LTV (lifetime value)

If an average user of a game spends $12 in purchases and generates $3 in ad revenue over their lifetime, their LTV is about $15. That tells the developer it can profitably pay up to, say, $10 to acquire a user. LTV links marketing spend to real business value.

LTV is estimated from data such as retention curves, average revenue per user, purchase frequency and churn, and often predicted early, from the first few days of behaviour, so marketers can judge campaigns quickly. In app marketing, comparing LTV with cost per install (CPI) by source is the core test of an app install campaign. Retailers, subscription services and banks use the same concept for customers.

LTV is also a key fraud indicator. Fraudulent installs from device farms or SDK spoofing have almost zero LTV, and sources with high installs but no revenue deserve investigation. Conversely, optimising only for installs rather than LTV invites fraud, since installs are easier to fake than long-term paying behaviour.

Think of it like this

LTV is like a café working out how much a regular customer spends over years of morning coffees, which tells it how generous the first free coffee can be.

An example

A subscription fitness app in the UK calculates a 12-month LTV of £48 for users from social ads and £9 from one ad network; it stops the network despite its lower £2 CPI.