LTV

A fairytale to illustrate why genre matters in mobile gaming. The money lies with the games that can make decent returns within reasonable timeframes.

As trends in mobile gaming move towards extended LTV games where players stick around for longer, it’s important to understand their behaviour over time. In this post we're going to explore the issue of convexity in LTV curves, and how to correctly factor this into your wider UA and growth planning models.

A gaming company needs data and analytics to understand player behavior, predict LTV, and innovate live ops. Understanding this will allow them to improve player experience and grow their community.

Rather than focus on certain deals and multiples, we will try to set out a rational framework for how to value a mobile gaming studio based on some fundamentals around how these companies operate.

Games with lifetime values (LTV) measured over months or years is where the industry is heading. But in creating games with much longer LTV periods (think Candy Crush and the like), the associated user acquisition (UA) costs to scale such a game also rise dramatically.

IMVU analyzed user journeys with our data team to explore what organic behaviors resulted in the most valuable users or purchasers.

While oftentimes a healthy projected future LTV is a good sign that you have a sustainable, profitable UA strategy, what can sometimes get lost in the optimism of strong projections is that LTV is a made up number - and the map can sometimes differ from the territory.

As app marketing gets more sophisticated, there’s an increasing focus on metrics of every sort. Having a clear understanding of your unit economics is extremely important specifically customer acquisition cost (CAC) and user lifetime value (LTV) - how much a customer costs to acquire and the expected value of that customer over time from your app or game.

When most developers are looking at acquisition costs on mobile, many get stuck in short-term thinking, getting hung up on headline prices rather than a return on investment calculation.

Aside from the development team, app companies tend to have two clear groups that are critical to their success: the finance and marketing teams. While these two functions have historically been divided into all types of company and sector, in the field of apps there is a strong imperative to bring them together to work more closely together on a daily basis.

Since creating the first app store lending product in 2014, we’ve learned a lot about how developers can use their receivables as a really effective and capital-efficient way to grow their business. We’ve rolled all of this learning into our new credit line product, making it easier than ever for qualifying developers to access a new source of low-cost capital to grow their business.

Lifetime Value is prized as a predictive metric, one that yields the value of future cash flows based on calculations tied to the actions and affinities of your users. But users are different and provide a different level of value depending on the category of app you offer and the user journey it enables.

Lifetime Value is all revenue a single user is expected to generate from the time they download the app until they stop using it. It’s quantified as a window of time in which an app is seen as turning a profit over operating costs.

If you have just launched a new app, it’s often the case that you’ll have very little experience of developing a UA strategy. This is exactly what happened at Peak Labs, who released their cognitive brain training app in 2014, so they brought in Adam Turowski to build their strategy from the floor up. Since their launch they have experienced huge growth and been nominated for best app in the store twice. At our latest London Growth Summit, Adam discussed the 10 steps he followed when developing Peak’s successful UA formula.

App developers by their very nature are inherently clever people. Crafting a mobile app or game requires plenty of experience and smarts. Unfortunately, however, developers are so focused on their product, and coding a great app, that they are left perplexed by the more traditionally “soft” skills required in marketing and user acquisition to make their app a commercial success.