VC-backed video sites Youku, Tudou announce merger

Competition is intense in the online video market, with Sohu, Baidu and Tencent all seeking to eat away at the two market leaders. This has led to increasing costs for internet bandwidth, content and mobile video services.

Neither Youku nor Tudou has reported a profit since inception - their investor appeal is based on the growth of China's internet market and the potential of the firms to create a viable business model. Once merged, the company will be known as Youku Tudou and serve a userbase of more than 450 million people.

Youku, which is backed by VC firms including Brookside Capital Partners, Maverick Funds and Farallon Capital, will own around 71.5% of the new company, with the rest held by Tudou shareholders. Tudou's VC backers include IDG Ventures, General Catalyst Group, Granite Global Ventures, Capital Today and JAFCO Asia.

Youku chairman and CEO Victor Koo will head the new company and Tudou's CEO Gary Wang will join the new entity's board of directors.

"We intend to lead the next phase of online video development in China," Koo said in a statement filed with the US Securities and Exchange Commission on Monday. "Youku Tudou Inc. will represent a differentiated leader in the online video market in China with the largest user base, most comprehensive content library, most advanced bandwidth infrastructure and strongest monetization capability within the sector."

Koo also said the new entity will see significant synergies across a number of areas including leveraging licensed content over a larger user base and realizing efficiencies in bandwidth management and other common expenses.

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• Topics
• Greater China
• Technology
• JAFCO
• Chengwei Ventures Shanghai
• IDG Ventures
• China
• Technology
• TMT