Subscription Dollar Retention Rate. We believe that our subscription dollar retention rate provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. Accordingly, we compare the aggregate monthly subscription revenue of our customer base in the last month of the prior year fiscal quarter, which we refer to as Retention Base Revenue, to aggregate monthly subscription revenue generated from the same group in the last month of the current quarter, which we refer to as Retained Subscription Revenue. Our Subscription Dollar Retention Rate is calculated on an annual basis by first dividing Retained Subscription Revenue by Retention Base Revenue, and then using the weighted average Subscription Dollar Retention Rate of the four fiscal quarters within the year. Our Subscription Dollar Retention Rate was approximately 100% for each of 2011 and 2012.
Or, if you're wondering how that accounting maps to operationas, "Marketo's upsells to customers in year N+1 almost exactly cancel churn in yearly subscriptions since year N, when aggregated."
[Edit: Whoops, now that I think about it, they're sort of juicing that metric by construction. In a growing company with 1 to 3 year payment terms, quarter-to-quarter churn could be very close to zero even without churn being near-zero.]
As a public market investor, this sort of thing drives me batty. Many companies won't release an actual churn rate, but only a "dollar retention rate," as above. Yelp is one of them.
While the dollar retention rate is certainly nice to know, knowing the actual customer (logo) churn is critical to evaluating the cost of acquisition and overall profitability.
As Jason points out, if it costs too much up-front to acquire each customer, you can still go broke even with a nice-looking dollar retention rate--you still have to pay to acquire the customers you lose.
http://investors.marketo.com/secfiling.cfm?filingID=1047469-...
Subscription Dollar Retention Rate. We believe that our subscription dollar retention rate provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. Accordingly, we compare the aggregate monthly subscription revenue of our customer base in the last month of the prior year fiscal quarter, which we refer to as Retention Base Revenue, to aggregate monthly subscription revenue generated from the same group in the last month of the current quarter, which we refer to as Retained Subscription Revenue. Our Subscription Dollar Retention Rate is calculated on an annual basis by first dividing Retained Subscription Revenue by Retention Base Revenue, and then using the weighted average Subscription Dollar Retention Rate of the four fiscal quarters within the year. Our Subscription Dollar Retention Rate was approximately 100% for each of 2011 and 2012.
Or, if you're wondering how that accounting maps to operationas, "Marketo's upsells to customers in year N+1 almost exactly cancel churn in yearly subscriptions since year N, when aggregated."
[Edit: Whoops, now that I think about it, they're sort of juicing that metric by construction. In a growing company with 1 to 3 year payment terms, quarter-to-quarter churn could be very close to zero even without churn being near-zero.]