What Is LTV? (Lifetime Value)
The total net revenue a user generates over their relationship with your app: the ceiling on what you can spend to acquire them.
Book a free callLTV (Lifetime Value) is the total revenue a single user generates for as long as they use your app. In its simplest form, it's calculated as ARPU × Average User Lifetime. It's the metric that sets the ceiling on your ad budget: if you spend more than a user's LTV to acquire them, every new user loses you money.
How to calculate LTV
For subscription models, there's a more useful variant:
In mobile games and in-app purchase models, revenue is far more uneven, so instead of a formula teams use a cohort-based cumulative revenue curve: measure the cumulative revenue per user a cohort generates at D1, D7, D30, D90 and D180, then extend the curve forward.
Gross LTV vs. net LTV
Making budget decisions on gross LTV is one of the most expensive mistakes in mobile marketing. A significant share of what users spend never reaches you.
| Item | Typical rate | Impact |
|---|---|---|
| Store fee | %15 – %30 | Apple / Google cut |
| Payments and refunds | %1 – %5 | Cancellations, chargebacks, processing fees |
| Taxes | Varies by market | VAT and digital services taxes |
| Variable cost of service | Depends on the model | Servers, content, support |
What's left after these deductions is net LTV, and target CPA and target CPI should be set on this number only.
LTV / CAC ratio: the measure of healthy growth
LTV means something not on its own but relative to acquisition cost. This ratio is the shared benchmark for investors and growth teams.
| LTV / CAC | Interpretation |
|---|---|
| < 1 | Every new customer loses money; the model isn't sustainable |
| 1 – 2 | Close to break-even; high risk once fixed costs are added |
| Around 3 | The widely accepted healthy range |
| > 4 | Profitable, but you may be underinvesting in growth |
Alongside the ratio, teams also track the payback period: how many months it takes to recoup acquisition cost. For cash-constrained teams, a 12-month payback matters more than a 3x LTV/CAC ratio.
How to raise LTV
- Improve retention. Because churn is LTV's denominator, keeping users is often more effective than increasing revenue. A few points of gain in D1 and D7 retention lifts LTV disproportionately.
- Diversify monetization. Hybrid models that combine subscriptions, in-app purchases and ad revenue noticeably increase revenue per user.
- Test pricing. Tests on package structure, trial length and price points have a direct effect on LTV.
- Re-engage users. Winning back dormant users with segmented push notifications and email flows extends average lifetime.
- Acquire the right users. LTV is an outcome; optimizing campaigns toward high-value user segments brings in a better cohort from the start.
Frequently asked questions
Over what time window should LTV be measured?
Since true LTV can span years, in practice teams pick a fixed window, usually D180 or D365. What matters is using the same window across all channel and cohort comparisons; LTV values from different windows can't be compared.
How do you forecast LTV for a new app?
Without enough historical data, you use the cumulative revenue curve of early cohorts: derive the D7-to-D30 and D30-to-D180 revenue ratios from similar apps or your first cohorts, and forecast with those multipliers. The forecast should be updated with every new cohort.
What is the difference between LTV and ARPU?
ARPU measures average revenue per user over a given period; LTV is the total revenue a user generates over their entire lifetime. ARPU is a snapshot; LTV is a forward-looking cumulative forecast.
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