Tudou and Youku race for the rights to say 'I did it first'

Tudou and Youku race for the rights to say 'I did it first'

Let the video wars begin. China’s two largest video sites race to complete IPOs in the United States
Youku Tudou IPO
Which site, Tudou (left) or Youku (right), is going to make it to the IPO finish line first?

Beijing-based Youku.com, China’s largest online video company, recently filed for its IPO with the SEC, hoping to raise a reported US$150 million on the New York Stock Exchange.

This in itself would be a news-worthy event -- it's not every day China’s largest online video sites makes moves to go public -- but Youku’s announcement comes less than a week after fellow Shanghai-based Internet video site Tudou.com announced it was filing for an IPO on the Nasdaq, hoping to raise US$120 million. 

Youku has an estimated 18 percent market share in China while rival Tudou has approximately 13 percent, according to figures at the end of the third quarter of 2010, reports research firm Analysys International

Both Tudou, which launched in 2005, and Youku, launched in 2006, say they serve around 200 million visitors per month.

Although both companies are racing to raise funds, neither is profitable yet. Both face the problems of expensive bandwidth and state regulation. 

Last year, Youku's sales were US$22.5 million and its net loss stood at US$26.7 million, according to Shanghai Daily.

The Youku and Tudou sites are, at their core, Internet video sites. But their similarities with Western counterparts like YouTube stop there. Youku and Tudou both on average have much longer format videos (which are in higher demand by Chinese Internet users) and much more professional content, verses many of the viral homemade videos that dominate on YouTube. 

As of September, 2010, according to Wiredvc, Youku’s library contained more than 2,200 movie titles, 1,250 television serial drama titles and over 231,000 hours of other professionally produced content, including 194 variety shows.

Tudou is going even further, becoming a complete media house by creating its own online TV show “That Comes Love." (For more on “That Comes Love” see our interview with the show's star Joseph Cheng.) 

Youku and Tudou are hoping to capitalize on China's video-hosting market, which is expected to continue growing. Currently, out of China's reported 420 million-plus Internet users, about 264 million of them watch videos online, according to the China Internet Network Information Center. This is a captive market as U.S.-based sites like YouTube and Hulu are either blocked or do not stream videos to China.