Losses, Ad Revenue Rise for China Video Site Ku6

The operator of one of China's largest video-hosting sites, Ku6 Media, continues to struggle toward profitability, posting a net loss of US$11.8 million in the company's second quarter financial results.

The company, which runs the popular video site Ku6.com, reported the widening of the financial losses on Sunday, increasing from the $10.9 million lost in last year's second quarter. Ku6 Media, however, still holds $38 million to sustain its operations.

Like Youtube in the U.S., video-hosting sites in China have also faced challenges in turning profits. Ku6.com, is China's fourth-largest video-sharing site with 10 percent of the market share, according to Beijing-based research firm Analysys International. China's largest video site, Youku, holds 20 percent.

But even as Ku6 posted a financial loss, the potential for future profits may be starting to emerge. The company also reported $2.4 million in advertising revenue for the second quarter, an increase from $1.2 million from the first quarter, which only included the months of February and March.

Stronger marketing efforts to brand advertisers and a growth in users led to this gain, said Ku6 in a statement. During the World Cup period, Ku6.com brought in an average of 34 million unique visitors per day, said company spokesman Matthew Zhao.

Ku6's strategy has been to acquire more copyright content to create an experience that can mirror television. Already, the company offers content from more than 100,000 producers of original films and television programs. By taking this approach, the company hopes to bring in more revenue, said CEO Li Shanyou earlier this month during the 2010 China Internet Conference in Beijing.

"It's been universal for all of these video sites to not make profits," said Tang Yizhi, an analyst with Analysys. "The amount of ad revenue is increasing. But the operational costs are also increasing as well."

Those costs will only continue to rise as video sites in China will spend more money to acquire copyright content, she added. But Ku6 has the potential to capture additional profits by offering more original content, and acquiring the rights to broadcast live programming like the World Cup.

"In the future, it can do more in this area, and maybe it will be a breakthrough for the company," Tang said.

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