Posted January 6, 2010 3:51 pm by with 1 comment

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Yesterday’s rumors have proven true: dominant Chinese search engine Baidu has officially announced their entry into the online video market in China. In fact, they’ve confirmed almost all of the rumors floating around yesterday: Baidu is involved, it’s a partnership, they’ll be soliciting content licensing agreements from professional content producers, it will be free with ad support (like Hulu), and Yu Gong, former China Mobile exec, will head up the site. Only Providence Equity Partners’ participation wasn’t confirmed.

As mentioned yesterday, the Chinese video market is lucrative—worth 162 million yuan ($23.73 million) in Q308, according to Analysys International. It’s little wonder that Baidu is eyeing the market (even though the Chinese search market is valued at 2B yuan [$293M], with Baidu controlling around two thirds of the market). China also faces piracy problems that seems more serious than those in the US, where a site with a similar model has enjoyed unexpected success at Hulu.

With all these concerns, the Chinese video market looks even less appealing in light of another point from Reuters: “J.P. Morgan analyst Dick Wei said most video sites in China were still making losses but Baidu had the added advantage of being able to offer more targeted advertisements given its search technology.”

Baidu didn’t say whether the new venture would feature UGC, with the additional content and IP problems it can pose, but even without that, they could face not only competition but content theft from video pirates. The Chinese video market is highly fragmented online, so there’s a definite possibility that Baidu could emerge as the leader (and winner) in this arena—but will they?

What do you think? Can Baidu succeed in two areas? Will China receive a Hulu of their own?