Cost per user
Definition
Cost per user is the purchase price divided by the number of active users or monthly sessions acquired with it. Where there is no profit to multiply, it is the only unit that lets two unrelated pre-revenue assets be compared, and the only sane check against buying the same audience with advertising.
Cost per user is the purchase price divided by the number of active users or monthly sessions acquired with it. It is the unit that lets two unrelated pre-revenue assets sit next to each other on a page and be argued about sensibly.
Between $10,000 and $50,000 it does a second job, which is keeping the buyer honest. Every audience can also be bought through advertising, at a rate anyone can look up. If acquiring a product works out dearer per active user than simply paying for the same users directly, the difference has to be justified by the code, the domain, the content or the data coming with them.
| Asset | Price | Base | Cost per unit |
|---|---|---|---|
| Mobile app | $18,000 | 900 monthly actives | $20 per active |
| Content site | $22,000 | 25,000 monthly sessions | $0.88 per session |
| B2B tool | $35,000 | 340 free accounts | $103 per account |
Where it bites
In the denominator. Sellers quote the biggest available number, so installs appear instead of actives and pageviews instead of sessions. Recompute the figure on the stricter base yourself, because a $20 cost per active becomes $1.50 per install and the two tell opposite stories.
Worked example
The B2B tool at $35,000 with 340 free accounts and no pricing page works out at $103 per account. Paid acquisition of a free B2B signup in most categories runs somewhere between $40 and $120, so the price is inside the range a buyer could defend, and the working product arrives at no extra charge.
Then the harder arithmetic. Charge $29 a month and convert 8% of the base, which is a fair result for accounts that signed up when the product was free, and that is 27 subscriptions producing about $9,400 a year. Two full years to recover $35,000 before any growth at all. That is the honest picture, and it is a reason to negotiate rather than a reason to walk.
Cost per user turns a vague sense that a listing is dear into a number you can put in an email. Sellers should calculate their own before listing, because a buyer will. Both sides get a shorter conversation for it.
Related: monthly-active-users, asset-based-valuation, monetisation-path, how-much-is-traffic-worth
See what a business at this level is listed at.
Everything on sale between $50,000 and $150,000, on the same fields.