Calculating Revenue Per User
 

How would you guys go about calculating revenue per user for a recurring web service?

Typically, you would just take the total revenue and divide it by the total number of customers. With a recurring service, however, you have to take into consideration the people that have yet to cancel their account (we don't know the value of that customer).

And no..."log into NATS & click revenue per user button" is not a solution for me! :mad:

charge_per_month * average_retention ?

If your initial sales and retention levels are fairly consistent then $rev/customers_count would be reasonably accurate anyway

Yeah total revenue divided by average retention would do the trick. The problem is figuring out the average retention. How do you allow for customers that signed up 1 month ago (but may end up renewing for the next 8 months)? Just counting them as "1 month" into the average retention figure severely weights that number down.

Exclude members that have signed up within the past 1, 2, 3 etc months in your average retention calcs. Don't exclude too far back otherwise long term changes in buying habits could affect the accuracy.

I take it you're trying to value a site for sale? :D

We're just trying to figure out our revenue per user as a base for what we can spend on ad campaigns. If we spend $40 per sale and make $50 per user, we're good to go...for instance.

Yeah taking it back a few months is pretty decent. It'll get it a little more accurate, but could still be way off (if we have a huge ad campaign that started 1 months ago, and I'm going back 3 months).

you should add "upsales" like a profit per member..

lol --> http://www.gofuckyourself.com/image....ine=1208203902