Gen Z, Sometimes Called Post-Millennials Or Centennials, Are the First Generation to Have Grown up with a Smartphone in Their Hand

Engaging across generations Japan Report Ÿ January 2017 Engaging across generations

Contents

• Introduction, methodology and summary of findings • Generational profiles • Challenges in connecting with generations through advertising • What each generation thinks of different ad formats • Strategies for overcoming ad avoidance

2 Engaging across generations

Introduction and objectives

A new generation is approaching adulthood. Gen Z, sometimes called Post-Millennials or Centennials, are the first generation to have grown up with a smartphone in their hand. How radically different are their media attitudes and behaviors from people in the older Gen Y* (Millennial) and Gen X *(Baby Busters) generations? And how much of a challenge does this pose to marketers as they plan media and develop creative?

Concurrent with this generational shift, increased media fragmentation means marketers are scrambling to understand which channels and creative ideas are best used to reach and engage their target audiences. Options seem endless. The rapid rise of online video and mobile ad formats makes it hard to know what type of creative will work, and where best to place it.

Our previous AdReaction Video study (released October 2015) told us that Japanese audiences were still spending more daily minutes watching Live TV than watching video on digital devices, and receptivity to digital ads remained much lower than for live TV ads. It also provided valuable insight into how and why advertisers should adapt their videos for the digital and mobile world.

This new AdReaction study explores advertising receptivity across Gen X, Y and Z to understand when and where each group are most likely to respond positively. It also provides marketers with practical advice about how to overcome ad avoidance, and which creative approaches work best across the three generations.

* In Japan, Gen Y is generally named as Minimum Life, Pressured, or Yutori/Satori. Gen X is called as Bubble, Dankai Junior, Post Dankai Junior, or Employment Ice Age.

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Methodology Sample size in Japan • Gen Z (16-19 year olds) = 154 • Gen Y (20-34 year olds) = 220 • Gen X (35-49 year olds) = 226 • All data based on this sample unless specified otherwise Online panel-based interviewing • All interviewing conducted via online self-completed questionnaire* • For each generation: 50% male and 50% female • This report refers to Japanese results only, but the same study was fielded in 38 other countries (global data available at http://www.millwardbrown.com/adreaction/genxyz/) Ad testing (Japan is not included) • 31 ads copy tested across10 countries (Australia, Brazil, China, France, Germany, India, Mexico, Spain, U.S. and UK) — 11 TV, 8 Facebook video, 12 YouTube video • Total sample size = 8,986 interviews; approximately 100 Gen X, 100 Gen Y and 100 Gen Z per ad • All interviewing conducted via online self-completed panel-based questionnaire (Link for TV and Link for Digital)

Social Media Research (Only Japan) • Collected approx. 50M ad related posts on Twitter, picked up and analyzed their relative strength of response by generation

*Statistically significant generational differences noted within this report are tested at a 90% confidence level 4 Engaging across generations

Why a Spotlight on Gen Z?

• The focus for marketers is shifting from Millenials to GenerationZ. • This mobile-native generation is growing with social media and on the cusp of entering the workforce but still has a strong influence on the purchasing power of GenX and GenY parents. • It is said that Gen Z will shape the future of the Japan with their purchasing power. Therefore, understanding Gen Z is increasingly important for marketers.

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Summary of Findings

§ In spite of high usage of digital, Gen Z is less receptive to digital ad formats and avoids ads instantly. § Because of their life stage, Gen Z lives with parents and consume TV and OOH well with good receptivity. § On the other hand, they are negative to legacy digital ad formats, especially formats without control such as pre-roll or auto-play, while shows better receptivity toward new ad formats and branded contents. § Developing advertising to meet the needs of audiences will help advertiser to connect across generations § Gen Z compels advertisers to consider discrete components like humor, story, visual appeal, and music, which are all essential and must form a seamless fit with each other and the advertised brand. § Knowing that audiences are turned off by invasive and interruptive formats, advertisers have a clear window of opportunity in short content that offers audiences the ability to interact with and feel more in control of the advertising they receive. § Increased focus on the experience of the creative can make branded and sponsored contents a good option for advertisers. Interest to category, affinity to brand, and relevant offers should be integrated into creative idea with ownable manner. § Gen Z requires a 360 approach to media planning including offline media and optimization § Media Planners must give sufficient weight to how factors like time of day, mood, and physical context influence favorability and optimize their media to reach Gen Z in the times and places where they are most receptive to media. e.g. OOH & Mobile at commuting § Targeting must be in lock step with creative development. There must be synergy between the advertised brand / category and the audience, yet at the same time media must be contextually relevant to the places and spaces it’s running.

