Youku strong at edge of Olympics

CEO Victor Koo strikes careful content balance

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BEIJING -- Apart from a brief dip in traffic during the opening of the 2008 Beijing Olympics, a steady 20 million people have made their way to Youku.com each day during the Games, viewing more than 150 million online videos daily, founder Victor Koo said Friday.

Since its launch two years ago, Beijing-based Youku -- whose 220 staffers serve up user-generated alongside traditional film trailers, TV shows and music videos from the likes of Huayi Brothers, CCTV, TVB in Hong Kong and EMI -- has grown by leaps and bounds.

In 2007, Youku.com's traffic exploded from 5 million video views per day to 100 million per day. That growth, based on internal data tracked for the company by China Rank-Nielsen, drew advertisers including Coca-Cola, Honda and Lenovo.

Koo graduated from Stanford's MBA program and returned to Beijing in 1994. After stints in private equity and at Nasdaq-listed Web portal Sohu.com, where he rose to president, he launched Youku with $3 million in seed money.

The Olympics posed a challenge for the fledgling Web site.

"For a lot of Chinese, the Olympics were the first time they turned on the TV in a long time," Koo said, boasting that, based by users' time spent on the site, Youku has a 52% share of the China's online video market.

To stem the flight of sports-mad viewers to traditional television, Youku primed its audience to think of it as an alternative site for the Games. Inviting the Chinese diaspora to share videos of the Olympic torch as it was relayed around the world, Youku kept viewers coming back once the Games began with a contest for best Olympics-related human-interest video.

Because Youku is not allowed to show footage of Olympic competitions -- strictly the realm of rights-holder CCTV -- Koo partnered with the broadcaster's Web site to cross-promote coverage of China's first Olympics.

Still-photo montages of fallen hurdling hero Liu Xiang -- who dropped from the Olympics injured -- are posted to Youku, as are videos of Chinese singing "Take Me Out to the Ball Game" in the stands at an Olympic venue, and antic videos of scalpers haggling over Olympic tickets with international visitors to China's capital.

But Koo said that Youku, where only about one-third of the videos are user-generated (in marked contrast with Google-owned YouTube), has learned to stay away from content offensive to the State Administration of Radio Film and Television.

In June, SARFT shut down rival 56.com after, rumor has it, the company posted a user-generated video widely thought to be insensitive to the victims of the May 12 Sichuan earthquake. When the administration issued a list of approved video sites in July, 56.com was not on it; but neither were Youku and Tudou.

"There's more latitude on the Internet in China than on TV, but it means you have to have an ongoing open dialogue with SARFT," Koo said. Youku was the first of the sites to get a new SARFT license, and the first to be licensed as a broadcaster.

The pressure to stay on the right side of the censors has been high ever since Youku got $12 million from Sutter Hill Ventures of Silicon Valley's late in 2007, and another $30 million tranche last month led by U.S. hedge fund Maverick Capital.

To keep in good stead with the censors, Koo employs about 90 video reviewers per day, working around the clock in three, eight-hour shifts, 365 days per year. And to keep on the right side of the Hollywood studios -- whose content has been known to show up on the Web -- Youku and the MPA signed an agreement in April to protect copyrighted works, an MPA spokeswoman said in an e-mail.

So Youku's video reviewers have their work cut out for them since the site's videos average eight to 10 minutes, compared to two to three on YouTube.

"Because we keep our viewers longer, we stray away from racy content and focus on delivering traditional media, we're a safer advertising platform in China," Koo said.

And as advertisers look to capturing a market even bigger than China's 250 million Web surfers -- specifically, its 600 million cell phone owners -- Youku will be going mobile.

By the second half of 2009, when Koo predicts China's long-awaited 3G wireless standard will gain traction at last, Youku aims to be ready. Koo is in talks with Apple about developing content for their iPhone, not yet available in China.
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