'Lifetime Value' Is Silicon Valley's Next Buzzword (reuters.com) 32
So long, "total addressable market." Farewell, "flywheel effect." Silicon Valley has a new buzzword. As the cost of signing up new customers rises, "lifetime value" is set to become must-use jargon for technology executives, investors and analysts in 2023. Reuters reports: Companies like Uber, DoorDash and Spotify want shareholders to know they can squeeze more revenue out of users than it costs to recruit them. As with previously popular jargon, though, the idea can quickly get garbled. The concept of lifetime value is not new, but a common definition remains elusive. The venture capitalist Bill Gurley defines it as "the net present value of the profit stream of a customer." Hollywood uses it to estimate the cumulative income from streaming movie titles, after deducting the cost of making the film.
It's catching on in the tech world. Uber boss Dara Khosrowshahi and his team invoked (PDF) the term seven times during the ride-hailing firm's investor day. At a similar event in June executives from music streaming service Spotify mentioned (PDF) it 14 times, with another 47 references to the abbreviation LTV. Earnings transcripts for 4,800 U.S.-listed companies analyzed by Bedrock AI show executives and analysts mentioned "lifetime value" over 500 times between October and mid-December, up from just 47 times in three months to March 2019.
The problem is that everyone seems to have a different definition of lifetime value. Food delivery firm DoorDash looks at it as a metric to measure "customer retention, order frequency, and gross profit per order" over a fixed payback period. Uber and its Southeast Asian peer Grab treat it as the ability to bring in one customer and then cross-sell different services at a lower cost. The $49 billion e-commerce firm Shopify defines lifetime value as the total amount of money a customer is expected to spend with the business over the course of an "average business relationship." But lifetime value isn't a silver bullet, as Gurley noted a decade ago. As capital becomes more scarce, generating free cash flow remains the most important target. As with previous buzzwords, investors may find that references to lifetime value do more to confound than clarify.
It's catching on in the tech world. Uber boss Dara Khosrowshahi and his team invoked (PDF) the term seven times during the ride-hailing firm's investor day. At a similar event in June executives from music streaming service Spotify mentioned (PDF) it 14 times, with another 47 references to the abbreviation LTV. Earnings transcripts for 4,800 U.S.-listed companies analyzed by Bedrock AI show executives and analysts mentioned "lifetime value" over 500 times between October and mid-December, up from just 47 times in three months to March 2019.
The problem is that everyone seems to have a different definition of lifetime value. Food delivery firm DoorDash looks at it as a metric to measure "customer retention, order frequency, and gross profit per order" over a fixed payback period. Uber and its Southeast Asian peer Grab treat it as the ability to bring in one customer and then cross-sell different services at a lower cost. The $49 billion e-commerce firm Shopify defines lifetime value as the total amount of money a customer is expected to spend with the business over the course of an "average business relationship." But lifetime value isn't a silver bullet, as Gurley noted a decade ago. As capital becomes more scarce, generating free cash flow remains the most important target. As with previous buzzwords, investors may find that references to lifetime value do more to confound than clarify.
Lifetime value ignores competition (Score:4, Interesting)
No way (Score:1)
Need long term data to make numbers plausible (Score:3)
I think for most users of LTV, it's a sign of weakness and attempting to manufacture the image of
Yep. The data harvested from you... (Score:3)
More "Intangibles" to hide losses in annual report (Score:2)
So they will leave the non-idiots alone now? (Score:1)
No? Well, that would have been too good to be true.
IBM and MS already pioneered that (Score:1)
"Vender Lock-in". Noobs gotta rename everything.
Re: (Score:2)
And Cisco, and SAP, and ServiceNow. The list goes on and on.
No, the Military - Lifecycle from Hatch to Retired (Score:2)
Try thinking about “profit” (Score:3)
"Flywheel effect" (Score:1)
"Flywheel effect" was just a euphemism for monopolist behavior enabled by an abuse of market power, mainly used at Amazon.
Post-scarcity economy and commodification. (Score:2)
It's happening faster and faster, and introducing new buzzwords ain't gonna change that.
I really fundamentally never got why "corps" like Twitter, TikTok or that inane snapchat would have some billions of evaluation. It makes no sense whatsoever for anyone who knows the elementary basics of computing and digital networks. That this won't fly forever was always perfectly clear to me.
