February 18, 2010 | Authored by: Vindicia Team Blogs
Online Business Metrics
If you’ve talked to us here at Vindicia, you know that we’re passionate about helping online merchants grow revenue through increasing customer acquisition and retention.
That might seem strange for a billing company, but we think everyone selling digital goods online should focus on the levers that really impact their business – and our billing solution provides some of the answers.
So what metrics should you be tracking to understand acquisition & retention? This will depend on the nature of your products, but the following are a good start:
- Monthly Unique Visitors (Monthly Active Users for social network apps & games)
- Campaign conversion
- Trial conversion
- Free to paying user conversion
- Offer page conversion
The metrics above disregard the work necessary for SEO & page ranking in search results (which obviously affect customer acquisition), but they are a good place to start for customer acquisition. For customer retention, the basic list should include:
- Customer Duration
- Average Ticket Price
- Number of purchases / month*
- ARPU / ARPPU (monthly)*
- % of payment failures (gross & net, where net = passive opt outs after retry schedule)
* = microtransaction / free to play specific metrics
The average customer lifetime value (ACLV – product of customer duration & average ticket price) will also inform customer acquisition spend in the virtuous circle of online businesses.
Now that we’ve discussed the typical metrics, let’s take a look at some baseline values by industry.
Social / Casual Gaming
- Free to Paying user conversion – Many analysts are plugging in 10% as an intuitive guess. From our experience, this is a highly subjective number and our microtransaction-based merchants have conversion rates ranging from 6% to nearly 20%
- ARPU / ARPPU – Again, the blogosphere has done much analysis on these numbers and the consensus tends to be around $0.40 for Facebook games and around $1-$2 per user per month for standalone sites. Our merchants in this space tend to range between $1.25 to over $2, so these numbers seem to be inline.
- % of payment failures – This tends to be higher for microtransaction-based games than subscription counterparts due to the nature of “one-time” transactions. The gross payment failure rate tends to be around 30%-40% as compared to a 20%-30% rate for subscriptions. Note that the net payment failure rate after billing retries is much, much lower, especially for subscription-based games (typically from 3% – 10% total).
- Number of purchases / month – Our evidence indicates that the paying users are making multiple purchases per month – from three purchases every two months on average for one merchant to several per month for others.
Premium Content / B2C Software / Subscription MMOs
- Customer Duration – While this depends on the product and the relative value for consumers, most of our merchants are finding a customer duration of 6 – 18 months, longer if products are renewed annually.
- % of payment failures – As mentioned in the social gaming section, subscription-based sites have a much lower net failure rate. Our merchants are regularly achieving 90%+ retention rates.
The metrics covered here are the ones that we are most often asked about, and this is an effort to share what we’ve learned from our experience running consumer sites and working with our merchants across different industries. As with any metric though, each of these will depend on the products offered, target markets and customer demographics. For further reading on these topics, I’ve suggested a few links below.
Customer Duration / ACLV
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