Shareholders in China’s two largest online video firms, Youku and Tudou, have cleared the plan to merge and create the biggest online video firm in China. Youku acquire rival Tudou via a stock swap deal valued at $1 billion.

Rising costs of acquiring and streaming video content have seen losses increase at both the companies. The merger is likely to cut costs as well as boost their market share. According to some estimates, the tie-up may help the firms save between $50 million to $60 million over the next 18 months.

The combined entity is expected to have a market share of more than 35 per cent giving it more bargaining power with potential advertisers.

Earlier this month, Youku reported a net loss of 62.8 million yuan ($9.9m) for the April to June period, compared with a loss of 28.1 million yuan during the same period last year. Meanwhile, Tudou said that its net loss for widened to 154.7 million yuan during the second quarter, from 78.9 million yuan during the same period last year.

The two firms have been fierce rivals for years and have even taken each other to court.

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