China: Sina pays $66,4m for 9% stake in Tudou

31 August 2011 11 h 28 min 13 comments

Sina Corp, which runs China’s third- most popular website and China’s major microblog platform, has raised its involvement 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.

Sina acquired 1.075 million American depositary receipts at Shanghai-based Tudou’s initial public offering in the U.S. this month for $31.2 million, it said in a filing to the Securities and Exchanges Commission yesterday. Sina spent $35.2 million for an additional 1.49 million Tudou ADRs, after the listing, taking the total holding to 9.05 percent, according to the filing.

Both Tudou and Sina said they expected to co-operate in the wake of this financial link-up. In a statement to Chinese news sources, Tudou said simply that it is open to “strategic business cooperation in multiple areas” with Sina and that the investment would not affect the technological direction of the firm.  Sina’s investment is “financial” in nature, Tudou said.

This 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. Before this deal, Tudou was rumoured to be acquired by baidu or Youku.

Approximately 301 million people had watched videos online in China by the end of June. That figure accounts for more than 60 percent of the country’s total Internet population of 485 million over the same period, according to statistics from the China Internet Network Information Center.

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. Tudou accounted for 14 percent of online-video advertising revenue in China at the end of June, compared with 17 percent at the end of 2010, while Youku gained two percentage points to 23 percent and Sohu.com Inc. (SOHU)’s video site jumped to 13 percent from 7.9 percent, according to data from Analysys International.

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 but 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.

According to FT, “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”.

According to Tang Yizhi, an online video expert at Analysys “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,” “Social media marketing and mobile video microblogging are two very promising areas of co-operation for the two,” she said.

The investment in Tudou, China’s second-biggest video website, follows Sina’s acquisition of a minority stake in online apparel retailer Mecox Lane Ltd. this year. Sina, based in Shanghai, said in May it plans to spend $100 million to develop its Weibo microblogging service to attract social-networking users.

Tudou has declined about 11 percent in trading on the Nasdaq stock market since its $174 million IPO.

SOURCES: FT, Bloomberg, China Daily, China Economic Net

IN THE PRESS:

. Sina Acquires 9% Stake in Tudou (CRI / 31/8/2011)

.  ”Rumor: Sina to Buy 4% of Tudou’s Shares for $40mln” (21CBH, 22 Aug 2011)

. “Sina to purchase 4% of Tudou” (China Daily, 23/08/2011) 

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