Meanwhile, TV.Sohu.com has the variety show and, especially, the American TV audience in China locked down. Specifically, Sohu’s American TV views jumped 136% from the third to the fourth quarter — thanks in part to popular shows such as “Breaking Bad” and “Modern Family.” And given that American TV viewers are often of higher educational and wealthier backgrounds, it’s likely that Sohu will continue to dig out its niche to draw in higher-end advertisers.
So, in a sense, Youku Tudou has few places to go. Of course, it shouldn’t give in without a fight, but with iQiyi’s lead in domestic, professional content and Sohu TV’s strength in variety and American shows, Youku Tudou may have to concede hopes to become a subscription service of premium content like Netflix.
That’s no matter because Chinese trends still favor Youku Tudou.
3 demographic reasons to favor Youku Tudou
First, Youku.com is No. 1 in terms of hours watched because of its focus on providing short, user-generated videos, which is what really appeals to Chinese online viewers. Moreover, Tudou.com is also a user-generated video website, so altogether the company is the 800-pound gorilla of China’s online video market.
Second, Chinese netizens love social, and Youku Tudou best caters toward sharing. Based on a McKinsey April 2012 report, 91% of China’s netizens use social media and 88% of them are active users. (For comparison, only 67% of U.S. netizens use social media.) Though these trends may mostly refer to social media sites such as Sina Weibo, the statistics are important because it shows that the Chinese like to share. Because Youku Tudou Inc (ADR) (NYSE:YOKU) is primarily a user-generated video website, you can find similar online activity seen between Google’s video bloggers on YouTube.
Third, the number of netizens will no doubt grow. As of January, only about 42% of China had desktop access to the Internet. That’s only 564 million people of the country’s 1.3 billion population. Back in Sept. 2012, Youku Tudou Inc (ADR) (NYSE:YOKU) reported 475 million unique visitors a month, or about 84% of China’s online citizens. So, like China, Youku Tudou has plenty of room to grow.
Youku is probably a good long-term buy
I’m sure there’s a reason Youku Tudou could beat out Baidu’s iQiyi or Sohu TV and become the “Netflix of China,” but its core business is appealing enough.
As the Chinese continue to come online in droves, they’ll want to share more of their lives and connect via short, self-made videos. Currently, Youku.com and Tudou.com have been, are, and will continue to be the best places to share videos.
With an increasing audience, Youku Tudou Inc (ADR) (NYSE:YOKU) should have no problem earning millions, perhaps billions, in the future as the “YouTube of China.”
The article Can This Company Profit as the “YouTube of China”? originally appeared on Fool.com.
Fool contributor Kevin Chen owns shares of Baidu. The Motley Fool recommends and owns shares of Baidu, Google, and Netflix. It also recommends Sohu.com.
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