Chinese Online Video Firm iQiyi Seeks IPO

Site could be spun off from Baidu

HONG KONG – iQiyi, the Chinese online video service, will seek a stock market listing within the next three years, according to reports.

The company is currently a unit of Baidu, the NASDAQ-listed Chinese search engine giant, having been founded in 2010 by Baidu and Providence Equity Partners. Baidu subsequently bought out Providence’s stake in Nov 2012.

iQiyi’s CEO Gong Yu (pictured) said that he aimed to surpass the current market leader Youku Tudou in terms of revenue and market share by the time of the IPO. Youku Tudou, which is listed on the New York Stock Exchange, has a market capitalization of $3.7 billion.

iQiyi has not yet made a profit, though it claims to have the highest unique viewers in terms of daily and monthly visitors via computers. The company benefits from strong integration with Baidu’s search functions.

Many of China’s online video companies have emerged from piracy operations and they struggle to convince many Chinese consumers to pay for content. As a result transactional and video-on-demand portions of the business lag far behind an advertising supported business model.

Speaking recently in Hong Kong, Gong complained that the Chinese regulatory environment makes it difficult for China’s 620 million internet users to make payments online, though others point out that the spread of smart phones is making mobile micro-payments easier.

Gong forecast that advertising on China’s online video sites will grow by 40% in the current year. He also said that over the past three years, more than five million online users in China have paid to watch films online.

“Things are continuing to grow at a rate of something between 300 to 500%. One day, this could catch up with advertising income,” Gong said.

“The earnings prospects for online video and iQiyi are very attractive and we remain supportive across the platform,” said Baidu CEO Robin Li Yan-hong during a recent earnings call.

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