What is CAC?
Customer Acquisition Cost (CAC) measures the total cost to acquire a new paying customer. Unlike CPI (Cost Per Install), CAC includes all costs and calculates the cost to acquire a user who actually generates revenue, not just downloads the app.
CAC is a critical metric for understanding unit economics and determining whether your business can scale profitably.
CAC Formula
CAC = Total Acquisition Costs ÷ Number of New Customers
CAC vs CPI
| Metric | Measures | Includes |
|---|---|---|
| CPI | Cost per app install | Ad spend only |
| CAC | Cost per paying customer | All marketing + sales costs |
What to Include in CAC
- Advertising Spend: All paid media (Facebook, Google, TikTok, etc.)
- Marketing Team Salaries: Pro-rated based on acquisition focus
- Creative Production: Ad creative, video production costs
- Tool Subscriptions: Attribution, analytics, creative tools
- Agency Fees: Any external agency or consultant costs
- Influencer Payments: Sponsored content, partnerships
CAC Benchmarks by Category
| App Category | Typical CAC | Good CAC |
|---|---|---|
| Gaming (Casual) | $1-3 | <$1 |
| Gaming (Midcore) | $5-15 | <$5 |
| E-commerce | $10-30 | <$10 |
| Subscription Apps | $20-50 | <$20 |
| Fintech | $50-200 | <$50 |
| B2B/SaaS | $100-500 | <$100 |
The LTV:CAC Ratio
The relationship between Lifetime Value (LTV) and CAC determines business viability:
- LTV:CAC < 1:1: Losing money on every customer (unsustainable)
- LTV:CAC 1:1 to 2:1: Breaking even or slight profit (risky)
- LTV:CAC 3:1: Healthy ratio (ideal target)
- LTV:CAC > 5:1: Very profitable (may be underinvesting in growth)
Pro Tip: Blended vs Paid CAC
Track both blended CAC (all users) and paid CAC (attributed to ads). Organic users lower blended CAC but don't reflect true paid acquisition efficiency. Both metrics matter.
Reducing CAC
- Improve Conversion: Better creatives and targeting reduce cost per install
- Increase Monetization: Higher payer conversion improves CAC
- Optimize Channels: Focus budget on best-performing channels
- Build Organic: ASO, content marketing, and virality reduce reliance on paid
- Leverage Lookalikes: Target users similar to best customers
CAC Payback Period
How long it takes to recover CAC from a customer's revenue:
- Gaming: 30-90 days ideal
- Subscription: 3-6 months ideal
- E-commerce: 60-120 days ideal
- SaaS: 12-18 months acceptable