Part of a rent has always been customer acquisition cost (CAC) to the extent it is paid for street traffic and visibility (ie, it belongs below the gross margin line as part of marketing). inc.com/magazine/20180…
If a business adopts direct to consumer the need to pay to acquire customers does not evaporate. The ability of sellers to use organic search and social media to reduce is gone. "If a business does not know its CAC it is a blindfolded poker player." google.com/amp/s/25iq.com…
Every business has the same underlying financial engine. Some businesses have enough product/market fit that word of mouth increases exponentially If they sell a digital offering with ~no marginal cost that can make for "mighty fine" margins. If the product is atoms not so much. 
If you don't understand lifetime value you can't understand business and if you can't do that you can't value a business as an investor. You can speculate based on prices in a Keynesian beauty contest, but that isn't investing. Use the formula carefully. abovethecrowd.com/2012/09/04/the…
Warren Buffett: "The tooth fairy does not pay for CAPEX. We have to account for it to assess a company’s true earnings power." The same point applies to sales and marketing expenses. Both CAC and CAPEX are real cash out the door up front, which is the worst type of expense.
What reduces CAC most effectively? Network effects which exist when value depends on the # of users. Affinity between participants/value of trade between participants can also increase network effects. Network effects can have positive or negative impacts which can be nonlinear.
MoviePass: "Our cost of acquisition per user (CAC) since we launched in August is zero." Cue the tooth fairy who must be paying the retail cost of all these tickets so the CAC is avoided. google.com/amp/s/25iq.com…
