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Chinese Social Networking Site Successfully Monetizes Live Video Chat

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June 12, 2012

Chinese Social Networking Site Successfully Monetizes Live Video Chat

By David Delony, Contributing Writer

For many people in the West, social networking means Twitter (News - Alert), Facebook or possibly Google+. Although China has a population of 1.35 billion people, the country's technology tends to get overlooked in Western media. The country has launched some innovative startups, including, a video chat service.

While Airtime, a U.S.-based service, launched last week to great fanfare, has been doing the same thing since 2008, and is doing something that almost no other social networking service has been able to do so far: allow its users to make money. users flock to various chat rooms on the site covering a variety of topics. These include courses on PhotoShop and English instruction, as well as live music concerts.

The most popular chat rooms are karaoke, where users can belt out tunes for up to 100,000 other people at a time. The karaoke rooms are so popular that they're still full of thousands of users at 4 a.m. China time.

Users who attract a following can receive virtual gifts and redeem for very real cash. Talented singers often earn $20,000 per month by cashing in virtual roses from their fans. One young man who started teaching Photoshop fresh out of college earns 1.2 million yuan, or $188,000 per month, simply by teaching the popular image editing program to other users.

Most of YY's revenue comes from these virtual gifts. Only 20 percent comes from advertising.The ability for singers to make money online could pique the interest of the music industry in the West, which has been struggling due to the combination of new technology and rampant piracy.

One of the service's biggest advantages according to founder and CEO David Li (News - Alert) is the ability for users to form groups based on shared interests. “In real life society, people live in groups: family, school, colleagues,” Li told Forbes. “We’re very strong on interest-based groups, whether it’s music, farming, education or medicine.”

The Guangzhou-based service began as a spin-off of, a Chinese gaming site founded in 2005. In 2008, Duowan launched YY as a way for gamers to coordinate their gaming sessions with other players by voice that. The service quickly took on a life of its own. YY has over 310 million users, 60 million of which are active monthly.

 The company has raised $95 million in venture capital, much of which has been unused. YY already has $100 million in cash on hand. The company is rumored to be making an IPO, but Li said that the company is in no hurry, since it's already profitable, though one is planned for the future.

Although YY has not yet launched in the U.S., Li told Forbes he has plans to expand across the Pacific in the future. “YY is one of the few China products, we believe, that has a chance to make it as a global product,” Li said.

Edited by Amanda Ciccatelli

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