Tudou-Sina Tie-Up: More to Come？土豆网联手新浪

By newsdoug on February 6, 2012

Tudou to stream over Sina's Weibo Five months after buying a 9 percent stake in Tudou (Nasdaq: TUDO) shortly after its New York IPO, Sina (Nasdaq: SINA) has just announced its first tie-up with the online video site, China’s second largest, in what looks like the first of more to come, perhaps ending with the biggest tie-up of all, an outright acquisition. Under their first tie-up announced late on Friday, the 2 companies have launched a platform allowing sharing of Tudou videos on Sina’s popular Weibo microblogging platform. (English announcement; Chinese article) This particular tie-up looks quite interesting, as it combines Tudou’s rich online video library with Weibo’s 250 million users to create a potent platform that would be extremely attractive to advertisers — one of the main income sources both companies are relying on in their search for sustained profits. This combination could not only help Tudou steal advertising dollars from rivals like Youku (NYSE: YOKU) and Sohu (Nasdaq: SOHU) video, but could also help Weibo chase dollars now going to traditional social networking sites like Renren (NYSE: RENN) and Kaixin, as this kind of online video offering will give it a more traditional SNS feature. Sina shares didn’t do much after the news came out, actually dropping a bit despite a rise in the broader market. But more interesting was the reaction in Tudou shares, which jumped 16 percent to $16.25 — a healthy gain although still far below the $29 that Tudou sold shares for in its IPO last August. That jump is certainly fueled in part by excitement over this new deal, but another major factor is also growing expectation that Sina may make an outright offer for the company in the not-too-distant future. Such an offer would make sense for Sina, which needs a video offering to better compete with Sohu and looks like an increasingly important piece in general for a diversified web portal. From Tudou’s perspective, a merger would instantly give it access to Sina’s huge user base, both through its core portal business as well as subsidiaries like Weibo. Of course the major sticking point could be price, assuming Tudou Chairman Gary Wang wants to sell, which is far from certain. But even if he wants to sell, he may be loathe to part with his company for less than its IPO price, which would be a hefty 80 percent premium to its last closing price. Still, this kind of a merger looks almost too logical for either side to ignore, and I wouldn’t be surprised to see Sina either significantly increase its stake or buy Tudou outright by the end of this year.

Bottom line: A new tie-up between Sina’s Weibo and Tudou looks like a smart for both sides, and could pave the way for the former to acquire the latter by year-end.

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