China's Youku Tudou Trims Losses in Third Quarter

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The Chinese Internet TV company says it is on track to become profitable in the fourth quarter based on a surge in mobile traffic past 300 million daily views.

Youku Tudou expects to become profitable in the fourth quarter of this year after the Chinese Internet TV company narrowed its losses in the third quarter of 2013 thanks to surging mobile traffic.

"We are happy that we grew the topline by a strong 14 percent quarter over quarter, and our mobile traffic surged to over 300 million video views per day. We will continue to drive mobile monetization and ramp up revenue from local advertising clients, content marketing solutions and paid services," Youku Tudou chairman and CEO Victor Koo said in a statement.

Youku Tudou was formed by the merger last year of China's two biggest video websites, Youku and Tudou.

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"We expect that Youku Tudou will be non-GAAP profitable in the fourth quarter of 2013 after Youku on a stand-alone basis reached the same financial milestone in third quarter of 2012, demonstrating the success of the Youku Tudou merger and solid execution by the team."

Both Youku and Tudou started out copying the business model of YouTube, which is banned in China. In recent years it has focused on providing licensed content, which is good news for Hollywood and other overseas firms eager to access the China market.

Company president Dele Liu said the company had again felt the benefits of the merger in the third quarter in improved economies of scale resulting in a significant narrowing of losses at the operational level.

"We were able to control costs as we further leveraged the scale of our platform and in-house production capabilities," said Liu.

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Bandwidth costs as a component of cost of revenues were $29.7 million in the third quarter, representing 21 percent of net revenues.

In the fourth quarter, the company expects net revenues will be between $141.1 million (860 million yuan) and $147.7 million (900 million yuan), which would be a year-on-year increase of between 35 percent and 42 percent.

Of this, advertising net revenues are expected to contribute between $128 million and $134.6 million, which would be a 36 percent to 43 percent year-over-year increase.

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