4 Reasons You’re Getting Your LTV and ROI Wrong

4 Reasons You're Getting Your LTV and ROI Wrong

You’d have to be living under a rock to not notice that mobile apps have developed into profitable businesses. It all started out with paid apps but the prices dropped and suddenly people were no longer willing to pay for apps at all. The rescue came in the form of advertising and today, the majority of app developers rely on advertisements to earn a steady income off their free or almost free app.

Nevertheless, the ad-based app monetization comes with its own set of challenges, especially when it comes to measuring your ROI. An app’s LTV has to be higher than its CPI in order to generate profit, but you cannot calculate LTV without knowing what your ARPDAU (Average Revenue Per Daily Active User) is. To elaborate, here are several reasons preventing you from receiving accurate information about your LTV and ROI.

1. IAP is not your only monetization method

ARPDAU is quite easily calculated if your only monetization method is IAP. You only need to divide the daily income by the number of DAU. Both these numbers are readily available, courtesy of your analytics platform or in-house business intelligence.

This information is available for each user, so in order to learn the ARPDAU in a particular segment, cohort or traffic source, you only need to repeat the process for the group of users in that segment. The story takes a whole different turn if IAP is not your sole monetization method.

2. Ad-supported apps do not measure Ad Revenue per user

Focusing on IAA in apps has challenges on its own:

  • Having more than one ad network means there is more than one dashboard from which to collect the revenue information
  • This data supplied by ad networks is available only for the country/day, not on the user level
  • It is difficult to discern who the users who click on the ads are, let alone the precise install data
  • Most of the users (90%) who don’t click on the ad, don’t generate revenue on CPI or CPC campaigns.

3. You’re using an average

Although this method of calculating the ad revenue per user, LTV, and ROI, is quite straightforward and popular, it doesn’t necessarily mean it is the best. In order to measure the ad revenue per user, the companies take the profit gained in a certain country on a specific day and divide that number by the number of users on that day.

This method is not without its flaws either. Namely, doing this infers that every user generates equal revenue, which we all know is probably not the case. The cold hard truth is that only 2% of users in the app will click on the ads and install the advertised apps. In other words, using an average is wrong about 98% of the time!

4. You’re counting impressions per user

Another popular method of calculating LTV is counting the number of impressions served per user and per segment. It is increasingly utilized by more sophisticated app publishers but this method is also far from ideal.

As you may already know, the majority of ad networks use the CPI and CPC campaigns as the main drivers of revenue, so ad impressions are not a reliable indication of revenue there. For instance, a user that has 200 impressions may not have generated any revenue at all, whereas another user with only 10 impressions could have generated $10 if he or she also clicked on the ad and installed the advertised app.Getting your LTV and ad revenue right is not an easy task, but SOOMLA Traceback tool can give you a hand with that

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