What is Lifetime Value?

Lifetime Value (LTV) is the total revenue a user is expected to generate during their entire relationship with your app.

For example, if a typical user pays $5/month and stays for 6 months before canceling, their LTV is $30. It tells you how much a user is worth — not just at the moment of acquisition, but over time.

In subscription apps, LTV is usually tied to how long users stay subscribed. In gaming or e-commerce, it might be based on in-app purchases or repeat transactions.

How does it work?

LTV is calculated by estimating three things:

• Average revenue per user (ARPU)

• Retention (how long users stay active or subscribed)

• Churn rate (how quickly users leave)

A basic formula looks like:

LTV = ARPU × Average customer lifespan

But advanced models might factor in discounts, refunds, seasonal behavior, or user segments (like power users vs casual users).

For example, two users might both generate $10 in their first month, but one churns immediately while the other sticks around for a year. Their LTVs are very different.

Why it matters

LTV is a foundational metric in growth and monetization strategy. It tells you how much you can afford to spend to acquire a user and still be profitable.

If your Customer Acquisition Cost (CAC) is higher than your LTV, your business model breaks. But if your LTV is growing (because users stay longer or spend more), you can reinvest more confidently in marketing.

It’s also a key benchmark for evaluating the long-term health of your app. A rising LTV means users are getting more value and sticking around, which is exactly what you want.