Youku Tudou expects mobile income growth, trials e-commerce program

China's leading online video provider Youku Tudou Inc said Wednesday that its mobile revenue will continue increasing, as the company is actively carving out its territories for the online to off-line business in partnership with e-commerce giant Alibaba.

By the end of 2013, the mobile business contributed 3 percent of Youku Tudou's total revenue, while to date, the proportion has increased to 30 percent, Victor Koo, chairman and CEO of Youku Tudou, told the Global Times Wednesday during the three-day World Internet Conference being held in Wuzhen, East China's Zhejiang Province.

The company would connect its video streaming platform with Alibaba's marketplaces, enabling its video audience to immediately buy goods that they see in videos via their portable tablets and cell phones, according to Koo.

Given the trial of this new business mode and precise online marketing based on Alibaba's and Youku Tudou's big data, he believes that the mobile revenue will keep on growing.

Different from the PC, mobile devices are "everywhere" and easier to generate impulse purchases from, said Koo, noting that in the era of mobile Internet, "the screens are likened to sales channels and contents to stores online."

Some analysts have a pessimistic attitude toward the prospects of the new business trial.

"Although Chinese consumers have gotten used to and love to shop online, the majority would not halt their entertainment to shop for goods. Such shopping habits need at least three years to be developed," Zhang Yi, CEO of Shenzhen-based market consultancy iiMedia Research, told the Global Times Wednesday.

Besides, most online purchases are settled via larger-screen PCs currently, which means the PC is still the most preferred medium for advertisement clients and can seldom benefit video companies' mobile income, said Zhang.

In the third quarter of the year, the transaction volumes on the mobile front in China hit 230.96 billion yuan ($37.73 billion), compared to the total sales of 691.41 billion yuan, showed data from Beijing-based market research firm iResearch on November 8.

However, Luo Lan, an industry analyst with Beijing-based market research firm Analysys International, had a different opinion.

She told the Global Times that Youku Tudou's marketing and selling of goods via its videos, which can persuade video audiences to buy goods subliminally, is likely to be a plausible or even an effective way of making more money than the commonly used pre-video advertisements.

Regardless of whether the new business mode can work out in the future, both Luo and Zhang think that how to maintain a leading position in active users should be the top priority for Youku Tudou.

"More users means more chances of making money in the Internet world. In order to attract users away from competitors, online video companies have gotten into a neck-and-neck rivalry in purchasing exclusive streaming rights for popular TV dramas and videos," said Zhang, believing that China's online video streaming industry would continue burning money in the future.

Youku Tudou's major rival iQiyi, which is backed by China's Internet behemoth Baidu Inc, also sensed the importance of the mobile segment.

On Wednesday, the company announced that it got a $300 million investment from Beijing Xiaomi Technology Co, according to a press release e-mailed by iQiyi to the Global Times Wednesday.

Zhang noted that this investment not only financially supports iQiyi, but also enables the video provider to gain mobile Internet advantages from the world's smartphone rising star.

iQiyi would enhance its position and sharpen its edges on the mobile front with the help of Xiaomi, said the press release.

Baidu poured in 498.1 million yuan on content, mainly related to iQiyi, in the third quarter of the year.

In contrast, industry leader Youku Tudou spent 501.8 million yuan on content, witnessing a net loss of 181.4 million yuan over the same period.