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After the Hong Kong Televsion Broadcast Limited deal on Tuesday, fellow Fool Rick Munarriz made compelling points for Youku Tudou to become the “Netflix of China” with a subscription-based model.

However, I’m not so sure the online video giant should abandon its YouTube-ish roots. It would put Youku Tudou in more direct competition with such online video giants as Baidu’s iQiyi and Sohu TV, both of which have carved out strengths in distributing professional content.

Looking at long-term demographic trends in China, Youku Tudou‘s continued focus on user-generated videos — similar to Google’s Youtube — may best lead the way for long-term profits and shareholder returns.

Why competition could crush Youku Tudou’s hopes
Youku Tudou displayed serious hopes to become a purveyor of all kinds of online video with its Hong Kong TVB deal. Not only will it receive 2,500 hours of exclusive content per year (including current and past TV shows), but the deal also opens the way for co-producing original content.

Given the company’s position in the online video market, it’s not hard to see why Youku Tudou made the deal and thinks it can make the transition.

Video Site	Hours Watched	Parent Company
1. Youku.com	698M	Youku
2. iQiyi.com	569M	Baidu
3. V.QQ.com	474M	Tencent
4. TV.Sohu.com	406M	Sohu
5. Tudou.com	291M	Youku

Source: We Are Social. For Aug. 2012. Tencent is not a U.S.-listed stock.

Youku Tudou outpaces the competition in number of hours watched. Youku.com alone attracted 129 million more hours watched than its nearest competitor, iQiyi.com. And once you combine Youku.com and Tudou.com together (the companies merged in 2012), you’ll see that they trounce the competition.

So while Youku Tudou has the lead, it believes that it can continue to dictate its position in the market, whether that be a purely user-generated video website or something more.

However, I think that the company is underplaying the first-mover advantage that its competitors have already carved out in their online video niches.

Baidu acquired iQiyi.com last year because of its leadership in providing full-length movies and TV shows. In the latest earnings release, Baidu announced that it will continue to step up its “investments and [increase] sales and marketing efforts to ensure [iQiyi] captures the huge opportunities ahead.” iQiyi.com is the No. 2 most watched video site for a reason, and could be for some time.

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 …read more
Source: FULL ARTICLE at DailyFinance

By Don Schultz, Contributor Marketers have difficulty understanding today’s digital generation, i.e., those young people 18-34 years of age who grew up with interactivity, the internet, mobile and the like. And, when one compares the Chinese digital generation with a similar group in the U.S., the results are even more confusing due to the cultural differences. We have examined the China market for many years and most recently we targeted our research toward the young digitals. Not surprisingly, the differences between them and their American counterparts are vast and present both challenges and opportunities for global marketers. (In fact, the findings were so intriguing and vital to success in China that we decided to write a book.) What follows below are some of the key findings. The Chinese rely heavily on the Internet to stay in touch with friends, families and associates. So, do Americans, but, the tools are quite different. The Chinese rely on instant messaging via QQ and Weibo. Americans favor email. There is no dominant major social network in China similar to Facebook in the U.S. Instead the Chinese rely on special interest networks such as Sina Weibo, Youku/Tudou and Renren, all of having their own specific purpose. Chinese consumers actively search products and services on line before buying, even if they end up buying in a retail store. Americans do the same but, focus primarily on price comparisons. Online shopping is booming in China, but only recently. Lack of trust, payment facilities and logistics, all of which are prevalent in the U.S., are just now being overcome. Chinese chat and blog. Americans watch TV and play video games. Digital generation Chinese spend their leisure time alone, more so than Americans. They are on the internet, reading or listening to music. Young Chinese women are much heavier users of digital media than their male counterparts, focusing heavily on shopping activities. There are major differences in how and in what way the digital tools are used in Tier 1, Tier 2 and Tier 3 Chinese cities. Much like the differences in U.S. digitals between New York and Los Angeles and those in Racine, WI and Big Spring, TX. In summary, while the digitals around the world may have the same demographics, they are radically different based on their cultures, activities and interests. Marketers should, therefore, proceed with caution.
Source: FULL ARTICLE at Forbes Latest

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