After three "connections", why does SoftBank prefer investing in video websites?

With investment endorsement, A stood on cooperation in traffic, bandwidth, and content copyright, and received support from Youku Tudou. Gu Yongqiang, CEO of Youku Tudou, has also confirmed this. More importantly, with Youku Tudou as a Series A investor, there is a foundation for accessing subsequent investors.

Softbank has made many investments in the Internet field, and Masayoshi Son is called "Mr. Japan.com" by the outside world.

In China, investments by Japan's SoftBank and SoftBank China (SBCVC) include well-known Internet companies such as Shanda Networks, Alibaba, Yahoo, Sina, Netease, Dangdang, Ctrip, and Renren. Among them, in 2011, Softbank of Japan invested US$250 million in PPTV, setting the largest investment in the video field since Google acquired YouTube.

But it was this controversial investment that made Japan's SoftBank and SoftBank China fail. After Suning Yunshang and Hony Investment took over PPTV, Japan's Softbank and Softbank China all withdrew at a loss. At that time, SoftBank China related people once said that SoftBank China continues to be optimistic about the video field.

In fact, the same is true.

US$60 million invested in AcFun

On January 14, AcFun (hereinafter referred to as "Station A") announced that it had received US$60 million in Series A+ financing from SoftBank China, using the money to improve its products and promote its brand.

Prior to this, Station A received an investment of US$50 million from Youku Tudou. However, a person from the original Youku Tudou revealed that there was another secret to the investment. Youtu did not take out US$50 million in real money, but used other methods.

On August 6 last year, Station A announced that it had received US$50 million in financing from Youku Tudou, and all the funds were in place. Turning the time back to the previous six months, the two sides were at odds for a time because Station A infringed on many Youku Tudou works. What worries Station A is that if Youku Tudou takes Station A to court, it will not only have to pay a huge amount of money, but will also face more serious problems-Station A, which has no online audio-visual broadcasting license, and no online text, has always lived in a gray area.

Later, the two sides reconciled. However, the price paid by Station A for this is that the compensation will be used as part of Youku Tudou's shareholding. Therefore, Youku Tudou did not really inject US$50 million into the account of Station A.

After SoftBank China withdrew from PPTV, showalk had a contact with SoftBank China. They expressed their continued interest in investing in videos, but at the same time they would also invest in non-Internet directions such as clean technology and medical care.

Therefore, investing in Station A is not surprising. However, the above-mentioned person from Youku Tudou said that this round of investment was not just invested this year, but an investment last year. The real purpose of the announcement at this time is to build momentum for the next round of financing. After Alibaba privatized Youku Tudou, external financing was the best way to supply blood to Station A.

Two "marriages" between SoftBank and video websites

Before Station A, SoftBank and China's video websites had two "marriages". Among them,"US$250 million +" invested in PPTV, setting a record for the industry. The other marriage occurred on Renren.com Investment 56, but it is not pleasing to the outside world.

Investing in PPTV is a big bet on the video field by Masayoshi Son after SoftBank Relay (Alibaba) and Social Media (Renren). This investment was taken out by former PPTV CEO Tao Chuang and said many times: 250 million yuan in 25 minutes. When telling Sun Zhengyi about PPT, the computer died after 6 minutes... These seemingly unintentional details sound very deliberate.

Tao Chuang must have forgotten one detail-when investing in Japan's Softbank, Softbank China started chasing PPTV since the Angel Wheel. Softbank China once talked about how to catch Yao Xin, a young fellow in graduate school, in the graduate dormitory of Huazhong University of Science and Technology, and how to manage post-investment-and bring PPTV from Wuhan to Shanghai.

As the LP of SoftBank China, SoftBank of Japan cannot and will not fail to pay attention to this company, nor will it fail to notice the global rise of the video industry. This industry is becoming another popular outlet for the Internet after information, social networking, games, and shopping. Unlike other industries, the video industry will not have immediate results, and its business model is far from mature and has been expanding and evolving.

Facts have proved that Japan's Softbank's US$250 million can be regarded as a big gamble that shocked the video industry. On December 8, 2010, the day Youku went public, it only received US$233 million from the New York Stock Exchange. Before going public, Youku raised 6 rounds of financing, raising a total of US$160 million.

