BEIJING - With the successful initial public offering (IPO) of smaller online video sites like LeTV.com, bigger Chinese online video firms have accelerated their pace of expansion.
Industry analysts predict that with more Internet users and advertisers investing time and money into the Internet, more Chinese online video firms will follow the lead of LeTV.com and may publicly list their company in the next couple of years.
"Being listed is the inevitable choice for us," said Gary Wang, chief executive officer of Tudou.com, one of China's largest online video sites.
Refusing to disclose the timetable for Tudou's IPO plan, he noted that the location for the IPO would be either in the United States or Europe.
Earlier this month, Tudou announced that it has raised $50 million in venture capital, with $35 million from Temasek Holdings, a state investment company in Singapore, and $15 million from its previous investors. The fund raising, which is the fifth round for Tudou, is believed to be the last round before the company's IPO.
Qu Dufang, Tudou's public relations manager, said the company may list by early 2011.
Different from LeTV.com, which mostly profits from subscriber fees, Tudou makes most of its revenue from online advertising. Wang said that the company plans to expand in China's mobile market, which will bring more new customers in the next few years.
According to figures from China Internet Network Information Center (CNNIC), China's online video users reached 140 million by the end of last year. Nearly 40 million users said they watch videos on the Internet only.
Tao Chuang, chief executive of PPTV, a Chinese online video site, said on Wednesday that Chinese video sharing firms have seen explosive growth in their advertising revenue this year.
"I think there will be an IPO wave of Chinese online video sites in the next one to two years," he said.
The turnover of China's online video market hit 516 million yuan ($75.99 million) in the second quarter of this year, an increase of 217.5 percent over the same period last year, according to figures from Analysys International.
Tang Yizhi, an analyst with Analysys, said the market was mainly boosted by an increasing acceptance from advertisers as well as events such as the Shanghai World Expo and the World Cup.
Chinese Internet firm Shanda Interactive Entertainment announced last year it would acquire Ku6.com, one of China's biggest online video sharing websites, through its US-listed subsidiary Hurray. That made Ku6 the first Chinese online video site to be listed in the US.
"The listing of Ku6 put great pressure on rivals like Tudou and Youku, which have also accelerated the pace of their IPOs after several rounds of funding," said Tang.
But Tang said it is unlikely for major Chinese online video firms to make huge profits in the near term, as the increasing expenses for broadband fees and the purchase of copyrighted video content could easily surpass their revenue from advertising.
Major Chinese online video websites in China made most of their revenues from online advertising. But the rampant pirating of videos in the country made advertisers wary of connecting their brand with illegal content.
However, Wang from Tudou said he is still optimistic about China's online video markets, as major players have increased their expenses in purchasing authorized online content.
"I believe it is quite natural that in the coming three to five years, there would be a Chinese video company with a market value around a billion dollars," he said.