Most people should know by now that China is the world’s largest smartphone market. What is more interesting is how the Chinese have been using their smartphones as an all-in-one entertainment tool: with the long hours spent traveling to and fro work, many of them end up playing games and watching plenty of videos on their mobile devices.

According to government agency CNNIC, there are now 160 million mobile video viewers in China. Chinese app store Wandoujia says:

For a country on the move, leisure must be finagled into awkward pockets of time between overtime, long commutes and an ever-changing environment. Getting home for dinner and the 7 o’clock news each night is simply unrealistic.

With the rise in mobile video views, this is in turn propelling the rapid growth of online video. It is therefore not at all surprising that Chinese tech giants are seeking to make their mark within the online video space to capitalize on the opportunities that come as Chinese consumers effectively take their TVs to the subway.

Mobile video on the rise

Mobile video has already been showing dramatic growth. Wandoujia notes that video apps were by far the fastest-growing apps over the past year — average session length rose a staggering 259 percent to reach 31 minutes from 9 minutes.

Last month, the app store’s China App Index research report showed that Chinese are flocking to video apps due to the rise of phablets — smartphones with screens that measure five inches and above — as well as bigger storage capacity and longer battery lives on Android devices. This trend is also on the rise due to more availability of Wifi, considering that mobile data is still expensive.

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Wandoujia noted that in July, two video apps were among its top five fastest-growing apps. Video site Youku Tudou’s app clocked up 276,000 downloads in its store, up 163 percent from June. Another video download app Xunlei Kankan recorded a 126 percent rise in downloads from June to July.

Tech companies are eyeing the online video space

Wandoujia notes that in China, virtually any TV show is quickly and legally available to watch online, creating plenty of competition as companies strive to attract the eyeballs of consumers.

With all the rivalry, China’s online video space has been seeing a lot more consolidation. Last year, Youku and Tudou merged in a deal estimated at more than $1 billion and in May this year, Chinese search giant Baidu announced it would buy PPS Video for $370 million.

The next giant to zoom in on online video: Alibaba.

The company has been rumored for months to take a stake in PPTV, but news from Tencent Tech today cited sources as saying that Alibaba will be investing in Sina’s video unit instead, while PPTV may go to another interested party, electrical appliance retailer Suning.

Besides content, Chinese tech companies are also heading into the living room — and a UMeng/PPTV report on online video trends in the first half of the year showed why. Surprisingly, the PC is experiencing a decline in the market share of TV show views in China. On the other hand, Android devices and TVs are increasing their share.

Yesterday, Baidu announced its jump into the smart TV space, partnerting with electronics maker TCL Multimedia to sell TVs, which include content and branding from iQiyi, the Baidu-owned online video platform.

Its latest move follows Alibaba’s recent announcement slightly more than a month ago that it has developed a smart TV operating system and is working with a number of partners, including Cisco and Chinese manufacturers, to develop smart TVs, set-top boxes and services to run inside them.

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What is left now for Alibaba to do is beef up its portfolio with video content, and with all the supporting figures that online video is growing rapidly, it would make a lot of sense for it to jump on the ship sooner rather than later.

More to online video than just reproducing TV shows

As more companies crowd the online video space in China, original Web TV will likely be what helps a company come out tops, as they take action to attract enough loyal users to their platform.

Tudou already took a first step last year after its merger with Youku — it announced three new self-produced programs under its youth-focused Tudou Original brand, which was set to offer weekly installments of entertainment programming.

Youku Tudou also announced earlier this week that its second annual short film project — which invites directors to create original micro-movies on the platform — racked up 10 million views within the first month.

iQiyi has also recently spun another twist in the mobile video space — setting up a social network for people to chat about certain topics concerning the TV shows.

Indeed there is much potential for the mobile video ecosystem to grow even further and cement more loyalty from their users. iQiyi’s social network is just a start — integration with chat apps may make a logical next step, and maybe: even getting celebrities from these TV shows to sign on for chat sessions with their fans.

Engagement is key to retaining customers, and it will be no different for the online video space.

Headline image credit: Mark Ralston via AFP/Getty Images, other images via Getty Images