Youku Tudou outlines vision for merged company

Youku Tudou Inc, China's biggest online video provider, is stepping up efforts to manage its two online video websites after a merger that combined the two biggest web-video competitors into a single company.

The newly merged company plans to keep Youku.com and Tudou.com as distinct players to target different kinds of users, an effort that comes amid some analysts' doubt about whether the merger can bear fruit as the company expects.

Tudou.com will position itself as a video website for "fashion" and "youth", while Youku will be more of a "mainstream" online-video provider, the company said on Wednesday. It was the first time the company has talked about its strategic plans since the merger was finalized last month.

Tudou.com will present its new homepage and provide a series of self-produced entertainment programs, among other efforts to emphasize its brand positioning, in the coming three months, said Yu Zhou, Tudou's chief strategy officer.

Youku and Tudou used to be the two biggest players in the market. However, when measured by revenue, Tudou dropped out of the top three in the second quarter.

Youku had 21.5 percent of the online video market in China in the quarter, followed by Iqiyi.com's 10.2 percent and Sohu.com Inc's 9.8 percent, according to the domestic research company Analysys International. Tudou ranked fourth with 8.6 percent.

It is still unknown whether the merger can make the new company bigger than Youku and Tudou combined, analysts said.

The year-on-year growth rate of Tudou's net revenue dropped from 77 percent in the first quarter to 47 percent last quarter, according to its financial report.

Tudou's growth slowdown may be partly due to advertisers' weakening appetite for it, giving rise to worries over whether the two companies can differentiate themselves well after the merger, said Qiu Lin, an Internet stock analyst at Guosen Securities Co Ltd. "The biggest benefit is just that Youku has eliminated a major rival."

Youku Tudou, however, said only 14 percent of the two websites' users are overlapped on a daily basis, hinting that the two websites can develop as distinct players.

Youku.com Inc, which used to be the country's largest online video provider, acquired its main rival Tudou Holdings Ltd in a stock-for-stock transaction that closed last month.

In the second quarter, Youku posted a net loss of 62.8 million yuan ($9.9 million), while Tudou registered a loss of 154.7 million yuan due to rising costs for Internet bandwidth and content.

Analysts also expect more acquisitions or mergers to occur among eight to 10 small rivals in the online-video market.