Until recently an overall growing global market sought for places to invest and put excess money in so-called "tech" companies
Re: (Score:2)
Microsoft proved to the tech world that inertia is everything. People don't want to change platforms, ever, not even when it's obvious that they should. And often, there's a lot of regulatory capture, monopolization, and other anticompetitive fuckery that makes it very difficult to do so. That's why social networks are able to persist so successfully despite their deservedly bad reputations.
Re: Post-scarcity economy and commodification. (Score:2)
Post Middle Class labour scarcity.
We are still unbeatable good robots for low enough wages and the owners employing those robots still need some physicians and court entertainers.
It's like turtles... (Score:2)
Just like turtles, except it's bullshit - bullshit all the way down.
The fact that language like "lifetime value" and "flywheel effect" influences investors, allows "wealth" to be created based on the wonderful new clothes that the emperor isn't wearing. And we wonder why inequality and wealth concentration are spiraling out of control. Good Lord we're a gullible lot.
Without a decade or more of data, its BS (Score:3)
"lifetime value" is set to become must-use jargon for technology executives, investors and analysts in 2023.
No it is not, except perhaps in desperation to change the topic from current cash flows. "Lifetime value" is a return to the sort of logic the Silicon Valley investors already rejected and improved upon. The old-school long term projections in a business plan, which has always been complete BS for entrepreneurial ventures. Long term projections only work for companies with extensive experience in their markets, like when they are already a leader and selling v3 of the same goods/service to the same market that has not changed with respect to its customer needs/wants, ie they still have good product/market fit. Not the early adopter experimental minor portion of the market on the near side of the "chasm" but the conservative main market on the far side of the "chasm".
Use of "long term value" is largely an admission of weakness, an attempt to spin the situation as an "opportunity". The exception being companies that have a decade or more of data and can actual document the "long term value" of real customers. Its just BS otherwise.
Re: (Score:2)
Use of "long term value" is largely an admission of weakness, an attempt to spin the situation as an "opportunity". The exception being companies that have a decade or more of data and can actual document the "long term value" of real customers. Its just BS otherwise.
It is the mark of the bean counters taking over.
Senescence sets in, and this is the first symptom.
Re: (Score:2)
It is the mark of the bean counters taking over.
No, it is the mark of salesman finding the dumb money easier to find at the moment.
1960 called (Score:2)
It even permeates the pharmaceutical and medical business.
That these masters of the Universe in techworld are excited like this is something new just tells us how clueless and desperate they are getting. Inventing new buzzwords for krissakes.
just fuck off if you don't have SYNERGY (Score:2)
If you don't have SYNERGY, Business Cat will gobble up your still-attached balls and turn you into a man-woman (or is it woman-man these days?)
https://www.urbandictionary.co... [urbandictionary.com]
Buzz-words are for pussies. Get a life.
Re: (Score:3)
Our turnkey managed solution, while providing a large ROI, will enable a dynamic and adaptable paradigm shift that is data-driven and takes advantage of core competencies while delivering scalable monetization of innovation that is incentivized by a cohesive and actionable strategy.
What's the lifetime value of this buzzword? (Score:2)
I bet it's about the same as most of the companies now (over-)using it...
They've squeezed me too far (Score:3)
Doordash and other companies have already squeezed as much value out of me as they are going to get in my lifetime.
My breaking point was when I ordered a couple Banh Mi's from a local vietnamese place. When I go to the restaurant, they cost $8.95 a piece, so for about $20 I've got a meal for two.
Then one time I had a $40 promo credit and ordered on Door Dash, between the inflated menu prices ($12.95 for a sandwich that cost $8.95 in store!), the service fee, the delivery fee, a couple other fees I can't remember, and driver tip, it cost over $75 for the order. Even with the $40 credit, it cost $15 more than going to the store.
In other words... (Score:2)
The other side of the balance sheet from TCOT? (Score:2)
TCOT (Total cost of ownership) is a term I remember from my business classes way back when. This seems like an attempt to measure something similar on the other side, the credit side, of the balance sheet. It seems like it could be a useful metric for use in business planning and cost accounting, but that the concept is being abused for marketing purposes.
The fact that I even speak of a balance sheet probably shows just how long ago it was that I took those business classes.
value of who? (Score:2)
Need to look at lifetime value of empolyees.
Definition? (Score:2)
Is that "lifetime value" to the CUSTOMER, or to the COMPANY? Because if it's the latter, it means upping planned obsolescence, so the "lifetime" referred to is that of the product.
To the customer, on the other hand, means you stop conning them into buying cheap shit that will fall apart, or otherwise need to be replaced in a year or two.
did... did they just (Score:2)
Buzzwords (Score:2)