Record this image: 700 million Chinese watching your video

July 29, 2011 | Marketing, Social Media, Video, Web 2.0

Companies hot to crack the mammoth Chinese market with its fast rising upper- and middle-classes will find video a ripe channel.

The Chinese spend four hours per week viewing videos, double that of U.S. citizens. It gets even better. In four years more than 700 million Chinese will be watching online video content, according to research conducted by the San Francisco-based management consulting firm McKinsey & Co.

Before you dive into the market, be aware of this cultural difference in U.S.-Sino video viewing preferences: While U.S. citizens are happy to consume the user-generated content that dominates YouTube , the Chinese prefer professionally made recordings.

Youku, one of China’s leading online video sites with 200 million monthly users, recently had a successful stock market debut. Its closest rival, Tudou, has 180 million monthly viewers.

While this all sounds like a lavish opportunity for U.S. companies, McKinsey’s research report urges caution. Although the market is growing at a furious pace, few companies are making money, McKinsey says. The firm’s research indicates that profits will eventually come, but only for players with the deepest pockets. Successful online video sites will need capital to:

  • Expand their bandwidth
  • Attract experienced online advertising salespeople, who are in short supply
  • Buy the content that will win the biggest audiences and the most advertising

“The single biggest future [cost] will be content, which used to come cheap – not least because so much of it was pirated,” the report says. “But the government is now attempting to enforce licensing rights, and companies considering initial public offerings in Hong Kong or the United States are keen to comply.”

Already, the competition is fierce in China, with about 200 online video sites jockeying for market advantage.

Great risks and rewards await the winners. Proceed with caution and alacrity.