China tops the world in terms of number of internet users, and this number is growing in leaps and bounds. The time people spend online is also getting longer, especially with the rapidly-expanding online video industry.

More than 60 percent of China's approximately half billion internet users watch video content online. That's equivalent to about 325 million users in the second half of 2011. As the number of internet users grows, so will the online video market. In the fourth quarter of 2011, the value of the online video market in China reached almost 2 billion yuan ($300 million).

Shi Yu, CEO of Ku6.com said, "China's internet users are very mature and opinionated. Because we have a large population of users, there is a great need for a platform to socialize. Online videos allows netizens communicate in the most direct and comprehensive way. Right now, the lion's share of revenue made by online video companies is generated from advertising. That's because Chinese viewers are not yet used to paying for online content, and it's very difficult to change that."

The combined revenue of Chinese online video websites was 4.25 billion yuan ($672 million) for 2011 - the largest contributor to the industry's revenue. A company's revenue-generating power can be estimated by the number of pages viewed.

China's online video industry is a hybrid sector, which unites user-generated materials and licensed content such as TV shows and movies.

Shi said, "China has many online video companies, but in the next five years there will be a lot of consolidation. The total number of companies will go down, and they will combine to form a few big companies. Because investment costs are really high in this industry, it's unlikely for similar companies to co-exist. The big companies will focus on different market demands. For example, Youku and Tudou will spend a lot of money on buying the rights to movies and shows, and Ku6 will focus more on user generated content."

(CNTV.cn May 24, 2012)