platform.
Victor Koo, Chairman and Chief Executive Officer of Youku Tudou said; “I am very pleased that once more we delivered accelerated and increasingly diversified top-line growth in the second quarter, driven by robust consumer business development and supported by healthy advertising revenues.”
He further commented that; “revenue diversification through consumer business has been successful and based on progress driven by our business unit reorganizations and management team additions”.
The company has adapted to the ever-changing demands of the Chinese market and remained flexible in terms of its organization and approach, this is key.
Increasing advertising revenue
The growth in revenue has been attributed to the increased Youku’s advertising services used by brands. There has been an increase in not only the number of advertisers but also a rising average spend per advertiser.
Revenue diversification to reach more users
This is perhaps the key to Youku’s success. Nearly half of the companies advertising revenues have come from mobile, the emerging dominance of mobile as arguably the most important digital platform is a trend Youku have capitalized upon. “We have achieved broad adoption of mobile advertising by domestic and international advertisers alike,” said Victor Koo.
Product development expenses have increased. This increase in expenses evidently delivered results with product development and diversification in mobile, search, social, subscription, and interactive live entertainment services.
China Membership market competition between 3 top video platforms
In the Q1 financial report in 2019, iQiyi’s subscription members have reached 96.8 million, and Tencent Video has 89 million paid members.
Although Youku did not disclose the number of its paid members, Alibaba’s recent first-quarter financial report showed that Alibaba Entertainment’s digital media reached 5.671 billion yuan, a year-on-year increase of 8%. The main source of growth included Youku subscription members.
Youku – on the shoulder of China’s e-commerce giant – Alibaba
To compete with two other rivals, Youku is tied to Alipay, Ele.me, Taopiao, and other Alibaba’s software. Moreover, various Ali’s services are packaged with Youku members, trying to expand user development channels.
A digital success story
Youku-Tudou is a digital success story in the notoriously competitive and complex digital market in China. They have remained open to change and flexible in terms of their approach. Capitalizing upon emerging trends in mobile engagement, diversifying revenue sources, running a popular advertising service, and increasing the revenue derived from their user subscription service all reflect a company remaining engaged with the Chinese market.
Competition to be continued
It is undeniable that Youku, which is in the first echelon of online video, still has the opportunity to compete with iQiyi and Tencent Video with the support of Ali funds and resources, but there is not much time left for trial and error, especially after iQiyi goes public, Youku will face greater competitive pressure.
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