Stay in the latest updates. Get the latest tips and advice delivered straight to your inbox. Email Ellis Luk | May 30, 2012 | Important lessons about monetizing users from the Facebook IPO The Facebook IPO has been the talk of the town and brought much chatter about the revenue model of Facebook. Yes, it’s an awesome application with staggering user growth but the money-men on Wall Street are also shining a light on the fundamentals of the Facebook business: specifically, Facebook is lagging far behind in terms of monetizing its users as compared to others in the Business. Google fetches about $28 per user per year, Facebook only fetches $4; and Fox can pull in 21 cents in advertising per eyeball for a single show, whereas Facebook pulls in only 3 cents in advertising per eyeball in a single day. Of course Facebook is pitching that herein lies the growth opportunity. Fine, but what is Facebook doing to increase the average revenue per user? According to a recent article on CNN, the Facebook strategy to grow customer lifetime value is three-fold: 1. Hire success managers Instead of hiring advertising sales people, Facebook is hiring customer success managers with MBAs and domain expertise to think with the customer about strategic ways to leverage the Facebook platform. These are consultants, not sales people. 2. Measure customer lifetime value Customer lifetime value is a core metric. Revenue metrics are typically lagging indicators, but the average revenue per user or customer lifetime value is actually a leading indicator of customer profitability. 3. Focus on customer engagement Active users are profitable users. Users who are most actively using the service, are also the ones that will generate the most revenues. Therefore, much of the product strategy of Facebook is geared toward driving user engagement. Facebook is not alone in focusing on increasing the revenue per customer. In the recent book, “Inside Apple: How America’s Most Admired–and Secretive–Company Really Works”, Adam Lashinsky reveals that the main challenge for Apple is no longer acquiring new customers: many in the world already own at least one Apple product. Instead Apple is focused on selling more products to its existing customers. Enter the Genius Bar. At first glance a generous show of customer service, the Genius Bar is the source of many new product sales. The very definition of a customer centric organization, as per the Wharton School of Business, is an organization that perceives and manages itself not as a group of products, territories and functions but as a portfolio of customers. A bigger lesson we can all learn about this: the key to profits is no longer the customer acquisition we are all so focused on. For steady-state recurring revenue businesses, up to 80% of revenues can come from existing customers. In this brave new world, customer acquisition is necessary but not sufficient. The key differentiator in the future will be the ability to systematically grow the average revenue per user. If there is one lesson to learn from the Facebook IPO then the importance of customer lifetime value, in addition to customer acquisition, would be it. Popular Posts A day in the life of a Customer Success Manager: What do they do? 15,902 views The difference between Customer Success Managers and Account Managers 12,963 views Your 90 day plan as a new VP of Customer Success 5,518 views Ellis Luk I'm the marketing and communications manager at Totango - but you can call me Chief Content Officer. When I'm not writing, you can find me obsessing over memes, debating grammatical usage or getting distracted by the latest Tumblr gif blogs. Customer love starts with a friendly hello! You might also like You might also likeTen Reasons Your Organization Needs Totango, the Leader in Customer Success ManagementGrowth Hacking with User BehaviorWhen Is The Right Time For a Customer Success Solution? BACK TO BLOG | NEXT ARTICLE Let's stay in touch! We’re passionate about customer success. Sign up to get the latest in thought leadership and to follow our adventures.