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

PUBLISHED : Monday, 27 April, 2015, 10:31am
UPDATED : Monday, 27 April, 2015, 10:31am

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.

iQiyi is not the only Chinese video company to come to that conclusion. Rival LeTV announced this month that it was spending up to HK$1 million per episode on a series of locally produced television dramas for a Hong Kong audience.

LeTV set up an office in Hong Kong in August 2014 with support from InvestHK, a government body meant to attract businesses from China and abroad. In recent weeks, LeTV has been aggressive in hiring marketing and content staff, with a focus on acquisition of video content and partnership with local media firms to produce movies and TV dramas.

Local firm HKTV has also targeted streaming video users. The HKTV app, which also includes live broadcasts, was downloaded more than one million times on its first day of operation, according to the company.

Where iQiyi stands apart from its local and Chinese rivals, Huang said, is in its partnership with Baidu. Using data from Baidu searches, the video firm can serve users highly targeted advertising.

He gave the example of a user searching for information of cars on Baidu, and then seeing an automobile advert the next time they watch a video on iQiyi.

"That's where the true power of targeting is," Huang said.