LTV (Lifetime Value)

The average revenue a user generates during their entire time using an app.

Formula (simplified):
LTV = ARPU × Average User Lifespan
(ARPU = Average Revenue Per User)
  • Helps to decide how much we can spend to acquire a user.
  • Core to long-term profitability and valuation.

ARPU (Average Revenue Per User)

Formula:
ARPU = Total Revenue / Number of Active Users

Example: If earnings is $500 this month and had 1,000 active users:

ARPU = $500 / 1000 = $0.50

CPI (Cost Per Install)

The average cost you pay in advertising to acquire one new install.

Formula:
CPI = Total Ad Spend / Number of Installs
  • Tells how efficiently we’re acquiring users.
  • Helps measure the performance of paid campaigns.

Key Rule:

For profit:

  • LTV must be greater than CPI (i.e., we’re earning more from a user than it costs to get them)

Sample LTV & CPI Calculation

This was done on an early stage app, which has a negative net revenue