China's Youku Tudou Sees Quarterly Losses Deepen as Revenues Rise

Victor Koo, chairman and chief executive officer of Youku Tudou Inc.
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Victor Koo, chairman and chief executive officer of Youku Tudou Inc., attends the Allen & Company Sun Valley Conference on July 9, 2014 in Sun Valley, Idaho.

China's version of YouTube saw strong growth in its consumer business and ads were up in the quarter.

Leading Chinese online TV company Youku Tudou saw net losses nearly double in the second quarter of this year, but revenue grew above expectations on the back of consumer business development and supported by healthy advertising revenues.

New York-listed Youku Tudou's net loss was $55.2 million in the second quarter, compared to $23 million in the same period a year earlier. The revenues were at the high end of analysts' estimates.

Youku Tudou, in which e-commerce giant Alibaba and its founder Jack Ma together have an 18.5 percent stake, saw net revenues rise 57 percent to $259.6 million in the second quarter of 2015, while non-GAAP net revenues rose 58 percent to $244.3 million year-on-year.

Victor Koo, chairman and CEO of Youku Tudou, said the group's revenue diversification through consumer business had been successful and based on progress driven by our business unit reorganizations and management team additions.

"Meanwhile, with nearly half of advertising revenues coming from mobile, we have achieved broad adoption of mobile advertising by domestic and international advertisers alike," he said.

"We expect these positive trends, reinforced by our clear growth strategy and improving business economics, to continue during the second half of this year," Koo said.

Acquisition of licensed copyright for the second quarter was $59.1 million, and Dele Liu, group president, said boosting web-native content was one of the key growth pillars driving Youku Todou's business development this year, in addition to accelerated topline growth and revenue diversification.

"More specifically, we are creating cross-domain synergy for high quality IPs taking the forms of web series, online game, and movies, leveraging our large and growing user base and high quality traffic as measured by user time spent and user engagement," said Liu.

Consumer revenues, which are derived from the group's subscription-based service, interactive live entertainment and mobile game joint operation, were $28.1 million in the second quarter of 2015, a 596 percent increase from the corresponding period in 2014.

"The growth was primarily attributable to the increasing user adoption of our consumer services as evidenced by expansion of subscriber base of our subscription-based service, and growing number of paying users and average spend per user of our interactive live entertainment service," the group said in a statement.

Bandwidth costs as a component of cost of revenues were $53.3 million in the second quarter, or 21 percent of net revenues, while content costs were $120.1 million, accounting for 46 percent of net revenues as compared to 45 percent of net revenues for the corresponding period in 2014.

This article was first published by The Hollywood Reporter.