Problem 🎯

An interviewer at Meta asked:

We are planning on launching Facebook Portal – a smart device for video calling. How many do you expect Meta to sell in the first year?

Tips💡

Apply top-down analysisStart with key facts – the population size of the U.S. is about ~300M and Meta has 3.8B active users across all of its app ecosystem (e.g. Facebook, Instagram, WhatsApp). Consider what fraction of the Meta’s user base is within the U.S., then refine the group into particular segments that would most likely be interested in purchasing Portal.
Consider the customer segmentWhat type of users would likely be interested in using Portal? Start with what the device does. Then, focus on the types of users who would be interested in such a product.
Round early when calculating segmentsWhen calculating the segments, you do not need to be precise with the numbers. A rough rounding is perfectly fine. For instance, instead of calculating 4.2 * 10, round down 4.2 to 4 then multiply it by 10. Just make sure you call this out to the interviewer as you are demonstrating your thought process.

Solution ✍️

[Interviewer] We are planning on launching Facebook Portal – a smart device for video calling. How many do you expect Meta to sell in the first year?

[Candidate] Thank you for the question. I’d like to start with some clarifying questions. Could I have a better sense about the price point, target audience and marketing strategy?

Price point: given that the price points for similar products like Amazon Echo and Google Nest Home is about $100 to $300 range. Could I assume that Portal will be priced similarly?
Target audience: could I assume that the target group could be consumers and businesses. On the consumer side, they primarily consist of existing Meta users and, on the business side, they could be mid-to-large-sized businesses partnered with Meta. Is there a particular group you want me to focus on?
Channels and distribution: How will will Portal be advertised? Will it be only on Ads within the Meta ecosystem? And, what about distribution? Will it be sold in brick-and-mortar stores like Best Buy and eCommerce like Amazon?

[Interviewer] Those are great questions. For the price point, you could assume that it’s $110. The target audience group you should focus on is the consumer side. But, you can go ahead and focus on U.S. consumers. The advertisement is purely done on Meta’s ecosystem – Facebook, Instagram, and e.t.c. And, you may not need to worry about the distribution. Just assume that the user can purchase Portal from a dedicated website built by Facebook.

[Candidate] Okay, great! Thank you for the input. Here’s my analysis of how I would estimate Portal sales in the first year.

Define the Target Market:
- Users across Meta ecosystem: I know that the cumulative count of unique users across the Meta platform – Facebook, Instagram, Whats App, and Messenger – is 3.8B, and the population of the world is 7.8. This means that about 50% of the world’s population is active in the Meta ecosystem.
- U.S. population: The population of the U.S. is 330M. Using the 50% ratio calculated previously, I can presume that 150M (330M, rounded down to 300M * 50% ratio) of the users are in the U.S.
- U.S. households: Facebook Portal is a household device. If a family has 4 members – 2 parents and 2 children – it doesn’t make sense for each household to possess one Portal per member. So, I am going to presume the following.
  - Singles – These are individuals who live alone. Let’s presume 1/3 of the 150M U.S. users are in this household. This is about 50M.
  - Couples – 1/3 of the 150M U.S. users are in this household so it’s 50M.
  - Families (3+ members) – This household has 3 or more members – think of parents and children(s). But, let’s assume that the typical family size has 4 – 2 parents and 2 children. 1/3 of the 150M U.S. users are in this household so it’s 50M.HouseholdsSize per HouseholdUser SizesHousehold CountsSingles150M50M (=50M / 1)Couples250M25M (=50M / 2)Families3+50M12.5M (=50M / 4)
    
    Total90M (rounded from 87.5M = 50M + 25M + 12.5M)

Just a pulse-check. Do I have a reasonable estimate about the number of users and households in the U.S.?

[Interviewer] Yes you do. Proceed.

[Candidate] Okay great, continuing my discussion of defining the target market. I need to consider the segment of the households who would care about this. We can consider the segmentation based on three key factors – income bracket, active usage of video calls, and smart device preference per household level.

