Businessmodel of Youku

Customer Segments

Youku Tudou has a multi-sided market business model, with two interdependent customer segments that are both needed in order to operate: producers of video content (professional and amateur) and consumers who view and share the content.

Value Proposition

Youku Tudou offers four primary value propositions: accessibility, customization, risk reduction, and brand/status.

The company creates accessibility by enabling anyone to contribute to its programming. The majority of its content is professionally-produced and licensed from copyright holders. It includes feature films, TV dramas, news programs, animated features, music videos, variety shows, and sports coverage. That said, its platform also allows average Internet users to create, upload, and share their own work – in fact, its slogan is “everyone is a director of life.“

The company enables customization by allowing users to create a personalized channel for video sharing. They can manage their uploads, visitor comments, online friends, and online chats.

The company reduces risk by taking significant efforts to protect third-party copyrights – an essential strategy as infringement is a major problem in China’s online video industry. Its invests heavily in copyright protection technologies. These include a video fingerprint system that compares new videos with fingerprint trails of copyrighted videos and a text-filtering system. It also maintains 3,000 full-time and 800 contract employees who engage in copyright checking, content files screening, editing, and source file acquisition. Beyond combatting piracy, Youku Tudou has its in-house reviewers screen all submissions for inappropriate content such as pornography.

The company has established a strong brand due to its success. It is the leading Internet television platform in China, attracting over 580 million monthly unique visitors. Its video content library includes over 5,500 movie titles, 2,600 television serial drama titles, and 540 variety shows. It has also ventured into mobile gaming, and now operates a collection with more than 1,500 games that have generated over 200 million downloads. Lastly, it is one of the world’s largest bandwidth users.

Channels

Youku Tudou’s main channel is its website. The company promotes its offering through its social media pages, direct marketing, and participation in seminars, workshops, road shows, trade shows, and conferences. It also hosts award ceremonies to honor users with the most popular content.

Customer Relationships

Youku Tudou’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees.

Key Activities

Youku Tudou’s business model entails maintaining a robust common platform between two parties:  video content producers and viewers.

Key Partners

Youku Tudou maintains the following partnership programs:

• Revenue-Sharing Program – The company maintains a program through which it enables qualified content creators to earn money generated from ads embedded with the videos they upload. Top creators have earned as much as $3,500 to $10,000 per month. There are over 600 partners.
• Star Video Alliance – The company co-founded this program, which aims to create a premium standard for gaming video content in China. It gathers top gaming media into a vertically-integrated gaming video ecosystem. ### Key Resources

Youku Tudou’s main resource is its proprietary software platform, which serves over 580 million monthly unique visitors.

It depends on its technology staff to maintain and update the platform.

As a startup it has relied heavily on funding from investors, raising $134.5 million as of August 2011.

Cost Structure

Youku Tudou has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is sales/marketing, a fixed expense. Other major drivers are in the areas of product development and administration, also fixed costs.

Revenue Streams

Youku Tudou has five revenue streams:

• Advertising Revenues – Revenues generated from online advertising services, which include display and in-video advertisements, as well as sponsored live events, product placements, and in-house-produced viral videos. The company partners with almost 900 brands that sign contracts with fixed prices; they include major names such as Coca-Cola, P&G, General Motors, Lenovo, Apple, Samsung, and China Mobile. This stream accounts for the majority of Youku Tudou’s revenues.
• Subscription Revenues – Revenues generated from fees charged for access to ad-free premium content, such as high-definition feature films. Subscription timeframes range from one month to twelve months.
• Licensing Revenues – Revenues generated from the sub-licensing of content licensed from third party vendors and other online video broadcasting companies.
• Service Revenues – Revenues generated from mobile value-added services provided through partnership agreements with third-party mobile network operators.
• Transaction Revenues – Revenues generated from transactions involving the exchange of online broadcasting rights of licensed copyrights with other online video broadcasting companies.