Common use of Business Overview Clause in Contracts

Business Overview. Tudou is a leading Internet video company in China. ▇▇▇▇▇ believes that the "Tudou" brand is one of the most recognized Internet brands in China. The ▇▇▇▇▇.▇▇▇ website was the first UGC and video sharing site launched in China based on the Gartner Report. Tudou provides a robust online platform for Chinese Internet users to upload, watch and share videos via the Internet. By leveraging its recognizable brand and its position as a leading Internet video company in China, ▇▇▇▇▇ has established a large and highly engaged user community. Tudou's registered users increased from approximately 54.4 million as of December 31, 2009 to approximately 78.2 million as of December 31, 2010 and approximately 101.9 million as of December 31, 2011. ▇▇▇▇▇'s average number of new video clips uploaded daily increased from approximately 28,700 in 2009 to approximately 40,000 in 2010 and approximately 57,580 in 2011. In addition, the number of monthly unique visitors to ▇▇▇▇▇.▇▇▇ increased from approximately 137 million in December 2009 to approximately 182 million in December 2010, and to approximately 227 million in December 2011, according to iResearch. In December 2011, the number of monthly video views nearly doubled to 5.2 billion from 2.6 billion in December 2010. Tudou provides an on-demand and interactive viewing experience where its users can find content they want to view, share content they create and connect with other users on its platform. Tudou offers a comprehensive selection of entertaining content including UGC, premium licensed content and content developed in-house. Tudou's extensive content library is designed to meet its users' diverse viewing needs, including entertainment, animation, finance and music. The volume and quality of Tudou's content, combined with its enjoyable user experience, have allowed ▇▇▇▇▇ to establish a large user base, consisting primarily of young, urban, affluent and educated viewers that are particularly attractive to advertisers. Tudou has focused on developing its online platform to provide what ▇▇▇▇▇ believes is the best user experience in the online video industry in China. Tudou has developed a user friendly and interactive interface that ▇▇▇▇▇ believes provides its users with a superior viewing experience. Tudou's website allows its users to watch, upload, rate, comment on and recommend videos, creating an engaging and interactive experience. In addition, Tudou has created rich community features to enhance its users' experience. Tudou encourages the creativity of its user community through signature industry events such as the Tudou Video Festival, through talent development initiatives and monetary incentives to producers of its most viewed UGCs. To ensure an enjoyable user experience, Tudou has built a robust technology platform with access to over 4,000 servers across China, which focuses on the delivery of online video content with an emphasis on stability, scalability and flexibility. Online video and online advertising have grown rapidly in China in recent years as a result of positive macroeconomic trends, increasing Internet penetration rates and the growing acceptance of the Internet as a critical channel for advertisers' marketing strategies. In addition, users are seeking alternatives to traditional television to have more control over their media viewing experience. Content portability is also becoming increasingly important as users want to have the option to access video and other content on their mobile phones and other Internet-enabled devices. ▇▇▇▇▇ believes it is well positioned to capitalize on these key industry trends. Tudou generates revenues primarily by delivering online advertising services. Tudou provides advertising services primarily through its ▇▇▇▇▇.▇▇▇ website in various formats, including pre-roll or post-roll video advertisements, in-roll logos, background advertisements, banners, buttons, links and streaming advertisements. In addition, Tudou provides innovative online advertising services, including event sponsorships, interactive advertising and opportunities to purchase advertising embedded in its content developed in-house. Tudou also began generating revenues in January 2010 from its mobile video services that it provides primarily through a channel on China Mobile's wireless video platform, which had an aggregate of approximately 15.8 million users with a total of approximately 27.7 million video views in 2010 and an aggregate of approximately 42.7 million users with a total of approximately 85.9 million video views in 2011. Through its agreement with China Mobile, Tudou selects and provides videos based on its assessment of mobile user preferences. Users pay a monthly subscription fee to China Mobile for access to ▇▇▇▇▇'s video channel or pay on a per-clip basis, and ▇▇▇▇▇ shares the fees for these services with China Mobile. In addition, Tudou began providing its mobile video services in April 2011 through two video channels on China Unicom's wireless video platform and in January 2011 through China Telecom's NETiTV platform. Since Tudou launched its online video platform in April 2005, its business has grown substantially. As is customary in the advertising industry in China, Tudou typically enters into advertising contracts with third-party advertising agencies. Tudou pays agency fees to third-party advertising agencies that purchase its advertising services and recognize revenues net of these agency fees. Tudou's net revenues are net of sales taxes. Tudou's net revenues increased from RMB89.1 million in 2009 to RMB286.3 million in 2010 and to RMB512.2 million (US$81.4 million) in 2011, representing a compound annual growth rate, or CAGR, of 79.1% over the three-year period. Tudou's net loss was RMB144.8 million, RMB347.4 million and RMB 511.2 million (US$81.2 million) in 2009, 2010 and 2011, respectively. Its adjusted net loss, a non-GAAP financial measure, which excludes non-cash items including share-based compensation expenses, beneficial conversion charges on convertible loans and fair value changes in warrant liabilities from Tudou's net loss, was RMB133.3 million, RMB107.2 million and RMB292.4 million (US$46.5 million) in 2009, 2010 and 2011, respectively. For a reconciliation of ▇▇▇▇▇'s net loss to ▇▇▇▇▇'s adjusted net loss, see footnote 2 on page 45 of this joint proxy statement/prospectus.