When venturing into the fields of mobile app creation and monetization, you will often encounter mentions of Ad Lifetime Value or LTV (see recent Ad LTV Benchmarks report). LTV represents the total value of a user if given enough time to fully use up all opportunities to pay or watch ads in an app. In other words, it is the total amount of income generated during the company’s entire relationship with a customer.
Sometimes referred to as Customer Lifetime Value (CLV), LTV is often averaged across a group of users called a cohort. Most publishers try to create models for future LTV prediction on the basis of the activity during the first few days after the app’s launch so they could predict how much profit a customer can bring and optimize their marketing strategy accordingly.
1) LTV is reserved for marketing campaigns only
Although this is partially true, it nevertheless doesn’t tell the whole story. Yes, it is accurate that the primary reason for calculating LTV is to assist in the development of marketing strategies.
However, the real fact is that LTV needs to be analyzed much sooner, before the app reaches the marketing planning phase, ie. during the early design stage. It is in that point in time that any self-respecting app developer has to start thinking about potential LTV, on the basis of benchmarks from similar apps.
This not only helps you in gathering funds but also in deciding what kind of a mobile app you will make. Another perhaps even more important reason is that LTV takes into consideration both ARPDAU and retention, reflecting on success in the long run. Devoting efforts to active tracking and calculation of potential LTV allows you to focus your efforts to all the relevant elements that take part in the process of making important decisions about the app and your monetization methods.
2) Real LTV is easy to calculate
In fact, there might not even be such a thing as real LTV. What we actually mean when we talk about LTV is the predicted LTV during a set timeframe. This timeframe is usually 180 or 365 days and that is too long to wait to have the real LTV. For this reason, you should focus on calculating the predicted LTV instead. Once you have done that, you can use it to make better decisions relating to your highest value acquisition sources, drive more profitable in-app behaviors, and finally increase your profit.
There are multiple methods to calculate LTV and we explain the six best ways in this blog post.
3) You cannot succeed with low LTV
This is another myth that is easy to bust. Just take a look at the current mobile app market and you’ll see examples of successful apps whose LTVs reach as high as $500 and as low as $0.1. LTV will always differ from one app to another, aggregated by various demographic characteristics like geography, acquisition source, device type, and other elements. Regardless, all installations are important, even when they’re not bringing in a lot of money.
Having said that, your LTV may be low but it shouldn’t be in a downward spiral as this is a strong warning sign that something is seriously wrong with your app that drives away purchases and users who want to view your ads. A declining LTV is what ultimately makes you lose money.
4) Successful companies have LTV > CPI
The belief that you need a higher LTV and a lower CPI in order to beat your competition has gained traction all over the business, with some companies even organizing event series named after it.
However, the situation on the ground isn’t always in accordance with our best expectations. You cannot expect to excel in all segments all the time in order to achieve the LTV > CPI goal, which is why most companies usually have both CPI > LTV as well as LTV > CPI interchangeably.
Every good app developer has to focus on both of these metrics. LTV allows you to make better decisions than those who rely only on CPI but keeping track of and optimizing your CPI also has its perks. First of all, it’s easy to track, using server-to-server matching or tracking links. Secondly, it provides greater security than CPC and CPM campaigns in terms of payment because it guarantees the advertiser is paid only when a user installs the app upon engaging with an ad. Lastly, it enables low-cost, volume-driven marketing campaigns.
You shouldn’t blindly focus on racing toward the LTV > CPI goal. You should be optimizing the entire process instead of focusing exclusively on performance. The aim is to discover the best segments of your strategy and focus on improving them. If your monetization strategy includes placing ads in your app, then you should trace ad LTV per segment. This can be achieved with a little help from a platform such as SOOMLA’s.
5) LTV can be created in under 30 days
When you start analyzing your LTV, you’ll notice that the first 30 days only bring in between 25% to 50% of the total LTV. Compare this result to the results gathered from day 31 to 180, and you’ll see that LTV may be twice as much as in the first 30 days.
Evidently, you need to divert your view toward long-term goals – focus your attention on a longer period instead of just the first month and make an additional effort to create reasons that will make your most devoted users stick around for longer and come back to your mobile app time and time again. These reasons could be additional levels, characters, and items if it’s a game, new exercises if it’s a fitness app, and so on – you get the gist.
The importance of LTV must not be underestimated. Measuring it properly is essential in the mobile app marketing business as it gives you valuable insights on which stage of the user lifecycle do your users bring in the most value. This knowledge allows you to create, strategize, and optimize your marketing strategies, ultimately propelling your mobile ad revenue growth.
On top of that, you need an impartial approach to measuring your app’s ad LTV and attributing ad revenue to the user level. An unbiased third party measurement is a critical enabler for exponential growth in mobile apps.
One of the broadest and most complex KPIs, LTV is influenced by multiple factors, including in-app purchases, app referrals, ad based revenue, and more. It may be tricky to keep track of all this, but SOOMLA can help with our versatile platform. Not only does it allow you to track LTV per segments, cohorts, and testing groups, but it also has the right tools for ad revenue tracking, ad revenue attribution, and managing your mobile ad networks (among other things).
SOOMLA is also an unbiased third party that can accurately attribute ad revenue for each and every single user.