App Monetization, Resource

LTV Calculator – The Naive method

customer LTV calculations can be confusing for an app developer doing it for the first timeThis is the 1st post in a series of 6 posts. Here is a summary post explaining all the different calculators.

The customer LTV calculation method shown in this post is rather simple and is the most naive way to calculate the lifetime revenue per user.

Explanation of the customer LTV calculator

Inputs:

  • ARPDAU – this is the average daily revenue per user – simply take the daily revenue in the segment (or for all users) and divide by the number of active users that day.
  • Expected Lifetime – this is how long you users will likely to use the app – you can estimate that based on other apps or just wait until the users stop showing up.

Outputs:

  • Estimated LTV per user

Pros:

  • Simple
  • Good to get a sense of the customer LTV rather than for real optimizations

Cons:

  • This method is a bit too simplistic and assumes all users stay the same period of time
  • There is no way to know in advance how long users will stay

More methods to calculate user value

Here is a more advanced method to calculate the CLV based on limited retention data

You can also model out LTV in one segment based on data from other segments

 

 

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4 Comments

  1. […] Simply multiplying the ARPDAU by the expected lifespan of a single user. You can refer to this LTV calculator as an example of how to do […]

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    February 6, 2017 at 5:59 pm

    […] value x conversion rate: Calculate the lifetime value of a customer, and multiply that by your conversion rate (average number of email subscribers who […]

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  3. […] value x conversion rate: Calculate the lifetime value of a customer, and multiply that by your conversion rate (average number of email subscribers who […]

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  4. […] value x conversion rate: Calculate the lifetime value of a customer, and multiply that by your conversion rate (average number of email subscribers who […]

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