LTV (Lifetime Value) — a metric that shows how much money one customer brings to a business over the entire period.
For example, an acquired user may first make one purchase and then return a month later and buy again. In a subscription service, they may pay every month, while in iGaming — make repeat deposits. All these payments form their value to the business over a long period.
Why calculate LTV
LTV helps determine how much a company can spend on acquiring a customer.
If acquiring a customer costs $50 and they generate an average of $200 over the entire period, such expenses may pay off. If the same customer generates only $30, spending $50 to acquire them is no longer profitable.
Therefore, more expensive traffic is not necessarily worse than cheaper traffic. One campaign may acquire users at a lower cost, but they quickly leave and do not buy anything else. Another — may acquire them at a higher cost, but these customers return and continue generating revenue.
How LTV is calculated
There is no single formula here: it depends on the business and what exactly the company considers revenue from a customer.
In a simple version, you can take the average revenue from one customer over a certain period and multiply it by the average length of time the customer stays with the company.
Important: LTV is usually calculated not for one specific person, but as an average for a group of customers. Therefore, it is a benchmark based on accumulated statistics and may change over time.