In 2013, the video industry entered a period of integration. Before mobility found a successful profit model, the business model of the PC era did not help each family competing day find a way to cover costs, and losses continued. After the merger of Youku Tudou, iQiyi integrated PPS, and PPTV fell into the pockets of Suning and Hony. Although Alibaba, which has the same shareholder (Softbank of Japan), tried to win PPTV, after making net worth, it found that the company was not worth the price.

The story after that can be seen on Baidu on the Internet. When everything settled, showalk communicated with people from Tao Chuang and Softbank China respectively. The former was relieved, but the latter refused to mention more. Like a couple who have been injured by each other, they no longer recall the past after separation.

This vigorous "marriage" made us forget another simple "marriage". In October 2011, Renren acquired 56. com for US$80 million. At this time, Japan's Softbank was the largest shareholder of Renren. It was impossible for it to invest in 56 without the approval of the major shareholder.

After Renren invested, 56.com began to adjust its strategic direction and develop Short Video that are more suitable for the circulation of social networking sites. With the decline of Renren, 56 did not explode through Short Video. On the contrary, due to insufficient investment in copyright content, it gradually fell behind in the process of competing with other companies. In 2014, Renren, which was in the dark, sold 56 to Sohu Video for US$25 million.

Two "marriages" between SoftBank and traditional video websites have ended.

SoftBank's video complex

There are several venture capitalists in China who use the name of SoftBank. In addition to SoftBank of Japan, there are SoftBank Saifu and SoftBank China. Softbank Safre has changed its name to Safre Asia Fund in 2009. Softbank China Venture Capital Co., Ltd.(Softbank China) is currently a VC with Softbank as a LP, and has multiple US dollar and RMB funds under it.

It can be said that SoftBank has a complex in video investment. But for capital, the complex follows business logic.

First of all, video is a high-frequency application. From PCs to mobile Internet, video is the only need of users, and users 'demand for video continues unabated. Data provided by CNNIC shows that as of June 2015, the number of online video users reached 461 million, with a user utilization rate of 69.1%. The number of mobile online video users is 354 million, with a utilization rate of 59.7%. The growth of mobile video users is the main driving force for the growth of user size in the online video industry. In terms of user monthly usage time, online video ranks first with a monthly effective time share of 33.1%.

Second, video websites are IP production and distribution platforms. As the IP craze continues to flourish, the role of video websites continues to increase. Nowadays, IP is the keyword they talk about most in major cultural industries such as the game industry, film and television industry, animation, and literature. The domestic capital market also gives higher PE to A-share companies that export IP concepts. As an IP production platform and distribution platform, the value of video websites has become prominent. As a production platform, video websites can post content themes that are of interest to users based on user data, and at the extreme, they can follow Netflix. As a distribution platform, video websites are gaining momentum.

Third, the commercialization of video websites is still in the development stage and is far from mature. At this stage, the main profit models of the video industry still rely on four major components: advertising, copyright distribution, value-added services (services for members, on-demand, monthly viewing, live broadcast, etc.), and others (game intermodal transportation, hardware sales revenue, etc.). There is no doubt that advertising is still the absolute main force of each family at this stage, even accounting for 80 - 90% of it. Although video websites such as Youku Tudou and iQiyi have begun to try to integrate with e-commerce, such as "buying while watching", they are still only in the exploration stage and have not yet formed a scale.

Finally, Station A, which represents subcultural communities, is a new trend in consumption. In terms of Zhihu, there are many discussions about Station A and Station B (bilibili). They are basically recognized as subcultural communities and gathering places for the second dimension. This group has some commonalities such as loneliness, youth, missionary work, etc. For businesses, this is the main group for new consumption trends and the future.

Ma Huateng emphasized more than once that when making products, we must understand the preferences of the post-90s generation. Ma Yun mentioned several times that the future belongs to young people. Robin Li wants to link up with the post-90s generation. Regardless of whether they exaggerate or not, they must realize that the consumption behaviors of young people may not be the same as, or are very different from, the consumption views of the post-60s, 1970s, and 1980s. In other words, young people are an important target for them to recruit new people.

Based on these four points, it is reasonable for SoftBank to take frequent actions in the video field. However, various video websites are still expanding the boundaries of commercialization while breaking through the shackles of user loyalty. Only in this way can BAT and venture capital institutions better enter the market.

Editor: yvonne