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Food for thought: YOKU

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think_1 July 15, 2014 (Chinavestor) Business Overview- Youku Tudou Inc (NYSE:YOKU)

Youku Tudou Inc (NYSE:YOKU) is a Chinese language online entertainment company. It mainly operates in China and within the online Advertising Business. Its main line of service is providing entertainment video through its website. However, the main source of revenue for the company is online advertising. Currently, the company holds over a third of the market share in China. There is a high degree of competition within the online video industry in China. Similar video contents across websites leave little room for YOKU to differentiate itself. The company needs to establish its competitive edge through video differentiation.

 

Continuous Loss: YOKU is making continuous loss over the recent three years due to high content cost and sales & marketing expenses, brining negative EPS to investors.

Relatively single revenue pattern: YOKU is mainly relying on advertising for revenue (89.3% in 2013). If the company could diversify its revenue channel through user subscription and mobile video services, revenue might boost at a faster pace.

Recent Events

Jan 20, 2013: Youku Tudou Inc announced collaboration with Qualcomm Technologices, which allows users to access YOKU video content through Qualcommm Snapdragon processor powered devices.

Jan16, 2014: Chinese censors investigated websites including Youku Tudou Inc and Baidu Inc over the distribution of violent and pornographic content. Some of the content are hit and banned for no clear reason. And to the present, 122 online publications were banned. This significantly affects YOKU's online library building.

Apr 24, 2014: Youku Tudou Inc announced new partnerships with China's leading smart TV and OTT (Over-The-Top) companies for the integration of pre-installed Youku Tudou App.

Apr 28, 2014: Youku Tudou Inc announces the $1.22 billion investment from joint investment vehicle of Alibaba Group and Yunfeng Capital.


Chart Analysis

One-year stock price chart:

YOKU_Price_20141y

Figure 1


Comparison with major competitors:

YOKU_comp_20141y

Figure 2

Stock price charts shows no upward momentum for Youku Tudou Inc. (NYSE:YOKU). Comparison with other stocks such as Sohu.com (NASDAQ:SOHU), TENCENT IN HK (HKG:0700) and Baidu Inc. (NASDAQ:BIDU) shows a rather tepid stock performance of YOKU. No obvious upward or downward signs arae shown on stock charts.



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