Bloomberg News reports that Baidu Inc. (BIDU)’s iQiyi video website plans to hold an initial public offering within three years as it competes with Youku Tudou Inc. (YOKU) for China’s 618 million Internet users seeking movies and TV shows online.
The Beijing-based site, which offers Mad Men and the South Korean drama My Love From the Star, is aiming for a valuation that surpasses Youku Tudou’s, Chief Executive Officer Gong Yu said in an interview in Beijing on April 29. The U.S.-listed Youku has a market capitalisation of US$3.7 billion and posted 3 billion yuan (US$479 million) in revenue last year.
“We want to have the largest market share and revenue share in the industry,” Gong said. “By the time of the IPO, if our market share and revenue are both larger than Youku, we should have a bigger valuation than it does.”
China’s market for online video probably will be worth 17.8 billion yuan this year and then double to 36.6 billion yuan in 2017, according to a report by Internet consultant IResearch.
Baidu, the owner of China’s largest Internet search engine, is boosting its online entertainment content to compete against Youku, which will receive a US$1.22 billion investment led by Alibaba Group Holding Ltd. iQiyi is looking to spend at least 300 million yuan this year to produce its own content, including drama programmes, that cater to people born after 1985, Gong said.
“We want to boost the lead we have against other competitors and solidify our existing strength,” Gong said. “Based on this, we will definitely increase our investment.”
iQiyi, which has yet to make a profit, wants to hire more producers to create content in an effort to increase traffic and cut costs, Gong said. He declined to provide a timeline on when the company would become profitable.
iQiyi, which also competes against Sohu.com Inc. (SOHU), offers movies including The Hunger Games: Catching Fire and attracted 224.8 million unique visitors in February. The site has the most unique daily and monthly visitors via personal computers in China and is the market leader according to monthly time spent via PCs and mobile devices, Baidu CEO Robin Li said during an April 24 earnings conference call.