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GENERATIONAL PROFILES

Who is Gen Z? From childhood, they can reach massive information through smartphone, and show themselves and know various peoples on social media. It’s possible that such a difference of environment cause the difference of values and behaviors.

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How Gen Z is described generally?

Gen Z is really digital native, mobile native and growing with social & smartphone Use multi-screens and multi-accounts, and always connected.

Not expect Good at self- Care about Conscious to Open minded to completeness but branding personality privacy minority reality

Marketing need to change to engage Gen Z.

Visual first and Short attention Good at search, More trust in Frankly use consume audio span to ad, and i.e. experience influencers than e-commerce well ad blocking over information brand

8 Gen Z at a glance

Judging from the size of households, Gen Z seems to live Media Usage with their parents and mentioned Demographics (One hour or more per day) they are not very busy. Working status 17% TV 71% Opposed to global trend, TV is still (part/full-time) a dominant media. Chief Shopper Magazines 7% 20% Gen Z spends more time outdoor (all the time) Newspapers 6% as well as using mobile phones. Size of HH 89% YX Laptop usage is less compared to (3 or more ) the other generation. Radio 8% Married 20% Outdoor 45% X

Very busy 14% Laptop 58%

Not very busy 32% Mobile 67% YX

What is your current working status? How many people are there living in your household, including yourself? Are you the parent/guardian of any children under 18 who live in your What is your current marital status? 9 household? How busy would you say you are? Do you personally choose the items to buy from supermarkets and shops for U.S. Report your household….? Tapping into Gen Z mindset

VALUES • Digital privacy (18% X) • Content that feels honest and real (14%) • Diversity and individuality (29% X) • Spending time with like-minded people (35% YX) MISCONCEPTIONS ABOUT GEN Z • Love selfies (Only 10% YX) • Receive lots of feedback on what they post (Only13% X) BEHAVIORS • Turns to Google for queries (34%) • Starts new projects and activities (21% YX) • Keeps busy by multi-tasking (13%) Gen Z • Enjoys access to always-on music (14%) • Share my activities, interests and hobbies online The strongest feature of GenZ is seen in sharing with my friends.(33% YX) interests online and spending time with like-minded Gen Z Gen Y Gen X people. They are open-minded, but careful about I like to share my activities, interests and digital privacy. Social environment influenced their 33YX 17X 9 hobbies online with my friends. values and behavior.

10 Q: From the following statements choose all that you identify with more. U.S. Report Advertising is a topic worth to talk with Other members of your family Friends others Work colleagues None of these

Audiences are discussing Gen Z 50 YX 62 8 17 advertising with those closest to them.

Because of life stage, GenZ discuss advertising with their friends, which means viral Gen Y 54 40 Z15 27 network is strong in GenZ’s community such as school and shared to the other generations through family. Gen X Z 60 36 ZY 24 22

11 Q: Who are you more likely to discuss advertising with? U.S. Report Engaging across generations

Why is Gen Z so influential? The evolving new generation is a trend setter and influencing upper generations with leveraging social.

News

Family School GenX Hot topic on social Established Media News

GenZ Share

Social consumption GenY Social Media

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Based on TNS’s Connected Life, as age becomes younger, User Generated Contents are more consumed.

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CHALLENGES IN CONNECTING WITH GENERATIONS THROUGH ADVERTISING As audiences have become more reliant upon their devices and skilled in finding the content that they are consistently adept at avoiding ads that they perceive to be interrupting, irrelevant or annoying.

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All generations try to avoid ads, especially Gen Z. Gen Z especially take advantage of ads offering control. Gen X lack of interest.

