Value of a social network user

https://news.ycombinator.com/item?id=496133

by maxer • 17 years ago

6 2 17 years ago

news.ycombinator.com

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?

tjic• 17 years ago

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.

eatenbyagrue• 17 years ago

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.

Value of a social network user

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