CAC

Also called: customer acquisition cost, CPI, cost per install, blended CAC

Customer acquisition cost: marketing spend divided by the new users (or paying customers) it brought. State which of the two you mean.

CAC (customer acquisition cost) is what it costs to win one new customer:

$\text{CAC} = \frac{\text{acquisition spend in a period}}{\text{new customers acquired in that period}}$

The formula is simple; the arguments are about the numerator and the denominator.

The denominator. In a mobile app you'll see several "costs per" side by side: CPI (cost per install), cost per signup, cost per trial and CAC per paying customer. Each step down the funnel makes the number larger. None is wrong, but each must be compared with an LTV counted over the same people: LTV per install with CPI, LTV per payer with CAC per payer.

The numerator. Media spend is the obvious part. A fully loaded CAC also includes creative production, agency and freelancer fees, tools and the share of team salaries that goes into acquisition. Use media-only CAC to compare campaigns with each other, and fully loaded CAC to decide whether the business model works.

Blended vs paid. Blended CAC divides all spend by all new customers, including organic users and those who came through invitations. It's useful for the company as a whole but flatters paid channels: a free invite channel pulls the average down. To decide on a budget, use the paid CAC of a specific channel, and ideally its incremental version, since some of the users a channel claims would have come anyway (see incrementality).

Example

In September Theo spends $6,000 on paid social ads for Halves. Halves gets 6,000 new installs in total; 2,400 of them are attributed to paid social, and 96 of those become paying Halves Plus subscribers.

Metric	Working	Result
CPI, paid social	$6,000 ÷ 2,400	$2.50
Conversion install → paid	96 ÷ 2,400	4%
CAC per payer, media only	$6,000 ÷ 96	$62.50
CAC per payer, fully loaded (+$900 creatives and tools)	$6,900 ÷ 96	$71.88
Blended CPI, all installs	$6,000 ÷ 6,000	$1.00

The blended $1.00 looks four times cheaper than paid social, only because 3,600 installs came from invitations and store search at no media cost. The number to put next to paid social's LTV is $2.50 per install, or $62.50–$71.88 per payer.

Common mistakes

Not saying "per what". CPI, cost per trial and CAC per payer differ by an order of magnitude; label every number.
Blended CAC for budget decisions. Free organic and invite users hide how expensive a paid channel really is.
Media spend only. Leaving out creatives, agency fees and tools makes the model look better than it is.
Timing mismatch. September spend often turns into payers in October, after the trial; attach payers to the cohort that was acquired, not to the calendar month they paid in.
Trusting the channel's own count. Platforms tend to claim more conversions than they cause; check with the store's attribution data and an incrementality test.

Learn it in the course

CAC, payback and ROI · Judge a paid channel by the cohort it buys: CAC, payback period and cohort ROI at a stated age, and why a month's profit divided by that month's spend flatters ads.
Channels and marketing attribution · Channel capacity and marginal CAC, a break-even cost that values the invitees a paid user brings, marketing attribution through the stores' privacy frameworks, and incrementality from a geo holdout.
Forecasting active users · New users × retention: build a monthly active users forecast from cohorts, with a separate curve for summer cohorts, and price a cut in paid acquisition in users.