Technological Physical Advantage of Control Lack of Interest

Gen Z Gen Y Gen X 16-19 20-34 35-49 Look away Install ad from screen broker tool

41 35 35 35 30 34

53 39 51 53 73 64

Skip * In US, ad blocking is more Q. What actions have you taken to block or avoid ads on your desktop computer/ in your web serious issue (51% of Gen Z) the ad browser/ on your mobile phone? Engaging across generations

Total Gen Z 19 Changed settings Gen Y 17 Gen X 14 Technological Gen Z 18 I installed an ad blocker plug-in Gen Z and Y rely on 33% Gen Y 22 different avoidance Gen X 20 I installed an ad blocker app Gen Z 7 strategies. Gen Y 11 X Gen X 5

Gen Z 24 Gen Z is most likely to skip and I do something else on my device Gen Y 22 look away. Gen X 20 Physical Gen Z 31 XY Gen Y is most likely to install both 37% I look away from the screen Gen Y 22 Gen X 23 the app and plug-in ad blocker.

Gen X has no idea about how to Gen Z XY deal with ads. I skip ads whenever I can Gen Y 48 Advantage of control Gen X 49 Gen Z 6 60% I'm willing to pay for premium versions of Gen Y 10 websites to avoid ads Gen X 8

Gen Z 12 I don't mind ads while I'm online Gen Y 11 Gen X 14

Lack of interest Gen Z 11 51% I haven't taken any action Gen Y 16 Gen X 18 Z

Gen Z 17 I didn't know there was anything I could do Gen Y 30 Z 16 Gen X 37 Z Q: What actions have you taken to block or avoid ads on your devices? Engaging across generations

FORMAT & CHANNEL CHOICE Use shorter formats and frontload essential content into the first 10 seconds of an ad

Gen Z click fast... And they click often... Observed: Skip time among skippers (seconds) Attitude: “I skip ads whenever I can”

12.6 56 10.9 9.5 Desktop: 50 49

47 Mobile: 40 37 Gen Z Gen Y Gen X

Based on 12 YouTube ads Base: Gen Z 7087 Gen Y 8490 Gen Z 8330

17 Source: AdReaction Gen X, Y, and Z global copy test, 2017 Engaging across generations

Ads are not only annoying but also Gen Z Gen Y Gen X 56 interruptive for all Ads interrupt me when I want to do 52 generations since something else 60 51 43 they are looking into Ads make it hard to find what I'm looking for 36 some information. 40 41 Ads distract me 28

38 44 Ads slow down computer/phone too much 42

35 45 Ads annoy me 40

32 30 Ads are boring 28

29 Ads are generally not relevant or helpful to 43 me 43

28 30 Ads use too much data (mobile phones only) 22

18 Q: Why have you installed an ad blocker on your computer? Engaging across generations

WHAT EACH GENERATION THINKS OF DIFFERENT AD FORMATS While each generation broadly attempts to avoid ads, they do not view advertising monolithically. Their receptivity to advertising formats varies greatly by both medium and format. Contextually-relevant formats marked by simplicity, control and reciprocity are most well-regarded by all generations.

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Recap: Generational Media Consumption

One hour or Overall, TV is still a dominant Gen Z Gen Y Gen X media across generations. more per day

Gen Z spend more time outdoor TV 71 68 78Y as well as using mobile phones. Magazines 7 11 9 Gen Y and Gen X use laptops more since they use them at work. Newspapers 6 8 9 Gen X use mobile significantly less than other generations in Radio 8 18Z 17Z Japan; they keep using traditional feature phones. Outdoor 45X 37X 29

Laptop 58 79Z 82Z

Mobile 67YX 57X 29

MC1AB. Total Hours Watching Television (not Online) MC1AB. Total Hours Using The Internet On A Laptop Or PC For Something Other MC1AB. Total Hours Reading Magazines (not Online) Than Email 20 MC1AB. Total Hours Reading Newspapers (not Online) MC1AB. Total Hours Using The Internet On A Mobile Device For Something Other MC1AB. Total Hours Listening To The Radio (not Online) Than Email MC1AB. Total Hours Travelling Or Walking Out And About Engaging across generations

High usage of mobile doesn’t mean good receptivity for GenZ Net +ve % Gen Z Gen Y Gen X Cinema ads 43 YX 25 X 13 TV ads 37 25 34 Magazine ads 29 24 18 Gen Z love traditional media such Billboard/Outdoor ads 25 X 18 X 11 as TV or OOH. On the other hand, Product placements in movie or shows 19 23 9 their receptivity to mobile ads are Newspaper ads 12 10 22 Z rather negative. Radio ads -3 4 4 For most digital formats, Gen Z’s Online search ads -8 X -8 X -20 opinions mirror those of their Online display ads (laptop or PC) -22 -10 ZX -19 parents, Gen X. Online display ads (mobile) -25 -11 X -30 Video ads (mobile) -28 -13 -24 Among all ad formats, all the generations are positive to TV ad. Video ads (laptop or PC) -32 -20 -23 Gen Y and Gen Z are most Direct mail (postal) -33 -8 -14 receptive toward cinema ads. Gen X is more endorsed with traditional Higher than row average Row Average Lower than row average News paper. Stat testing at 90% confidence level:

