Estimating Lifetime Revenue From an Ad-Free YouTube Subscriber Cohort

YouTube Red is YouTube's paid tier that removes ads. Suppose 1.5% of YouTube's initial user base signs up for it. Estimate the lifetime revenue Google earns from those subscribers. Structure the estimate, label each assumption, and end with a figure and a range. ```hint Separate count from value Work out how many paying subscribers the 1.5% gives you, then what one subscriber pays over time, and think about what decides how long a subscriber keeps paying. ``` ### Clarifying Questions - Does "signs up" mean a paying subscriber, or someone who starts a free trial and may cancel before paying? - Which user base does the 1.5% apply to: global monthly users, or only the markets where the tier was offered at launch? - Should revenue be gross subscription revenue, or net of the ad revenue YouTube no longer earns from these users? - Is lifetime revenue simply summed, or should future payments be discounted? ### What a Strong Answer Covers - A settled interpretation of "signs up", the user base and "revenue" before any arithmetic - An equation linking subscriber count, monthly revenue per subscriber and how long subscribers stay - Labeled, round assumptions for price mix and churn, each with a short rationale - Arithmetic that is correct and unit-consistent - A sanity check, a final range, and how the answer moves under the other interpretations ### Follow-up Questions - Which assumption moves the answer most, and how would you measure it once the tier is live? - If YouTube raised the price and churn rose as a result, how would you tell whether lifetime revenue went up or down? - Should a subscriber who cancels and later rejoins count as one lifetime or two, and why does it matter for this estimate?