News today that that China's two biggest video websites, Youku and Tudou, have agreed to merge is the latest sign of consolidation and a search for economics of scale in China's Internet industry as growth eases from its torrid early-era pace.
The two companies said they would combine in an all-stock deal that has been seen as inevitable as Youku has gained on Tudou in the market and following Tudou’s rocky IPO last year. The transaction will produce an industry leader and also lead to "improvement in the industry structure and the underlying economics of the online video sector in China," Youku CEO Victor Koo said in a statement.
Prior to the announcement, Youku ranked as the no. 11 website in China, according to web ranking site Alexa. Tudou was no. 14.
It's instructive to look over the rest of China’s top 25 to see some of the larger cross-over and consolidation trends afoot. No. 1 Baidu, a search site led by the richest mainland Chinese entrepreneur Robin Li on the new Forbes Billionaires List, crossed over into the travel space last year by spending $306 million for a stake in Qunar. Baidu already owns no. 17 Hao123.com, a directory site. Alibaba Group, which is 40% owned by Yahoo and led by Chinese billionaire Jack Ma, owns three sites in the top 25: no. 3 Taobao.com, no. 13 Tmall.com, and no. 19 Alipay.com. No. 19 Renren has built it itself up in part through acquisitions, and No. 12 Soso is owned by the same company that runs No. 2 qq.com, Hong Kong-listed Tencent. No. 22 Sogou.com, another search site, is owned by No. 8, Sohu.com.
As RedTech advisors managing director Mike Clendenin recently told China Wealth, a larger trend in China’s internet space is the adjustment to slower growth. “If you look at the Internet in general, you see the maturation of the Chinese Internet,” he said. Click here for the full Mike Clendenin interview.
