Kate Bulkley, Media Analyst.

Movie star in the making: China's answer to YouTube

By Kate Bulkley

The Guardian

Thursday November 06 2008

Gary Wang

Gary Wang

With 12 million users a day, Gary Wang's Tudou is the biggest video sharing site in China and it's set to get much, much bigger.

If the world thought that the PC and mobile phone had revolutionised the way we live our lives, then just wait for the impact of video and pictures on the internet. Most commentators expect the moving image to dominate the next phase of the internet around the globe, but in China this trend has already begun in earnest.

Tudou - China's answer to YouTube - was started in January 2005 (a month before YouTube) by 35-year-old Gary Wang. Nearly four years later, Tudou has some 12 million users a day and 75 million unique users a month. It serves 100m videos a day, numbers that make it the biggest video-sharing site in China. As for growth, Tudou has nearly three times more user visits today than a year ago.

"[The] internet in China is very much viewed as an alternative to TV entertainment," says Wang. "People come to the internet looking for fun, not just for information." In fact, one of the reasons he called the site Tudou is because it is the Chinese word for potato - a play on the English term "couch potato".

Wang is personable and speaks fluent English, a legacy of having studied and worked in the US and Europe before returning to his native China earlier this decade. Back in China, Wang worked for almost three years for Bertelsmann Group trying to open various business doors, particularly around investments in TV channels. He realised there were too many regulations to work an entertainment miracle on the traditional medium, but recognised the potential of the internet.

"There are things you cannot do in China because of certain regulations," says Wang. "TV is simply off limits. If you take away TV you didn't have a large market, so I began thinking how to bring entertainment to China, where there were already 10 to 20 million broadband users and I knew it would build up."

Only connect

His instinct proved correct: there are now more than 250 million Chinese online, with 91 million going online in the past year alone, according to the recent KPMG report Destination Digital. The report claims the scope for growth in China's online market is huge: only 19% of Chinese people are online and, despite the recession, digital ad spend in China will increase 40% next year to reach $5.2bn, predicts KPMG.

Wang is expecting to ride the wave of growth with perfect timing. In April, he closed his most recent funding round, raising $57m from existing investors IDG Technology Venture Investment, Granite Global Ventures and General Catalyst Partners. In total, Tudou has raised $85m. The company has 250 employees and four offices throughout China.

Speaking to the Guardian at the recent Mipcom TV market in Cannes, Wang explains that of the 13m video clips currently on Tudou, somewhere between 30% and 70% are of a type acceptable to advertisers. "It's about the willingness of the brand advertisers," says Wang. "The format is there. The audience is there. The tracking is there but the willingness needs to be there."

Wang says that so far only about 5% of Tudou's video inventory is being monetised with advertising; analysts estimate that YouTube is monetising only 3% of its total video inventory. The biggest hurdle for both sites is attracting advertisers to user-generated videos where the type of content is hard to predict.

Longer form, higher quality

Wang's answer to this dilemma came in August when the company launched a new site called Heidou for professional videos from name-brand suppliers like Chinese, Korean and Japanese broadcasters - and soon, he hopes, some big Western media companies. But Wang is clear the content that resonates best with his audience is Chinese or Asian. "We all look for relevancy and for us it's Chinese faces and Chinese issues," says Wang. "But some of that is a lack of exposure to Western content and we will try and make some changes in that."

Heidou already has 15,000 videos in its library - all with copyright permission - and some 2m videos are viewed a day by nearly one million users. "Heidou is longer form, bigger screen and higher quality than Tudou," says Wang. His hope is that the new site will generate more interest from advertisers.

"They beat YouTube because they understand how to relate to the Chinese," says Dan Mintz, chief creative officer Dynamic Marketing Group, a full service, independent ad agency based in Beijing. "Being successful in China is not just about translation, it's about how people think, write and communicate."

According to KPMG's Honson To, China is on the verge of a second digital revolution driven in part because new media is less regulated than its offline counterparts. But there are still hurdles and sensitivities. Earlier this year Tudou, along with 32 other online sites in China, was given warning notices by the State Administration of Radio Film and Television (SARFT) for either hosting illegal content or operating without a licence. When asked about the potential business impact of the warning, Wang looks sanguine. "That's just doing business in China," he says.

So far Tudou has been able to stay on the right side of the regulators because a video vetting system checks every upload to the site. Some 100 staff are dedicated to vetting each and every video to make sure it does not contain political or social content that is barred by the government. "There is a 15- to 30-minute gap between when a video is uploaded to the site and when it is shown," says Wang.

Wang's biggest headache is managing growth. He may have just raised new finance but he admits that the biggest drain on the business is the bandwidth needed to serve more and more videos. "We are trying to control the growth because serving video is very expensive," says Wang. Tudou owns and operates its own content distribution network, which he says helps keep his costs down. "We don't have a Google behind us so we have to be very careful to grow but not too fast," he adds, referring to YouTube's deep-pocketed parent company.

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