Factor 1 – Income bracketLet’s presume that 30-50-20 split among the low, middle, and high-income classes. And, that only the users in the middle and high class can reasonably afford the $110 product, which is relatively expensive for low-income households. So, we can assume that only half of the low-income households are open to buying Portal whereas 100% of the households in middle and high-income brackets can purchase the device. Income BracketAllocationSegment SizeTarget %Target Size within SegmentLow30%4M (12.5M rounded down to 12M, 12M x 30% = 3.6M rounded)50%2M (4M x 50%)Middle50%6M (12.5M rounded down to 12M, 12M x 50% = 6M)100%6M (6M x 100%)High20%2M (12.5M rounded down to 12M, 12M x 20% = 2.4M rounded)100%2M (2M x 100%)

Total10MThis means that 10M households are open to purchasing Portal.
Factor 2 – Distribution of video calls per month at the household levelSince I am doing the analysis at the household level, I will assume that it only takes one user who regularly uses video calls to make a purchase of the Portal at the household level. So, we can use this single user as a proxy for the distribution of video calls conducted per month.The second assumption is that the individuals who make video calls regularly are more likely to purchase the portal device.The third assumption is that the distribution of video calls is skewed to the right, but inflated at 0. Given the convenience, most consumers will prefer to text or phone calls over video calls.Based on these two assumptions, I can create a summary table:Video Calls / MonthAllocationSegment SizeTarget %Target Size within Segment030%3M (= 10M x 30%)0%01-350%5M (= 10M x 50%)50%2.5M (5M x 50%)4+20%2M (= 10M x 20%)100%2M (2M x 100%)

Total4.5 (2.5M + 2M)
Factor 3 – Smart device preferenceThe next factor I will presume is that consumers have varying preferences for smart device. So, I will further segment 5M users into 3 groups of smart device interest – low, moderate, and high.
- Low: already have a smart device or no interest in having one
- Moderate: somewhat interested. Or, may already have a smart device, but are still open to having one.
- High: highly interested in having a smart deviceIncome BracketAllocationSegment SizeTarget %Target Size within SegmentLow33.3%1.5M (4.5M * 33.3%)0%0Moderate33.3%1.5M (4.5M * 33.3%)50%0.75MHigh33.3%1.5M (4.5M * 33.3%)100%1.5M
  
  Total2M (2.25M rounded to 2.0; 2.25M = 0.75M + 1.5M)

Based on these assumptions and segmentation, I presume that Meta would sell about 2M Portal devices in the first year in the U.S.

[Interviewer] This is great. Are there any other factors you would consider? Perhaps, focusing on the adoption curve?

[Candidate] I suppose that the 2M users are users likely to purchase the Portal device at some point. But, not all will convert in the first year. A consumer good device usually has a lifecycle of about ~3 years. That’s why major consumer electronic companies like Apple and Microsoft will release new products every 2 to 3 years. To reflect how this device will be converted over time, and refine the number of sales in the first year, I will presume that prospects adopt to a new device in one of three intervals: <1 year, 1 to 2 years, and >2 years.

Adoption in Years	Allocation	Segment Size
< 1	33.3%	~700K (2M * 33.3%)
1 to 2	33.3%	~700K (2M * 33.3%)
> 2	33.3%	~700K (2M * 33.3%)

Considering the adoption curve, I will now adjust the estimation from 2M to 700K Portal devices sold in the U.S. within the first year.

Assessment 📝

Business Sense & Insights

Rating: Outstanding

The candidate demonstrated an outstanding business sense as he understood how price, target segmentation and channels/distribution play important roles in Portal sales. In addition, the retention and utilization of key figures (e.g. the population of the U.S., active number of users in Meta) showed that the candidate is capable of leveraging numbers for insights.

Communication & Presentation Skills

Rating: Outstanding

The candidate’s communication was clear and structured. He started by clarifying the problem and the knowns, proceeded step by step, and summarized his findings. The use of tables to break down calculations was also a great addition.

Technical Methodology

Rating: Outstanding

The candidate showcased a strong understanding of how to apply opportunity sizing to determine the quantity of Portal sold in the first year. Overall the methodology was data-driven and realistic. The use of assumptions, segmentation and calculation were sound.

Problem Solving & Critical Thinking

Rating: Proficient

The candidate demonstrated proficiency in problem-solving and critical thinking in this case problem. What was impressive was that the candidate factored in that Portal is more of a household device, rather than a handheld device like an iPhone. It was clever to take the individual users and then divide it by 3, an approximation of the average household size.

In addition, the candidate’s approach to segmentation and further breaking down the target group by income bracket, video call usage, and smart device preference were all impressive.

However, what the candidate failed to account for was how the devices adapt over time. The question was limited to the adoption within the “first year.” However, candidates seemed to have addressed this from a static standpoint, merely considering how the entire addressable market will convert within the first year.

[Meta] Portal Launch Opportunity Sizing

Problem 🎯

Tips💡

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