What is LTV? (Lifetime Value Explained)

LTV—Lifetime Value—is the total revenue a user generates over their entire relationship with your app.

It's the most important metric for understanding whether your user acquisition strategy is sustainable.

If your LTV is $30 and your CAC (Customer Acquisition Cost) is $10, you're making $20 profit per user. If LTV is $10 and CAC is $30, you're losing $20 per user.

The math is straightforward. But calculating LTV accurately is harder than it looks.

Why LTV Matters

LTV tells you how much you can afford to spend acquiring users.

If your LTV is $50, you can profitably spend up to $50 on acquisition. In practice, most apps target an LTV:CAC ratio of 3:1 to account for operational costs and maintain healthy margins.

When LTV is too low relative to CAC, growth isn't sustainable. You're spending more to acquire users than they'll ever generate in revenue.

When LTV is high relative to CAC, you have room to scale aggressively. You can outbid competitors because your unit economics are stronger.

How to Calculate LTV

There's no single "correct" LTV formula. The right approach depends on your monetization model and available data.

Formula 1: ARPU / Churn Rate

LTV = ARPU / Churn Rate

This is the most common formula for subscription apps and games with recurring revenue.

Example:

• ARPU (Average Revenue Per User) = $5 per month
• Monthly churn rate = 10% (0.10)
• LTV = $5 / 0.10 = $50

If 10% of users churn each month, the average customer lifespan is 10 months (1 / 0.10), so a user generating $5/month will generate $50 total.

Formula 2: ARPU × Average Lifespan

LTV = ARPU × Average Customer Lifespan

This is equivalent to the first formula but more intuitive for some teams.

Example:

• ARPU = $5 per month
• Average customer lifespan = 10 months
• LTV = $5 × 10 = $50

Formula 3: Total Revenue / Total Users

LTV = Total Lifetime Revenue / Total Users

This simplified approach works when you have mature cohorts and want to calculate actual (not predicted) LTV.

Example:

• Total revenue from 2024 cohort = $500,000
• Total users acquired in 2024 = 10,000
• LTV = $500,000 / 10,000 = $50

Which Formula Should You Use?

Subscription apps: Use ARPU / Churn Rate because it accounts for ongoing revenue.

Ad-monetized apps: Use Total Revenue / Total Users because ad revenue is more variable.

IAP-heavy games: Use cohort-based analysis with predicted LTV based on early spending behavior.

LTV Components

Understanding what drives LTV helps you improve it. LTV is determined by three factors:

1. Monetization (ARPU)

How much revenue does each user generate? This comes from:

• Subscriptions
• In-app purchases
• Ad revenue
• One-time purchases

Improving monetization means optimizing pricing, paywalls, ad placements, and purchase frequency.

2. Retention (Churn Rate)

How long do users stay active? Lower churn = longer lifespan = higher LTV.

If monthly churn is 20%, average lifespan is 5 months. If you reduce churn to 10%, lifespan doubles to 10 months.

A 10% improvement in retention can increase LTV by 20-40% depending on your revenue model.

3. Engagement

How often do users interact with your app? Higher engagement drives both retention and monetization.

Engaged users stick around longer and are more likely to pay.

LTV:CAC Ratio

The LTV:CAC ratio tells you if your growth is profitable.

LTV:CAC Ratio = Lifetime Value / Customer Acquisition Cost

What's a Good Ratio?

• Below 1:1 – You're losing money on every user. Not sustainable.
• 1:1 to 2:1 – Breakeven to marginally profitable. Risky.
• 3:1 – Industry standard for sustainable growth.
• 4:1 or higher – Strong unit economics. Room to scale aggressively.

Why 3:1 is the Target

LTV measures revenue, not profit. You have other costs:

• Server infrastructure
• Customer support
• Development
• Payment processing fees
• Team salaries

A 3:1 ratio provides margin to cover these costs and still generate profit.

Calculating Your Ratio

Example:

• LTV = $60
• CAC = $20
• LTV:CAC = $60 / $20 = 3:1

This means you're generating $3 in revenue for every $1 spent on acquisition. After operational costs, you're likely profitable.

Predicted LTV vs Actual LTV

You can't measure true LTV until a user churns, which could take months or years.

Most growth teams use predicted LTV based on early behavior.

