Boomer Broadband: Boom!

By Gary Kim

Baby boomers and “third agers”—adults in their early 40s to mid 60s—are an underestimated presence in the U.S. e-commerce market, according to a study by ThirdAge and JWT Boom.

A survey of 1,210 American adults 40 years old or more revealed that 72 percent of baby boomers have broadband connections in their homes, beating the national average across all age groups, the researchers say.

“Third agers are regularly stereotyped as being technophobes and slow to jump on the technology bandwagon,” says ThirdAge CEO, Sharon Whiteley. “However, not only are they online, they’re surprisingly a formidable presence on the Internet.”

Boomers also are heavy users of “bread and butter” applications such as research before shopping, online shopping and communications and research, the study suggests. It is blogs, social networking, audio and video downloading and streaming as well as networked videogames that represent “new” uses of the Internet that “grownups” haven’t embraced.

The survey found that 73 percent of third-age Internet users have shopped online, while 86 percent have researched products on the Web before purchasing at a store.

Although older users aren’t as likely to watch videos, write blogs, play games or download music over the Internet, they form a huge, and all-to-often underestimated component, within the larger e-commerce market, researchers say.

According to the survey, the three top reasons this group spend time on the Internet are to seek out information (92 percent), to stay in touch with friends and family (95 percent) and to shop online (73 percent).

Other high percentage activities include general browsing of the Web (95 percent), reading articles (91 percent) and researching products before purchasing offline (86 percent).

Based on survey findings, more than 96 percent of boomers say they share information and details about new discoveries with their families, 84 percent with their children, 83 percent with their spouses and 71 percent among their co-workers, making this cohort one of the most active groups in the viral marketplace.

Though 82 percent use a desktop computer to connect online, 17 percent use laptops.

Close to 108 million people are over the age of 45, the researchers note. The group also comprises more than 40 percent of the entire U.S. population and has the majority of the buying power in the United States.

They account for 70 percent of the U.S. net worth, controlling $9 trillion. In the next 15 years, the 50-to-64 population will grow by 50 percent and the 65-plus population will grow 32 percent, while the traditionally coveted 18- to 40-year-old populations will grow only 3 percent combined, the researchers point out.

In an odd sort of way, broadband access has already become a staple. Where many surveys seem to suggest that just more than half of U.S. homes have broadband, this survey suggests that 72 percent of the entire baby boomer age cohort already are customers. That’s 77.76 million people.

CBS Corp. chief research officer David Poltrack, in fact, argues that “we have found no significant separation between the 18- to 34-year-old segment and the 34-to-55 segment,” in terms of broadband connectedness.

“In fact, those in the second group are more likely to be in the fully connected group (having broadband and a digital TV connection) than the younger group,” says Poltrack. One can infer from that statement that broadband penetration rates among the 18-to-44 ages segment are pretty close to rates for baby boomers (45 to 64).

Something seems disconnected here.

If one assumes people less than 18 do not rent or own apartments or houses, and wouldn’t be counted whenever one is assessing household penetration of anything, then any significant gaps in broadband penetration between 18- to 6- year-olds and the entire population would have to be explained by exceedingly low penetration among households headed by people 65 years and up.

That’s logical, but most surveys find broadband penetration in the 30 percent or higher range for the 65-plus crowd. So maybe the answer is that the 65 and over households are quite numerous. Either that or one or both of the other metrics are wrong, in some way.

Of course, there’s lots of wiggle room here. The Organization for Economic Cooperation and Development claims that, as of December, 2006, just 19.6 percent of Americans had broadband. Both Jupiter Research and Parks Associates estimate 2007 broadband penetration levels at about 50 to 53 million, growing to about 86 million households by 2012 or so.

The other issue is how many households actually own personal computers, since demand for narrowband or broadband Internet access now depends on that metric.

As recently as the beginning of 2005, for example, MetaFacts estimated that about 58 percent of U.S. homes owned a personal computer, representing 64.3 million households.

And the glitch with the notion that it is the 65-plus crowd that is skewing broadband penetration stats is that “the most likely to own a computer are the affluent empty nesters and older SINKs (single income no kids),” according to MetaFacts.

The “least likely” to own PCs are the “single heads of households who are 75 or older,” says MetaFacts. Their PC ownership rates are 40 percent less than average.

Still, almost all other groups are within 15 percent of the norm for the general population in terms of PC ownership, says MetaFacts. In fact, at the beginning of 2005, the rate of Internet connectivity of any kind was 57 percent, or only one point lower than the rate of PC ownership. “Apparently, if they are going to have a PC, they are going to connect it,” MetaFacts surmises.

Also in 2005, Yankee Group estimated there would be nearly 50 million broadband households, a number quite close to what other researchers now report, and projected there would be 84.3 million PC households. Based on the accuracy of the access forecast, there is no reason to assume Yankee Group is too far off on PC ownership, either.

The theoretical market for broadband access to PCs then would be 84.3 million main household accounts (not counting wireless broadband in the form of PC cards and 3G services). At 53 million broadband accounts, penetration of the universe would be 63 percent, a figure reasonably consistent with the assertion that most of the 18-to-64 crowd subscribes at about a 70 percent rate, while older people subscribe at much lower rates.

The primary remaining addressable customer base is the 31 million dial-up customers who, by definition, also own PCs and are likely to upgrade to broadband.

In some key ways, “penetration of households for purposes of connecting a PC to the Internet” is not the most reasonable measure of customer demand. Penetration of homes that own PCs is the more relevant measure. That’s the difference between broadband penetration of homes (50 to 53 percent) and broadband penetration of PC users (63 percent).

And perhaps half of dial-up users say they presently are satisfied with dial-up and do not want to upgrade to broadband, as odd as that may seem to many of us.

At the moment, if every single U.S. household containing a PC user were on broadband access, penetration would stand at 72 percent or so. That would represent 100 percent penetration of the universe of potential buyers for “broadband access to PCs.” To get to 100 percent penetration of homes, people would have to decide to own, or be given, PCs.

If 63 percent usage is what we see now, and 72 percent represents complete penetration of the market, we are well along the path to full adoption. Some 31 million homes are what remain to be gotten.

That’s because only 72 percent of U.S. homes have PCs in them. Broadband for purposes of watching television is the additional application that will drive penetration above 72 percent or so.

So while we might note that boomers have embraced broadband access, it is only the 65-plus age cohort that shows any significantly higher resistance to broadband and PC usage. If one assumes that children use access their parents pay for, while the 18-to-44 use broadband at comparable rates to baby boomers, the norm is that 70 percent or so of U.S. residents younger than 65 use broadband at home. IP