Wojtek Skalski
June 22, 2023

Scalable channels and ARPA

Which scalable channel can be a primary growth engine for your startup depends on many factors, one of them being how much revenue you make from a single user or account.

💡 Let's break it down:
  • If you're earning $10 a year per user, it's likely you monetize your audience through showing them ads. As your acceptable CAC is low, you must rely on strong virality and/or a large scale – likely user-generated or programmatic.
  • If you're bringing in $100 a year per user, you're probably serving consumers who pay for your service. Virality remains important, and you can still grow through SEO, which can now involve also editorial content. You can also begin utilizing paid channels to buy traffic as you can finally afford it.
  • If you're at $1,000 a year per account, you're likely catering to small businesses. At this stage, you can start using sales methods, such as cold emailing and LinkedIn outreach. You'll have even more opportunities in paid channels, including platforms like LinkedIn Ads.
  • Moving to $10,000, your sales tactics can certainly flourish. SEO content becomes more diverse, targeting different audiences and showcasing your product from various perspectives.
  • At $100,000, word-of-mouth becomes crucial again. Paid channels present a lot of options and potential for high spending, but competition is also likely to be intense. Investing more in sales organization becomes important, as building relationships is key at this stage.
📌 Side notes:
  • For SEO and Paid Ads, the question is which specific (search) platforms should you focus on? For SEO, the default is Google, but your business context matters. If you have an iOS app, you must also be on the App Store, and if you are in e-commerce, you might consider Amazon. The same goes for Paid Ads – there are plenty of options to choose from, not limited to Google or Meta (including just mentioned App Store and Amazon).
  • As you increase your ARPA (Average Revenue Per Account), the number of possible channels increases, but as the number of potential customers who can afford your services goes down, the competition gets more fierce. Transactions become more complex (longer cycles, more parties involved, etc.), and you need more touchpoints across multiple channels to close a deal.
  • If you're in the traction phase, your goal is to get people to use your product to improve it and validate your product-market fit. At this point, scalability or cost of channels may not be your primary concern. You have a broader range of channels to choose from than this table suggests.

📖 This post builds on a framework by Christoph Janz (Point Nine) on ways to build a $100M business.

Leave a Reply

Your email address will not be published. Required fields are marked *