Youku Tudou, 'China's YouTube', posts solid Q2 revenue on strong advertising, consumer business

PUBLISHED : Thursday, 20 August, 2015, 10:09am
UPDATED : Thursday, 20 August, 2015, 10:09am

Youku Tudou, mainland China’s leading online video services provider, saw efforts to diversify its business pay off after posting second-quarter revenue at the high end of the company’s estimates.

New York-listed Youku on Thursday reported a 58 per cent increase in net revenue to 1.5 billion yuan (US$244.3 million), up from 958.7 million yuan in the same period last year.

“That came in at the high end of the company’s guidance range of US$237 million to US$245 million, beating Bloomberg [analysts’] estimates of US$241.7 million by 1.1 per cent and our US$243.4 million forecast,” Alicia Yap, the head of China internet research at Barclays, said in a report.

Youku, which is headquartered in Beijing, attributed its strong revenue growth in the quarter ended June 30 to higher advertising sales and a sharp rise in its consumer business, comprising subscription-based service, mobile games and interactive live entertainment.

“With nearly half of advertising revenue coming from mobile, we have achieved broad adoption of mobile advertising by domestic and international advertisers alike,” Youku chairman and chief executive Victor Koo Wing-cheung said on Thursday.

“We expect these positive trends, reinforced by our clear growth strategy and improving business economics, to continue during the second half of this year.”

That solid turnover, however, was partly offset by wider losses last quarter.

Youku posted a second-quarter net loss of 220.7 million yuan, compared with a 76.9 million yuan loss a year ago.

That was directly impacted by the company’s higher operating expenses.

Sales and marketing costs, which mainly covered commissions paid to Youku’s sales team, rose 305.6 million yuan last quarter, up from 185.8 million yuan a year earlier.

Product development expenses — related to mobile, search, social, subscription and interactive live entertainment services — climbed to 141.8 million yuan, up from 78.6 million yuan the previous year.

Despite the wider losses, Youku forecast its net revenue in this third quarter to be between 1.69 billion yuan and 1.78 billion yuan amid continued growth in advertising.

“We view the accelerated [revenue] growth in the second quarter and the third-quarter guidance as further evidence that Youku’s efforts to improve [its business] with more diversified diversified revenue stream is working,” Barclays’ Yap said.

At an event in Beijing earlier this month, Youku announced a plan to support the expansion of user-generated content on its platform with about 10 billion yuan in funds and other resources.

The company said it will foster the development of as much as 100,000 video channels run by various organisations and semi-professional users on its platform, according to QQ News.

Koo said Youku will also produce original 360-degree view, virtual reality content to tap into the growing consumer market for virtual-reality headsets.

Youku’s plans on virtual reality and greater user-generated content are the kind of ambitious bets that one of its strategic investors is certainly familiar with.

Last year, e-commerce giant Alibaba Group and Yunfeng Capital, a private equity firm co-founded by Alibaba executive chairman Jack Ma Yun, acquired a combined 18.5 per cent stake in Youku for US$1.2 billion.