YOKU Youku Tudou Inc. American Depositary Shares, Each Representing 18 Class A Ordinary Shares.

BEIJING, Aug. 6, 2012 /PRNewswire-Asia/ -- Youku Inc. (NYSE: YOKU), China's leading Internet television company ("Youku" or the "Company"), today announced its unaudited financial results for the second quarter 2012.

Second Quarter Highlights[1]

• Net revenues were RMB387.4 million (US$61.0 million), a 96% increase from the corresponding period in 2011.
• Gross profit was RMB76.9 million (US$12.1 million), a 45% increase from the corresponding period in 2011. Non-GAAP gross profit, which is herein defined as gross profit excluding share-based compensation expenses, was RMB79.5 million (US$12.5 million) in the second quarter of 2012, a 48% increase from the corresponding period in 2011.
• Net loss was RMB62.8 million (US$9.9 million), as compared to a net loss of RMB28.1 million (US$4.4 million) for the same period in 2011. Non-GAAP net loss, which is herein defined as net loss excluding share-based compensation expenses and business combination related expenses, was RMB29.3 million (US$4.6 million) in the second quarter of 2012, as compared to the non-GAAP net loss of RMB20.8 million (US$3.3 million) in the corresponding period in 2011. This increase was primarily due to content price increase during 2011, which we amortize using accelerated method, broadening of our content portfolio, increase of number of employees as a result to rapid growth of our business and our continuous and expanded investment in product development in mobile, search, social and paid services.
• Basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for the second quarter of 2012 amounted to RMB0.54 (US$0.09) and RMB0.54 (US$0.09), respectively.
• Cash, cash equivalents and short-term investments totaled RMB3.5 billion (US$546.6 million) as of June 30, 2012.
• Acquisition of property and equipment for the second quarter of 2012 was RMB22.6 million (US$3.6 million), as compared to RMB18.9 million (US$3.0 million) for the same period in 2011.
• Acquisition of intangible assets for the second quarter of 2012 was RMB51.6 million (US$8.1 million), as compared to RMB144.2 million (US$22.7 million) for the same period in 2011.

"Despite challenging macroeconomic conditions, we recorded another quarter of strong revenue growth." said Victor Koo, Chairman and Chief Executive Officer of Youku. "We are pleased to see the continued rationalization of the online video sector and improving content and bandwidth cost structure. The planned integration with Tudou is proceeding smoothly and we are on track to realize the potential of the combination of No.1 and No.2 online video platforms in China."

Dele Liu, President of Youku, commented, "We are further cementing our leadership positions in video and continue to benefit in the structural budget shift from traditional media to online video by offering high ROI marketing solutions. We will continue to drive our edge in user experience, content management and monetization to achieve sustainable and profitable growth."

Second Quarter 2012 Results

Net revenues were RMB387.4 million (US$61.0 million) in the second quarter of 2012, representing a 96% increase from the corresponding period in 2011 and meeting the revenue guidance previously announced by the Company. The growth was primarily attributable to the increased average spending per advertiser from RMB0.9 million to RMB1.7 million and increased number of advertisers from 260 to 283, representing an increase of 89% and 9%, respectively, from the corresponding period in 2011.

Bandwidth costs as a component of cost of revenues were RMB111.9 million (US$17.6 million) in the second quarter of 2012, representing 29% of net revenues, compared to 33% in the corresponding period in 2011.

Content costs as a component of cost of revenues were RMB144.0 million (US$22.7 million) in the second quarter of 2012, representing 37% of net revenues, compared to 25% in the corresponding period in 2011. The increase was primarily due to content price increase during 2011, which we amortize using accelerated method, and broadening of our content portfolio.

Gross profit was RMB76.9 million (US$12.1 million), an increase of 45% compared to RMB52.9 million (US$8.3 million) for the same period in 2011. Non-GAAP gross profit was RMB79.5 million (US$12.5 million) in the second quarter of 2012, an increase of 48% compared to RMB53.6 million (US$8.4 million) in the corresponding period in 2011 due to operating leverage.

