BEIJING: Online video adspend is rising in China, but making a profit still remains a challenge for the major players in the industry.

According to figures from Analysys International, the research firm, online video ad revenues hit RMB1.69bn in the final three months of 2011, up from RMB1.48bn quarter on quarter.

This total had reached RMB1bn in Q2 2011 and RMB660m in Q1, demonstrating that sales levels are increasing at a fast pace, taking the market to an annual value of RMB4.83bn.

While demand for content among web users is booming, the study suggested certain issues were facing the sector, especially copyright disputes, which have forced some providers to remove significant amounts of material.

This may threaten advertising revenues and viewer numbers in the short term, but Analysys International predicted "sustainable" growth would result from broader favourable shifts, especially the expansion of the internet user base.

Youku was the leading video site in Q4 2011 when it came to advertising sales, with a market share of 21.8%. Tudou secured 13.7% on this metric, ahead of Sohu TV on 13.3%.

A "second tier" of platforms is also starting to emerge, led by iQiyi on 6.9%, LeTV on 5.8% and iFeng on 5.2%. Elsewhere, Funshion logged 3.7% and Sina Video took 2.9%.

Tudou recently reported that revenues climbed by 79% in 2011 on an annual basis, to RMB512m. Within this, advertising supplied RMB444m and its mobile video service generated RMB58m.

At present, Tudou receives 300m unique visitors a month, collectively playing back 5.2m pieces of content. However, the company made a net loss of RMB551.2m last year as it invested in improving infrastructure.

Data from comScore, the research firm, also showed that 41% of videos – some 180m items – played back on Sina Weibo, the microblog, were from Tudou in December 2011.

"We are focused on enhancing our user experience through further integrating our video platform with China's leading social networking platforms," Gary Wang, Tudou's CEO, said.

"As social media becomes more integrated and media consumption becomes more mobile, Tudou is well positioned to benefit directly from these major macro shifts."

Data sourced from Analysys International; additional content by Warc staff