The Startup Ideas Podcast
The best businesses are built at the intersection of emerging technology, community, and real human needs.
ATM Economics for Paid Advertising
Mental model for evaluating paid advertising where you should maximize spend on any channel that returns more than it costs, like an ATM that outputs more than you put in
Decision Rule
If customer lifetime value significantly exceeds customer acquisition cost, increase ad spend until the arbitrage disappears or budget constraints hit
How It Works
Customer pays acquisition cost upfront but generates revenue over time through retention, so short-term losses can yield long-term profits if unit economics work
Failure Modes
Focusing on short-term ROAS instead of lifetime value
Not accounting for churn in lifetime value calculations
Lacking sufficient tracking to measure true attribution
Running out of budget before reaching statistical significance
Example Decision
“Spend $80 to acquire customer who pays $39 first month but generates $550 lifetime value - continue spending until cost per acquisition approaches $400-500 range”