3. Web Business Models
Advertising
Social (Facebook, Pinterest)
Content (NY Times, Youtube)
Search
Software as a Service: SaaS (Salesforce, Zendesk, Chartio)
Market Places
E-Comerce
4. Social
Viral Coefficient
How many users each new user brings.
k = viral coefficient
k = (# invites sent/user) * (# invites accepted/# invites sent)
k = .8 k = 1.2
50" 300"
45"
250"
40"
35"
200"
30"
25" 150"
20"
100"
15"
10"
50"
5"
0" 0"
1" 2" 3" 4" 5" 6" 7" 8" 9" 1" 2" 3" 4" 5" 6" 7" 8" 9"
5. Social
Viral Cycle Time
The time it takes a user to invite other users.
25000" 160"
140"
20000"
120"
10"days" 10"days"
15000" 100"
20"days" 20"days"
80"
40"days" 40"days"
10000" 60"
80"days" 80"days"
100"days" 40" 100"days"
5000"
20"
0" 0"
1" 2" 3" 4" 5" 6" 7" 8" 9" 10" 11" 1" 2" 3" 4"
7. SaaS
Churn Rate
aka. attrition
How often you lose customers.
If you have 100 customers,
and you lose 10 of them in a year
you have a 10% annual churn rate.
8. SaaS
ASP: Average Selling Price
The average price that you sell your product for.
ASP = ARR / # of Customers
Why its important:
Determines your sales and distribution strategy. Can you afford a sales
team? Can you afford adwords?
9. SaaS
ACS: Average Cost of Service
Your average cost to support and maintain a customer.
ACS = Total Expenses / # of Customers
Trend:
This should ideally trend downward as your number of customers goes up.
10. SaaS
CLTV: Customer Lifetime Value
Average total expected revenue from a customer.
simple CLTV = ASP / churn rate
Why its important:
This also determines your go to market strategy. Can you afford a sales
team or adwords?
11. SaaS
CAC: Customer Acquisition Cost
The average cost to gain a new customer.
costs: adwords, sales, marketing, PR
Why its important:
Acquiring a customer along with the ASP must cost less than the life time
value the customer will bring in.
12. SaaS
Profit?
Profit = (LTV - CAC - ASP) * # Customers
So you need
LTV > CAC + ASP
