Digital youth: A glimpse into future market evolution
While many commentators note the swift uptake of all things digital by younger consumers, there are distinct and surprising differences in device usage and content consumption.
- February 2013
- Bertil Chappuis, Ewan Duncan, and Naomi Neruda
Authors
How well do companies understand young consumers — those under 35? Can they describe fairly accurately how these consumers communicate, with what devices, and why? Important questions to be able to answer — particularly for high-tech, telecoms, and media companies. Half-trillion dollar questions, actually, since that is McKinsey’s estimate of the aggregate market that will be affected by this cohort.
Differences abound between US consumers aged 13 to 34 (youths) and consumers aged 35 to 64 — and the implications these differences raise could be strategically decisive for telecoms, media and entertainment, and high-tech companies.
McKinsey’s research revealed that American youths lead digital lives distinct from older consumers: they don’t and won’t buy PCs or laptops, preferring smartphones or tablets. Landlines are a curious waste to them, as are CDs and most hard-copy media — newspapers, magazines, and books. Not surprisingly, they are almost twice as likely to own portable digital devices as older consumers, and they lead in adopting new services such as video chat, social media for many types of communication, and on-demand video.
But it’s not only their current behavior and preferences that present a challenge to many companies, or even the greatest challenge. It’s what it portends for the future. Based on current penetration and usage among youths, projected cumulative revenue from youths in emerging digital streams over the next three years tops USD 15 billion across mobile advertising, mobile apps, on-demand digital video, and social network advertising.
However, device and content provider choices among the youth will affect USD 500 billion in annual estimated spend across PCs, mobile/landline voice, and pay-TV. As the digitization of life continues, brands that ushered in the digital age such as Microsoft, Sony, and Yahoo don’t resonate with youths as much as Apple or Google. Is losing this market a foregone conclusion for more mature companies? No. But it will require some new thinking. Companies will need to invest in capabilities, services, partnerships, and business models that reach and retain this critical segment. In short, action must be taken to bridge the divide before it becomes an abyss.
The youth segment drives current and future digital consumption “Early adopters” may be an understatement — at least in some categories of activity. During the past five years, new platforms and digital offerings proliferated rapidly, and youths drove adoption of many of these devices and services. Compared with consumers aged 35 to 64, youths are 1.5 to 2 times more likely to own a smartphone, tablet, Internet-enabled gaming console, or Internet video box. Similarly, youths are 30 to 50 percent more likely to go online to communicate via social networks and VoIP/video chat or access entertainment such as online and over-the-top video.
Surprisingly, when further segmenting youths into the most common life stages — teens (13 to 17), college-aged (18 to 21), and young adults (22 to 34) — there are minimal differences in the penetration rates of devices and activities. The two exceptions are online gaming — which skews slightly toward teens — and VoIP/video chat — which is favored by more in the college-aged segment. The most dramatic drop-off in usage occurs after consumers “age out” of their youth in their mid- to late-30s.
The most probable explanation is that this post-youth stage of life is when many consumers have young children and career demands that combine to limit the amount of time available for device usage or quick adoption. The high level of familiarity with digital devices and channels and the consistency of digital behavior before consumers reach 35, however, suggest an opportunity and challenge for device makers and content providers alike. Companies will need to work harder to create offerings that would maintain usage by the 35- to 44-year-old cohort, and adopt different customer management approaches for this time-starved group.
Even more compelling than device adoption is the higher willingness of youths to pay for digital content. Across the content menu, McKinsey found that youths are 1.5 to 2.3 times more likely to purchase premium content subscriptions and apps. Many use their mobile device as the predominant gateway to news, entertainment, and communication.
Unlike older consumers, youths may not have any non-digital subscriptions to magazines and newspapers, or even a landline phone or pay-TV service. Thus, they are not duplicating channels or costs by paying for digital content. The relative portability also drives consumption of digital content.
The implications of this are significant for content owners looking to drive more revenue from subscription services. Combining subscription/transaction services of youth-oriented content optimized for digital platforms could habituate more consumers to turn to digital channels exclusively — and this could extend into later life stages.
This article was part of the iConsumer: Life Online compendium
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