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Oct. 8, 2014, 12:37 p.m.
Audience & Social

The newsonomics of the millennial moment

The new wave of news startups is aiming at a younger audience. But do legacy media companies have a chance at earning their attention?

he new wave of news sites all look like they do different things. Vox attracts those drawn to the populist wonkiness of explainer journalism. BuzzFeed entertains those attracted by its mix of addictive animal videos and a growing news report. Vice entrances with adventurous, less-filtered news video, while Fusion provides both irreverence and context on the news of the day.

What they have in common is more important that what differentiates them: They all aim to get significant shares of the millennial market. It’s a market — similarly sized to the baby boomers who reshaped selling and buying — that has come of marketing age. They run in age somewhere between 14 and 34 (there’s little agreement on its age boundaries; have someone in the range take this Pew quiz) and number about 78 million in the United States.

At that size, this generation will spend $200 billion annually by 2017 (and $10 trillion in their lifetime) in the U.S. alone. It’s the lower end of the 25-54 audience that TV advertisers covet, and therein lies a new tale of budding ad competition. Young consumers’ brand buying preferences remain open to suggestion.

Add it all up, and we see why hundreds of millions of dollars is being invested in these newsy millennial-targeting sites. These startups may take differing approaches, but they share a dead aim at the sweet spots of this era. For audience: video, mobile, and POV reporting. For revenue: native, social, and video advertising.

Legacy media gnaw at these phenomena. They try to graft them on to their mature trunks; often the graft doesn’t quite take. It’s far easier for digital native newsy companies to meld them into products and businesses that look different.

In September, Vice Media — with bombastic CEO Shane Smith acting as the town crier of the millennial media movement — landed another $500 million in investment. A+E Networks, co-owned by Hearst Corporation and Disney, and Technology Crossover Ventures each invested $250 million. Just last fall, Rupert Murdoch’s News Corp bought a 5 percent stake at a $1 billion valuation, seeking a very post-MySpace entry into the youth market. Rupert’s Vice investment won some guffaws, but the new investment now values Vice at $2.5 billion.

In August, BuzzFeed took in another $50 million in investment from Silicon Valley’s influential Andreessen Horowitz. Its millennial-centric pitch to advertisers (and investors) couldn’t be clearer: 150+ million monthly uniques. 50% are 18-34 years old.

In April, Mic, formerly PolicyMic, picked up another $10 million in investment, and has doubled its staff to 40. Its readers’ average age: 29.

This moment is a global one. Both Vice and BuzzFeed market their brand well outside the U.S., with BuzzFeed already producing sites in French, Portuguese, and Spanish and planning launches in Germany, Mexico, and Japan. The millennial moment is a natively multilingual, multicultural phenomenon. In the U.S., the the numbers tell that story: African Americans, Hispanics, and Asian Americans account for 41 percent of millennials; Hispanics alone make up 18 percent, according to Kantar Media.

U.S.-centric Fusion, a joint venture of ABC and Univision, aims to be a twofer brand. Fusion is born dual, a cable channel and a digital platform, with a particular target of bilingual Latinos. Still trying to figure out what millennials want, the one-year-old venture just replaced its chief programming officer.

In France, Melty began serving the emerging generation in 2008. It now claims high-ranking performance among news sites in France, Spain and Italy. CEO Alexandre Malsch, 29, tells me that U.K. and U.S. sites will be up soon, as well. The content mix is BuzzFeed-like, including 250 original videos. But 70 percent of its traffic is search-driven, compared to BuzzFeed’s 60 percent driven by social. Only 15 percent comes directly to Melty. The Paris-based staff now numbers 96; revenue totals €4.5 million.

It was Ezra Klein’s decamping The Washington Post for Vox that certified this media trend, and that was only at the start of this year. Vox Media, parent of Klein’s and six other topical sites that skew young, just hired away Vice’s Jonathan Hunt to become global VP for marketing and partnerships. Silicon Valley venture firm Accel Partners is a major backer of Vox, believing it is setting up the millennial chain of the digital age. It’s far from alone, as the hundreds of millions in venture investment in millennial media show, and as I detailed in a Politico piece in May, “Why Silicon Valley VCs suddenly love the media.”

