April 23 (Bloomberg) -- Tudou.com, China's answer to YouTube, aims to next year achieve what the U.S. video-sharing Web site owned by Google Inc. has failed to do -- post a profit.

``We are projecting a sales surge early next year, so I hope that will happen by then,'' Chief Executive Officer Garry Wang said in a Bloomberg Television interview broadcast today. ``There hasn't been an Internet application in the last five years that could attract users like video can.''

Three of every four Internet users in China watch videos online, luring companies including Adidas AG, Microsoft Corp. and Sony Corp. to buy advertisements on Tudou's site. Tudou, meaning ``potato'' in Chinese, is the leader in an Internet market that has more users than the combined populations of France, Germany and the U.K.

``The interactive experience of video-sharing sites gives this market room for a lot of growth in the next five to 10 years,'' said Liu Bin, an Internet analyst with research company BDA China Ltd. ``In the next few years, advertising spending for these sites will rise quickly.''

China was home to 210 million Internet users at the end of 2007, according to the China Network Information Center. About 77 percent of Web users watched online videos last year, more than doubling from 2006, said the government agency.

Tudou's closest rival is Youku.com followed by 56.com, which are both Chinese-language sites, according to BDA's Liu.

``Interest in the Chinese video-sharing sites has really increased,'' said Elias Glenn, a Shanghai-based analyst at JL McGregor & Co., a consultant to venture-capital firms and institutional investors in China. ``I'd definitely say Tudou is China's YouTube. They're the one everyone's talking about.''

Lost in Translation

YouTube isn't a competitor for the top three video-site providers in China, Liu said. ``Internet users in China are always going to prefer videos in Chinese rather than the English content on YouTube,'' he said.

Shanghai-based Tudou had almost 29 million visitors each week in August 2007, more than double the 11.5 million three months earlier, based on the latest data from Nielsen//NetRatings. YouTube had 78.5 million U.S. viewers for the month of January, according to research company ComScore Inc.

Tudou, which received funding of almost $30 million from investors including IDG China, Granite Global Ventures and JAFCO Ventures, began operations in April 2005.

Wang, 34, the Tudou chief executive, declined to give projections for profit and sales.

Rival Takeover

YouTube started its service later in 2005 and was bought in November 2006 by Google Inc. for $1.65 billion, more than 100 times the video-sharing site's annual revenue.

China in January issued rules requiring new online-video providers to be owned by state companies, making it unlikely privately held Tudou will be acquired as YouTube was, Wang said.

Censorship in China may also be a deterrent. The nation bans pornography, gambling and material critical of the government from the Internet by blocking access to sites such as Amnesty International, and owns all newspapers, television channels and radio stations.

Tudou was one of 32 Web sites warned by the government last month for ``inappropriate'' content.

One of the company's biggest departments is for censoring clips uploaded by users, Wang said, declining to say how many of Tudou's 140 workers are employed in that section.

``Most of it is self discipline,'' Wang said. He didn't specify details of Tudou's censorship criteria.

Copyright Issues

Copyright violation is also holding back Tudou from an initial public offering. The company is involved in three ongoing lawsuits filed against it by domestic copyright holders seeking ``minor amounts,'' Wang said, without giving more details.

``I don't intend to run a huge pirate shop here,'' he said.

It's also ``too early'' for an IPO because the company must increase revenue further, Wang said.

Tudou started an anti-piracy campaign in January with the Motion Picture Association and Microsoft Corp., asking its users to submit videos on protecting intellectual property rights. Producers of the best videos will win prizes including copies of Microsoft software autographed by Chairman Bill Gates.

``User-generated content sites are the key to resolving the problem of pirated content uploads,'' Mike Ellis, Asia-Pacific President of the Motion Picture Association, said by e-mail. ``It is clearly in the best interest of both our industries to jointly address these issues.''

The movie group holds regular talks with YouTube and hasn't planned any anti-piracy campaign with the site, Ellis said.

To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net; Stephen Engle in Hong Kong at sengle1@bloomberg.net.

Last Updated: April 23, 2008 05:14 EDT