Why YouTube Is MIA in China

The Google-owned video-sharing service is conspicuous by its absence in the mainland, and Chinese often have trouble seeing the U.S. site

by Bruce Einhorn

By any reckoning, China should be an important new territory for YouTube. The country is the world's second-largest Internet market, after the U.S., it's rapidly beefing up its broadband infrastructure, and it's home to millions of Net-savvy youths who love posting videos online. The Backdorm Boys, a Chinese-student singing duo, was one of the first breakout hits from online video, with their lip-synching clips recorded in their dormitory room winning fans worldwide. Moreover, YouTube owner Google (GOOG) is making a big push in the mainland, poaching top Microsoft (MSFT) executive Kai-Fu Lee two years ago to spearhead the search engine's drive into China. In October, YouTube made its first moves in Greater China, launching Chinese versions in Hong Kong and Taiwan in October.

But in China, YouTube is conspicuous by its official absence. It hasn't launched a mainland service yet and Chinese who log onto the company's U.S. site from China often complain that the site is inaccessible. One explanation could be bandwidth shortages. Another cause for the blackouts could be government censorship, since YouTube is not based in China and therefore doesn't follow the Beijing government's rules prohibiting content that the government deems too sexually or politically charged.

That censorship regime means YouTube is unlikely to make any fast move into China, says Rebecca MacKinnon, an assistant professor at the Journalism & Media Studies Center at the University of Hong Kong. Google took a beating from critics in the West after it launched a Chinese search engine and started censoring search results, and rival Yahoo! (YHOO) CEO Jerry Yang last month publicly apologized for Yahoo having provided the Chinese government with e-mail information leading to the imprisonment of a Chinese dissident. Google is not offering e-mail or blogging services in China, says MacKinnon, who often blogs about Internet censorship in the mainland. "It has to do with censorship issues that they don't want to be involved with, because of the criticism they would receive," she says.

A Big Boost for Local Services

YouTube executives would not comment when approached by BusinessWeek via a Google spokesman.

One result of Beijing's censorship policy: It's providing a big boost to local video-sharing services that otherwise might not have much chance of competing against a giant like YouTube. Video "is certainly an area that can be sensitive," says Victor Koo, the CEO and founder of Youku.com, a Beijing startup. With YouTube out of the picture, "that does give the [local] players in China some time."

Koo, 41, is taking advantage of that opportunity. On Nov. 26, the Stanford MBA and former chief operating officer of Chinese portal Sohu.com (SOHU) announced that his video-sharing company had received $25 million in funding from four venture-capital funds, including new investor Brookside Capital, an affiliate of Bain Capital. Existing investors Sutter Hill Ventures, Farallon Capital Management, and Shanghai-based Chengwei Ventures, which previously funded a $15 million round, also took part in the latest fund raising.