ad network revenue calculation
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Ethical Shopperad network revenue calculationStanford Venture Lab 2012technology entrepreneurship
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The math: Non-converted usersCalculation for this is (per 100,000 downloads) using industry averages.
Assumption: 10% are "converted", choosing to keep the app and become premium customers. Remaining 90% of users are "non-converted" and delete the app after 5 minutes.
For the 90%:
Assumption: 80% of users have spare data plan and are network connected
90,000 x 0.8 = 72,000
Each ad must be displayed for 30 seconds, so to calculate impressions per minute
72,000 x 5 = 360,000 minutes x 2 impressions / minute = 720,000 impressions
Assumption: 100% of ad space used; eCPM = $3.00
720,000 / 1000 (CPM is per 1000) = 720 x $3 = $2160.00 for the non converted customers
The math: Premium customers
For the other 10,000 (premium customers)
CLV (customer lifetime value) - normally about 3 weeks of app for converted customers
7 (days) x 3 (weeks) x 10 (minutes) = 210 minutes x 2 = 420 impressions
eCPM still $3
420/1000 x 3 = $1.26 so this is the amount we make per converted customer – we have to factor in converted customers that are connected
10,000 x .8 x 1.26 = $10,080
So total revenue per 100,000 downloads = 10,080 + 2160 = $12,240
The total
The total addressable smartphone market is 750,000 users therefore
total ad network revenues year 1
7.5 x 12,240 = $91,800
The market will grow to 2.5 million in 2013
year 2
25 - 7.5 (they already have it or have tried it) x 12,240 =$214,200