Life Time Value (LTV)
Updated: May 2, 2019
What is life time value? How can app developers benefit from understanding they're users LTV?
What is Life Time Value?
LTV is the ratio between the cost of a new user and the revenue this user generates. An average of all users, over the lifetime of the app-user relationship.
Why LTV is important?
In mobile marketing, we’d prefer data based decision making, so although LTV is only an estimated value— its important in order to take smart marketing decisions. For example - how much money do we need to pay (in average) for a new profitable user? In order to answer that, we need to know the average time a user uses our app, and the average amount of money he is going to put into the app before he deserts the app.
How to Calculate my Users Lifetime Value ?
An example will make it easier to understand: Lifetime User Revenue — Lifetime user cost (UA, Manage) = LTV A user makes an in-app purchase with 100$, the cost of this user is 20$ in total so the LTV is 80$ Over a lifetime period which is not a real lifetime but the average time a user uses the app.
Where does the LTV lead us? Once we have calculated LTV, we can decide on our CPI cost for a new user more easily. Another big advantage is that by calculating LTV, we get the benchmark on how long to wait until we see full return on investment\ad spend (ROAS/ROI).
Yogev Hevron 27 Feb 2019