Not so long ago the cult novelist Douglas Coupland introduced us to Generation X. Over-educated, disaffected and unable to find satisfying jobs, these alienated twenty somethings drifted aimlessly across the bleak rolling deserts of California.

Now the UK internet industry has discovered Generation Y. This e-marketing buzzword is a direct reference to the large number of UK teenagers who have grown up in a world of exploding technology and for whom being wired up is as natural as having electricity.

"Their bedrooms are usually filled with a computer, a scanner, a mobile phone, a pager, a stereo and their PlayStation. They are using all the latest technology to empower themselves. It's part of their life," explains the Cartoon Network's head of content, Dorenna Newton. "Their bedroom is like a virtual world. They have a social life out of their bedroom. They do not know a world without technology."

According to the online industry's latest estimates, more than one in four UK teenagers regularly accesses the web, and the average 14- to 16-year-old has an annual disposable income, based on pocket money and part-time jobs, of £600.

To win the loyalty of Generation Y, new services to encourage teenagers to spend online are being launched; a flurry of student portals have gone live; the BBC is planning to introduce a new online teenage service in the spring, and consumer goods giant Procter & Gamble has just announced it is teaming up with Excite, the internet portal company, to create a major new teenage lifestyle site.

"The level of penetration among teenagers is growing higher and higher," says the director of BBC Online, Nigel Chapman. "They are very technology savvy. They are going to be large consumers of net material. They are the next generation and they are increasingly going to want to buy things online."

The BBC foresees TV viewing habits declining among teenagers due to the competing and powerful influences of new technologies, and realises that if it is to survive the corporation has to build relationships with teenagers over the internet.

Similarly, e-entrepreneurs have picked up on the fact that teenagers are often the key drivers of the purchase of hi-tech goods within British households. With computers being introduced into schools, technology is becoming a completely normal part of their culture. "The big barrier has been that you can get teenagers to surf but you cannot get them to buy because they are under age for having credit cards," explains director of Fletcher Research, Neil Bradford. This has been frustrating for e-marketeers because they know parents have been buying for teenagers but they have not been able to capitalise on the growing online teenage market.

But all this is about to change. New forms of internet payments and dedicated teenage shopping sites are being brought to the market. But, as usual, the UK internet industry is simply following in the footsteps of its US counterparts, who have already introduced specific teenage shopping sites such as DoughNet.com, ICanbuy.com and the wittily-named Cybermoola.com, to name but a few. In a direct pitch for Generation Y, a major teenage shopping service has been launched in the UK called Y-creds (www.Y-creds.co.uk).

Billing itself as the ultimate online high street for Generation Y, the site allows teenagers to shop online without a credit card. Y-creds operate like traditional offline book vouchers or record tokens. Parents buy Y-creds for their teenagers and set up online accounts for them. The Y-creds site is linked to various online retailers, and through a control menu parents can designate which shops their offspring can buy from. They cannot access their children's accounts: they are informed when a transaction has occurred but are not told what has been bought. Each Y-cred is worth a modest penny and they can be bought in units of 500 costing parents a fiver.

Goods for sale at this online high street are age-restricted so, for example, a 13-year old Madonna fan would not be allowed to buy 15-cert videos. Like most canny new online services, Y-creds has gone for a low key launch to avoid serious media scrutiny until the product has proved itself. The company is likely to begin seriously hyping itself at key commercial times such as summer holidays and half terms, as and when more retailers come on board. "I would like to see Y-creds being used by as many different retailers as possible across the UK, empowering teenagers to shop online with their parents' permission," says founder Kevin Sefton.

On the Y-creds web site, teenagers are encouraged to get their parents to "load up" their accounts so they can start spending, but Sefton denies he is whipping up online pester power to burn holes in the wallets of hard-working parents.

"I would say that parents will welcome Y-creds. They encourage financial responsibility. We are not advertising particular products. Instead we are providing mechanisms for paying for them." Sefton says many parents worry about how their teenagers spend money when they go shopping outdoors, and he feels Y-creds will put parents more in control and eradicate any fears of their children's pockets being picked. The long term plan, if Y-creds take off, is to create an online teenage bank.

Already Sefton is talking to potential online banking partners who will doubtless be keen to start a relationship with potential customers of the future. Once, high street banks used to attend freshers' fairs at universities to win new accounts. Now they are taking part in virtual ones being organised by the new crop of student portal sites such as student pages (www.studentpages.com).

Here students can visit online stalls of banks such as the Royal Bank of Scotland and click through to other sites to take advantage of specially-tailored discount deals. Students might have a reputation for spending most of their time and grant (what's left of it) boozing and eating Pot Noodles, but online marketeers know these older teenagers will be the architects of future consumer spending patterns.

One of the leading new student sites, NowNet (www.nownet.co.uk) has tied up with consumer brands such as Tango to run treasure hunt games across its site. There is also a virtual NowNet bar and once you've clicked on the 3D bouncer at the door you enter an environment which is like a film set. In the best traditions of Tinseltown, product placement is finding a home on the student portals. In NowNet's bar students can click on a book which just happens to be lying around, and then go straight through to Waterstone's site where they can buy books. Many of the new student sites are ISPs as well, and offer free email addresses.

The strategy is to hold on to students after they have graduated so they take their email addresses with them into the real world of work. Then the dial-up ISPs still continue to make money out of them.

The majority of student sites are positioned as entertainment zones and go all out to get on the side of the students, which underlines the importance of appropriate content. Getting the right image for its teenage service in the spring is preoccupying BBC Online at the moment.

"Our teenage service has the potential to have credibility with teenagers," explains Chapman, who has two teenage daughters of his own. "But we have to be very mindful of tone and be very contemporary. It is not going to be po-faced." Carving out its own public service niche against fierce competition from the e-entrepreneurs, BBC Online hopes to offer quality, trusted content for teenagers about issues such as drugs and health.

But it won't be easy. What's more, the scramble to colonise the emerging online teenage audience is being waged across all platforms. Interactive TV is in the sights of most of the new teenage shopping sites and student portals. But the key gateway to teenagers is the mobile phone.

The Cartoon Network is planning to introduce online cartoons and MP3 music files this year, and will be providing content through mobile phone companies as well. Asked about the importance of mobile phones for targeting teenagers, Cartoon Network's Dorenna Newton replies: "Enormous. Enormous. Enormous. They will be huge. Last Christmas was a mobile Christmas."

Techniques for profiling and marketing to teenagers are likely to become far more sophisticated this year. Traditionally, when a middle-aged parent bought a present for one of their children it was impossible to build up a profile of that child. But as teenagers part with their email addresses to join new teenage shopping sites, they can expect targeted offers (virtual mail shots) to automatically appear on their computer screens or phones when they log on.

Huge amounts of creative effort are going into understanding the online behaviour of teenagers. For the non-digital generation who are currently in charge of teenage online businesses, this is hard work. The Cartoon Network finds teenage focus groups wearying. "They always look pissed off, wearing their Nike caps the wrong way round and chewing gum," laughs Newton.

But she says they come alive when they are given the chance to start testing computer games. Games are a key way to generate affection for an online brand. But there are plenty of other ways. The Cartoon Network has a Scooby Doo web cam on its site. They took a life-sized stuffed Scooby Doo toy around London and filmed it to keep their online teenage audience amused. While they are logged on, laughing at Scooby, teenagers are also being encouraged to consume advertisers' messages for cereals and chocolate bars. Sometimes e-marketing to teenagers sounds fun. But don't kid yourself. Online teenagers are commercial gold dust. These e-entrepreneurs are not playing around. It's a war out there.