Why Tudou is on the wrong track – Shaun Rein

China’s second largest video sharing firm Tudou launched last week successfully at Nasdaq, and business analyst Shaun Rein discovered they want “buy things”. Wrong, he argues in CNBC: Tudou should focus on its sustainability and become profitable.

Shaun Rein:

I expected after the IPO, Tudou’s investors and management would talk about how Tudou would use its war chest to develop profits. Instead David Orfao, a Tudou board member and managing director of venture capital firm General Catalyst, focused on what Tudou would buy in an interview with the Wall Street Journal. He said Tudou “ need(s) to continue to buy quality video content. They need to scale their infrastructure. Delivering these videos in a quality manner with minimal delay is key.”

The founder of Tudou, Gary Wang, told the blogger Gang Lu after the IPO that the proceeds raised would be used mainly for content, bandwidth and platform upgrades.

Orfao and Wang barely touched upon how Tudou would actually start to generate more revenues and profits, but on how they would buy stuff. That is deeply concerning for a company losing tens of millions a year.

If Tudou can figure out a way to develop a sustainable business model and lower bandwidth and other costs investors might want to take a look especially if the price drops further as they might become a takeover target for well capitalized firms like Baidu.

More in Shaun Rein’s column at CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.