Friday, January 08, 2010

3 Ways to Value Nothing

Sometimes you want to calculate usage growth rates for people who are brand new. There are three options for doing this. They are:

  1. Throw out these ones and keep the ones where there was previous growth.
  2. Set a standard denominator based on the bottom. (say 1 or 0.1 or 0.8 or something)
  3. Set a dynamic denominator based on the top. (Say new value – 2 or new value – ½ of new value)

These options show that there is ambiguity in how you value new users with possible small amounts of usage.

I'd recommend that you do this in all three ways; changing parameters in the second two and see what you like, given your risks and business purposes.

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