A while back I looked at subscriber growth next to revenue growth in the E-Commerce division for fiscal '97 and '98. Revenue increased about $43 million (after charges etc), as subscribers went from 1.7 mil to 2.4 mil. I surmised that over a twelve month period CKFR derived on average about $60 in revenue for each new sub. Some signed up on July 1 and some on June 30 of that period, but on average about $60 per new sub. Before last years debacle Pete Kight talked about driving 50% of new revs to the bottom line. I tried to use this info to create a loose model for potential going forward.
A closer look by quarter:
Qtr.......Revenue(000's).Profit......Subs(millions)
6/97 ......??................??........1.7
9/97......30,088..........(689)......2.0
12/97.....35,452..........(23).......2.0
3/98......36,080...........587.......2.4
6/98......38,773..........(535)......2.4
9/98......38,100...:-(....(4,610)....2.5
12/98.....41,298...........(778).....2.6
3/99......43,530..........1,484......2.8
6/99........??..............??.........3.0
Revenue up over $13.5 million in qtr 3/99 over qtr 9/97, with profits up 2.17 million. The subscriber numbers they list are just approximations, but it appears there is a lag of about one quarter before new sub revenue is realized. Sub growth 6/97 to 9/97 was 17%. Revenue 9/97 to 12/97 up 17% despite flat sub numbers. If one quarter lag is real, then revenues increased $13.5 million per quarter, with revenue from 0.9 million new subs, or about $60 per year (PK did say a mature subscriber brought in about $50 per year; I wonder how much for an immature one?;-).
What concerns me is we are nowhere near seeing 50% of new revenues going to the bottom line. Yes they are preparing for big growth (2 million new subs over the next 9 months), but how much will it cost to service the next 2 million? And the 2 million after that? With the need for so much customer service support, when do we see the 50% margin on new business? I would really like to know how much support costs per subscriber (ongoing costs) and how much of the spending is "one time" for Genesis scaling, etc.
Erik (IMO) |
