China’s video giant Tudou Q2: Profits up 47%, but net loss doubles to $24m ahead of crucial Youku merger

China’s video giant Tudou Q2: Profits up 47%, but net loss doubles to $24m ahead of crucial Youku ...

Chinese video provider Tudou has announced a 47.3 percent rise in revenues to $27.1 million (RMB171.9 million) for the second quarter, but a 123 percent spike in cost of revenue left the company with a $24 million net loss.

The Shanghai, China-based company attributed increases in “bandwidth costs, content costs and mobile video services costs” to the rise. Bandwidth expenses nearly doubled from $5.4 million (RMB34.5 million) in Q2 2011 to $10.2 million (RMB65.1 million) last quarter.

Content costs almost tripled to $15.8 million (RMB100.5 million) over the period, as a result of premium licensed content and content produced in-house, while mobile video services costs rose to $1.9 million (RMB12.3 million) from $910,000 (RMB 5.8 million) in 2011.

Also of note are $3.7 million (RMB23.7 million) in expenses related to the companies upcoming merger with Youku. The two companies, which have been fierce rivals for years and make up roughly half of China’s Web video market, announced the deal in March. Though the agreement came as a surprise to many, the two companies had discussed linking up as early as 2009.

Tudou, which hit 300 million monthly visitors earlier this year, noted in its earnings release that the merger remains on schedule to complete in the third quarter, pending approval from the companies’ shareholders.

Rising costs for both Tudou and Youku have made their coming merger even more crucial to their long-term success. They expect to save as much as $60 million dollars in operating costs once they’ve come together.

For its part, Youku is set to announce its own second-quarter earnings on Monday. The company posted a net loss of $24.8 million in the first quarter.

The Chinese video market is in the midst of rapid expansion. Advertising revenue for the industry leapt up 218 percent year over year and 25 percent sequentially to $330 million in the first quarter of 2012.

Image via Flickr / vipworld

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