Online gaming is one of the fastest-growing segments of the global technology sector and the pastime’s popularity has grown beyond the geek squad.

In the US, 67 percent of households have at least one gamer who devotes an average of eight hours per week to playing video games. With 49 percent of gamers between the ages of 18 to 49 years, gaming is no longer exclusively the domain of youth. In fact, the average gamer is now 34 years old. Although the majority of gamers are male, women comprise 40 percent of the market and their share is growing every year.

The global picture is much the same. In 2010, an estimated 20 million people devoted 17 billion man-hours to playing games on Xbox Live, Microsoft Corp’s (NSDQ: MSFT) online multiplayer gaming platform.

But Chinese gamers are among the most dedicated gamers in the world and their share of the market is growing rapidly. Last year, 120 million Chinese played online games and spent more than $5 billion on them. As the Internet becomes more widely available throughout China, both the number of players and the revenue they generate for the online gaming industry is expected to grow between 13 percent and 15 percent annually over the next several years.

Changyou.com (NSDQ: CYOU)—which was spun off in 2009 from Internet search powerhouse Sohu.com (NSDQ: SOHU)—has emerged as one of China’s most popular gaming franchises. Changyou trails competitors NetEase.com (NSDQ: NTES) and Shanda Games (NSDQ: GAME) in terms of market share.

However, Changyou’s martial arts-themed Tian Long Ba Bu (TLBB) is one of the hottest games in China, with about 1.2 million peak concurrent users, a measure of the number of people logged in at any one time.

The company built upon the success of TLBB with the launch of Duke of Mount Deer (DMD) in mid-2011. Duke of Mount Deer is also a martial arts-themed game, but its more advanced gameplay appeals to hardcore gamers. That shift in focus has allowed DMD to grow rapidly without cannibalizing Changyou’s TLBB user base.

Changyou is also further expanding its product line by offering web-based games that enable the company to reach gamers in other countries. For example, DDTank is a first-person shooter game that can be played via social-media platforms such as Facebook and has become increasingly popular in Vietnam and Indonesia.

The company’s success in capturing market share has translated into ballooning revenues, which shot up to USD166 million in the latest quarter from USD119 million a year earlier. Changyou’s earnings have grown commensurately, hitting USD2.76 million.

The firm has no outstanding debt and threw off $176 million in free cash flow last year. Additionally, Changyou boasts some of the most attractive margins in the industry, with a nearly 60 percent operating margin for the trailing twelve months compared to an industry average of 10.7 percent.

Changyou recently announced a shakeup in the ranks of its top management, bringing in a new chief information officer and promoting its former chief technology officer, Xiaojian Hong, to chief operating officer.

Innovation will always be the key to the Changyou’s success, because it must constantly update and develop new games to keep consumers engaged. However, it also appears that the company is beginning to focus on maximizing the value of its current offerings. Cash in on China’s gamers by purchasing Changyou under 40.