The summit last week between the United States and China highlighted not just the differences but also the economic similarities between the world’s two superpowers — and nowhere is the overlap more pronounced than in the ascendancy of the Internet.

Case in point: Youku Tudou Inc (YOKU), the dominant video-sharing website in China. With a market cap of $4.4 billion, Youku Tudou operates as an Internet television company in China, providing a web-based platform that enables users to search, view and share video content across various devices.

Often referred to as China’s version of YouTube, Youku Tudou more precisely mirrors a melding of Netflix (NFLX) and Hulu, a joint partnership among major television networks. Like YouTube, Youku Tudou generates most of its revenue from advertising, but like Hulu and Netflix, it also streams movies and TV shows.

On Nov. 11, China’s privately owned Xiaomi, one of the world’s largest smartphone makers, announced that it would acquire a stake in Youku Tudou, which would create an integrated and formidable combination of smartphone maker and content provider.

Youku Tudou went public in 2010 and has benefited from its early entry into the field. In 2012, Youku paid $1 billion to acquire its chief rival Tudou, at the time No. 2 in the streaming video market. The merged entity is now by far the dominant company in web-based video, controlling roughly a third of the market.

On-demand digital movies and TV are the wave of the future, supplanting conventional modes of entertainment and news. Younger audiences are abandoning the cable and TV networks, shunning so-called “appointment viewing” and even traditional Hollywood movies for streaming content that’s available where they want it, when they want it, on any device. Media is increasingly fragmented, niche-oriented and mobile. Content providers that don’t adapt are doomed to become media dinosaurs.

This trend is especially salient in developing markets, where newly affluent consumers are early adopters of the latest Internet innovations. The burgeoning middle class in China, combined with massive government initiatives to build Internet infrastructure in remote areas, is translating into enormous room for growth for Youku Tudou.

To be sure, Baidu (BIDU), the world’s biggest Chinese language online search company, provides a digital streaming service called iQiyi that directly competes with Youku Tudou. But since its 2010 merger, Youku Tudou faces no serious competitive threat.

Growing Pains

On Nov. 13, Youku Tudou reported third-quarter 2014 revenue of RMB1.11 billion ($180.3 million), an increase of 29% from the previous year. However, it also posted a net loss of RMB181.4 million ($29.6 million), which was a 17% drop from a year ago.

Youku Tudou’s loss is indicative of ephemeral growing pains that are typical for a relatively young and small Internet company. The company’s strategy for 2015 and beyond remains perfectly tailored for the dynamics of Internet companies in general and the Chinese market in particular: expand the advertiser base; increase revenue per advertiser from existing clients; and penetrate smaller, untapped cities throughout China’s hinterlands, where government investment and spreading prosperity is generating new ranks of tech-savvy consumers.

If you’re looking for a way to profit from China’s Internet revolution, Youku Tudou stock is uniquely positioned to leverage the Middle Kingdom’s growing infatuation with Western-style entertainment.

As of this writing, John Persinos did not hold a position in any of the aforementioned securities.