Chinese P2P Companies Rake in Big Bucks

Pacific Epoch is reporting rumors today that the Chinese P2P company Xunlei is in talks with U.S. venture capital companies to raise a final round of $100 million. Xunlei had previously secured a total of $30 million in funding, with an estimated $5 million coming out of Google’s check book. An IPO is planed for later this year, according to Pacific Epoch.

Xunlei isn’t the only Chinese P2P company raking in big bucks these days, and we’re not just talking about VC play money, either. The Chinese market research company iResearch is reporting that P2P companies like PPLive and PPStream are attracting an increasing amount of advertising dollars. The growing revenue goes along with tons of users watching thousands of video streams. Maybe Joost and others should take a look at China to see how to make money with P2P video.

User numbers are exploding across the board for Chinese P2P providers, according to iResearch. The market research company is reporting that PPLive is now the market leader, clocking almost 24 million active users in May. Competitor PPStream is following closely with 23.5 million users. QQLive reached around 17 million users, UUSee got almost 10 million users and Tudou trails the field with 7 million users.

The popularity of these services also translates into increasing ad revenue. iResearch estimates that PPLive has already generated roughly 23 million RMB ($3.4 million) in revenue in the first half of this year. PPStream made 15 million RMB during the same time, while PPFilm and UUSee both generated 4.6 million RMB each.

We had a chance to talk to PPLive VP James Seng a month ago, and he told us that the company has seen some 100 million downloads of its P2P streaming video client, which offers access to 900 or so live TV channels. It has 110 employees, is looking to expand into the U.S., and yes, it’s profitable. iResearch now adds to this picture the detail that PPLive apparently has been able to attract more than 200 individual advertisers this year alone.

Of course it’s not all rosy for Chinese P2P companies. They’ve had their fare share of copyright infringement lawsuits as well. The MPAA sued Xunlei in February of this year and PPLive was sued by a local rights holder in May. However, Chinese courts don’t always side with the rights holder, and the fines seem to be negligible compared to the money at stake: Tudou was recently ordered to pay the equivalent of a mere $7,000 for distributing a movie without the consent of rights holders. US-based companies would have to expect statutory damages of up to $150,000 in such a case.

Chinese online video startups have other things to fear instead, such as being closed down for hosting videos that don’t go over well with government officials. Local YouTube competitor 56.com recently closed down for more than a month, and the word on the street has been that it was due to non-sanctioned videos. Meanwhile, other video portals can’t seem to stop raising money to cover their huge expenses.

In China, P2P startups seem to be doing better than their video portal brethren, if iResearch’s figures are accurate. It’s an interesting juxtaposition to the situation in the U.S. Is it that P2P video platforms in China have concentrated on safe TV fare and shied away from potentially problematic user-generated content? Or is there another explanation?

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