Strategic Analysis Report of Youku 优酷网战略分析.docx

Strategic Analysis Report of Youku 优酷网战略分析.docx

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StrategicAnalysisReportofYouku优酷网战略分析

TheStrategicAnalysisReportofYInc.（优酷）

Author:

JasonHaiyuWang

StudentID:

561069

Date:

May7th,2011

WordCount:

3377

TableofContent

Introduction……………………………………………………………………………1

ExternalAssessment……………………………………………………………….2

Porter’sFiveForcesAnalysis……………………………………………………………..6

InternalAssessment……………………………………………………………...10

SWOTAnalysis……………………………………………………………………….12

StrategicOptions…………………………………………………………………...16

Conclusion……………………………………………………………………………..17

Reference……………………………………………………………………………….18

Introduction

YInc.registeredintheCaymanIslandas1VergeInc.in2005andchangedtheircompanynametoYInc.in2008（YInc.,2010a）,Themajorassetofthiscompany,Y,waslaunchedinlate2006andithadbecomeoneoftheleadingInternettelevisioncompanyinChinamarketin2010（YInc.,2010b）.InDecember2010,YInc.wentpublicandissued15.8millionADSintheNYSE.AlthoughcurrentlyYoukuhasnotmetthebreakevenpointintheiroperationyet,thefutureoftheirbusinesslookspromisingbecauseoftherapidgrowthoftheirquarterlyrevenueandthecontinuousreductionofitsquarterlyoperatingloses.

Astheirmissionstatementindicated,Yintendsto“becometheprimarysourceofonlinevideocontentforChineseinternetusersacrossallInternet-enableddevices”.Thismissionstatementprovidedacleardirectionfortheminthefuture.IthasclearlypointedoutthatYoukuwouldfocusononlinevideoindustryinChinamarketandintendtodelivertheirserviceviamultipleonlinechannelstotheChineseconsumers.Guidedbytheirmissionstatement,Youku,accordingtotheProspectusofthemfortheirIPOintheNYSE（YInc.,2010a）,wouldbefocusedonprovidingmoreattractiveonlinevideocontentstotheChinesenetizens,increasingtheinvestmentonoperatingfacilitiesanddevelopingmoreadvancedtechnologiesforonlinevideotransmissionthroughtheInternetandMobileInternettoimprovethewatchingexperienceoftheirusersinthenextfewyears.

ExternalAssessment

PESTELAnalysis

PoliticalandLegalFactors

1.Thetriple-networkintegrationinChina

Chinagovernmentintendstointegratetheexistingtelecommunicationsnetworks,cableTVnetworksandtheInternetinthenextfewyears.By2015,thisprocedurewouldbecompletedaccordingtoastatementofChina'sMIIT（KuoG.,2011）.Thisactionmaychangethecurrenteco-systemofonlinevideoindustryinChinabecause,firstly,itwouldenabletheTVnetworkstoprovideVODservicetothepublicandseizevideo-watchersfromtheonlinevideowebsite;andsecondly,itmightprovideanopportunitytotheexistingplayersinChinaonlinevideoindustrytoenterthisnewmarketandincreasetheiraudiencebase.

2.TheenforcementofintellectualpropertiesprotectionandonlinevideocontentcontrolinChina

InNovember2010,China’sSARFTannouncedabanonanyformsoftradingandsupplyingunauthorizedforeignTVseries.

Alongwiththisaction,theChina’sMinistryofCulturelaunchedasix-monthnationwidecrackdownoncounterfeitinginOctober2010tohaltthetheftofIPRSandpromotepublicawarenessinIPRSprotection（Xinhua,2010）.ThereareagreatnumberofnetizenswatchingunauthorizedforeignTVseriesfromtheonlinevideoproviderslikeYandthisactionfromChinagovernmentmaylowerthosepeople’sdemandofonlinevideoservicesoreventurnthosenetizensfromtheonlinevideowebsitestoothersmallillegalvideo-sharingwebsitesempoweredbyP2Ptechnology.However,Chinagovernmenthasbeentryingtoeliminateallillegalvideo-sharingwebsitessince2008andhasgotsomeimpressiveachievementinthelasttwoyears.

3.

Theregulationandrestrictionofonlinevideoserviceproviders

InDecember2007,China’sSARFTandtheMIITannouncedthatallonlineaudioandvideoserviceproviderswillberequiredtoapplyforan"OnlineAudio-VisualBroadcastingLicense"inordertokeepconductingbusinesslegallyinChinamarket.Thekeyqualificationsforobtainingthislicenseinclude:

beingmajoritystate-ownedandpossessingacomprehensiveprogramcensoringsystem,legalprogramresources,legalfundingsources,and"standardizedtechnology"（MarbridgeConsulting,2007）.Furthermore,in2010,China’sSARFTandtheMIITannouncedthatonlythecompanieswhohavegot3Gvideolicensescanenterthe3GnetworktopromotetheironlinevideoservicetothemobilephoneusersinChina（SARFT,2010）.Thoseregulationswould

EconomicFactors

1.QuickGrowthofdisposableincomeinChina

TheannualdisposableincomepercapitaforChineseurbanhouseholdswastriplingfromabout6,000CNYin2001to17,175CNYin2009（StarmassInternational,2010）.Asforruralhouseholds,similartrendcanalsobespotted.ThistrendimpliesthattheseChineseaudienceshavebecomemoreattractivetoadvertisersaswellasmorecapableofpayingforcontent.

