While overall penetration still hovers at just 19 percent, the number of Chinese Internet users is rising 56 percent a year, and stood at 253 million in July 2008. Chinese consumers are increasingly turning to the internet as a key source of product information. Today, only 9 percent of consumers would check a blog or online forum before purchasing a consumer electronics item, compared to 25 percent compared to 25 percent in the US. However, if internet penetration approaches the levels of developed economies, blogs and online forums will become the second most important media channel by 2020.

It will not come as a great surprise that younger consumers are more likely to go online to collect information before deciding to purchase something, nor that they are most likely to do so for consumer electronics purchases (SEE CHART TWO). Given the predicted increase in the importance of the internet, however, companies need to be very aware of how they are being talked about.

Online forums in particular are notorious breeding grounds for rumors that can spread rapidly through “offline” word of mouth. These concerns should be heightened in an environment such as China, where some people are skeptical of official sources and rely on word of mouth for information. Word of mouth has more credibility than any form of advertising, which is true in many markets but especially so in China. Indeed, when asked what would lead someone to buy a new moisturizer, almost two-thirds said the recommendation of friends and family was vital, compared with just 38 percent in the US and the UK. By contrast, free samples would sway two-thirds of British and US consumers, but only one-fifth of those in China.

Many Western companies are becoming more familiar with dealing with user-generated media, but they can still fall short in this unfamiliar environment. One company that got it right is Chinese soft drink manufacturer, Wang Laoji 王老吉. After the Sichuan earthquake, Wang Laoji donated 100 million renminbi during a charity telethon – substantially more than most other large companies gave initially.