No business built on teenager demand is sustainable

This is a law of business you can take to the bank

Perhaps the most common ‘doom and gloom’ cry for businesses — especially Internet businesses — is that teenagers, who were once their main customers, are ‘leaving in droves.’ The great example of this is Facebook where it is often claimed that it will be overtaken by Snapchat or the like because teenagers are leaving to other places. Thus, they will either have to stem the tide — perhaps by paying billions for Instagram or WhatsApp— or face decimation in a MySpace way. The same claim has been made for a few years now regarding the iPhone versus Android. “The younger people are going for the cheaper option and away from the phone their parents are using. The iPhone is doomed!” is the similar cry.

What commentators are asking us to do here is to look beyond customer numbers and consider demographics. That is a sensible idea. But my claim here is that they are making precisely the wrong inferences from those demographics. What they are doing is looking at a business that was built on the back of teenager (13-19 year old) demand, noticing that the demographic mix is changing, and making a prediction of doom. But what if, instead, that change in demographics was good news rather than bad?

This notion crystallized for my while reading danah boyd’s It’s Complicated which looks at the digital life of teenagers. boyd presents convincing evidence that teenagers are, not surprisingly, misunderstood being savvy about exploring their social relationships and signals while being naive about the underlying technology they are using. This has implications for parenting but also for business. That is because the overwhelming picture of the teenager as a consumer is of a person that is going to change. Teenagers are doing things that they did not do as children and that they will not do as adults. Thus, as a consumer, they are transitory and not in a good way. Unlike childhood demand where there will always be other children to consume toys such as Lego, the next wave of teenagers will engage in their behavior using the next available technology (or fashion). And since there have been teenagers that technology has been changing.

This notion of the transient consumer implies something very strong: business exclusively built on teenager demand will lose their customers. This is as true of musicians (which is why we will soon be free of Bieber) as it is of technology (remember the Sidekick) and social networks (consider MySpace). This suggests that businesses that have become the darling of teenagers should make hay while the sun shines or, and this is the tricky part, work out how to broaden their customer base to include adults. Either way, worrying about teenager demand is futile.

This is not the end of the story, however. We need to add a second ingredient that comes from boyd’s work: teenagers and adults don’t mix. Teenagers will avoid fashions adults adopt, technology they carry and social arenas where adults are present. As an example, a few years ago, the grade my eldest child was in had their first instance of cyber-bullying. The details aren’t important. What was surprising was where this occurred; it took place on Google Buzz. Now you will be forgiven for not remembering Google Buzz let alone, if you do, being amazed that it ever reached sufficient status for bullying to arise. Buzz was one of Google’s early attempts to build a social network off of Gmail. It was fairly rudimentary and, frankly, dismissed by most. However, for my child’s middle school in Brookline MA, Google Buzz was the first social network they congregated. Why? Precisely because their parents had not heard of it and, on a screen, it looked like they were just doing email. In other words, it satisfied the ‘adult avoidance’ criteria in spades.

The notion that adults are oil to teenager water too has business implications. For starters, it implies that if you have a business built on teenager demand, you want to do whatever you can to discourage adults from being customers as well. This will maximize the return you get even if it is transitory. The exception, of course, is where you see adults as the future and want to make a ‘switch.’

It is here where the commentators slip up. They often see adults as the problem because they will discourage the teenagers. But, in fact, if you business isn’t just loosing teenagers but is gaining adults, the whole story is different. For the iPhone, even if younger people adopted them first and now find them uncool (although I’m far from convinced that is the case), the fact that adults (and the older the merrier) are buying them is great news. They have money and they tend to be less fickle than younger demographics.

But it is in relation to Facebook where the opportunity is significant. Facebook (and also Twitter and LinkedIn) are watershed businesses for social media precisely because they have a large adult base. For it is the adults where the network effects that lock in demand are at their most strongest. The college students who use Facebook and then leave college stay there to keep connected with their friends who no longer have the time to bounce around alternative sites even if they are the next big thing.

Perhaps more critically, and somewhat insidiously, are the parents who joined Facebook to see what their kids were up to. They then found other parents and long lost friends. And when their kids realized they were there and moved on to other platforms — although as boyd points out the teenagers often maintained a calming and regular presence on Facebook to convince and fool their parents that they were still under their watchful eye—the parents remained.

Commentators who portend peril as teenagers leave as customers should instead be looking to places where adults are being retained and built up as customers. Not all will be like Facebook where the teenagers drew the adults in almost by accident, but they will be the ones high on the list of future sustainability.

Joshua Gans is a professor at the University of Toronto and the author of Parentonomics (published by MIT Press) and Information Wants to be Shared (published by Harvard Business Review Press).