Chinese "YouTube" sees possible sector shakeout
SHANGHAI (Reuters) - Video-sharing Web site Youku.com, which is trying to position itself as China's next YouTube (GOOG.O), foresees a possible shake-out in the sector after Beijing's latest clampdown on what it deems unsavory Internet content.
In a bid to curb pornography and politically sensitive online subjects, authorities said late last month that only state-owned firms can apply for licenses to share videos and audio online.
While this may help the sector in the long-term, some of the scores of smaller video-sharing firms trying to gain a following in the world's second-largest Internet arena may be forced out of the market, said Victor Koo, chief executive of Youku.com
"I'm quite sure of a shake-out actually," said Koo, previously president of major portal Sohu.com Inc (SOHU.O), in an interview on Wednesday.
"There are an increasing amount of barriers in the market ... and in this sense (the rules) will become another barrier that will make it more difficult for smaller players to survive in the market," he added.
China is the world's second-largest Internet market after the United States, with over 162 million Web users.
Youku, which has surpassed 100 million daily video views, according to research firm Nielsen/NetRatings, and a bevy of firms such as Tudou.com and UUSee are backed by foreign venture capital.
Youku -- which by November had completed three rounds of venture financing worth a total of $40 million -- is backed by Brookside Capital, an affiliate of Bain Capital, Sutter Hill Ventures, Farallon Capital and Chengwei Ventures.
But foreign investors, which have been pouring record amounts into China's Internet sector, may now think twice about backing the country's latest Web talent until the Ministry of Information Industry, and State Administration of Radio, Film and Television clarify how the rules will be implemented, Koo added.
"It requires a few months to work through this process, and within this period, it does pose some uncertainty to the investment environment," he said.
Another challenge that many video-sharing and social networking sites face is finding ways to monetize traffic and attract advertisers.
"The company's focus in the next 12 to 18 months is to improve our business model, just as we've proven our product model. Then we'll explore exit options," Koo said.
(Reporting by Sophie Taylor, editing by Ken Wills)
