It's a small fraction of the real economy, but a large and growing fraction of waking hours. It's hard to measure the consumer surplus created by high-quality entertainment, but it's clearly enormous if people are willing to devote multiple hours per day to TV (or, if they're in the demographic you mentioned, games and the Internet).

If that activity is <.25% of GDP and ~5% of waking hours, it might imply that our measurements are out of whack, not that it's insignificant.

Plus! The rise of online dating might cut into the cosmetics market, by reducing the necessary baseline of attractiveness. If people meet their mates when they're standing in line at the grocery store, looking good in the grocery store has a direct, positive impact on lifetime happiness. If people meet their mates on OKCupid, it's okay not to care too much about personal appearance at other times.