Summary
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Lifetime value metrics for subscription / a la carte businesses
This spreadsheet lets you play around with your viral growth, how your revenue sources work, and how your financial model interacts with your paid user acquisition strategy (namely: buy users when it costs less than their Lifetime Value [LTV]). Try it out by changing the variables on the VARIABLES page!
Daniel James (Three Rings)
4/27/2010Distributed for free under GNU Free Documentation License - http://www.gnu.org/copyleft/fdl.html
Lifetime value metrics for subscription / a la carte businesses
v1: Based on the retention rate, ARPU, and registration funnel, what is your LTV? And can you re-invest that LTV cash profitably to acquire more users via paid acquisition?
v2: With evidence from the growth of social networks, the viral growth model was changed to a more accurate population growth equation. The "OVERVIEW + VARIABLES" sheet was added to quickly alter variables and show the results to interested parties (or potential investors).Aidan Nulman ([email protected])Andrew Chen ([email protected])
http://youphonics.posterous.comhttp://andrewchenblog.comhttp://thefloggingwillcontinue.com
If you have questions, anything to add, or want to generally chat, don't hesitate to reach me at my e-mail address, voodoo [at] gmail --Andrew Chen
Likewise! aidan [at] youphonics. Also, if you're looking for a template for your pitch deck, benefit from my research and download this spreadsheet's companion at http://aidannulman.com/2010-pitch-template --Aidan Nulman
This spreadsheet lets you play around with your viral growth, how your revenue sources work, and how your financial model interacts with your paid user acquisition strategy (namely: buy users when it costs less than their Lifetime Value [LTV]). Try it out by changing the variables on the VARIABLES page!
PAID USER ACQUISITION USER METRICS
Monthly ad spend increas 5% PopulationPop. at Day 0 1000
Google Carrying constant 100,000,000CPC $1.00 Growth rate 30%# of impressions 25,000 Retention rate 80%CTR 1.0%Signup % 10% Miscellaneous
Free-to-pay conversion 1%Ad.com Cost of service (per user) $0.68CPM $1.00# of impressions 250,000CTR 0.5%Signup % 20%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Ad spend versus Revenue
Revenue
Total cost
REVENUE MODEL
ProAverage monthly revenue $10.00Adoption rate (% of total paid) 90.0%
PartnerAverage monthly revenue $15.00Adoption rate (% of total paid) 8.0%
More options can be addedAverage monthly revenue $2,000.00More adoption (% of total paid) 2.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Ad spend versus Revenue
Revenue
Total cost
Paid user acquisition model
Source CPM CPC CPA Impressions CTRGoogle $1.00 25,000 1.00%Ad.com $1.00 250,000 0.50%
Total 275,000 0.55%
Paid user acquisition model
Clicks Signup % Registered users Cost CPA250 10% 25 $250 $10.00
1250 20% 250 $250 $1.00
1500 18% 275 $ 500.00 $ 1.82
User funnel and simple viralityFree-to-pay conversion 1%
CPA (unadjusted for virali $ 1.82 New registered uu / week 275 Ad spend increase % 5%
Carrying constant 100,000,000Growth rate 30.00%
time period viral acq users bought users1 1,000 275 2 382 289 3 584 303 4 850 318 5 1,200 334 6 1,661 351 7 2,264 369 8 3,054 387 9 4,086 406
10 5,433 427 11 7,190 448 12 9,481 470 13 12,464 494 14 16,347 519 15 21,401 544 16 27,973 572 17 36,519 600 18 47,623 630 19 62,046 662 20 80,769 695 21 105,056 730 22 136,535 766 23 177,292 804 24 229,990 845
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
User funnel and simple virality
