Lifetime value or LTV is the total monetary value of a single user over the whole time they play a mobile game.
Tracking this KPI is especially important for understanding the mobile gaming market. From a commercial point of view, this metric is a reflection of your game’s market value.
Knowing this information helps you modify your marketing budget to stay profitable. It can also be used for forecasting how much revenue a game will generate in the foreseeable future.
Here’s an interesting fact about lifetime value. Even though this metric is widely used and of unquestionable value, there is no standard way to calculate it. There are many different formulas, from simple ones to complex math-level equations.
Written 9/4/2022 by Admin.
How much should you spend on getting one user to install your game?
A mobile game metric that solves this issue perfectly is customer lifetime value.
To stay profitable, you shouldn’t spend a dime over the sum you’re going to earn from a user.
Now, let’s talk about what lifetime value in mobile games is, how it can be calculated, why it is so important and ultimately, some techniques you can use to improve it for your game
Excited? Let’s dive right in.
Lifetime value or LTV is the total monetary value of a single user over the whole time they play a mobile game.
Tracking this KPI is especially important for understanding the mobile gaming market. From a commercial point of view, this metric is a reflection of your game’s market value.
Knowing this information helps you modify your marketing budget to stay profitable. It can also be used for forecasting how much revenue a game will generate in the foreseeable future.
Here’s an interesting fact about lifetime value. Even though this metric is widely used and of unquestionable value, there is no standard way to calculate it. There are many different formulas, from simple ones to complex math-level equations.
However, there is one thing most developers agree on: what LTV is. To break it down, lifetime value consists of:
The difference in industry opinions comes from the way these three categories are calculated.
For example, different metrics can be taken into account for calculating monetization: ARPU (average revenue per user), ARPPU (average revenue per paying user), and ARPDAU (average revenue per daily active user).
When it comes to calculating retention, we have simple retention rate formulas, as well as those more complex ones that are based on churn rate and engagement rates.
When it comes to game virality, it is excluded from most formulas since it’s the hardest to calculate. However, it is something to keep in mind when thinking about your game’s lifetime value.
We won’t get into the industry discussions on how to properly calculate LTV. For this reason, we will stick to the most basic calculation method using average daily user revenue and the number of days a user spends in a game.
To put it in numbers, if a user spent 10 cents a day on average while playing a game for a total of 60 days, his lifetime value stands at $6.
Generally, this lifetime value formula is based on the assumption that you already have enough historical data on the game.
Remember that using a simple calculation like this is in no case a way to get the most accurate numbers – look at it as more of a rough estimate.
The accuracy of LTV calculation also depends on how the game is monetized: it is much easier to measure it if the game is based on IAP revenue rather than ad revenue.
Additionally, there are predictive LTV models that can show you how LTV variables (retention, revenue) might change in the future.
Future calculations are where it all gets more complex. For this reason, there are a number of third-party LTV calculators that can do this for you.
No matter which calculation method you choose, one thing about calculating lifetime value is for sure → the higher the user LTV is, the higher the user retention and total game value.
By all means, there are multiple valid ways to calculate LTV. When you pick the calculation method you like most, make sure to stick to it to ensure result consistency and precision. When choosing a method, consider these factors:
Finally, how do you know if your game’s lifetime value is actually good?
You can find this out by comparing your LTV to the average customer acquisition cost (CAC). In the mobile game industry, CAC refers to the average cost per install – CPI.
By ensuring that the average lifetime value is higher than the game’s average customer acquisition cost, you can expect a positive ROI. Once the cost of acquiring a new user is higher than the user’s value, the game is no longer profitable.
For example, if your game’s LTV is $0.55 and your CPI is $0.70, it’s time to pause and restructure your marketing campaigns. At this scale, losing $0.25 for each new user is unacceptable.
Developers track the lifetime value of their mobile games for different purposes. Here are some things you can use LTV for:
Yes, you can learn all of this from a single metric. Despite that, many developers still don’t give lifetime value proper attention.
Keep in mind that there are some traps to avoid when using LTV for user acquisition and live ops. Some of the most common ones include overly optimistic predictions, and not separating revenue sources.
