Lifetime Value
What is Lifetime Value (LTV)?
Lifetime Value (LTV) is a metric that indicates that average revenue a game, app, or website can expect to develop from a user over the duration of their relationship. LTV can be leveraged to optimize customer acquisition costs (CAC), boost retention, and inform other key decisions. LTV includes revenue generated from all sources, including in-app ads such as Offerwalls, in-app purchases (IAPs), and subscriptions.
Why is LTV important?
LTV is a critical KPI used across digital advertising, whether for mobile apps, games, or websites. For marketers, this metric is essential because it determines how much can be spent on a single user while remaining profitable. In addition, over time, LTV can be used to allocate ad budgets to the channels that produce the highest long term returns.
Developers and publishers use LTV to assess the effectiveness of their apps, games, and/or websites in monetizing and retaining users.
How To Calculate LTV?
To calculate LTV, multiply the average revenue per daily active user (ARPDAU) by the average user lifespan:
LTV = ARPDAU x Average Lifespan
For example, if a user generates $25 a month for a game and typically remains a player for 12 months, the LTV would be:
LTV = $25 x 12 = $300