When Tudou and Youku merged - Marc van der Chijs

Marc van der Chijs

"Yes, it felt weird," summerizes Tudou-founder Marc van der Chijs the decision in March to merge with rival Youku, the numbers one and two on China's competitive video hosting market. But it was the right way to go forward, he tells The Pandodaily.

The Pandodaily:

In the seven years since [since their start], Tudou, like Youku, has grown into a major media channel, producing original content as well as benefiting from hosting its fair share of pirated TV shows and films. Youku, which launched in June 2006, has a very similar offering but would ultimately become the leader, claiming about 22 percent market share to Tudou’s 13 percent. In February 2010, the two agreed to share original content in a combined effort to stave off outside competition. 

As part of the $1.1 billion merger, Youku agreed to acquire Tudou to form Youku Tudou Inc. (Update: A reader has pointed out that the name, amusingly, translates to “Excellent Cool Potato”). Together, they will be gigantic. Each site claims 250 million to 300 million unique monthly users, and they own a third of the online video market, which, like most Internet sectors in China, is very fragmented. Baidu’s iQiyi and Ku6 are among the other major players in the space... 

So you can imagine Van der Chijs’ mixed emotions. But then, he’s quick to see the upside, and, as a shareholder, he no doubt enjoyed the benefits of the pop in Tudou’s share price, which tripled on news of the announcement. Van der Chijs, who was careful not to discuss stock information while the merger is still being finalized, is optimistic for the future of the new company. “I think Tudou and Youku together can actually do a lot more than Tudou could alone and Youku did alone,” he said. “So although it feels a bit weird, I really think it’s the right decision.”

More in the Pandodaily.

Marc van der Chijs is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

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Why Tudou is on the wrong track - Shaun Rein

Shaun Rein

China's second largest video sharing firm Tudou launched last week successfully at Nasdaq, and business analyst Shaun Rein discovered they want "buy things". Wrong, he argues in CNBC: Tudou should focus on its sustainability and become profitable. Shaun Rein:

I expected after the IPO, Tudou’s investors and management would talk about how Tudou would use its war chest to develop profits. Instead David Orfao, a Tudou board member and managing director of venture capital firm General Catalyst, focused on what Tudou would buy in an interview with the Wall Street Journal. He said Tudou “ need(s) to continue to buy quality video content. They need to scale their infrastructure. Delivering these videos in a quality manner with minimal delay is key." The founder of Tudou, Gary Wang, told the blogger Gang Lu after the IPO that the proceeds raised would be used mainly for content, bandwidth and platform upgrades. Orfao and Wang barely touched upon how Tudou would actually start to generate more revenues and profits, but on how they would buy stuff. That is deeply concerning for a company losing tens of millions a year. If Tudou can figure out a way to develop a sustainable business model and lower bandwidth and other costs investors might want to take a look especially if the price drops further as they might become a takeover target for well capitalized firms like Baidu.

More in Shaun Rein's column at CNBC. Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Not _all_ listed Chinese companies are bad - Shaun Rein

Shaun Rein

Long term China bull Shaun Rein warns against buying into listed Chinese companies, since in many cases they offer a receipt for trouble, he argues in CNBC. Not all NASDAQ listed Chinese companies are bad, but investors have to be very cautious.

Almost all suspended NASDAQ stocks belong to Chinese firms, Rein notes, and he sets some ground rules:

Another rule to follow is to be wary of firms that list in the US first because they did not qualify to go public on the mainland. Internet and social media companies Ren Ren[RENN 12.60   -0.56  (-4.26%)   ], Youku [YOKU  44.49   -4.05  (-8.34%)   ] and Dang Dang[DANG  19.95   -1.01  (-4.82%)   ] recently listed on the New York Stock Exchange, but would not have been allowed to list on the mainland because they don’t have enough profits. Companies need three years of profits before they can go public on the mainland China exchanges. In the US, you do not need to show profits in order to go public. Most senior executives have told me they would rather list in China if they could because they expect the yuan to appreciate.

Also be careful of boutique banks, investor relation firms and accounting companies, called middlemen firms, which are responsible for taking companies public and for pumping up stock prices.

More in CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Do not invest in Dangdang and Youku - Shaun Rein

Shaun Rein by Fantake via Flickr

US investors should be very cautious spending their money on Chinese companies like bookseller Dangdang or video hosting company Youku who have no clear business model or otherwise a hard time to show a profit, warns Shaun Rein in this debate on CNBC.
While China's economy has been doing pretty well, especially Chinese companies who list in the US, because they do not qualify to list in China itself, should not be touched.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference, do get in touch.

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When a China bull becomes a bear - Shaun Rein

Shaun Rein by Fantake via Flickr

Derided as the eternal bull on China, Shaun Rein now warns US investors (and others) in Forbes against a dangerous bubble emerging from China: the IPO hype from anything coming from China, including video hosting companies Youku and Tudou.

A mania about China has gripped too many investors. Anything with China in its name gets hot in the way dot-com got people's blood pulsing in the 1990s. Many of America's biggest-gaining initial public offerings this year have been of Chinese firms. Many of those companies deserve high valuations, but not all of them.

Soon two Chinese online video companies, Tudou and Youku, will be going public. Both are run by intelligent, savvy and aggressive management teams that have raised more than $100 million in private equity money. I have friends involved with both companies who will probably be very angry at me for writing this, so I do not say it lightly, but investors need to be very cautious about investing in these companies and understand the risks.

Shaun Rein has serious misgivings about the business models of both loss making companies who pin their hopes on the 420 million internet users in China.

Searching for profits, both Tudou and Youkou have moved into generating more content rather than relying on user-generated content, and they have clamped down on pirated shows. A Hulu-style site might make money more easily than one with user-created content, but the cost of creating content is huge. Tudou and Youkou are not television stations; Hulu's backers, like Newscorp and ABC, can simply broadcast their television content online. Creating content and developing a cool website take totally different management skills. Content, like the movie business, is a risky bet, because it is dependent on one-hit wonders.

More arguments in Forbes.

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Shaun Rein is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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