Why Customer Acquisition Cost is the New Rent

A few weeks ago Inc. Magazine wrote a fascinating article whose argument could be summed up in one phrase: Customer Acquisition Cost (CAC) is the new rent [1]. For those not reading tech reports for the past two-years, customer acquisition costs represent the cost of acquiring a repeat customer whether through Google AdWords (search advertising), social feeds (Facebook advertising), or even a marketplace such as Amazon or eBay (sellers’ commission). The crucial point is this concept can also be applied to the physical realm: CAC is a useful tool to compare online digital businesses to businesses which exist primarily in the physical world. I suspect these economic concepts can be extended beyond merely explaining the broad disruption of physical retail but also provide a framework for predicting what business configurations might flourish in the future.

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