Impending PPTV Bidding War: Alibaba And Sohu Both Vying For The Popular Chinese Video Streaming Website

Chinese tech giants Alibaba, Suning (SHE:002024) and Sohu (Nasdaq:SOHU) are all courting PPTV, one of China’s major video streaming websites, according to Yicai.

It looks as if China’s video streaming landscape is going through some serious consolidation. In 2012, Youku, the second-largest video site after YouTube and China’s largest, acquired Tudou, the second-most popular video-sharing site in China, to form Youku Tudou (NYSE:YOKU). In May Baidu (Nasdaq:BIDU) acquired PPStream, the third-largest video streaming network in China, and merged the website with iQiyi, Baidu’s own streaming site.

Now, the tech giants are going after PPTV, the last remaining major video streaming website, reported Yicai, a Chinese financial news portal.

In 2012 PPTV brought in 800 million yuan ($130.55) in revenue, 60 to 70 percent of which came from advertising, PPTV’s CEO Tao Chuang told Yicai. Comparatively, PPStream brought in 500 to 600 million in 2012, according to a report by Morgan Stanley (NYSE:MS).

In acquiring PPStream, Baidu valued the video sharing site at $370 million, which means PPTV should be valued at $500 to $600 million.

However, when Japan's SoftBank (TYO:9984) purchased a 35 percent stake in PPTV in 2011, the streaming website was valued at $714 million. This difference in valuation is a hurdle that has to be overcome in the potential acquisition of PPTV.

Sohu, a longtime competitor of Baidu and Sina, is anxious to acquire PPTV and merge the site with its own video streaming site.

For Suning, which began as an online electronics retailer but has opened brick-and-mortar stores around China, a move to the mobile market is crucial. PPTV’s mobile apps are highly popular, and more than 60 percent of its advertising revenue comes from electronics retailers just like Suning.

Alibaba pursues PPTV for similar reasons as Suning. The difference is Alibaba, having just received a loan close to $8 billion, may be able to put up more cash in the deal than Suning, according to Yicai.

The newly formed Baidu-PPS alliance and the Youku-Tudou alliance are poised to split the entire video streaming market in China. No matter which tech giant wins PPTV’s hand in the end, the goal of each is to grab a piece of the pie -- before long, China’s video sharing industry may have only three significant players left.