Financial forecasting guidance for TV pilots

1. TV CPAs tend to be similar to Facebook prospecting CPAs. (But individual client results vary. Without testing on TV, we will not know, and your results might be better or worse than your FB prospecting results).

2. TV CPVs and Conversions: While TV and Facebook prospecting CPAs are similar, usually TV CPVs and conversion rates are both somewhat higher offsetting each other. The higher CPV reflects the higher effort/engagement required. From TV, a viewer needs to type in the brand or URL versus simply click on a link. The higher conversion rate also reflects the higher needed engagement that demonstrates a higher intent to purchase.

3. FB prospecting results should account for incrementality and margin versus average. Standardly provided view-through metrics VTR overstate the effectiveness of marketing.

4. Early TV spend will not be optimized for creative and platforms (streaming) or networks/rotations (linear). Hence in the pilot weeks, TV CPAs likely will be somewhat higher than Facebook prospecting CPAs.

5. There is some immediate and some lagged acquisition impact from TV spend, especially for linear. Hence, initial week results for CPA measured contemporaneously will not look as good owing to some acquisitions coming in weeks after the TV spend.

6. In addition to directly attributable impacts from TV, there is a halo effect that boosts results in other marketing channels. Owing to the imprecision of measurement and differences in that effect across advertisers, we do not attempt to quantify that benefit.

What is your FB prospecting incremental CPA? (For sake of an example, I'll use $25 but that can be updated).

The simplest and still reasonable way to project TV is to start with the assumption that TV will have a similar CPA to that of Facebook prospecting. Early TV spend might be less efficient than that owing to not yet being optimized.

For example, if Facebook prospecting is delivering at a CPA of $25, then spending $25k per week on TV should yield about 1k acquisitions. Not all those acquisitions will happen immediately and hence the first-week acquisitions might come in at about 2/3 of the total, owing to some people learning about the product but waiting to buy when they have time or the need.

To establish reasonable optimization paths, let's assume that direct CPAs in pilot weeks are:

Let's also assume that acquisitions occur (note that these numbers vary by client):

With those assumptions, the following results are projected to occur:

Note as mentioned above, this forecast only reflects directly attributable impacts of TV and you should benefit from the halo impacts as well.

Note that the vast majority of clients continue after the pilot and frequently ramp up spend even dramatically. That implies TV usually works as a component of these companies' marketing mix. In some cases, the pilot does not hit KPI goals but demonstrates a path to do so. In some other cases, TV is profitable even in pilot before more optimizations can occur.