Why Chinese Web Video Is Like the Steel Business

Victor Koo, chief executive officer of Youku.com, speaks during an interview at the company's offices in Beijing Photograph by Keith Bedford/Bloomberg

As they cheer the proposed marriage of China’s two largest online video companies, investors in Youku and Tudou Holdings should make sure to thank the Chinese government’s censors. Because of the policy preventing Web surfers in China from visiting Google’s YouTube, the country’s cybercops created an opening for Made-in-China alternatives. Youku and Tudou have taken advantage of YouTube’s absence and now account for 52 percent of China’s total Web video traffic, according to Mirae Asset Securities analysts Eric Wen and Nancy Yang.  On March 12, the two companies announced that Youku would acquire Tudou, its smaller, Shanghai-based rival, in a stock-only deal worth $1 billion.

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