Value of a social network user
how do you put a value on the user of a site such as facebook? or even more so on plentyoffish.com? I'm number crunching a marketing strategy for a startup and wondering where i could find information on the return per user for big name sites? or is this confidential?
2 comments
You're basically asking "What's the net present value of the user?".
Let's say that the average user clicks 1 ad per day, and you get 5 cents per click, then each user is worth 5 cents per day. 5 cents * 365 = $18.25 in revenue per customer per year.
What's your cost? If you're paying $300k / year in salaries, Red Bull, website hosting and office rent to support a website that can handle 20,000 customers, then the cost per customer per year is $15.00.
...so your profit is $3.25 per customer per year.
What's the churn rate? If an average user lasts 2 years, then you're getting $6.50 in total profit per customer.
...except the profit for year two should be "discounted" by some factor (inflation, opportunity cost, risk, etc.). Call the first year $3.25 and the second year $2.50, perhaps.
So: a new customer is worth $5.75.
You can see all of the variables I used above - feel free to substitute your own numbers in.
Let's say that the average user clicks 1 ad per day, and you get 5 cents per click, then each user is worth 5 cents per day. 5 cents * 365 = $18.25 in revenue per customer per year.
What's your cost? If you're paying $300k / year in salaries, Red Bull, website hosting and office rent to support a website that can handle 20,000 customers, then the cost per customer per year is $15.00.
...so your profit is $3.25 per customer per year.
What's the churn rate? If an average user lasts 2 years, then you're getting $6.50 in total profit per customer.
...except the profit for year two should be "discounted" by some factor (inflation, opportunity cost, risk, etc.). Call the first year $3.25 and the second year $2.50, perhaps.
So: a new customer is worth $5.75.
You can see all of the variables I used above - feel free to substitute your own numbers in.
Start at your planned 'revenue event' and work your way backwards to your expected traffic volumes.
For example, if you have a plan to build a site with users and content, and your revenue plan is to sell T-shirts;
- What percentage of checkout pages will be completed?
- What percentage of tshirt page visitors will click the 'buy now' button?
- What percentage of site visitors will click your promo to view the tshirt page?
- How often will your users visit your site?
- How many users will you have?
Selling Tshirts isn't the best revenue model, but you can follow these steps to build a model for anything.
For example, if you have a plan to build a site with users and content, and your revenue plan is to sell T-shirts;
- What percentage of checkout pages will be completed?
- What percentage of tshirt page visitors will click the 'buy now' button?
- What percentage of site visitors will click your promo to view the tshirt page?
- How often will your users visit your site?
- How many users will you have?
Selling Tshirts isn't the best revenue model, but you can follow these steps to build a model for anything.