A few weeks ago, news broke out about the number 1 online video site, Youku, buying out the number 2 online video site, Tudou. Last December, this acquisition would have been dismissed as ridiculous given the bitter fighting between Youku and Tudou in a tit for tat battle over content rights.  But as China’s tech sector grows at hyper speed and companies with deep pockets enter the same space like online video or group-buying, the natural cycle of fierce competition then consolidation is inevitable.

Now, as reported by Bloomberg, Tencent’s v.qq.com, tv.Sohu and Baidu’s iQiyi have announced their alliance, only after a month after the consolidation of the two biggest players, Youku and Tudou.  It almost feels like a modern version of China’s Three Kingdoms warring period.  Originally a slew of online video sites emerged, so many that it was hard to remember all the options. The only real differentiator was which could deliver the best quality content the fastest. After a year of close combat, many of the weaker players have died, leaving the remaining players to join forces and continue the battle to become the supreme winner. Now it will clearly be Youku + Tudou against v.qq.com+tv.sohu.com+iqiyi.com.

Such consolidation in the market mirrors what is happening in China’s group buying space. At one point there was an absurd amount of group-buying sites, in the 6,000+ range.  But now those numbers have rightfully dwindled to a few hundred and will inevitably result in the top five.  Reports of Lashou’s downsizing follows, 360Buy’s outsourcing of its  group buying business and 55Tuan’s takeover of Ganji’s group buying business.

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Jason Lim

Jason is an Australian born Chinese living in Beijing, specializing in entrepreneurship, start-ups and the investment eco-system in China, especially in the tech and social area.