Lifetime Value (LTV)

Mapendo Team
May 13, 2022
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Lifetime Value (LTV)

Lifetime Value

In any mobile app install campaign there are different important metrics to take into account, as these can estimate the profit you are making from the app users. Here we will discover what lifetime value – LTV – is, and its importance. 

 

What Is Lifetime Value (LTV)?

Lifetime value (LTV) is a core metric in mobile app marketing. Lifetime value can be defined as the revenue coming from a single app user, on average, during their “life” within the app, that is to say, during the entire period of time in which they are using the app.

In this respect, it is important to underline a key difference between lifetime value and ARPU, as these metrics are often confused.
ARPU, which stands for Average Revenue Per User, is another key monetization metric in a mobile app install campaign, that only estimates the average revenue coming from an app user in a limited timeframe – and not in the whole period a user engages with the app.

To determine LTV, you firstly need to consider the average value of app usage and number of in-app events generating revenues in a given period of time; you then need to measure the average time the average user stays within the app and engages with it. With these data in mind, you are now able to estimate your average user’s lifetime value.

 

Why Is Lifetime Value Important?

Let’s see why estimating the users’ lifetime value is so important.

First of all, together with ARPU, lifetime value is one of the most significant monetization metrics, as it can tell you the expected profit coming from a single app user during their overall app usage or experience.

With this precise estimate app marketers can make more informed and thoughtful decisions on budget allocation, as well as expenses related to marketing and advertising.
Calculating lifetime value can therefore be one of the keys to optimize your spending on the app install campaign, and to know more precisely what to expect from your users in terms of profit.

On the other hand, users’ lifetime value is also important for advertisers, as it allows them to estimate the profit they are making out of any app install campaign. Moreover, comparing LTV with the total spending for a given app install campaign is also a key metric for advertisers to determine the app install campaign ROAS as well as to evaluate the overall performance of both the app install campaign and their marketing partners. 

Indeed, determining users’ lifetime value is an important part of the app campaign optimization, as through this metric, app marketers are able to know the available budget to allocate on user acquisition strategies with no loss.
Together with this, once you have determined your app users’ lifetime value, you can also optimize your app install campaign in order to identify and acquire users with similar behavior within the app. 

 

What You Need To Know About Lifetime Value?

  • Lifetime value (LTV) is a fundamental metric in any app install campaign and a key optimization tool;
  • Lifetime value calculates the average profit coming from a single user during their entire experience with the app;
  • For this reason, lifetime value can help with optimization in every app install campaign, as it provides marketers with a more precise overview of the available budget, avoiding losses;
  • Lifetime value can also help in making more rational user acquisition decisions over the course of an app install campaign, as you know what to expect from your app users;
  • It is different from another metric, ARPU, as this latter only expresses the average profit coming from a single user in a selected period of time.