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