Baidu-backed video site iQiyi to expand into Hong Kong with major advertising deal

Baidu-backed video streaming provider iQiyi is gearing up for a major expansion into Hong Kong as it seeks to take on Chinese rival Youku Tudou and Google's Youtube.

iQiyi, which recently set up an office in the city and has engaged a top advertising firm, is already a top five video provider in Hong Kong, reaching around 500,000 users per month, according to ComScore data, compared to YouTube's 2.5 million users. ComScore does not measure mobile users, which iQiyi claims accounts for almost half of its total traffic.

"Hong Kong [has] one of the fastest internet speeds around the world. Coupled with 230 per cent mobile phone penetration, the city has adopted online video at a rapid pace," said Xiao Chen, iQiyi vice president of sales.

According to a 2014 PricewaterhouseCoopers report, digital advertising in Hong Kong is forecast to grow at a 12.2 per cent compound annual growth rate between 2013 and 2018.

"As we see that shift to mobile and video, we know advertisers are going to look for alternatives to television," said Kevin Huang, chief executive of Hong Kong ad firm Pixels, the largest digital advertising sales company in the city, which has signed an exclusive partnership with iQiyi.

Huang said that iQiyi's Netflix-style original content model will play well in the Hong Kong market. In July 2014, the company launched its own in-house film production studio, and has also invested in original television series.

"What's been lacking in Hong Kong in the last 10 years or so is quality content and quality talent," said Huang.