Glossary · Metrics

What is CAC?

Customer acquisition cost

CAC (customer acquisition cost) is the average amount a service spends on marketing and sales to gain one new paying customer. It is total acquisition spending in a period divided by the number of new customers won in that period.

How to calculate CAC

Add up everything spent on acquiring customers in a month and divide by the new paying subscribers that month. Spending $20,000 to gain 800 subscribers gives a CAC of $25.

  • Paid advertising and promotion
  • Affiliate and influencer payments
  • Free trials: the cost of serving trial users who never pay
  • Discounts and promotional offers for the first period
  • Marketing salaries, agencies and tools

Blended and paid CAC

Blended CAC divides all spending by all new subscribers, including those who arrived through search, word of mouth or your existing audience. Paid CAC counts only the subscribers who came from paid channels and is always higher. Use paid CAC to judge a campaign and blended CAC to judge the business.

CAC, LTV and payback

CAC only means something next to what a subscriber is worth. A common target is a lifetime value at least three times CAC. Payback period, CAC divided by monthly margin per subscriber, shows how many months it takes to earn the spending back.

Count trial users carefully. If only 40% of trials convert, the cost of one paying subscriber is the cost of one trial divided by 0.4.

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FAQ

CAC, answered.

More definitions in the streaming glossary.

Planning a streaming service?
What does CAC stand for?

CAC stands for customer acquisition cost.

Why does CAC rise as a service grows?

The first subscribers are the people already looking for you. Each further group is harder and more expensive to reach, so paid CAC tends to climb as a channel is used more heavily.

How can a streaming service lower CAC?

Build audiences you own, such as email lists and social channels; use free episodes and trailers as marketing; add referral rewards; and improve the share of trials that convert.

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