What is Lifetime Value, or LTV?
In mobile gaming, Lifetime Value (LTV) is a prediction of the profit margin a game developer will earn from an average user during the entire time they play their game.
Why is LTV important?
LTV is the KPI that takes all revenue factor into account, a company that focuses on LTV and consistently increases it over time will be successful.
By calculating LTV, you will be able to:
- Estimate how much each acquired user will generate over time
- Calculate scale potential by identifying how much you can spend on user acquisition and still generate a profit
- Understand when it’s time to stop promoting a game without new features or changes
- Optimize revenue streams to increase profitability
This data allows marketers to modify budgets and pinpoint exactly how much money they can afford to spend on user acquisition and still remain profitable.
How is LTV calculated?
This topic has been an ongoing discussion in the industry for a number of years. There are multiple ways to calculate LTV, ranging from quick and easy to complicated formulas with lots of data.
One relatively clean way to measure LTV is by using ARPDAU.
- LTV = ARPDAU * Lifetime
Assuming you have already calculated ARPDAU and it is relatively accurate, you need to calculate the average player’s lifetime, which means looking at your retention rate and incorporating that into your calculations.
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