Is this a bubble? I doubt it. Some of these companies will become big winners, either as independents or merged into the massive cross-media companies that are investing in them. Some will limp along, finding uncertain fates. But the market is real enough — and sufficiently distinct from older news-consuming generations — to offer staying power.

We will see in the next several years whether a news generation gap is forming. So far, the evidence is mixed. Millennials are somewhat self-segmenting in their choice of media overall, and that includes, of course, news media. The digital age transformed the who, the what, and the on what of their media consumption.

The younger millennials are the digital natives, a strange species first identified back in the last century. Now it’s out of high school, in college and in the workforce. Digital natives don’t see much use in print, especially packaged news as stale as day-old bread. Move up the age ranks into the early thirties, and we can see millennials’ uneven reading habits relating to legacy media.

Take a look at the chart below, prepared with data from Comscore. In it, we rank 15 representative news sites by the percentage of their unique visitors who are millennials.

Vice 54.3%
BuzzFeed 52.9%
Slate 47.1%
Wired 44.1% 42.4%
The Guardian 40.7% (The Oregonian) 39.7% 37.2% 36.8% 35.2% 34.2% 32.7% 30.0% 29.8% 19.4%

It’s little surprise that Vice (54.3 percent) and Buzzfeed (52.9 percent) top the list. They are the only ones that can count more than half of their monthly unique visitors as 18 to 34. Then Slate (47.1 percent) follows them; it’s appealed to millennials even before the newest sites grabbed the spotlight. Interestingly, Vox is pulling a lot of older readers in addition to millennials who make up 37.2 percent of readership. Two magazines, tech-native Wired (44.2 percent) and in-motion Time (42.4 percent), find lots of young web readers.

Among national/global newspaper-based companies, The Guardian leads the pack, followed by The New York Times and The Wall Street Journal. Thirty percent of the Journal’s online audience is millennials.

Among the cable news competitors, MSNBC leads the pack (34.2 percent), followed by CNN (32.7 percent) and Fox (29.8 percent).

Three local sites give just a glimpse into non-national markets. OregonLive, newly enhanced with Advance’s digital-first strategies, sees almost 40 percent of its audience coming from millennials. comes in a few points lower. Minneapolis’ ranks lowest at 19.4 percent.

The quick takeaway: This is an audience and a market to be contested by both startups and legacy companies. While millennials may be “detached from institutions” (as Pew put it in a good profile of the population), it’s a generation that isn’t necessarily anti-establishment if legacy media can serve its needs.

Most notable: Millennials offer huge potential to digitally proficient publishers. Though they make up only 30 percent of the web audience, they routinely make up more than 30 percent of news site usage. They want and use digital news, much of it on mobile. While older readers spread their news consumption more widely among TV, radio, and print, as well as digital, millennials make up the first profoundly digital generation.

How to serve this group differently is a major conundrum. For many newspaper companies, it’s just another challenge they don’t have the resources to face, as staff cutbacks continue apace.

As one top-ranking business-side newspaper chain exec told me: “We do see good millennial consumption via mobile of our content. But I think we are a bit challenged to organize around that, both in news and advertising, to further it along. We are more worried about making inroads with folks already spending digital and using the exchanges if we have to get additional millennial audience than we are going out and getting more of it specifically.”

Contrast that approach with that of BuzzFeed. BuzzFeed chief revenue officer Andy Wiedlin, a veteran of The Huffington Post and Yahoo, credits “social lift” for much of the site’s success. That’s not just the fact that social drives 60 percent of BuzzFeed’s traffic. That lift also shoots BuzzFeed-created native ads (for 85 of the top 100 brand advertisers, he says) around the web, multiplying their value. Rather than “publishing” in the traditional sense, BuzzFeed’s model is more about feeding the voracious, never-sleeping digital flow.

Some bigger legacy companies are testing multiple approaches. While its TV side still suffers in ratings (see Emily Steel’s New York Times piece), CNN Digital is making new audience inroads.

CNN Digital excelled as an early leader in mobile, social, and of course video, growing into the web’s second most trafficked news site. Twenty years in, it’s still graduating out of “the dumbest box in your house,” says CNN general manager KC Estenson. For Estenson, the millennial shift is about another kind of graduation. The 18- to 34-year-olds grew up on their own media, from Nickleodeon to MTV, he emphasizes. Now it’s on to news. One factor, he believes, that defines them: “They believe they can change the world,” citing climate change activism as an example.

