A Crystal Ball for your Internet Startup

August 30, 2009

Mike Koss – StartPad.orgStartupWeekend – BizSpark/Redmond

Your Site = Social Experiment

Predictions

• How many unique visitors will you eventually have?

• What will be your maximum revenue?

• What is the life-time value of a new customer?

• How much is your business worth?

• How can you improve the above?

A Simple Model

ActiveUser Base

New Users Leave

Stay

%(Attrition)

A Simple Example

ActiveUser Base

New Users Leave

Stay

%(Attrition)

ActiveUser Base

New Users Leave

Stay

%(Attrition)

User Growth

-

2,000

4,000

6,000

8,000

10,000

12,000

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Months

Users

10% - > 10,000

30% - > 3,333

50% - > 2,000

80% - > 1,250

Max User Base = New Users/Attrition_rate (1,000)

What Can Change?

• # of New Users:– Search Engine Optimization (SEO)– Paid Ads– PR or “Events”

• The user type:– May have different expectations or be more or

less inclined to join

• Attrition rate (through site improvements or active engagement, e.g. email)

ActiveUser Base

New Users Leave

Stay

%(Attrition)

ActiveUser Base

New Users Leave

Stay

%(Attrition)

StartPad.org

Example (cont)

958 Unique(Last Month)

836 New Leave

89 Returns

91%(Attrition)

Prediction:User Base Peak =

836/91% = 919

A “Freemium” Model

Organic

New Users

Paid

Viral

Free TrialUsers

%

ConversionRates

%

%

Leave

%

$$$Subscription

Users

Leave

%

Referrals

%

Data Collection

• Customization of Google Analytics Needed

• User Defined variable can be used to tag each user as “Paid”, “Referral”, “Trial”, or “Subscriber”

• “Cohort Analysis”– Track individual users by month they first

visited your site (or signed up for an account)– Track each cohort monthly to see % returning

Summary

• Understanding your web site dynamics you can predict:– Peak User Base (Trials and Subscribers)– Expected Lifetime of each user class– Lifetime value of each new user– Peak Revenue– Current Enterprise Value

Download Spreadsheet fromhttp://startpad.org/crystal-ball

Photo Credits

1. http://www.flickr.com/photos/plasticbystander/