Back-of-Envelope Unit Economics of a Typical User of Capital One's Shopping Extension

Estimate how much profit Capital One makes in a month from a typical user of Capital One Shopping, its free tool that finds coupon codes, compares prices and pays rewards to online shoppers. Show your assumptions and your arithmetic. ```hint Follow one month of shopping Start from what a user spends online through the tool, then trace what the merchant pays for those sales, how much goes back to the shopper, and what it costs to serve them. ``` ### Clarifying Questions - Should "per user" mean per installed user or per monthly active user, given that many installs go dormant? - Should profit cover the tool on its own, or also include value to the card business, such as new card accounts from tool users? - Should I estimate an average month across the year, or a specific month such as the holiday shopping peak? - Should fixed costs such as engineering, partnerships and marketing be allocated per user, or left out as contribution profit? ### What a Strong Answer Covers - A clear profit equation that separates commission revenue, rewards paid back and costs - Labeled, round assumptions for spend, credited share, commission rate, rewards share and costs, each with a reason - Correct arithmetic leading to a per-user figure and a plausible range - A sanity check against a top-down view or a real-world anchor - Which assumptions move the answer most, and why ### Follow-up Questions - How would the estimate change for a user who shops almost entirely on a phone? - Which lever would you pull first to double profit per user, and what might it cost in user trust? - How would you fold in the value of tool users who later open a Capital One card?