Youku and Tudou officially announced that Alibaba and Yunfeng Capital (founded by Jack Ma and Yu Feng who is board director of Huayi Brothers) purchased Youku and Tudou’s A shares with $1.22 billion, Alibaba will hold 16.5% and Yufeng Capital holds 2%. Besides, Alibaba will appoint CEO Lu Zhaoxi as one of the board director of Youku and Tudou.
Youku and Tudou’s evaluation reached $6.6 billion, 10% to 15% higher than present market value. When the deal is finished, Gu Yongqiang and Chengwei Capital will have over 40% voting and Youku and Tudou management still have the dominant control.
Gu Yongqiang indicated that with Alibaba’s $1.22 billion, plus Youku and Tudou’s cash totaled 10 billion yuan. The $1.22 billion investment will be used in 4G mobile internet development, OTT technology and growing paid users and SME clients.
As for why choosing Alibaba to be its strategic partner, Gu Yongqiang explained it as follows:
- Alibaba could afford billion USD financing which help accelerating Youku and Tudou’s OTT, UGC and the whole video businesses development;
- Alibaba is a good supplement for Youku and Tudou. Youku and Tudou now has 400 million users, and its main revenue comes from large enterprises’ advertising. While Alibaba’s e-commerce businesses have accumulated advantages among consumers and SME, it could help Youku and Tudou in precision advertising for SME clients and charge its users.
- Multi-screen integration is one of Youku and Tudou’s strategy, Youku and Tudou’s mobile app, and Alibaba’s Alipay, Taobao, UC and Weibo all ranked top 10 in viewing time. The potential cooperation is wide in range.
Youku and Tudou realized profit for the first time in Q4 2013, with 44.2 million yuan (USD 7.17 million) net profit. However the net loss of 580.7 million yuan (USD 95.16 million) in 2013 made Youku and Tudou worried about high video royalties. The fierce competition with Sohu video, Tencent video and iQiyi led to the alliance with Alibaba, to guarantee its high quality video contents building and remain as market leader.