Chinese couch potatoes love Gary Wang's video site

Will marketers follow them to Tudou?

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SHANGHAI--Gary Wang is turning China into a nation of coach potatoes with, a hip dot-com startup that has evolved into China’s leading video-sharing site.

Tudou has become “the de facto market leader,” said Chinese media analyst David Wolf, president-CEO of Wolf Group Asia in Beijing, because the site is “habit-forming” for many Chinese, and therefore “a valuable resource for advertisers.”

Created by Tudou’s Chairman-CEO Mr. Wang and his Dutch cofounder and board member, Marc van der Chijs, Tudou means “potato” in Chinese, a playful reference to the English idiom “couch potato.” In China, however, young consumers are glued to computer screens rather than TV sets.

Tudou lets users upload content like videos, audio podcasts and video blogs and then manage them by creating their own channel. Users can share videos, as well as wikis and blog entries with other users, who can view content freely and sign up to receive new uploads from specific channels automatically.

The Chinese-language site has created strong social networks as well as some well-known “netizens” like the Back Dorm Boys, two Chinese art students who grew famous in China with videos that show the pair lip-syncing songs by the Backstreet Boys and other pop bands.

The site is often called the “YouTube of China,” a term that rankles Mr. Wang, a 34-year-old Fujian who was educated in the U.S. He founded the site in April 2005, just two months after YouTube was launched in the U.S. by three former PayPal employees. Tudou has developed a large following in China at the same time YouTube was taking off in the U.S.

Regardless of whether consumers see it as a Chinese copycat or an innovator, there’s no question it’s successful. Tudou has a 55% share of China’s video-sharing market, even though about 20% of its users are based in Chinese communities around the world such as Hong Kong, Singapore and Chinatowns in western countries.

Tudou’s users view 360 million clips per week and the site attracts up to seven million unique visitors per day, and about 27 million weekly. Those figures easily top the popularity of its main rivals, both video-sharing sections of community sites like as well as the designated video channels on big Chinese web portals like Sohu, which launched a video-sharing section on its own portal in June 2007 under its blogging service.

“ has become one of the fastest growing web sites in China whose audience has grown significantly over the past several months,” said Nielsen//NetRatings spokeswoman Stephanie Zhu in Shanghai. “Unique visitors to grew by 150% from 11.49 million to 28.84 million. Weekly web pages viewed also grew by 175%, from 179 million in the week of May 21 to 493 million in the week of Aug. 17.”

While the site has grown steadily in popularity among consumers, it hasn’t had much impact on advertisers until now. While television commercials--both foreign ads and spots created in China--often pop up among the videos aired on Tudou, usually they are uploaded by viewers rather than seeded by internet-savvy marketers.

“We haven’t done much with advertising on the site so far. We wanted to build up our content and user base first,” said Mr. Wang, who has funded the company so far with capital raised from companies such as Granite Global Ventures and IDG.

In the past year, Tudou has ballooned from 20 staffers to more than 60, and headquarters is now a hip warehouse near Shanghai’s trendy Suzhou creek. The office feels like an inner city U.S. high school, with inexpensive desks packed into massive rooms with walls splashed with colorful graffiti spray-painted by Tudou employees during company parties.

Like many dot-coms, Tudou’s founders and backers hope advertising will turn the site into a cash cow. About two-thirds of the site’s viewers are white-collar workers, and many are between the ages of 17 and 25, a hard-to-reach demographic.

“Advertisers are trying to reach these people with television but these days, they spend all their time in front of computer screens,” said Mr. Wang. In mid-July, he launched an advertising platform with curtain ads that wrap around Tudou’s video screen for three seconds as well as nonmoving, clickable ads surrounding the video player in the browser.

Ads can be inserted based on specific locations, surfing behaviors and subjects, said Mr. Wang. “The ads are accepted by our users, as long as they are not too intrusive.”

About 50 companies are now advertising on Tudou, including skin care marketer DHC, PepsiCo, Coca-Cola, Intel and Viacom’s MTV Networks Asia.

“It’s an experiment right now for us, since they just started running ads a few weeks ago. We’re not sure yet whether it’s going to be an efficient way to advertise in China,” said Leo Tsoi, Shanghai-based marketing director for Pepsi in China.

“But we’ve been paying attention to this site for a while. Among all of China’s video-sharing sites, it’s the one with the most competitive technology, they’re doing good tech support and the viewing experience is comparatively better than other sites. Tudou’s strong community aspect is appealing as well. Many Pepsi campaigns in China now are consumer-generated and the user behavior of Tudou is in line with the kinds of consumers we want to talk to as well.”

It may not work as well for less youth-oriented marketers, however. “Personally, I love Todou because it changes the way Chinese can interact. For example, they can corner a corrupt official and put it online,” said Shaun Rein, Shanghai-based managing director of China Market Research Group. However, he questions their revenue model.

“But I’m not sure how many people are going to put ads around these videos. It slows down the system and users may not like having an ad linked in. Also, how do you find a popular video that fits with what your ad is? It’s hard for marketers to control the image that their brands should be associated with.”

Alfonso De Dios, Procter & Gamble’s associate director of media for Greater China, also has concerns. “Advertising on Tudou is certainly a consideration but we’re also looking at other sites like Open V, a Chinese site that broadcasts real-time programming.”

Tudou is adding other features to improve its appeal to users as well as advertisers, such as wikis that expand community involvement. A slick new flash video player with a larger screen than the old player debuted about the same time as the new advertising platform.

The cost of advertising on Tudou varies based on the scope of the budget. In general, ads cost $2.50 per CPM, or “cost per thousand,” an industry standard measure for selling ads on web sites, said Mr. Wang, who dresses much like Tudou’s youngest consumers in jeans and T-shirts and avoids publicity.

Prior to launching, he was corporate development director of Bertelsmann Group and managing director of the Germany media group's online music business in China. He also has an engineering background, and was a business development manager at Hughes Electronics earlier in his career.

With healthy consumer support and marketer interest, Tudou’s financial future looks solid but growing competition and possible government intervention shouldn't be underestimated. New sites offering similar services are popping up all the time in China. More seriously, when 3G services are launched in China, competitors will start cropping up from mobile sources well, although Tudou plans to start offering content over phones at that point, for a fee.

The internet has also given young Chinese an outlet for expression. It’s not clear just how far the government will let community sites develop before putting the brakes on the social engagement they encourage now..

In addition to the obligatory firewalls that block content deemed unfavorable by regulators, either for political reasons or because they are too racy, Beijing doesn’t want to lose control of the web. The site has faced criticism from entertainment companies for allowing pirated material.

Another challenge is convincing marketers to go online. While some, like Pepsi and Coca-Cola, are adept at advertising in digital media, “we still have too much to learn about advertising in this new kind of space at this point to make it a major part of ad buys,” said Mr. Wolf.
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