Sina Corp, which runs China’s leading microblog, has raised the stakes in China’s online video and social media industry by buying into Tudou, the country’s second-largest online video company by revenues.
Sina paid $66m for a 9 per cent stake in Tudou, the company said in an SEC filing on Monday. Both Tudou and Sina said they expected to co-operate in the wake of the financial link-up.
A close alliance could strengthen Tudou against competitors such as Youku, the industry leader, and Qiyi, which is partly owned by Baidu, China’s largest online search engine by revenues. It could also reinvigorate Sina’s video offering as rivals have done better in this area.
Sina had a 7.3 per cent share of China’s online advertising revenues in the second quarter, behind Baidu and Alibaba and ahead of Google. But online video advertising is becoming increasingly important – it accounted for 16.8 per cent of the Rmb11.4bn ($1.79bn) total online advertising revenues in the second quarter, up from just 6.8 per cent a year earlier, according to Analysys, a Beijing-based research company.
Sina runs China’s leading microblog with 200m registered users and saw its profit plummet in the first half of this year amid aggressive expansion and marketing efforts to shake off competitors.
Tudou saw its loss widen in the first half over rising operating costs and has lost market share relative to Youku, which has pulled far ahead, and Sohu. The latter is now neck and neck with Tudou according to Analysys. Tudou’s share price has slid 11 per cent since its $174m IPO earlier this month.
Charles Chao, Sina’s chief executive, said this year he was readying for consolidation in the online video sector. All Chinese online portals have their own video outlets, but Sina’s has been much less successful than that of Baidu. Charles Zhang, chief executive of Sohu, another Sina rival, identified expansion in video as a key focus for this year.
“Sina’s investment will definitely give it some influence over Tudou’s future strategy, and the co-operation between the two will definitely influence the industry,” said Tang Yizhi, an online video expert at Analysys.
Ms Tang expects Sina to integrate its video offering with Tudou and enrich its microblog with content from its new video partner. “Social media marketing and mobile video microblogging are two very promising areas of co-operation for the two,” she said.
However, analysts cautioned that Sina has a weak record as an investor. This year, the company bought a 19 per cent stake in Mecox Lane, an online apparel retailer. The company’s shares, bought at $6 a share, have since fallen to less than $2.
Sina made an initial investment in Tudou’s IPO earlier this month and then continued buying after the online video company’s shares started trading in New York.