Rich Boehne, soon to be CEO of the U.S.’s fifth-largest broadcaster, when the Scripps/Journal Communications merger/split closes in the first quarter, hopes that the broadcast/digital combo will find success with young people. “I lay awake and look at the ceiling. None of these [sites like BuzzFeed and Vice] have been created by an incumbent. Why can’t we take advantage of this market?”

Among newspaper execs, new Boston Globe CEO Mike Sheehan imports the experience of his ad career in understanding the magnitude of the generational change before us:

When I (54 and getting older every day) start substituting Apple TV for cable boxes, it’s clear that alternatives to broadcast advertising to reach this audience are a worthy investment. I’ve been a TiVo devotee since it first came out, and my daughter was five when she saw her first television commercial (“What’s that?” she asked). Pretty funny that, at the time, I was CEO of a large advertising agency and had spent my career writing and creative directing television commercials. Getting an advertising message to millennials and younger will mean a new world order in media.

So if the millennial moment isn’t a bubble, how big a moment is it?

Digital ad veteran Dave Morgan, ex of RealMedia and Tacoda and now CEO of TV ad disruptor Simulmedia (“The newsonomics of targeted TV”), puts the battle with broadcast for younger audiences into perspective on the nature of today’s ad spending:

Ad dollars flow two ways.

One, they go where they can generate measured, predictable positive ROI to sales. Thus search, online display, and Facebook ads grow as long as they can deliver incremental return for each incremental dollar, until they run out of cost-effective incremental sales-producing volume. They are direct marketing channels that are invested in as long as they can keep delivering profitably and grow as they can deliver more profitably.

Two, they go where, in bulk, they drive offline sales and brand share of voice at massive scale quickly for marketers in categories like retail, automotive, packaged goods, fast food, movies. Here, every dollar doesn’t have to be incrementally justified, but these categories tend to involve defensive spend. Thus, if one fast-food company stops doing heavy TV, for example, competing brands gain market share. This money stays largely in TV, radio (and magazines and some newspapers) as long as they still have massive, [fast-accumulating] reach and still ring the cash register.

The BuzzFeeds of the world will win ad dollars when they can do one of the above at big scale. If it is the former, they take from online display and search and other direct marketing techniques — direct mail, telesales, etc. If the latter, they can take from TV. However, they won’t take from TV until they can deliver true TV-like scale, and are also competitive on pricing. Currently, video ads on online platforms cost CPMs that are typically 2 or 3× TV prices.

That scale tells us about the staying power of TV. Broadcast TV ranks now second to digital in its share of U.S. ad spend, having dropped into that position within the last year. Still, it commands $40 billion annually. BuzzFeed’s fast-growing annual revenue, for instance, only amounts to about $120 million a year.

David Brown, whose ahead-of-the-curve MXM agency recently won “Content Marketing Agency of the Year,” points to one trend we can see now — and another to come soon.

That video/social/mobile movement, he says, “reflects the new hyper-connected consumer. With the increase in media channels, millennial-focused sites are capitalizing with content rooted in discovery, empowerment, and friends.”

Then there’s the bigger game ahead. “There is also a trickle-up strategy,” he says. “These properties are using digital to build a trusted audience and catapult themselves to larger screens. To the media world, this will flip the way that broadcast content emerges, but to these digital natives, it will just be one more channel.” Hence, the investor interest among Disney, News Corp, Univision, and other broadcasters.

That’s classic disruption, and reminds me of how venture investor Kenny Lerer recently explained to me the why of all the new digital news venture investment. About one in five of Lerer Ventures’ 160 investments involves digital content.

For Lerer, the timing here is obvious. Just as the build-out of cable networks in the 1970s and 1980s demanded loads of new content — to fill the new distribution channels of USA, A&E, Bravo, and so many of others — the build-out of near-ubiquitous, mobile-multiplied digital media makes content creation newly valuable. The pipes have widened again. And now the pipeline to millennials is being filled.

As CNN’s KC Estenson asks: “What is the media that fills the platform?”

Photo of Millennial bike (“The bike is really, really good at social media”) by Tom Woodward used under a Creative Commons license.

POSTED     Oct. 8, 2014, 12:37 p.m.
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