21 Q: How would you describe your attitude towards each of the following formats of advertising? Base: Without Doesn't know Engaging across generations

Forced video is perceived negative across Gen, especially among Net +ve % Gen Z Gen Y Gen X Gen Z Mobile app reward 3 X 5 -12 Skippable mobile app pop-up -13 -12 -24

In-banner click-to-play -16 -13 -22 Gen Z is the most sensitive Skippable vertical video -19 -10 -24 audience to the control offering Social click-to-play -24 -12 -22 as seen in very negative Skippable pre-roll -25 -11 -27 receptivity in pre-roll or in-banner auto-play. View to play -35 -22 -31 Social auto-play -38 -24 -32

Mobile app reward is viewed Mobile app pop-up -48 -30 -41 rather positively, followed by ads offering control. Pre-roll -51 -34 -43 In-banner auto-play -51 -28 -33

Stat testing at 90% confidence level: Higher than row average Row Average Lower than row average

Q: How would you describe your attitude towards each of the following formats of online video advertising? 22 Base: Without Doesn't know Engaging across generations

In their own words: Gen Z receptivity to ad formats

Respect my choice Don’t interupt me For Gen Z, they value the freedom to dive into what interests them. Formats 見ている動画、PLAYしてい動画広告が効果的ですがバナー広告だけにして観た disturbing them were not acceptable. るゲームなどと、かなり親密嫌い -Female い動画の中にCMを入れるな関係にあるものを宣伝すのをやめてほしい。また、バ Consequently, skippable ad formats ることが最も効果的であるナー広告のページが勝手 are more valued to this generation. かと。また、スキップが可能に下にずれるなどの現象も Some of them put static over video to だが中毒性のあるリズム、なくてしてほしい。 avoid heavy load time of site. - Male 音楽等が流れている宣伝は特に頭に残りやすいと個人的には思う。 - Male

スキップできる機能をきちんサイトが重くならない広告。とつける。自分の意思でＣ勝手に再生しない動画広告Ｍを見られるようにしてほし Gen Z -Female い - Female

23 If a brand asked you the best way to speak to you and people of your age, what would you say? Engaging across generations

The other generations are also negative to 興味のある人にだけ広告を提供する事。ブランドなら自分のサイト内で forced approach. 広告を提供するなら問題ないが、別に興味もないブランドの広告を見せられるのに我慢ならない。たとえばファッションブランドや車ブランドなど、ファッション雑誌やファッションサイト、車雑誌や車サイトで広告をすればいいのに、まったく関係ないサイトや動画で広告が出てきたらブランド For the other generations, wider イメージも落としている事にメーカーやブランドは気が付いた方がいい。 issues are pointed out. だから広告削除のプラグインなどが流行っている事に気が付いた方がいい。誰も買わないだけではなく買おうと思っていた人ですら離れてい Experience of creative, placements, く事に実際なっている。 targeting, reward, data charge are also influencing to their receptivity. 見る側に見る事を強要する事がない広告。見る側にとってもメリットがあ Gen Y る広告であれば苦痛ではない。具体的に言えば割引クーポン付き広告とかどうでしょう。

シンプルでメッセージ性の高い、簡潔に正確に情報を提供するテレビCM、または、単純だが記憶に残るユニークな表現を交えたタイプのラジオCM、そして、ネット配信の場合には、貴重なパケットを奪って使われた、と感じさせない静止画の一枚広告。

Gen X 如何なる方法であれ、押し売りのような広告は逆効果。あざとさを感じない目を引く広告は興味を引く事もあるが他は邪魔でしかない

24 If a brand asked you the best way to speak to you and people of your age, what would you say? Engaging across generations

Some new ad formats are more accepted by Gen Z.

Positive% Gen Z Gen Y Gen X

Native ads 28 24 14 Native ads, Sponsored lenses are more welcomed by Gen Z. Sponsored lenses 26 25 20