Glossary | A | App Life-Time Value (LTV)
What is an app’s customer lifetime value (LTV)?
An app’s customer lifetime value, or LTV, estimates the average amount of revenue that an app can expect from each person who downloads the app.
LTV is an important metric because it helps developers understand how profitable (or unprofitable) their apps are. Ideally, app developers want lots of downloads, a low cost to acquire customers, and a high customer lifetime value. Let’s take a closer look at the various factors that can affect LTV:
- User acquisition costs: How much does it cost to acquire a new user, on average?
- User retention rate: What percentage of people who download an app go on to use the app for an extended period of time? What percentage abandon the app shortly after downloading it?
- Average lifespan: Of the group that uses the app over an extended period of time, how long does the average user use the app before abandoning it?
- Average revenue per user: How much revenue does the average user generate?
App developers can improve an app’s customer lifetime value by reducing the cost of customer acquisition, making changes to an app to encourage people to stick with the app over an extended period of time, and test different monetization strategies to boost total revenue per user.
App developers calculate LTV by dividing an app’s total revenue by its total users. Additionally, app developers can segment their customers into groups, to understand their app’s overall LTV, compared to the LTV of their power users, casual users, subscription-based users, users in specific geographic regions, and other segments.