LTV (Lifetime Value)

What is LTV?

Lifetime Value (LTV), also known as Customer Lifetime Value (CLV), represents the total revenue you expect to earn from a user over their entire time using your app. It's the most important metric for determining how much you can afford to spend on user acquisition while remaining profitable.

Understanding LTV helps you make informed decisions about marketing budgets, target audiences, and product development priorities.

Why LTV Matters

• Budget allocation: Knowing LTV tells you how much you can spend per user
• Channel evaluation: Compare LTV by acquisition source to find best channels
• Product decisions: Features that increase LTV are worth investing in
• Profitability: LTV > CAC = profitable user acquisition

LTV Calculation Methods

1. Historical LTV

Sum of all revenue from a user cohort divided by number of users. Simple but requires long observation periods.

2. Predictive LTV

Uses early behavior signals to predict future value. Essential for fast optimization. Common approaches:

• Regression models based on D1-D7 behavior
• Cohort-based extrapolation curves
• Machine learning predictions from engagement patterns

3. LTV Components

For a comprehensive view, consider all revenue sources:

• In-app purchases (IAP)
• Subscription revenue
• Ad revenue (if monetizing with ads)
• Referral value

Increasing LTV

1. Improve retention: Keep users active longer
2. Optimize monetization: Better IAP offerings and pricing
3. Enhance engagement: More sessions = more opportunities
4. Personalization: Tailored experiences drive higher spend
5. Reduce churn: Re-engagement campaigns for lapsed users

LTV by App Category

Average LTV varies dramatically by vertical:

• Casual Games: $1-5 (high volume, low value)
• Mid-Core Games: $10-30 (engaged players)
• Social Casino: $50-150 (whale-driven)
• Subscription Apps: $50-300 (recurring revenue)
• Fintech: $100-500 (high transaction values)