How you charge - e. free with advertising, freemium, transactional, free trial, one year upfront, etc.
Average Annual Revenue Per User – The average dollars you earn from your customersusers each year.
A common question I get nowadays is: “Why only look at average annual revenue and complete LTV?”
The reason is that most startups need to keep their payback period under a year. If it's much longer than a year, then you'll need more cash to fund growth. This is a catch-22 rule because fast-growing companies are able to raise lots of cash, but if you need lots of cash to grow fast i.e. high payback period, you'll never show the momentum to raise the money you need.
Let's go back to our definition of channel model fitting, where macedonia mobile database the channel is determined by your model, and see why this is the case.
ARPU <-> CAC Spectrum
Every business lies on the ARPU ↔ CAC spectrum. On the far left, your business has a low ARPU and therefore must use low CAC channels to attract customers. On the far right, your business has a high ARPU and therefore is able to use high CAC channels. I'll walk through some examples:
arpucac1.png
Most B2C companies that are driven by an advertising model companies like Facebook, WhatsApp, and Yelp are on the left end of the spectrum. They have lower ARPUs and therefore their product pipeline fits into low CAC channels like Virality and UGC SEO.