Operating expenses were RMB158.3 million (US$24.9 million) in the second quarter of 2012, as compared to RMB80.7 million (US$12.7 million) in the corresponding period in 2011. Non-GAAP operating expenses, which is herein defined as operating expenses excluding share-based compensation expenses and business combination related expenses, were RMB127.4 million (US$20.1 million) in the second quarter of 2012, an increase of 72% compared to RMB74.1 million (US$11.7 million) in the corresponding period in 2011. The increase was primarily due to increases in sales and marketing expenses, product development expenses and general and administrative expenses as a result of the substantial growth of our business. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB80.3 million (US$12.6 million) in the second quarter of 2012, as compared to RMB52.7 million (US$8.3 million) in the corresponding period in 2011.  Non-GAAP sales and marketing expenses, which is herein defined as sales and marketing expenses excluding share-based compensation expenses, were RMB74.3 million (US$11.7 million) in the second quarter of 2012, an increase of 50% compared to RMB49.7 million (US$7.8 million) in the corresponding period in 2011. This increase was primarily due to increases in marketing expenses and commission expenses paid to our sales force in line with our revenue growth.

Product development expenses were RMB35.0 million (US$5.5 million) in the second quarter of 2012, as compared to RMB14.2 million (US$2.2 million) in the corresponding period in 2011. Non-GAAP product development expenses, which is herein defined as product development expenses excluding share-based compensation expenses, were RMB28.6 million (US$4.5 million) in the second quarter of 2012, an increase of 130% compared to RMB12.5 million (US$2.0 million) in the corresponding period in 2011. This increase was primarily due to an increase in salaries and benefits for our product development personnel in mobile, search, social and paid-services.

General and administrative expenses were RMB43.0 million (US$6.8 million) in the second quarter of 2012, as compared to RMB13.8 million (US$2.2 million) in the corresponding period in 2011. Non-GAAP general and administrative expenses, which is herein defined as general and administrative expenses excluding share-based compensation expenses and business combination related expenses, were RMB24.5 million (US$3.9 million) in the second quarter of 2012, representing an increase of 104% compared to RMB12.0 million (US$1.9 million) in the corresponding period in 2011. This increase was primarily due to an increase in professional fees, personnel-related expenses and tax charges.

Net loss was RMB62.8 million (US$9.9 million), as compared to a net loss of RMB28.1 million (US$4.4 million) for the same period in 2011. Non-GAAP net loss, which is herein defined as net loss excluding share-based compensation expenses and business combination related expenses, was RMB29.3 million (US$4.6 million) in the second quarter of 2012, as compared to the non-GAAP net loss of RMB20.8 million (US$3.3 million) in the corresponding period in 2011. This increase was primarily due to content price increase during 2011, which we amortize using accelerated method, broadening of our content portfolio, increase of number of employees as a result to rapid growth of our business and our continuous and expanded investment in product development in mobile, search, social and paid services.

Non-GAAP EBITDA loss, which is herein defined as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, business combination related expenses and other non-operating items, was RMB33.1 million (US$5.2 million) in the second quarter of 2012, as compared to RMB10.1 million (US$1.6 million) in the corresponding period in 2011. This increase was primarily due to increase in operating expenses.

Business Outlook

For the third quarter of 2012, the Company expects year-on-year growth of 70% to 80% in net revenues. This forecast reflects the Company's current and preliminary view, which is subject to change.

Recent Business Developments

Youku to Hold 2012 Annual General Meeting on August 20, 2012

On July 18, the Company announced that it will hold its 2012 annual general meeting of shareholders at Suite 3206, The Centrium, 60 Wyndham Street, Central, Hong Kong on Monday, August 20, 2012, beginning at 10:00 am (Hong Kong time). Only holders of Youku Class A shares and Youku Class B shares of record on the close of business on August 13, 2012 (Hong Kong time) (the "Youku share record date") or their proxy holders are entitled to vote at the annual general meeting or any adjournment or postponements thereof. Each Youku Class A shareholder has one vote for each Youku Class A share and each Youku Class B shareholder has three votes for each Youku Class B share held as of the close of business on the Youku share record date. Holders of record of the Company's American Depositary Shares ("ADSs") at the close of business on July 20, 2012 (New York City time) who wish to vote the Class A ordinary shares of the Company represented by the ADSs must act through Citibank, N.A., the depositary of the Company's ADS program.

