First, Ancestry.com released information on 6 January 2010 about their 2009 operations, saying (in part):
"Ancestry.com Inc. Reports 17% Subscriber Growth in 2009 Fourth Quarter
"PROVO, Utah, Jan 06, 2010 /PRNewswire via COMTEX News Network/ -- Ancestry.com Inc. (Nasdaq: ACOM) today reported that it added approximately 165,000 subscribers in the fourth quarter ended December 31, 2009, finishing the year with 1,066,000 million paid subscribers. The end of year subscriber number is 17% higher than the 914,000 paid subscribers reported at the end of 2008. Fourth quarter additions were up 15% from the 144,000 added in the 2008 fourth quarter. Monthly subscriber churn(1) for the 2009 fourth quarter was 3.6%, compared to 4.0% in the prior year fourth quarter."
I was intrigued by the term "monthly churn" and checked the explanation:
"(1) Monthly churn is a measure representing the number of subscribers that cancel in the quarter divided by the sum of beginning subscribers and subscriber additions during the quarter. To arrive at monthly churn, we divide the results by three. "
So in the fourth quarter of 2009, Ancestry.com added 165,000 subscribers, but with a 3.6% churn rate over three months, they lost about 115,000 subscribers, for a net gain of about 50,000 subscribers (about 16,700 per month on average, my numbers are not exact because I don't have all of their figures - but they're close enough I think).
And over the year, they gained 152,000 net subscribers - over 12,000 per month. If none of their "lost" customers renewed, that means that they lost about 400,000 customers during 2009, and signed up over 550,000 new customers. The "right number" is somewhere in between those numbers, since some customers must have renewed after their subscription was dropped. The churn rate is sobering, isn't it? I can understand the emphasis on improving customer relations and receiving favorable publicity from genealogy media.
There is another set of subscriber data in the presentation that Ancestry.com gave on 6 January 2010 to the Citi 20th Annual Global Entertainment, Media & Telecommunications (EMT) Conference. The Ancestry.com page with links to the Webcast and to the presentation is here, and the actual presentation PDF is here:
* The Investment Highlights say that Ancestry.com is large ($200 million revenue), profitable (30% EBITDA margins), growing, a category leader, has several barriers to competition, and significant growth potential.
* Paid subscribers (12% average growth), Adjusted EBITDA (30% average increase) and revenue (13% average increase) have increased over the past five years.
* Monthly churn is highest for "Newbies" (first timers, about 11%) and lowest for "Experts" (subscribed more than 2 years, about 2%).
* Ancestry has spent 12 years and $80M acquiring, digitizing,and indexing content —4 billion records.
* User-generated content has increased substantially - now 12.2 million user trees, with 1.254 billion persons in the trees, 23.4 million user photos added and 2.8 million user stories added, all as of September 2009.
* One of the growth strategies is to provide quicker success for the beginner, continue to improve search, more powerful collaboration, easier sharing with family, and more content from around the world
* The chart for "Subscriber Economics" shows that Ancestry.com gains an average of $300 in revenue per subscriber, it costs them about $70 to acquire that subscriber (marketing plus advertising), they spend about $9 on merchant fees, for a lifetime value of $221. Not mentioned are the ongoing operating costs (data acquisition, imaging, indexing, storing, etc.).
I urge you to review the presentation PDF or watch the webcast so that you can get an idea of the status of Ancestry.com. One of the benefits of companies going on the public market like Ancestry.com did in November is that they produce information like this for their investors and customers.
The message I get from all of this is that they need to continue to market and advertise in order to overcome the 3.6% monthly churn rate and enable continued growth of the company. They've been successful in 2009, which is impressive to me considering the general economic conditions.
Disclosure: I am not an employee, contractor or affiliate of Ancestry.com. I am a fully paid US subscriber and a happy customer of Ancestry. The summaries and views expressed in this post are solely my own based on public domain information.
UPDATED: 2 p.m. Added some text about the effects of the churn rate.