Youku Tudou Inc (ADR) (YOKU), Inc (SOHU), Yahoo! Inc. (YHOO): A Few Ways to Make Money From Chinese Internet

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Youku Tudou Inc (ADR) (NYSE:YOKU)China is improving the infrastructure of internet-based services, which will increase its mobile user base to 800 million by 2015. That number was only 550 million in 2011. With the upsurge in the mobile user base that access internet using mobile devices and tablets, internet information providers are looking forward to take advantage of the opportunity. I have analyzed three companies from this industry which are monetizing the rising number of mobile internet users by launching new products and signing new deals.

Monetizing the opportunity

The daily video views of Youku Tudou Inc (ADR) (NYSE:YOKU)‘s mobile application reached 150 million by the end of March 2013 and is expected to exceed 300 million by the end of 2014. Due to the rise in the mobile video traffic, the company plans to monetize this opportunity and had rolled out advertisements on mobile devices in the first quarter of 2013. Youku Tudou Inc (ADR) (NYSE:YOKU) is testing mobile advertisements on iPads and has been successful in receiving positive feedback from clients.

Advertisers like Apple Inc. (NASDAQ:AAPL), The Coca-Cola Company (NYSE:KO), P&G, and China Mobile are now finding mobile video advertisements to be more effective than traditional advertisements on TV. From mobile advertisements, Youku Tudou Inc (ADR) (NYSE:YOKU) is anticipating revenue of $16.3 million (RMB 100 million) by the end of 2013 and $81 million (RMB 500 million) by the end of 2014. Looking at the monetization opportunity, the company is likely to see an increase in its revenue.

Youku announced a two year agreement with Hong Kong’s Television Broadcast, or TVB, in March 2013. This deal will bring 2,500 hours of new and classic TV shows from TVB onto Youku Tudou Inc (ADR) (NYSE:YOKU)’s website and its mobile application. This will help the company increase its advertiser base, which witnessed a 62% year over year rise to 480 advertisers in December 2012.

Youku Tudou Inc (ADR) (NYSE:YOKU) is in a good position to capitalize on the advertisement market and should perform well going forward.

Sogou Pinyin a hit!, a subsidiary of Inc (NASDAQ:SOHU), reported a 73% year over year growth in revenue to $39 million in the first quarter of 2013, which was driven by income from online advertisements. As per iResearch, the company has over 450 million customers who use its news, video, Pinyin, games, and other services on a monthly basis. The Sogou “Pinyin” product, a tool for writing Mandarin Chinese using the English alphabet, posted 88% penetration in the Chinese market for the quarter ending in March 2013.

Recently, Sogou launched the upgraded 6.2 version of the product, where users can see matching search results and suggestions below the input bar when words are entered, which was a missing feature in the 6.1 version. This will turn the product from just a typical typing tool into a search tool. The 6.2 version has an improved intelligent error correction feature and additional skin download options, making it even more user friendly. With high market penetration of the product, the company is expecting a revenue of $180 million by the end 2013 from the online advertisements placed on this product.

The online video advertisement business rose 70% year over year and is expected to rise by another 70% in 2013 as Inc (NASDAQ:SOHU) has acquired the online broadcasting rights of ”Voice of China Season 2.” Voice of China is a reality talent show to be aired in September 2013. The company is anticipating earnings of more than $100 million from online video advertisements aired during this event. Additionally, Inc (NASDAQ:SOHU) has approached Samsung to work on the pre-installation of the mobile application and also approached China Unicom for special data package allowance to promote the video application. Inc (NASDAQ:SOHU) is keen on monetizing the event by generating revenue from online advertisement.

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