Competitive Analysis of Youku & Youtube

Topics: YouTube, User-generated content, Video hosting Pages: 6 (1836 words) Published: December 15, 2012
China is just getting started with a capitalistic approach to building businesses and creating new markets for a burgeoning class of consumers. In a sincere form of flattery, Chinese companies have been looking to American companies for development ideas and emulating U.S. business plans. The strategy is paying off big for video sharing website, Youku, and has resulted it in being one of the larger firms in China in terms of users and profits.

Youtube’s & Youku’s Background
Both Youtube and Youku are websites that serve the same purpose of hosting and sharing videos. Youku is founded upon the concept of Youtube, but customized to suit local Chinese tastes and customs. YouTube is a video sharing website founded in February 2005 while Youku is a Chinese video hosting service based in China, formally launched in December 2006. It was founded by Victor Koo, the former President of Chinese Internet portal, Sohu.

Youtube is predominantly hosting user-generated content and some professionally produced videos such as music videos. However, Youku has predominantly professionally produced content such as tv dramas, movies, variety shows, video testimonials, online classes.

In November 2006, YouTube was bought by Google for US$1.65 billion. Youku also had its share of merger and acquisition when it merged with competitor Tudou in January 2010 to cross-license professionally produced video content.

In 2009, Youtube was banned from China, primarily due to China’s censorship laws to block any Youtube material that is critical of its policies. Although China is being well known for cloning Western companies, it has a key difference, which is that the Chinese sites are self-policing and conform to local laws. In this case, Youku altered itself to reflect local customs, by conforming to the Chinese government laws on censorship. Youku then found its place in the China market to serve as the number one in the Chinese Internet video sector, according to Internet metrics provider CR-Nielsen. (Miguel, 2009)

To date 2012, Youtube has 800 million unique users a month and four billion views per day while Youku is estimated to have 40% market share in China, and garnered 264 million monthly unique visitors.

Marketing strategy
Business model
Youtube dares to test out different revenue generating strategies and invests long-term plans into its own users. Besides the selling advertisements on its site, Youtube works with brands and media corporations through the partnership program, as well as with individual users for sponsorship ads.

On one end, Youtube ends via the partnership program that helps media corporations like BBC, VEVO put up their content online. On the other end, Youtube also support its numerous independent video channels by selling sponsorship. (Goreilly, 2012) This works on a shared-revenue model, where Youtube gives an initial grant for production, then splits profits from ad sales with the video creators after that first investment is recouped. This idea encourages more people and production companies to start making professional and original content for the site. Youtube is dynamic and creative with how it generates revenue.

Youku’s business model is more traditional. It primarily earns via advertisements especially the 30 seconds pop-up advertisements with leading brands, as well as search advertisements through partnerships with search giants Baidu, Taobao, Google. (David, 2009) As 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, if Youku chooses to focus its resources on to a traditional advertisement model, it will need to maintain its continuous nationwide effort of forging partnerships with government-owned television stations and other state media, while compromising gaining the market share in user generated contents....
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