Estimate Customer Acquisition Cost of LinkedIn

Prashant Bagga
3 min readJul 30, 2021

Mission

The mission of LinkedIn is connecting the world’s professionals to make them more productive and successful.

Facts

  • LinkedIn currently has roughly 774M+ users.
  • A total of 39% of LinkedIn users pay for LinkedIn Premium, which has four price tiers:
    Premium Career: $29.99/month
    Premium Business: $59.99/month
    Sales Navigator Pro: $79.99/month
    Recruiter Lite (Hiring): $119.95/month

Definition

  • Customer acquisition cost is the best approximation of the total cost of acquiring a new customer. It includes things like advertising costs, the salary of your employees, the cost of servers, payment processing fee, etc., divided by the number of customers acquired.
  • We’ll count the cost of maintaining/supporting the free tier of LinkedIn for all non-paying customers as part of the acquisition cost for the paying customer.

Assumption

  • LinkedIn’s userbase = 800M
  • Considering all the Premium tiers, let’s assume that LinkedIn Premium costs $70/month on average.
  • Assume all estimated prices apply globally as well. In real world, they would differ depending on the countries. For example, the salary of an engineer in the US is much higher than that of in India.

Calculations

Let’s break CAC down.

Free Tier

Let’s look at the Cost per Free User & Number of Free Users per Paid User:

  • Servers: As the number of users scale-up, server costs per user exponentially decreases. For LinkedIn specifically, the server costs will further come down as it’s moving to Microsoft Azure and I hope the parent company is giving them some discount. If we assume that LinkedIn spends roughly $200M every year on servers, the cost per user would come down to 40 cents.
  • Salaries: 480M free users & 16,000 LinkedIn employees. That means each employee is going to support 30,000 free users. If each employee costs $200,000 each year, then each user will cost (200K/30K) = $6.66 on average
  • Operational Costs (office space): LinkedIn has…

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