Measuring and optimizing our investment in paid ads
This was so helpful. Thanks again!
What can be added?
1. The problem for all subscription businesses, as in your example, is the very low subscription price, as a result, you need to be able to keep a subscriber for a large number of payment periods in order to get a unit the economy is positive.
2. Thus, a lot of effort goes into optimizing conversions and lowering the cost of a lead, but the worst thing is that we find ourselves in a very competitive segment, where a lot of businesses compete for cheap traffic, and as a result, the price of traffic is systematically growing.
3. However, if we raise the price, and focus on LTV, the price of traffic is still important, but not so critical. If, for example, the monthly price of a subscription is $10, and the average LTV is $70, then with the price of a free subscriber, I assume that the average CAC will be about $25-40. This is still good, but critical, since getting a subscriber to pay regularly is difficult, and the development resource is very small.
4. If the subscription price is $50, for example, then the average LTV can jump to $300 or $500, so even if the customer's price goes up to $70-100, it doesn't matter and the economy gets much stronger.
5. This approach raises a different question - what subscription levels to add to increase their monthly price to 50, 100, 500 or 1000$? There are quite a few such cases.
6. This approach, in particular, is widely used in the gaming industry, in the f2p model, which is many times more efficient from an economic point of view than any media business. In such games, the share of paying players is usually no higher than 3%, however, LTV can reach hundreds of thousands of dollars.
Hi, Reid. I made some sort of rating for all newsletters about growth: https://airtable.com/shrmYSQ0Xr2ifzI55 - I subscribed to all of them and try to understand where is really useful content or ... say so less useful.)))
I didn't include the thousands of weird people on Twitter and LinkedIn who write in the style of "I made $100 million, and I'm ready to tell you everything for free ...". Most of them repeat simple patterns and try to sell courses on Gumroad.