By Vincent Chang & Jay Ha

The word that best captures the vibrancy of China's digital and e-commerce landscape in 2016 is wang hong. The literal translation is "web red" and it refers to "red hot" online celebrities in the lucrative field of mobile entertainment. Although the west has long had its fair share of social influencers whose power is partially driven by the pervasiveness of the internet, China's wang hong economy only took off this year. It has had remarkable growth. There are three reasons for this.

Mobile economy

The rapid growth of China's mobile economy has created fertile ground for the rise of a new type of celebrity. While many developed countries have experienced a gradual evolution from desktop computers to laptops then smartphones, over the last 10 years users in large sections of China went directly to using mobile devices. It is second nature to them to shop and watch movies on their smart phones.

Chinese consumers' propensity to adapt is an important factor when it comes to mobile technological advancement, especially since many new technologies developed in the west failed simply because of main-stream consumers' unwillingness to embrace something new. The Chinese, on the other hand, appear to always be on the look-out for the latest gadget that will get them online.

China has the world's largest mobile economy with 710 million internet users and 656 million mobile users. The mobile penetration rate is 92.4%. WeChat alone has over 700 million users, and that is expected to reach between 800 and 850 million by the end of 2017. Videos are popular on WeChat, where they are often posted and shared. Content generated by top tier wang hongs gets millions of views. Good content generates traffic, and so it is increasingly becoming an advertisement tool. It provides entertainment and drives e-commerce. So from a marketing perspective, good content is a goldmine. Most wang hongs have sales channels on Taobao or WeChat, where they use live shows to attract shoppers to their online stores. They have unfettered access to an audience for whom paying online is the norm. China's younger generation is less likely to use cash or credit cards and more likely to use Alibaba's Alipay (which has more than 350 million users) or WeChat's Tenpay (200 million users). And they do all this from their smartphones.

Invitation-only environment

Some of the hottest apps in China are very similar to others found in the west. For example, WeChat's "Moments" is similar to posting on your Facebook page. However, unlike Facebook, your full list of Moments is only visible to your friends (the first 10 are public). Comments on your posts can only be seen by people who know each other, and there is no way you can interact with your friend's friend unless invited. In general Chinese platforms, including social media, video portals and messenger programs, tend to provide users with a fair bit of privacy when it comes to accessing friendship circles.

This invitation-only environment creates more room for wang hongs. Unlike celebrity endorsements in social media of the west, wang hongs create a smaller scale but much more sophisticated fan base through which they can communicate with their adoring public, promote themselves, advertise and sell products on the internet. Unlike bloggers or YouTube stars in the west (some of whom are seen as quasi-journalists or semi-professionals), wang hongs are more like a gauge for what will be the hot new trend. They try the newest and hottest products and recommend to their fans the ones they give a passing grade. These recommendations are important to Chinese consumers because many of them need advice before purchasing products.

The power of wang hongs' recommendations is also closely related to the Chinese consumers' understandable mistrust of products sold online. The stories of quality control issues, food safety concerns and the proliferation of fake products are well known. In China, big names do not automatically guarantee the quality of an item. So word of mouth and endorsements by real people who have actually tried the products is essential; it is also what gave rise to the wang hong phenomenon. In fact, wang hongs grew out of a group called wei shang, which means WeChat sellers.

Uncharted territory

The global influencer market, estimated at about US$30 billion, mainly consists of two categories: advertising and commerce. While the issue of which category wang hongs and influencers fall into can be a matter of opinion, there are clear differences between the two. Both have created an economy based on the strength of their fans or followers; but one major difference is that many influencers do not do the type of blatant advertising engaged in by wang hongs. Chinese audiences, so far, seem to have a high tolerance level for wang hong endorsements and some sites even look like the home shopping channels seen in the west.

Most wang hongs have live streaming shows on more than 30 different platforms. While Facebook's recently-introduced live show menu still has a long way to go in gaining popularity, China already has well-established ones such as YiZhiBo, MeiPai and YinKe. Most wang hongs do brand promotion and product sales through live shows to their fans on these popular platforms. Some attract hundreds of thousands of viewers; others have viewers in the millions.

Another difference between wang hongs and influencers is their age. In the west, influencers tend to be more experienced and established – and therefore older – individuals. Take for example Youtuber NigaHiga (one of the top social influencers on YouTube, with millions of viewers) who has been creating content for more than 12 years. In contrast, most wang hongs are in their late teens to early twenties and typically spend no more than two to three years in the market.

Because the market is so lucrative and so easy to enter for those with just the right 'star' qualities, China's wang hong economy is booming. Only time will tell, however, how long these young trend setters will be able to keep capitalizing on their online celebrity status. A word of caution to them: beware fleeting fame and fickle audiences.

Vincent Chang is Adjunct Professor of Entrepreneurship and Director of the eLab at CEIBS. Jay Ha is partner of ICONtv and Persona, a CEIBS eLab success story.

This article was first published by The Economist Intelligence Unit.