How much is riding on your one big channel?
A rule change does not arrive as a percentage, it arrives as a worse cost per acquisition and a smaller audience at the same time. Price the two together and the median year still looks fine, which is exactly why nobody prices it.
Marketing Advanced Monte Carlo Pro engine
After you install, this is the model to open.
What If the Ad Platform Changes the Rules?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
- Median year
- $0 lost, which is exactly why nobody prices it
- Mean
- $495K of gross profit lost a year
- P90
- $1.67M the severe branch arriving
- Channel under water
- 27.2% of years it stops covering its $2.4M spend
One channel, $2.4M of media a year, and a rule change that arrives as two things at once: acquisition gets more expensive and the audience you are allowed to reach gets smaller. The rule-change input says there is a 55% chance of a quiet year, a 32% chance of a mild change and a 13% chance of a severe one, and the two CHOOSE lines turn each of those into a cost multiplier and an audience loss.
Click Run on 20,000 trials, and the first thing to notice about gross profit lost is the median: it is exactly $0. In more than half of all years this exposure costs nothing, which is precisely why it never appears in a plan. The mean is $495,068, the P75 is $830,319 and the P90 is $1,668,277, and the jump between those last two is the severe branch arriving.
The output that ends the argument is the third one: the channel stops covering its own spend in 27 of every 100 years (27.15%). That is higher than the 13% chance of a severe change, because a mild change landing on an already expensive acquisition cost is enough on its own. Second run: halve the media spend to $1,200,000, as though the other half now went somewhere else, and run it again.
The mean gross profit lost falls from $495,068 to $247,534, exactly half, which is what anybody would expect. The number that does not move is the interesting one: the chance the channel stops covering its own spend stays at 27.15%, to every decimal place, unchanged. Concentration decides how much money is at risk. The unit economics decide whether the channel survives a rule change at all.
Diversifying answers the first question and does not touch the second, and if your blended acquisition cost is already 73% of your first-year gross profit, as it is here, a severe change breaks the channel at any size. What this cannot tell you is when. It prices one year of exposure at a standing annual probability, and it has nothing to say about a platform that changes the rules twice in eighteen months, nor about the six months it takes to rebuild an audience somewhere else.
To adapt it, put your real spend and blended acquisition cost at the top, take the first-year gross profit from your own cohort data rather than from a contribution margin, and reset the two CHOOSE lines from what the last real policy change did to your own cost per acquisition.
The model
It arrives on a tab called Template: Platform Dependence:
| Annual media spend on the one channel ($) | 2400000 |
| Blended cost to acquire a customer today ($) | 95 |
| Customers acquired today | 25,263.2 |
| Gross profit per customer, first year ($) | 130 |
| Gross profit from the channel today ($) | 3,284,210.5 |
| Rule change this year (0 none, 1 mild, 2 severe) | 0 |
| Cost-per-acquisition multiplier | 1 |
| Share of the audience lost to targeting limits | 0 |
| Cost to acquire after the change ($) | 95 |
| Customers acquired after the change | 25,263.2 |
| Gross profit after the change ($) | 3,284,210.5 |
| Gross profit lost this year ($) | 0 |
| The channel stops covering its own spend (1 = yes) | 0 |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Did the campaign really move the brand tracker?Two Big Samples, One Real Difference?
- Which media split buys you the most orders?Three Media Plans, Compared
- Which client should you turn down?Which Retainers Fit the Team We Have?
- Would three extra days move your critical path?What Sets the Go-Live Date?
- How many retainers can you afford to lose?What If Two Clients Leave at Once?
- Which launch day is a coin toss against the rival, and which is worse?What launch date has even odds of beating the competitor?
Every model like this one, and the method behind them: Monte Carlo simulation.