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August 5, 2010 10:35 am

Temasek to fund Chinese video website

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Temasek Holdings has made its first foray into the Chinese internet sector with an investment in Tudou, China’s second-largest online video company.

Tudou said it had raised $50m in its latest round of equity financing, with the Singapore state investment fund accounting for $35m of that.

The funds raised will be used to prepare for an expected take-off in mobile video consumption and to counter new competitors in the already fragmented market, Gary Wang, Tudou chief executive, told the Financial Times.

“There are a lot of new competitors coming in – the state-owned television networks, the portals and other big players such as Baidu and Tencent,” said Mr Wang. “We take them very, very seriously. We take everyone who has money to spend seriously.”

Mr Wang said Tudou’s most immediate focus would be on strengthening its infrastructure to increase bandwidth, servers and storage and to get a stronger presence on tablet PCs and other mobile devices. “The iPad and other devices like that will drive the next wave of growth in the online video market in China over the next three to six months,” he said.

“There is one Tudou application for the iPad already but it’s not good enough – it has only 40,000 videos,” he said. “We need to get all the libraries up there, which means 38m videos, and we want to have that ready for the iPad’s official launch in China later this month or next.”

Tudou held a 12.8 per cent share of China’s Rmb313.7m ($46.3m) online video market by advertising revenues in the first quarter, according to Analysys, the Beijing-based internet research company. Youku led the industry with 17.7 per cent.

CCTV, China’s main state broadcaster, and a number of provincial government-owned broadcasters have all launched their own internet television and video services this year, driven by government plans to push the integration of internet, telecom and broadcasting networks.

In the medium term, Tudou wants to transform itself from a video distribution platform into a full media company. The main effort will be in-house production of content, Mr Wang said. The company is set to launch its first self-produced online video drama next month.

State-owned video websites are making a strong effort to develop certain controlled platforms for user-generated content, a media form viewed by the Chinese government with deep unease.

Analysts believe they enjoy certain competitive advantages over private rivals because their state backing gives them more clout in negotiating exclusive broadcasting rights for popular events such as this year’s football World Cup.

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