Half a world away from Monterrey, Mexico, Victor Koo faces a different set of challenges than Meléndez. At his offices in Beijing, Koo is the cofounder of Youku, the leading video platform in the world’s most populous country.
You might say that Youku, which means “what’s best and what’s cool” in Chinese, is the YouTube of China, except that it is closer to Hulu, a free online video service in the United States that offers hit TV shows. Rather than the user-generated content that forms the core of YouTube, “Youku serves as a nationwide on-demand video content syndication platform with over 1,500 traditional media partners,” explains Koo. “Professional media content constitutes over 70% of our viewership.”
China’s internet audience has exploded this decade to the point where it now is 340 million, the largest in the world. With online video penetration above 80%, an estimated 300 million users are watching video over the internet in China late in 2009.
There were some 200 online video companies when Youku launched in 2006, but Koo says that the company now holds better than a 50% market share in terms of user time spent. It boasts of more than 150 million unique visitors every month, with each spending an average of an hour per day.
How did they get so big so fast? Partly, it appears, by nailing video search technology, partly by nailing customization, and partly by building strong relationships with China’s state-owned media companies.
Search and customization technologies are closely intertwined.
“Video viewing is fundamentally different from reading text,” Koo explains. “One can read 10 headlines together and grasp a variety of information, whereas it is impossible to open 10 different video windows and effectively watch them all at once.
“As such, finding the right video to watch is a lot more important for a video website,” he continues, “as you require a lot more focused attention from your users. We believe one of the most important benchmarks for a leading video platform is the ability to help users find ‘what’s best and what’s cool’ based on each user’s individual preferences.”
Next, Youku had to forge partnerships with government-owned television stations and other state media. The production of professional content is highly fragmented in China, with around 300 TV companies and thousands of channels as well as thousands of media production companies, so this required a nationwide effort.
Complicating this challenge is the fact that not only does the government own the media, it very tightly regulates what types of content can be published, censoring political, religious, and sexual content as well as most foreign media.
News about the rebellion that broke out inside Iran after last spring’s disputed election, for example, has been heavily censored by the Chinese government.
Western observers believe that Beijing fears that news of how tech-savvy Iranians have been able to organize protests and get around a ban on media coverage via social media like Twitter, proxy servers, and a variety of viral communication strategies could prove contagious in the event of future social unrest inside China.
Youku is regulated by the State Administration of Film, Radio, and Television. “We actively monitor video content uploaded by our partners and users,” Koo says. “For example, we actively screen out any pornographic, or even racy, content.”
By early 2008, Koo and his associates were ready to begin recruiting advertisers in earnest. They offered a safe environment for advertisers juxtaposed with highly desirable professional content, and brand names have shown up by the truckload.
Youku has booked ad revenue from over 290 companies to date including P&G, Uni-lever, Coke, Pepsi, Nike, Adidas, L’Oréal, IBM, Microsoft, Google, Samsung, Nokia, Sony Ericsson, Motorola, Mercedes-Benz, BMW, and VW/Audi, as well as the leading domestic brands.
The company also earns search ad revenue through a partnership with search giants Baidu and Google. The company recently launched its 3G mobile subscription version of Youku, and also a video e-commerce partnership with Taobao, the eBay of China.
“Proving our business model is the most important challenge at hand,” says Koo, “and extending our product model from PC to wireless and TV are longer-term challenges. We provide TV-like, cross-media, and internet marketing solutions to our advertiser clients that are growing rapidly. We see a growing and satisfied advertiser base that is increasing marketing spending on our platform quickly.”
