L

What is Lifetime value (LTV)?

Definition, examples, and more

Definition

The total revenue a user is expected to generate over the entire duration of their relationship with your app. LTV is a foundational metric for forecasting revenue, setting CAC targets, and evaluating the long-term impact of product or pricing decisions.

How to Calculate

Simple LTV = ARPU x Average Customer Lifetime (in months). Net LTV = Simple LTV x (1 - Platform Fee %). More precise: LTV = Sum of (Monthly Revenue x Survival Rate at Month N) for N = 1 to projected lifetime. For example: Month 1: $9.99 x 100% + Month 2: $9.99 x 92% + Month 3: $9.99 x 86% + ... summed across all months.

Example

A meditation app subscriber pays $9.99/month and stays for an average of 14 months. Gross LTV = $9.99 x 14 = $139.86. After Apple's fees (blended 22.5% for mix of year-1 and year-2+ rates): Net LTV = $139.86 x 0.775 = $108.39. This net LTV sets the ceiling for their CAC — anything below $36 (3:1 ratio) is profitable acquisition.

Why Lifetime value (LTV) Matters

LTV is the most important number in your subscription business because it determines how much you can invest in growth. A fitness app calculated LTV at $85 and set their CAC ceiling at $28 (3:1 ratio). A competitor with a $120 LTV could outbid them on every ad platform by 40%. The difference was retention: the competitor had 4% monthly churn vs 6% monthly churn. That 2-point churn difference translated to $35 more LTV per user, creating an insurmountable acquisition advantage.

Frequently Asked Questions

How do I calculate LTV for a new subscription app?

Start with cohort-based survival curves: track what percentage of each monthly cohort remains subscribed at 1, 2, 3 months, etc. Sum the revenue at each period weighted by survival rate. For early-stage apps with limited data, use the simple formula: ARPU / Monthly Churn Rate (e.g., $9.99 / 0.05 = $199.80 projected LTV). Be conservative — early LTV estimates are almost always too optimistic.

Should I calculate LTV per install or per subscriber?

Both serve different purposes. LTV per subscriber tells you the revenue from a paying user (useful for retention analysis). LTV per install includes the conversion rate and tells you the expected revenue from any user you acquire (useful for setting acquisition bids). LTV per install = LTV per subscriber x Install-to-Subscribe Rate. For ad bidding, LTV per install is what matters.

How do I increase LTV?

Three levers: 1) Reduce churn (extends customer lifetime), 2) Increase ARPU (through upsells, price increases, or additional revenue streams), 3) Improve conversion rate (higher % of installs generating revenue). Of these, reducing churn usually has the biggest compounding impact. Dropping monthly churn from 5% to 3% increases average lifetime from 20 to 33 months — a 65% LTV improvement.

Category
Subscription App Terminology
Related Area
Mobile App Growth & Monetization

More terms starting with “L

Optimize your subscription pricing with AI

Botsi automatically shows the right price to every user. Stop guessing and start growing.