Web video investment to cool
By Nicholas Ning (Shanghai Daily)Updated: 2007-01-26 14:16 The investment fever in China's online video sites will cool this year as few of the newly emerged Websites have shown a strong ability to maximize and profit from their online traffic.
Most of these Websites may even have to shut down in the second half, if they can't be profitable or gain new financing to sustain their operations, according to an industry report.
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By the end of last year, there were around 200 online video sites in China compared with just around 30 in 2005.
The dramatic growth was partly spurred by the success of Youtube Inc, an unprofitable startup which Google Inc bought for US$1.65 billion late last year. Encouraged by this, some Chinese startups try to copy the model to become China's Youtube.
But most of them hadn't figured out a clear business model before they went in. Some like PPLive, which is based on peer-to-peer file sharing technology, depends on advertisements on their Websites or ads shown before or during the video.
Others like Tudou.com partner television stations to market their podcast programs on traditional platforms.
"There is a joke in the industry that the yardstick to judge whether a video sharing site is successful or not is how much money it can get from the venture capitalists," said an industry insider who didn't want to be named.
"Some of them don't care much whether their site can be profitable as long as they can maintain a high level of traffic to convince investors or leading Internet players they got the potential."
Last year, at least 11 Chinese Websites received financing for their video service, of which four of them got two rounds of financing, bringing in a total of US$52.7 million, a jump of nearly 40 percent from 2005, according to ChinaVenture Investment Consulting Ltd. (See Chart)
"There's no dominant player in the market, although telecom operators like China Telecom and television companies have also ventured to grab a slice of the market," said Cao Junbo, an analyst at Shanghai-based iResearch.
The number of online video audience in China last year nearly doubled the level of 2005 to reach 63 million, who were expected to pay 400 million yuan (US$50 million) to watch sports, TV series and movies on the Internet, said a report by iResearch.
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