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Facebook's Alex Schultz: How to Estimate a Good Retention Rate for Your Product

By Alex Schultz · Product & Building · 1 min read

Schultz says figuring out what good retention looks like is not hard. Just do the math. Facebook has 1.3 billion active users. There are 2 billion people on the internet. Divide.

Key Points

You can estimate any company's retention rate from publicly available numbers
Different verticals need different retention rates — 20-30% for e-commerce, 80% for social media
If a physicist could figure out the power of an atomic bomb from a photo, you can figure out Facebook's retention rate

Figuring out what Facebook's retention rate is — that is not a hard problem.

The Nuclear Bomb Analogy

Schultz: People ask over and over — what does good retention look like? And I get really pissed off when people ask me that because I think you can figure it out.

There's a physicist named Geoffrey Taylor who looked at a photo published in Life magazine of a nuclear bomb test and was able to figure out the power of the atomic bomb just using dimensional reasoning. He basically revealed one of the top secrets in the world from a photo. That's a hard problem. Figuring out Facebook's retention rate is not a hard problem.

A physicist figured out the power of the atomic bomb from a photo. Figuring out Facebook's retention rate is not a hard problem.

Just Do the Math

Schultz: How many people are on the internet? About 2 billion. Facebook is banned in China, so about 2 billion. Facebook said about 1.3 billion active users in our last earnings call. Divide those numbers. It won't give you the right answer, but it'll give you close enough to a ballpark.

Similarly with WhatsApp — they announced 600 million active users. How many people have smartphones? You can figure out that number. Amazon has had a pop at signing up almost everyone in the United States.

Divide the numbers. It won't give you the right answer, but it'll give you close enough to a ballpark.

Different Verticals, Different Targets

Schultz: Different verticals need different terminal retention rates. If you're in e-commerce and you're retaining 20 to 30% of your users on a monthly active basis, you're probably going to do pretty well.

If you're in social media and your first batch of people signing up are not 80% retained, you're not going to have a massive social media site.

What you need to do is figure out who out there is comparable and ask — am I anywhere close to what real success looks like in this vertical?

If you're in social media and your first batch isn't 80% retained, you're not going to have a massive social media site.