Well, it does matter, after a fashion, and it's a one (of many) metrics that an acquisition can be considered on.
I found it interesting to look through the list for obvious winners and loses, and actually, that would be a much more useful plot: showing the cost-per-user on one axis against, say, the 3-5 year investment performance on the other.
Actually, better than that even would be to look at a number of dimensions and plot these against one another looking for patterns in the data. R is particularly good at this with its scatterplot matrices:
- When investing in or acquiring companies, people may use this metric in addition to price/sales or in rare cases for tech companies price/EBITDA valuation multiples. It forms the basis for comps analysis which bankers, M&A types and VCs do all the time.
- Companies use the ratio in similar ways when fundraising or talking to acquirers. "Based on how many users we have and comparable transactions, we're worth $X million"
- While you may buy users looking forward, you also may look at how you can "monetize" existing users, i.e., if we can get $X per existing user, that would be worth Y.
It is of course not the only metric that an acquirer evaluates (at least the good ones), but they do look at it as do investors, bankers and startups. So good or bad, it is here to stay.
Probably a lot more than there are now. As a former paying user of Flickr, Yahoo really stopped all development for about five years. Now, I have no reason to upgrade to a pro account.
I am amazed at how well that particular calculation works some times although I understand the statistics.
Even if that was the major metric in determining a price, there's often a very large difference between the number of users currently and the expected number 1 year or 5 years out.
You don't buy a company because of the number of users it has right now. You buy it because you think you can do something better with it, or to be defensive in a field, or to expand your own customer lists.
What's more, not all users are created equal! When Flickr for instance was aquired, what percentage of users were paying users?
I think its hard to make any real generalizations here, but better than a chart of cost per user, I think this is probably closer to a chart of how badly Company X feels it needs some audience. It's some formulation of growth, panic, defensiveness, etc.