Youku.com, Tudou.com and 56.com may be the most popular video-sharing sites in China, but within the last few months, they've all suffered from downtime -- due to what each of these venture-backed companies have said are technical problems.
There's another angle, though. Online videos are a great medium for sharing things like porn or political dissent, two things the Chinese government sometimes censors.
The Chinese government appears to have shut down 56.com, starting yesterday. More from Ogilvy blogger Kaiser Kuo, who has been following the video-shutdown story for some time:
The shut down — the second to impact a top-tier video sharing site — was in discussion for a few weeks, the insider said, and the timing of the outage “probably has nothing to do with” the anniversary of the suppression of the student uprising of 19 years ago.
The official reason for the site going offline: Server malfunctions. The company, which also makes slideshows widgets similar to those of Slide or RockYou, has received $20 million in funding from Japanese firm Hikari Private Equity and Susquehanna International Group China.
[Update: Sequoia Capital and Disney's Steamboat Ventures have also invested in 56.com and Intel Capital may have as well. My source about those investors mentions the irony that Disney would invest in the company which, like its competitors, hosts large amounts of pirated content. Duncan Riley also emphasizes the piracy issue, in comments, below.]
This past winter, the Chinese government introduced new regulations that require any new video site to have a license showing that it is majority-owned by a government-controlled business. A grandfather clause in the regulations, as China Web 2.0 Review reported, appeared to have made these three sites exempt from that rule. It is my understanding, from talking to these companies, that not one has actually obtained any sort of operating license, in any case.
Notably, one of the others, Tudou.com, was apparently shut down for one day in March. The company has raised a total of $85 million from firms like IDG, Granite Global Ventures and General Catalyst and other foreign investors. It competes neck-and-neck with Youku.com. Both claim to have more than 100 million video views per day; while traffic measures in China are not always trustworthy, both are generally considered larger than 56.com. Like 56.com, Tudou said it went offline because it was moving servers -- but other reports suggested censorship. From a post at the time by Kuo:
I’ll leave everyone to draw their own conclusions about what actually happened. There’s a story on Sohu.com about [the shut down] here, which makes reference to (unnamed, unsourced) reports about a document supposedly handed down from SARFT central to its Shanghai bureau, called “Shutdown Order Sanctioning Tudou’s Conduct in Violation of Regulations on Internet Audio-Video Services ” — my loose translation — which according to the Sohu story, order an indefinite shutdown pending rectification and reform for ineffective controls of pornographic content."
Of course, there are real technical challenges to running any large video site. Even YouTube, the largest video site in the world, has at times gone offline.
Youku, the third video site, was also offline for a short time earlier today. Between the three, it appears to be the most clear-cut case of actual server problems, as Kuo also reports.
The company, like its peers, has raised a significant amount of money from foreign firms. Farallon Capital, the hedge fund, led an initial round of $3 million in March 2006. Bain Capital venture subsidiary Brookside Capital Partners led the company's latest round, for $25 million last fall, with other investors including Sutter Hill Ventures and Chinese firm Chengwei Ventures.
For the conspiracy-sensitive, though, the timing of Youku going offline today -- while 56.com is still offline and on the anniversary of Tianenmen Square -- seems a bit much to be a coincidence.
There are two moving pieces here. On the one hand, the Chinese government is contemplating how to ease restrictions like free speech, or not -- see my interview with Chinese blogger Isaac Mao or my coverage of Facebook in China for more on that. On the other hand, Chinese entrepreneurs and investors know that in many cases, the government will turn a blind eye to things it declares against the law. These Chinese video sites, it appears, are living on the bleeding edge of what's permissible, emphasis on bleeding.