Early Indicators

• Day 1-7 revenue: Strong predictor of long-term monetization
• Day 7 retention: High D7 retention correlates with higher LTV
• Engagement frequency: Users who open the app 5+ times in Week 1 have 2-3x higher LTV

Platforms like Meta and Google use machine learning to predict LTV based on these signals. You can optimize for predicted LTV to make faster decisions.

Cohort-Based LTV

Track LTV by cohort to see how it evolves over time.

A cohort acquired in January might show:

• Day 30 LTV: $5
• Day 60 LTV: $12
• Day 90 LTV: $18
• Day 180 LTV: $28

If Day 30 LTV predicts 75% of Day 180 LTV, you can estimate long-term value without waiting 6 months.

LTV by Monetization Model

Subscription Apps

• Average LTV: $30 - $150 depending on pricing and retention
• Key driver: Reducing churn in the first 30 days
• Benchmark: 3-12 month average subscription length

Gaming (IAP)

• Average LTV: $5 - $50 (hyper-casual to mid-core)
• Key driver: Getting users to make their first purchase
• Benchmark: 2-5% of users contribute 80%+ of revenue

Ad-Monetized Apps

• Average LTV: $2 - $20 depending on session frequency
• Key driver: Daily active usage and session length
• Benchmark: 30-90 day lifespan for most casual apps

How to Increase LTV

LTV is the product of monetization and retention. To increase it, you need to improve both.

1. Improve Onboarding

Better onboarding increases retention, which extends lifespan. A user who completes onboarding has 2-3x higher LTV than one who doesn't.

2. Optimize Paywall Timing

For subscription apps, showing the paywall at the right moment increases conversion rates by 30-50%, directly lifting LTV.

3. Introduce New Revenue Streams

If you only monetize through ads, adding a premium tier can increase LTV for high-engagement users.

4. Reduce Churn

Email re-engagement, push notifications, and in-app prompts can reduce churn by 10-20%, increasing LTV proportionally.

5. Increase Purchase Frequency

For IAP apps, limited-time offers and events encourage repeat purchases, raising ARPU and LTV.

Common LTV Mistakes

1. Using Platform-Reported LTV Without Validation

Ad platforms estimate LTV based on models. Validate these numbers against your actual revenue data.

2. Not Segmenting LTV by Channel

Users from Apple Search Ads often have 2x higher LTV than users from TikTok. Blended LTV hides this and leads to poor budget allocation.

3. Ignoring Time Horizons

Day 30 LTV and Day 180 LTV are different metrics. Make sure you're comparing like-for-like when evaluating channels.

4. Forgetting to Update LTV

LTV changes as your product evolves. Recalculate quarterly to ensure your acquisition targets are still accurate.

Key Benchmarks to Remember

• Target LTV:CAC ratio of 3:1 for sustainable growth
• Top apps maintain 4:1 or higher
• Subscription apps: $30-$150 average LTV
• Gaming (IAP): $5-$50 average LTV
• Ad-monetized apps: $2-$20 average LTV
• 10% improvement in retention can lift LTV by 20-40%

FAQs

What is LTV in mobile apps?

LTV (Lifetime Value) is the total revenue a user generates over their entire lifetime using your app. It's calculated as Average Revenue Per User (ARPU) multiplied by Average Customer Lifespan, or ARPU divided by Churn Rate.

What's a good LTV:CAC ratio?

A sustainable LTV:CAC ratio is at least 3:1, meaning users generate 3x more revenue than they cost to acquire. Top-performing apps maintain ratios of 4:1 or higher.

How do you calculate LTV for mobile apps?

The most common formula is LTV = ARPU / Churn Rate. For example, if your ARPU is $5/month and monthly churn is 10%, LTV = $5 / 0.10 = $50. Alternative formulas include ARPU × Average Lifespan or Total Revenue / Total Users.

Why does LTV matter more than ROAS?

ROAS measures short-term revenue from ads. LTV measures total revenue over the user's lifetime. A campaign with low Day 30 ROAS could still be profitable if LTV is high due to strong retention.

How often should I recalculate LTV?

Recalculate LTV quarterly or whenever you make significant product changes (new features, pricing changes, monetization updates). LTV shifts as your app evolves.

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LTV is the metric that determines how aggressively you can grow. Get it right, and you can outspend competitors. Get it wrong, and you'll burn through budget without building a sustainable business.