ad spend total new users paying users cumulative users $ 500.00 1,275 13 1,275 $ 525.00 671 7 1,946 $ 551.25 887 9 2,833 $ 578.81 1,168 12 4,002 $ 607.75 1,535 15 5,536 $ 638.14 2,012 20 7,548 $ 670.05 2,633 26 10,181 $ 703.55 3,441 34 13,622 $ 738.73 4,492 45 18,114 $ 775.66 5,860 59 23,974 $ 814.45 7,638 76 31,612 $ 855.17 9,951 100 41,563 $ 897.93 12,958 130 54,521 $ 942.82 16,866 169 71,387 $ 989.97 21,945 219 93,332 $ 1,039.46 28,545 285 121,877 $ 1,091.44 37,119 371 158,996 $ 1,146.01 48,253 483 207,250 $ 1,203.31 62,708 627 269,957 $ 1,263.48 81,464 815 351,421 $ 1,326.65 105,785 1,058 457,206 $ 1,392.98 137,301 1,373 594,507 $ 1,462.63 178,096 1,781 772,604 $ 1,535.76 230,835 2,308 1,003,439
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
User funnel and simple virality
cum. paying users adj CPA 13 $ 0.39 19 $ 0.78 28 $ 0.62 40 $ 0.50 55 $ 0.40 75 $ 0.32 102 $ 0.25 136 $ 0.20 181 $ 0.16 240 $ 0.13 316 $ 0.11 416 $ 0.09 545 $ 0.07 714 $ 0.06 933 $ 0.05 1,219 $ 0.04 1,590 $ 0.03 2,072 $ 0.02 2,700 $ 0.02 3,514 $ 0.02 4,572 $ 0.01 5,945 $ 0.01 7,726 $ 0.01 10,034 $ 0.01
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Cumulative users over time
Time period
Tota
l users
User retentionretention rate % 80%
Paying user retention matrixTime period
1 2 3 4 5 6
Time-period cohorts
1 13 10 8 7 5 4 2 19 16 12 10 8 3 28 23 18 15 4 40 32 26 5 55 44 6 75 789
101112131415161718192021222324
paying users 13 30 52 82 121 172
Total users (paying and free) retention matrix1 2 3 4 5 6
Time-period cohorts
1 1,275 1,020 816 653 522 418 2 671 537 430 344 275 3 887 710 568 454 4 1,168 935 748 5 1,535 1,228 6 2,012 789
1011
Time-period cohorts12131415161718192021222324
paying users 1,275 1,691 2,240 2,960 3,903 5,134
User retention
Time period7 8 9 10 11 12 13 14
3 3 2 2 1 1 1 1 6 5 4 3 3 2 2 1 12 9 7 6 5 4 3 2 20 16 13 10 8 7 5 4 35 28 23 18 15 12 9 7 60 48 39 31 25 20 16 13 102 81 65 52 42 33 27 21
136 109 87 70 56 45 36 181 145 116 93 74 59
240 192 153 123 98 316 253 202 162
416 333 266 545 436
714
239 328 443 594 792 1,049 1,384 1,821
Total users (paying and free) retention matrix7 8 9 10 11 12 13 14
334 267 214 171 137 110 88 70 220 176 141 113 90 72 58 46 363 291 233 186 149 119 95 76 598 479 383 306 245 196 157 125 982 786 629 503 402 322 257 206 1,609 1,288 1,030 824 659 527 422 338 2,633 2,106 1,685 1,348 1,078 863 690 552
3,441 2,753 2,202 1,762 1,409 1,128 902 4,492 3,594 2,875 2,300 1,840 1,472
5,860 4,688 3,750 3,000 2,400 7,638 6,111 4,889 3,911
9,951 7,961 6,369 12,958 10,366
16,866
6,740 8,833 11,559 15,107 19,724 25,730 33,542 43,699
User retention
Time period15 16 17 18 19 20 21 22
1 0 0 0 0 0 0 0 1 1 1 1 0 0 0 0 2 2 1 1 1 1 1 0 3 3 2 2 1 1 1 1 6 5 4 3 2 2 2 1 10 8 6 5 4 3 3 2 17 14 11 9 7 6 4 4 29 23 18 15 12 9 7 6 47 38 30 24 19 16 12 10 79 63 50 40 32 26 21 16 129 104 83 66 53 42 34 27 213 170 136 109 87 70 56 45 349 279 223 179 143 114 91 73 571 457 366 292 234 187 150 120 933 747 597 478 382 306 245 196
1,219 975 780 624 499 399 319 1,590 1,272 1,018 814 651 521
2,072 1,658 1,326 1,061 849 2,700 2,160 1,728 1,382
3,514 2,811 2,249 4,572 3,658
5,945
2,390 3,131 4,095 5,348 6,978 9,097 11,850 15,425
15 16 17 18 19 20 21 22 56 45 36 29 23 18 15 12 37 30 24 19 15 12 10 8 61 49 39 31 25 20 16 13 100 80 64 51 41 33 26 21 165 132 105 84 67 54 43 35 270 216 173 138 111 88 71 57 442 353 283 226 181 145 116 93 722 577 462 369 296 236 189 151 1,178 942 754 603 482 386 309 247 1,920 1,536 1,229 983 786 629 503 403 3,129 2,503 2,002 1,602 1,282 1,025 820 656
5,095 4,076 3,261 2,609 2,087 1,670 1,336 1,068 8,293 6,634 5,307 4,246 3,397 2,717 2,174 1,739 13,493 10,794 8,635 6,908 5,527 4,421 3,537 2,830 21,945 17,556 14,045 11,236 8,989 7,191 5,753 4,602
