Things get tricky quickly though, because not only do you need to acquire customers, you need to retain a lot of customers. There is a set of formulas and calculations establishing the fact that for the business to be attractive, it is important to pay back CAC within 12 months, and that LTV needs to be at least 3x of CAC. Read this awesome post by David Skok to understand the details of these calculations. To build a viable business, a startup needs to prove that it can acquire customers as inexpensively as practical, and retain them for as long as possible. CAC vs LTVÄ«efore we dive into the Magic Moment, and why it is important, we need to talk about two other concepts-Cost of Customer/User Acquisition (CAC) and the Life-Time Value (LTV) of a customer/user.In very simple terms, CAC is related to the costs of acquiring a customer, and LTV is related to how much money the business can make per customer. The team had a hypothesis that 10 friends collectively generated enough interesting activity to populate the user's feed and to keep him or her coming back. For Facebook, 10 friends has literally become a magic number, because, while the exact mechanism behind it wasn't clear, users with 10 or more friends after 14 days didn't churn. Early on, after Facebook launched its Feed feature, the product team at Facebook was trying to understand how to engage and retain users. What the product team noticed is that IF a user got to 10 or more friends in 14 days, there was very high likelihood of this user sticking around for a while.
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