2.ThetrendofonlineadvertisingmarketandonlinevideoadvertisingmarketinChina

AccordingtoiResearch（2011）,inthenextseveralyears,theonlineadvertisingmarketinChinawouldkeepa30%-40%annualgrowthrate.ThesizeofonlineadvertisingmarketinChinawillbeexpectedtoexpandfrom32.12billionCNYin2010to129.64billionCNYin2014.Inthemeantime,thesizeofonlinevideoadvertisingmarketinChinawouldincreasefrom2.91billionCNYin2010to13.1billionCNYin2014correspondingly（iResearch,2010）.

3.TheincreaseofinterestrateofChineseYuan

ThePeople’sBankofChinahascontinuouslyincreasedthebenchmarkdepositandlendinginterestratesinthelastthreeyears.Theannualinterestrateforone-yearloanhasincreasedfrom5.31%inDecember2008to6.31%inApril2011（People’sBankofChina,2011）.Thiswouldincreasetheshort-termandlong-termborrowingcostforallthecorporationsinChina.Asacapitalintensiveindustry,onlinevideoindustrywouldbesignificantlyaffectedbythistrend.

SocialFactors

1.OnlinevideoservicehasbecometheseventhmostpopularonlineapplicationinChinamarket

InDecember2010,thenumberofonlinevideouserinChinareached283.98million,whichhadincreased18.1%fromthepreviousyear.Onlinevideoservicehadbecometheseventhmostpopularonlineapplication（CNNIC,2011）.

2.ThepreferredonlinevideocontentamongChinesenetizens

ThemostpopularcontentofonlinevideoinChinawasmovie.AccordingtoCNNIC（2011）,92.6%ofonlinevideousershadwatchedatleastonemovieviatheInternet.TVdramawasthesecondmostpopularand87.2%ofonlinevideousershadwatchedatleastoneepisodeinyear2010（CNNIC,2011）.

3.TheincreasingpopularityofMobileInternet

InDecember2010,therewere303millionusersofmobileinternetinChinaandthisnumberhadincreased30%fromthepreviousyear（CNNIC,2011）.

TechnologicalFactors

1.TheincreasingpenetrationrateofbroadbandInternetinChina

In2010,thenumberofbroadbandusersinChinareached450millionandhadincreased30%fromthepreviousyear.98.3%ofChineseInternetuserswereconnectedbybroadbandInternet（CNNIC,2011）.Theincreaseofnettransmissionspeedwouldenabletheonlinevideoproviderstodelivervideocontentsinhigherquality.

2.High-definitiontechnology

High-definitiontechnology,suchas720pand1080pvideotransmissionforonlinevideo,wascommercializedin2009andthepopularityofbroadbandinChinamarketenabledtheonlinevideoproviderstoadoptthistechnologyandimprovetheuserexperienceoftheiraudience.

3.Theraiseof3Gnetwork

From2009,themobile3GnetworkhadbeencommercializedinChina.Untiltheendof2010,therewere51.73millionusersof3GmobileserviceinChinamarket（Tencent,2011）.However,becauseofthecostofonlinetrafficandtheregulationofmobilevideoindustryfromthegovernment,thenumberofmobilevideouserswasrelativelylow.AccordingtoareportfromCNNIC（2011）,onlyonefifthofmobileinternetusershadalreadyusedthisservice.

EnvironmentalFactors

Theraiseofpublicawarenessforenergyconservation

In2008,Chinagovernmentstartedtoraiseacampaignforraisingthepublicawarenessofenergyconservation.Until2010,thisideahasbeenwidelyacceptedbytheChinesecitizens.

Porter’sFiveForcesAnalysis

ThreatsfromSubstitutes

Video-sharingwebsitesormediaplayersempoweredbyP2PTechnology

P2PtechnologyhasbecomemoreandmorepopularinChinaonlinevideoindustry.Theoretically,thebandwidthcostofanonlinevideoproviderempoweredbyP2Ptechnologyisonly1/10ofanonlinevideoproviderservedthesameamountofusersempoweredbyweb-hostingtechnology（Constantine,2008）.However,thistechnologyrequirestheuserstoinstallasoftwareorplug-ininadvanceandcannotbeimplementedonthedevicesotherthandesktopsorlaptops.However,moreandmorecompaniesenteredtheonlinevideoindustrybythistechnology.Xunlei,PPTVandQVODarethemostsuccessfulonesamongthosenewentrants.AlthoughthemarketsharetheyhaveacquiredisrelativelysmallerthanYhasdone,thistechnologymightbeasubstituteoftheweb-hostingvideoserviceandthefutureofonlinevideoindustry.

IPTV

AfterSARFTissuedlicensestothestate-ownedTVstationsforonlinevideoservicesandstartedthetriple-networkintegration,someChineseconsumersintheTier1citiesnowcanplayonlinevideoontheirtelevisionthroughtheIPTVserviceprovidedbytheirlocalTVserviceproviders.

ThreatsfromPotentialCompetitors

YouT

Untilnow,YouTisbannedinChinabecausetheywouldnotliketocomplywiththelocallawofChinagovernmentaboutself-censorship.However,astheonline