It was already known that video sites based in China were subject to strict regulation by the Chinese government, but the possible fate of 56.com, one of the 3 big video sites dubbed the Chinese YouTube, shows them in action.
The big three, 56.com, Tudou and Youku, are now down to being a bit two, as the former has been offline since June 3rd. No statement has been made as of yet, but it’s entirely feasible that the site has been shut down by the Chinese authorities.
What’s The Story?
According to Silicon Alley Insider, a message on the site in Mandarin states that the site is undergoing an unspecified server upgrade, but executives and investors’ silence on the issue suggests there is more to it than that.
This is a huge deal, because not only does it show up the difficulties with running a video business in China, it means that the $30 million of venture capital funding that the site raised is now worthless.
Losing All Traffic
Sequoia Capital and Disney’s Steamboat Ventures, just two of the investors surely won’t be happy to see the business going down faster than Paris Hilton in a nightclub.
The site is losing all of its traffic, and the brand awareness it had built up since launching. The Alexa graph below shows how much effect this downtime has had on the site’s traffic.
No Video Licenses
56.com wasn’t one of the video sites handed a license by the Chinese government last month, but then neither were Tudou or Youku, so there is speculation that they could be next on the hit list.
The only sites granted these video licenses were state-owned television portals, or state-controlled websites. It seems the Chinese government’s attempts to control everything in their power runs to the Internet.
Beijing Olympics
With the Beijing Olympics from China just over a month away, all eyes will be on the country, and the level of control still exerted by the authorities over the rest of the population.
Investors are certainly taking a gamble in trying to tap in to the obvious potential in these Chinese YouTube-clones, and the question over whether they will ever make their money back may come down to government intervention rather than the ability to turn the sites in to viable businesses.