28,545 22,836 18,269 14,615 11,692 9,354 7,483 37,119 29,695 23,756 19,005 15,204 12,163
48,253 38,603 30,882 24,706 19,765 62,708 50,166 40,133 32,106
81,464 65,171 52,137 ### 84,628
137,301
56,905 74,069 96,374 125,353 162,990 211,855 ### 357,517
23 24 0 0 0 0 0 0 1 0 1 1 2 1 3 2 5 4 8 6 13 11 22 17 36 29 59 47 96 77 157 125 256 204 417 333 679 543 1,106 885 1,799 1,439 2,926 2,341 4,756 3,805 7,726 6,181
10,034
20,066 26,087
23 24 9 8 6 5 10 8 17 13 28 22 45 36 74 59 121 97 198 158 322 258 525 420
855 684 1,391 1,113 2,264 1,811 3,682 2,945 5,986 4,789 9,731 7,784 15,812 12,649 25,685 20,548 41,709 33,367 67,703 54,162 109,841 87,873 178,096 142,477
230,835
464,110 602,123
Revenue versus ad spendRevenue mix Avg rev %Pro $10.00 90%Partner $15.00 8%More $2,000.00 2%Rev/paying $50.20
Cost of service $0.68
Time period 1 2 3 4Paying users 13 30 52 82Total users 1275 1691 2240 2960Revenue $640 $1,489 $2,614 $4,100 Ad spend $500 $525 $551 $579 Cost of service $867 $1,150 $1,523 $2,013 Total cost $1,367 $1,675 $2,074 $2,592
Profit per user $ (57.02) $ (6.27) $ 10.35 $ 18.46 Month's profit $ (726.95) $ (185.99) $ 539.08 $ 1,507.80 Profit-to-date $ (912.94) $ (373.86) $ 1,133.94
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Ad spend versus Revenue
Revenue
Total cost
Revenue versus ad spend
5 6 7 8 9 10121 172 239 328 443 594
3903 5134 6740 8833 11559 15107$6,059 $8,636 $12,020 $16,454 $22,256 $29,840
$608 $638 $670 $704 $739 $776 $2,654 $3,491 $4,583 $6,006 $7,860 $10,273 $3,262 $4,129 $5,253 $6,710 $8,599 $11,048
$ 23.18 $ 26.20 $ 28.26 $ 29.73 $ 30.81 $ 31.61 $ 2,797.17 $ 4,506.93 $ 6,766.51 $ 9,744.01 $ 13,657.82 $ 18,791.76 $ 3,931.11 $ 8,438.03 $ 15,204.54 $ 24,948.55 $ 38,606.36 $ 57,398.13
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Ad spend versus Revenue
Revenue
Total cost
11 12 13 14 15 16792 1049 1384 1821 2390 3131
19724 25730 33542 43699 56905 74069$39,741 $52,658 $69,496 $91,433 $119,999 $157,182
$814 $855 $898 $943 $990 $1,039 $13,412 $17,496 $22,808 $29,716 $38,695 $50,367 $14,227 $18,352 $23,706 $30,658 $39,685 $51,406
$ 32.23 $ 32.70 $ 33.08 $ 33.37 $ 33.60 $ 33.78 $ 25,514.75 $ 34,306.26 $ 45,789.51 $ 60,774.51 $ 80,313.85 $ 105,775.26 $ 82,912.87 $ 117,219.13 $ 163,008.64 $ 223,783.15 $ 304,096.99 $ 409,872.25
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Ad spend versus Revenue
Revenue
Total cost
17 18 19 20 21 224095 5348 6978 9097 11850 15425
96374 125353 162990 211855 275270 357517$205,561 $268,488 $350,309 $456,661 $594,846 $774,320
$1,091 $1,146 $1,203 $1,263 $1,327 $1,393 $65,534 $85,240 $110,833 $144,062 $187,183 $243,111 $66,626 $86,386 $112,036 $145,325 $188,510 $244,504
$ 33.93 $ 34.05 $ 34.14 $ 34.22 $ 34.29 $ 34.35 $ 138,935.58 $ 182,102.62 $ 238,272.88 $ 311,335.59 ### ### $ 548,807.83 $ 730,910.45 $ 969,183.33 ### ### ###
23 2420066 26087
464110 602123$1,007,303 $1,309,568
$1,463 $1,536 $315,595 $409,443 $317,057 $410,979
$ 34.40 $ 34.45 ### ###### ###
Lifetime valuePaying users LTVTime period 1 2 3 4 5Paying users 13 10 8 7 5
User periods 63Rev/paying user $50 Aggr LTV $3,185
LTV for paying user $249.81
New users conv % 1%
New (unregistered) users LTVTime period 1 2 3 4 5New users 1275 1020 816 653 522
User periods 6345Aggr LTV $3,185
LTV for new users $2.50
Lifetime value
6 7 8 9 10 11 124 3 3 2 2 1 1
6 7 8 9 10 11 12418 334 267 214 171 137 110
13 14 15 16 17 18 191 1 1 0 0 0 0
13 14 15 16 17 18 1988 70 56 45 36 29 23
20 21 22 23 240 0 0 0 0
20 21 22 23 2418 15 12 9 8
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