Tren Griffin+ Your Authors @trengriffin I work for Microsoft. Previously I was a partner at Eagle River, a private equity firm established by Craig McCaw. I am on the board of directors of Kymeta. Dec. 26, 2019 1 min read + Your Authors

25iQuiz: What is the LTV of a Prime subscriber?

"Amazon said the number of items delivered under its Prime free-shipping program almost quadrupled from a year ago."

"One of the hottest buys was: Glitter Globe Doll Winter Disco Series with Glitter Hair."  https://www.barrons.com/articles/amazon-stock-rallies-on-strong-holiday-sales-51577392774?refsec=technology 

Do you agree?

This LTV calculation for Amazon Prime from a few years ago is based on one set of assumptions by one analyst based on incomplete information.

ARPU: $193 a month

SAC: $312

Gross margin 29%

Churn 0.6% (customer life 167 months or ~14 years)

Discount rate 9%

Amazon isn't understandable if you believe its business model is similar to the manufacturer you learned about in "introduction to accounting." Also: trying to value Amazon’s Prime business with a P/E ratio is like trying to open a can of corn with a pickle. Focus on cash flow.


You can follow @trengriffin.



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