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Impact of TV advertising on Digital Startups: Some Examples

RDesign - 22 Febbraio 2018 - 0 comments

Photo by Muhd Asyraaf on Unsplash

By Carlos Vázquez, Investment Manager at Ad4Ventures Spain (Mediaset Group).

Ad4Ventures is the venture capital arm of Mediaset Group (leading free to air television broadcaster in Spain and Italy), focused on television media for equity deals. Ad4ventures has become the largest media for equity player in Southern Europe.

No doubt that at Ad4Ventures, as a media for equity VC fund, we analyze online LTV vs CAC, cohorts, conversions funnels, scalability, team, TAM and so on. In fact, we strongly believe and recommend that a digital business must master the digital world prior to considering a mass media campaign (take a look at our post regarding “When is the right time to think about Television for a digital startup?).

Being efficient in consumer acquisition is key in the early stages of a digital business, in order to prove viability to have access to funding. However, at a certain point in time, performance marketing may have its limits due to diminishing performance returns, the ability to reach larger audiences or lead a market, your capacity to communicate unknown new solutions (that nobody will look for) or the capacity to scale up to breakeven. Can a digital business afford a long period to reach this sweet point once it has proven a market/product fit and/or a solution that really solves a problem?

If you spend a couple of hours watching TV you will notice that many of the most relevant digital players will be advertising (e.g. Amazon, eBay, Apple), especially those of very competitive and mature online sectors like travel (Booking, KAYAK, Trivago, Momondo, etc.). Why digital top-of-mind brands have gone beyond the established LTV vs CAC dogma going offline? After having worked, analysed and optimized TV campaigns of tens of digital start-ups, we have gained some knowledge that we’d like to share with you about the TV impact on a digital business that go beyond just buying traffic/downloads:


B2C online performance marketing is becoming more and more costly, being competition fierce among the different performance channels (SEM, FB, IG, Twitter, etc.). It has become very difficult and expensive to gain visibility in certain categories (hotels, flights, vacations, e-commerce, etc.). Take a look, as an example, to the result for searching the word “hotel” in Google. First of all you will find the SEM paid ads which can only be afforded by the industry giants. Note that Google has included its own metasearch right after, making it very difficult to make a new business visible with a pure SEO strategy, increasing therefore the overall user acquisition bill.

On another hand, native digital businesses end up having a strong dependence on online performance marketing, requiring a large and sustainable level of marketing expense as a % of revenues if the company wants to maintain growth rates.

TV should help a digital business generate healthy growth while reducing dependence on performance channels by improving their organic growth, consolidating a better market positioning and leading to a more efficient online marketing acquisition (i.e. lower CAC).

The way brand awareness is normally understood is like an intangible asset expressed in the way of notoriety and brand recognition. In the example below, we see through surveys the way the brand of the company is recognized compared to competitors before and after the campaign

Another way of understanding the “intangible impact” would be to look, once again through surveys, at the purchase intent of the people asked, before and after the advertising effort:

A tool that gives some useful information in the digital world (obviously with certain caveats and limitations) is Google Trends. TV advertising becomes very visible when looking at brand searches over time:

In the case of Deporvillage, one of our participated companies, prior to launching their first TV campaign, the company was #3 outdoor sport apparel company in Spain by organic searches according to Google Trends (far away from the leader in the sector — Wiggle). However, after three TV waves, as well as several other operational improvements, Deporvillage has managed to become #1 in the market, while reducing the % of marketing expense over revenues.

On the other hand, in France, Deporvillage has been benefiting from the general operational improvements of the company and has steadily invested in online marketing (with the exception of a recent small TV campaign in a sports channel), achieving attractive revenue growth rates, maintaining the same % of marketing expense over revenues, but remaining far from leading the market.


There is a strong believe that nowadays all individuals can be reached through digital advertising, but when performing awareness surveys, we realize that most digital solutions/products launched over the last couple of years are broadly unknown to the masses, people who may be eager to become users should they be aware of the existence and benefits of those products.

The most unbeatable feature of TV advertising is “Reach”. A TV campaign has the ability to impact millions of potential customers in a short period of time (bear in mind that, depending on the country, TV is watched by 85%-95% of the population). We have talked in previous posts about the diminishing returns of performance marketing when scaling up. TV allows you to expand your market by increasing penetration in target groups which neither you nor your competitors have reached out before.

In the example below, we see the way La Nevera Roja and Just Eat expanded the market penetration of the food delivery category in the Spanish market by investing on TV (Google Trend searches).

As we can see in our post “The Virtuous Cycle of TV Impact on Digital Startups”, scale can become the real game changer for a startup as it allows it improve negotiation power with suppliers, reach profitability (due to operational leverage) or reach market leadership.

Another very relevant feature to take into consideration is TV as a powerful tool to discover new products. It is very difficult to make your product/solution visible in search engines if they are to some extent disruptive or represent a solution that people do not know they exist (as nobody will look for you). TV gives you time to present your product in a visual way so that it can be very effective to let people know of the problem that is intended to solve. In this case, we will always recommend startups to be very direct and explanatory in the communication campaign.


How many times have you seen the “seen on TV” claim? As ridiculous as it may sound, once on TV your business automatically becomes “real”, customers won’t wonder if your product/service is a scam (it has been working for ages!). Thus, increasing your conversion rates which makes online efforts more efficient.

