Youku Inc. (YOKU), China’s largest online video provider, plans to expand sponsorships and product placements in the content it produces, Chief Executive Officer Victor Koo said.

Youku, based in Beijing, has been letting companies pay to place products in its original programming for at least two years, Koo said in an interview after a speech at the Fortune Brainstorm Tech conference in Aspen, Colorado. Those types of agreements now represent much less revenue than standard advertisements, he said.

“Advertisers love them,” Koo said. “Major product placements make the advertisers a star.”

Last night, the U.S. Securities and Exchange Commission approved Youku’s bid to acquire Tudou Holdings Ltd. (TUDO), which also operates a Chinese video website, Koo said during an onstage interview. The approval puts Youku closer to owning more than half of the market share for online video in China, Koo said.

Tudou will keep its own name and branding after the acquisition, he said.

The merger will let Youku reduce the fees it pays to video producers because it will eliminate costly bidding wars for content, Koo told Bloomberg News. Youku is working with movie studios, including those operated by Time Warner Inc. (TWX) and News Corp. (NWSA), on ways to combat piracy and perhaps allow paid video to flourish one day in China, he said.

Youku built a business unit for producing original video programming a few years ago, and Koo compared it to Time Warner’s HBO channel.

“In China, the history of TV, as well as user-generated video, is very, very short,” Koo said. He said Youku could play a major role in shaping that experience for Chinese users.

To contact the reporter on this story: Mark Milian in Aspen, Colorado, at mmilian@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net