The One Growth Metric that Moves Acquisition, Monetization, and Virality

2. Retention improves monetization: - When it comes to monetization, two important things happen with improved retention - you can retain a larger proportion of a cohort, and in doing so, make more money from that cohort within a given period of time, and you can increase the length of time that a cohort retains, increasing LTV

- It isn’t just about retaining more users, it impacts every facet of your growth model and has multiple layers of impact on the health of any business. In fact, retention is one of the key factors that determines the long term success of any startup. Retention will make or break your company.

- There is a lack of understanding why retention is the priority. Without understanding this, people end up working on the wrong things and missing the biggest opportunities.

4.   Retention accelerates payback period: -  Payback period is the time it takes to break  even on the cost to acquire a customer.  It also determines how fast you can start reinvesting in acquisition to fuel growth.  Improving retention can help shorten your payback period to grow faster.

- A lot of teams at the fastest growing companies focus heavily on LTV. The problem with this is that LTV typically is not the limiting factor in growth - payback period is.

- Pinterest is a prime example of a fast growing company that relies on UGC as their main acquisition channel. When a retained Pinterest user creates a new pin and adds descriptive tags, Google indexes the pin. When people search and land on it, this experience introduces new users to Pinterest, and some percentage of those people sign up. Some per... See more

1. Retention drives acquisition: As you retain more users, those additional users take more of the key actions that accelerate acquisition, either through sharing, inviting, word-of-mouth, or creating content.

- Since improving retention drives monetization - meaning you make more money over a designated period of time - it also shortens your payback period.

3. Retention builds an acquisition competitive edge: - As you increase retention, monetization, and LTV,  you can pay more to acquire a customer. In doing so, you can push competitors  out of acquisition channels, open up new channels that were previously too expensive,  and grow faster.

- Spotify offers a great example of how retention can improve monetization for freemium models. When you sign up for Spotify for free, they serve you ads, many of which target you to upgrade to the premium ad free service. Let’s walk through two different scenarios demonstrating how improvements in retention impacts monetization for Spotify.