Youku has filed a registration statement on Form F-4 (the "Form F-4") with the Securities and Exchange Commission (the "SEC"), which became effective at 4:30 p.m., July 17, 2012 (New York City Time). The Form F-4 includes a joint proxy statement/prospectus and was filed with the SEC in connection with the previously announced merger agreement (the "Merger Agreement"), dated March 11, 2012, by and among the Company, Tudou Holdings Limited ("Tudou") and Two Merger Sub Inc. ("Merger Sub") and the merger contemplated thereunder (the "Merger").  Pursuant to the Merger Agreement and the plan of merger attached as Annex A to the Merger Agreement, Tudou will merge with and into Merger Sub, with Tudou continuing as the surviving entity and as a wholly owned subsidiary of Youku and the combined entity will be named "Youku Tudou Inc."

The notice of the annual general meeting included in the joint proxy statement/prospectus sets forth the resolutions to be submitted to shareholders of the Company for approval and other relevant information regarding the annual general meeting, the Merger and the Merger Agreement and how to vote ordinary shares or direct Citibank, N.A. to vote the Class A ordinary shares represented by the ADSs at the annual general meeting.

Conference Call Information

Youku's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 6, 2012 (8:00 p.m. Beijing/Hong Kong Time on August 6, 2012).

Interested parties may participate in the conference call by dialing one of the following numbers below and entering passcode Youku# (i.e., 96858#) starting 10-15 minutes prior to the beginning of the call.

US Toll Free Dial In: 1-866-519-4004

International Dial In: 1-718-354-1231

Mainland China Toll Free Dial In: 86-4006208038 / 86-8008190121

Hong Kong Dial In: 852-2475-0994

A replay of the call will be available by dialing  1-866-214-5335 (international 1-718-354-1232) , and entering passcode 16226822#. The replay will be available through August 13, 2012.

This call will be webcast live and the replay will be available for 12 months. Both will be available on the Investor Relations section of Youku's corporate website at http://ir.youku.com.

About Youku

Youku Inc. is China's leading Internet television company. Our Internet television platform enables users to search, view and share high-quality video content quickly and easily across multiple devices. Youku, which stands for "what's best and what's cool" in Chinese, is the most recognized online video brand in China.  Youku's American depositary shares, each representing 18 of our Class A ordinary shares, are traded on NYSE under the symbol "YOKU."

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Youku's strategic and operational plans, contain forward-looking statements. Youku may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Youku's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the online video market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with key advertisers and customers; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Youku does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Youku's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Youku uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP sales and marketing expense, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP EBITDA loss.  We define non-GAAP gross profit or loss, non-GAAP sales and marketing expense and non-GAAP product development expenses as the respective nearest comparable GAAP financial measure to exclude share-based compensation expenses. We define non-GAAP operating expenses  as operating expenses excluding share-based compensation expenses and business combination related expenses. We define non-GAAP general and administrative expenses as general and administrative expenses excluding share-based compensation expenses and business combination related expenses. We define non-GAAP loss from operations as loss from operations excluding share-based compensation expenses and business combination related expenses. We define non-GAAP net loss as net loss excluding share-based compensation expenses and business combination related expenses. We define non-GAAP EBITDA loss as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, business combination related expenses and other non-operating items. We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Youku's business for the foreseeable future.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP financial measures" at the end of this release.

For more information, please contact:

Investor Relations:

Ryan Cheung

Corporate Finance Director

Youku Inc.

Tel: (+8610) 5885-1881 x6090

Email: ryan.cheung@youku.com