What is Life Time Value?
The Life Time Value summarizes the average value that a mobile app user generates for an app (or the app owner) from the download to the uninstall.
Why is LTV important?
The LTV indicates the success of an app regarding monetization, user loyalty, and virality. Based on the LTV, app marketers can evaluate their monetization strategies. But they can also determine the right price points for user acquisition and retention campaigns. These characteristics make the LTV a crucial KPI for every app business.
How to calculate the LTV?
The LTV contains three components:
- the Average Revenue per User as the sum of revenues from in-app purchases, e-commerce, and advertising
- the Churn Rate as the percentage of users who abandon an app shortly after downloading it
- the Virality Factor as the number of new users that current users bring into the app by word of mouth, social sharing, and similar actions
The formula for calculating the LTV is:
LTV = ARPU / Churn Rate + (ARPU / Churn Rate x Virality Factor)