Hi!I shouldn’t admit this, but I rarely get up before my alarm rings in the morning. The snooze button and I play out a familiar battle that I typically win.
However today I actually woke up a whole 20 minutes before my alarm went off. I figure I can take the next 15 minutes of time to get some thoughts down… About anything.
Last night I had a good discussion about web application growth. I’ve been learning that after building an app there are a lot more things to consider than new functionality, beautiful design, and crafty code. Building an app is really only 20% of building a business (and 20% may be a generous # since I am a developer and product person). There are so many other things you also need to worry about.
The area that really geeks me out lately is user acquisition and revenue. I’ve been spending a lot of time thinking about that stuff. One of my recent thoughts is figuring out the sweet spot of Revenue Per User (RPU).
Say I want to earn $10k per month from my web service. If I have 20k users that means my RPU must be $6 for the year (at $0.50 per month). For most consumer web products that’s a lot! That means I need to find something I can offer each of my users that returns $6 to me.
One way I am looking at this is by considering the variables in a simplified (and admittedly naive) equation:
# of User x RPU = Total Revenue
RPU = Total Revenue / # of Users
This leaves me feeling that I do not have direct control over the RPU as it is a function of my desired Total Revenue and # of Users. So what can I control? Really the only thing I can control is what my desired Total Revenue is. I can lower it and thus the RPU becomes more manageable… Or I can do the more challenging thing and find new users to dilute the RPU.
If I increase my # of Users while keeping my Total Revenue the same I can distribute the RPU across those users. For example if I raise my user base to 40k users then my RPU is $3 for the year (at $0.25 per month).
This seems more ideal to me as the lower I get my RPU the more obtainable options I have for creating value from my site. For example placing ads or offers on the site becomes realistic if I lower my RPU to $0.05 to $0.10. However that means I need to have 2.4 to 1.2 million users (respectively)… Yikes!
So this becomes a play on volume of users. How to I find my new users and grow to grow my service? More on that later as my 15 minutes are up!
