Linking up with wired youth: Generation Y, the millions of boomers' babies, are online. Are you ready to do business with them? - Trends - Industry Overview - Statistical Data Included

Chief Executive, The, March, 2002 by Bob Woods

Grace, a first-grader who just turned 7, plops down in front of the screen. Not the TV -- the monitor firewired to her mom's Dell computer. She deftly wields the mouse, double-clicks on the phone icon and patiently waits the several seconds it takes for the modem to whir and connect -- just long enough to reach up and turn on the speakers. Another click launches Explorer, followed by a few strokes on the keyboard. Moments later Grace is scrolling down nickelodeon.com's games area in search of a "Rugrats" title she likes.

"Imagine Grace in a few years, when she can hop online, and what she'll demand in a shopping Web site," says Michael Antecol, an analyst or Forrester Research and lead author of numerous reports by the Cambridge, Mass.-based firm delving into the online habits of what it terms "wired youth." "She won't settle for slow, yucky sites or bad products. Kids want different things from sites -- not only more process and customer service, but also games and chat rooms. Those are the kinds of things companies may want to consider."

There are literally tens of millions of considerations when it comes to reaching kids like Grace, the progeny of the baby-boom generation. Marketers and demographers refer to them as Generation Y or echo boomers. Ranging in age from 7 to 28, they represent the largest population group since their parents -- a fact that rings up Pavlovian responses across corporate America, which is salivating over the prospects of kids' disposable income, influence on family purchases and early formation of brand loyalty.

The most remarkable aspect of Generation Y, no doubt, is its direct link to the Internet and the potential for companies to capture them there as customers. Grace may not be shopping online yet, but she's certainly ripe for plenty of commercialism in anticipation of the day she starts.

"Not since the days of the Beatles has there been such a phenomenon," declares Matt Diamond, CEO of Alloy, Inc., a New York City-based media and marketing services company focused on the approximately 58 million boys and girls between the ages of 10 and 24. "This is the first demographic to grow up with the Internet." Alloy connects its own brand, plus those of advertisers and marketing partners, with kids through an integrated network of Web sites, catalogs, magazines and student publications.

The mutual core is a Gen Y database of nearly 8 million names. "It doesn't make a difference if you close a sale online or offline," Diamond says. The key is having that person in your circle of assets. "You can source the customer online, but close wherever you can.

Actually, Diamond, 33, was born in the midst of Beatlemania -- making him a member of Generation X -- yet he's old and wise enough to perceive the power of tapping into pop culture. A former executive with General Electric, he co-founded Alloy in 1996 to take advantage of the converging booms in youth-oriented entertainment and the Internet. "Our timing coincided with the release of Titanic and teenage girls' infatuation with the movie and its star, Leonardo DiCaprio," Diamond recalls. "We saw the Internet as a good, low-cost entry to the enormous youth market."

Beyond the Mall

Just how enormous, as well as Net-Savvy and e-commerce-minded, is the purview of Forrester's research surrounding online 13- to 22-year-olds. In an August 2001 report, "Wired Youth Data Overview," Forrester estimates that the American youth market will grow to 37 million by 2006, when 90 percent of this demographic will be online. Centered on an e-survey of 10,565 members of Wilton, Conn.-based Greenfield Online's panel of U.S. and Canadian consumers, the report finds that, despite common misconceptions, kids have their own money. Indeed, the average yearly disposable income per young Net buyer in the United States will grow to $2,602 by 2006, from $2,380 this year. The average amount spent online purchasing CDs, MP3 players, video games, clothing, jewelry, sports gear and other things kids crave will rise to $755 from $514 -- for a total of $21.2 billion, or 30 percent of wired youth's disposable income.

What's more, adds Antecol, "kids control a vast amount of indirect family expenditures, for everything from cereals to cars. There's a growing realization that if you can market to kids, they will buy products or influence their parents."

Among other enticing findings: more than 65 percent of wired youth have purchased a technology product with their own money; despite the Napster phenomenon of downloading songs for free, 40 percent are willing to pay to download movies, music and TV shows; 68 percent purchase gifts online; and 65 percent say they compare prices before they click the "buy" button.

"They are savvy but careful shoppers," contends Carol Kruse, co-founder and group director of marketing for RocketCash LLC, which operates a free Web-based service that allows registered members to set up and fund accounts from which they can purchase products online -- in essence, an e-debit card. Teenagers, most of whom don't have their own credit cards and typically use their parents', comprise the bulk of the Mountain View, Calif, company's 3 million members.