In the example below, we see how, with a short/small campaign, the company increased the number of weekly orders after the campaign, but not so much as a result of many more visits, but due to improved conversion rates.

This fact can be cornerstone for businesses were trust is critical, such as fintech, e-health or businesses with high purchase tickets. In the example below, we refer to a fintech business you can see the way not only the number of sessions grow from week 24 (when TV starts) but also the way conversion rates improvement.


When talking about launching a TV campaign for the first time, online CMOs often propose stopping online marketing throughout the TV effort so that they can more easily attribute what the actual acquisition cost per channel is. We find this as a large error as one of the most relevant impacts of TV is the improvement of the efficiency of online marketing, both at the time of the campaign and thereafter. People get to know you through TV spots but they need to find you in their search engine.

Online and offline efforts complement each other magnifying the overall impact.

Why is TV advertising improving the efficiency of online marketing? As mentioned in our post “The Virtuous Cycle of TV Impact on Digital Startups” SEO positioning gets better (as you become more relevant for Google searches), CTR (click-through-rate) increases in relevant searches (as you are known to the user) or in case of mobile apps, the fact of being at the top rankings of the app stores (due to a large number of downloads within the campaign weeks) generates snowball effects. All of this should result in lower performance marketing unit acquisition costs.

In the example below we see a blended online CPI in the region of 1,4€ before going offline. During the TV campaign this increases to around 3,5€ in average, declining to 0,35€ in the weeks in between when there is no TV (due to short term snowball effects), but stabilizing in a sustainable 0,85€ once the campaign is over. Interesting to look at weeks 18–20 when the increase in the online marketing effort at the time of the campaign brings to lower blended CPIs while achieving large scale.


Retention/Repetition is key in a startup business, not only because of the mathematical impact on the Life Time Value formula, but also because it becomes a very relevant measure of customer satisfaction, and therefore, whether the product actually solves a problem. The investment decision in several of our participations was done on the basis of excellent cohorts analysis. Also a long period repetition profile can allow you be more aggressive in terms of marketing effort as if you increase your target marketing payback from 12 to 24 months recovery, this should help the business scale up significantly.

Coming back to the impact of TV, what we see is that the campaign has a remarkable impact on the ability to wake up old and passive users, who once reminded about the existence and the beauty of the product, purchase again, improving historic cohorts. A very illustrative example is the food delivery case. TV campaigns intentionally showing delicious hamburgers or cheese pizzas right before dinner time (especially on a rainy Sunday evening before the football match of the century…) increase the consumption of historic users of food delivery services.

In the example below we can see in a graphic way the average repetition profile of cohorts before and after the campaign, showing a tangible impact.


Very often, when people look at marketplaces, the analysis is focused on the demand side CAC, ignoring the fact that you need to have a wide and varied supply side to generate liquidity and make the marketplace work, and this, has a cost. One of the aspects that we have observed when advertising marketplaces is that the reaction rate from the supply side tends to be even greater than the demand. A lawyer or a restaurant owner who sees a TV spot that advertises a lawyers marketplace or a food delivery platform, will most likely pay much more attention to it than any other person who may need or not a legal service or a pizza being delivered.

In the case of La Nevera Roja (food delivery platform), restaurant acquisition was mainly run through telesales and lots of cold calls to restaurants to explain what the platform was about. After the campaign (starting in May 14), the restaurants were the ones who proactively started calling to become part of the platform.

Assuming that the key elements to make a marketplace work are 1) liquidity (large interaction between demand and supply); 2) trust; and 3) user experience superior to the existing alternatives, TV can have a significant impact on points 1) and 2), allowing the business benefit from the exponential impact of network effects, ideally leading to a “Winner takes it all” case.

Wrap up — A more elaborated example

Until this point we have illustrated TV benefits in different areas of a digital business as “buckets”, however the whole TV impact is greater than the sum of the parts. Let us illustrate this with a practical example (for which we cannot identify the company for obvious confidentiality reasons).

In this example, we can observe a background situation with declining YoY Sales growth rates as a result of a strategy of increasing prices and the diminishing effect of performance marketing, having large marketing costs over sales.

On chart (1) we see large online marketing effort in the first months, with declining YoY revenue growth rates down to negative in those months when online marketing is considerably reduced. A strong TV advertising effort over the following months manages to revert the declining trend, leaving it at a sustainable YoY growth level above 40% once the TV effort is over and with a much lower online marketing spend.

Following with the example, on (3) we see a unit CAC in the region of €75 before the campaign, increasing to an average of €100 during the TV effort, but declining to €60 right after with attractive YoY growth rates (as seen in the chart before). Number (4) shows a company with declining growth rates where online marketing expense was representing more than 10% of monthly revenues, becoming a growing company with less than 3% marketing expense over revenues after the offline advertising effort.

Despite all of this, the actual impact of an advertising campaign on a digital business, and therefore the success or failure, will strongly depend on the type of product advertised, the way the TV spot is focused, the size of the campaign and the ability of the company to meet the expectations of the customer (business maturity, operational capacity, etc).

Feel free to contact us on and we will be happy to review and assess your particular case and give you our views.