Video sharing website to raise ad prices

Source: China Daily | 11-11-2008 10:56

The costly though as yet not profitable online video sharing websites are finding a way out of the current financial turmoil.

6.cn, a famous video hosting website, recently axed two thirds of its 200 employees to trim expenditure. In the light of its current ad sales, the company said it expected to go in the black in three months and the trend may see consecutive profits after six months.

Unlike 6.cn's act in down-sizing, other online video websites like Tudou.com and Youku.com, advocate raising ad prices in a move to increase income.

Tudou.com, one of China's most popular video-sharing sites, has just debuted a subnet named hd.tudou.com, offering free TV shows and movies with high-definition and copyright authorization.

With a huge sum of investment in terms of copyright authorization, Tudou's chief executive officer (CEO) Gary Wang indicated that video ads on the new site would cost ten times more than that on ordinary sites.

"Costs in copyrights and bandwidth servers are higher for video websites than common websites. It doesn't make sense for ad prices on video websites to be on the same level with those on banners or on the search engines." said Wang to the Southern Metropolis Daily.

He also reasoned that the output of video ads did not match with the costs in China. Online ads price at 10-20 yuan (US$1.47-US$2.93) cost per mille (costs to show the ad to one thousand viewers), compared with 300-1000 yuan for a 10-minute ad on TV per thousand viewers. However, ads on video websites in US cost almost the same with those on TV at the prime time.

Victor Koo, CEO of Youku.com confirmed to the paper that his website also marked up major ad prices while launching new products. "It will go up by about 20 percent."

Seeing many of the 400 players in the market collapse, Koo is optimistic with his company. "The market will be more concentrated, and choices would be optimized for advertisers, partners or even web users." said Koo to the Southern Metropolis Daily.

"Video websites and television are relatively complemented to each other. Advertisers may broadcast ads on both in the good days, but taking account of strategy shift and costs, the former will shoulder more.".Koo is confident that his website will take in more than 100 million yuan next year.

Due to a worsening operating status, quite a few video websites are dropping out of this field, making the situation conducive to the survivors.

Editor:Zhang Ning