Is TPG’s Investment In Vice Overstating The Millennial Audience?

TPG's investment of $450m in Vice Media this week has valued the company at $5.7bn. CEO Shane Smith described the move as enabling the company he founded initially as a magazine in 90s Montreal to achieve the following:

'Build up the largest millennial video library around the world. This will be an essential component of our future Direct to Consumer tech stacks and our innovations in transactional relationships - all of which represent the future of media'.

Smith is right, this is the future, However, what this perception of the future shares with the past is a focus on youth, something that shifting demographics may not play into.

Mass media has youth-centricity built into its DNA. Its emergence alongside TV in the 1950s coincided with baby boomers’ entry into the workforce, as well as a booming economy facilitating higher disposable incomes for what was then a majority demographic. This is not the case in 2017. Millennials are struggling to enter stable and meaningful employment. Whilst progress in medical care and lifestyle mean baby boomers remain the most financially influential demographic in most developed western economies (US, UK, Australia)- controlling up to 70% of the total disposable income available in the US.

Despite this, large media entities and investments in the space still seem to focus on the millennial dollar. Vice are not the only company to benefit from this, with Snapchat recently being the beneficiaries of a $100m deal with Time Warner to create original content. As Vice is currently yet to offer a subscription tier directly for monetising its content – its value proposition remains its advertising value. Yet, when we consider that this valuation of Vice is double that of The New York Times, the numbers seem overstated, especially considering that new media services such as Vice and BuzzFeed are only used by 22% of consumers

Such investments also seem to focus too much on penetration and not the overall size of the audience when it comes to digital content. For example, in the US:

(Source MIDiA Research Consumer Survey Data)

The ability to push direct commerce through these channels as opposed to relying purely on advertising also ignores the fact that:

This could, however, simply be a matter of preparation for an IPO, which Smith alluded to when announcing the investment to US media. This is not to say that Vice should pivot towards the over 50s – a counter argument is that their brand of news coverage could become embedded in their youth audiences via online video consumption throughout their lives. It does suggest, however, that investments in digital media often understate the size and opportunity of older demographics being brought into the digital content economy.