The second is reform beneficiaries, who are between 26 and 35. They have easily adapted to the opportunities of the Internet and highly value the diversity it provides.

The last is frugal middle-agers. They are between 36 and 50 and are less comfortable with digital services. They often stick to using simple voice-only services, text messages and news search services.

Last year, digital goods and services generated an estimated 580 billion yuan in revenues in China. By 2015, revenues are expected to exceed 1.8 trillion yuan. Although the share of content and advertisement revenue is still slow, BCG expected it to grow significantly in the future.

While foreign Internet giants, such as Google and Yahoo!, have long struggled to gain market share in China, local players have adopted creative solutions to produce profits and stimulate share price growth.

China's digital market has produced several leading local players, such as Tencent and Sina, that have been able to beat their global competitors by investing aggressively, customizing their services to suit Chinese tastes, and figuring out which promising business models to pursue.

But according to the authors of the report, the implications go far beyond Internet companies. Eventually, every consumer company in China will have to find new ways to reconnect to consumers, which spend their time and form their opinions online.

BCG identified eight activities and principles that companies had to implement to deal with the challenges so that they could fully exploit the opportunities presented by the new digital generation.

They included being visible in the places where your customers spend time, actively using the new influencers that surround your customers, using the Internet to advertise your brand and build trust, building the online sales channel as part of a multi-channel model, reaching out to consumers in lower-tier cities, leveraging the collective power of the network of digital consumers, customizing products and services for China's online consumers, communities, and channels, as well as building organizational capabilities to address the digital space.

Clearly, success is not guaranteed. "Each company needs to define its own objectives and road map, depending on its industry and starting point," said David Michael, chairman of BCG Greater China, "Companies should spend time segmenting their customers defining priorities, and establishing a systematic approach," he added.

(China Daily July 18, 2008)