Here’s a common game marketing dilemma.
How much should you spend on getting one user to install your game?
A mobile game metric that answers this question best is customer lifetime value.
To stay profitable, you shouldn’t spend a dime over the sum you’re going to earn from a user.
Now, let’s talk about what lifetime value in mobile games is, how it can be calculated and why it is so important.
We also cover some techniques you can use to improve it for your game. Ultimately, we will go over some numbers for different game genres.
Ready? Let’s dive right in.
Defining Lifetime Value in Mobile Gaming
Lifetime value or LTV is the total monetary value of a single user over the whole time they play a mobile game.
Tracking this KPI is especially important for understanding the mobile gaming market. From a commercial point of view, this metric is a reflection of your game’s market value.
Knowing this information helps you modify your marketing budget to stay profitable. It can also be used for predicting how much revenue a game will generate in the foreseeable future.
Here’s an interesting fact about lifetime value. Even though this metric is widely used and of unquestionable value, there is no standard way to calculate it. There are many different formulas, from simple ones to complex math-level equations.
However, there is one thing most developers agree on: what LTV is. To break it down, lifetime value consists of:
- Monetization – A user’s contribution to the game revenue over the course of time they play the game.
- Retention – How engaged is the user with the game? How often do they come back? How long are their play sessions?
- Virality (K-Factor) – The number of additional users a current user will bring to the game by recommendation (via social networks, word of mouth, etc.).
The difference in industry opinions comes from the way these three categories are calculated.
For example, different metrics can be taken into account for calculating monetization: ARPU (average revenue per user), ARPPU (average revenue per paying user), and ARPDAU (average revenue per daily active user).
When it comes to calculating retention, we have simple retention rate formulas, as well as those more complex ones that are based on churn rate and engagement rates.
When it comes to game virality, it is excluded from most formulas since it’s the hardest to calculate. However, it is something to keep in mind when thinking about your game’s lifetime value.
We won’t get into the industry discussions on how to properly calculate LTV. For this reason, we will stick to the most basic calculation method using average daily user revenue and the number of days a user spends in a game.
To put it in numbers, if a user spent 8 cents a day on average while playing a game for a total of 50 days, his lifetime value stands at $4.
Generally, this lifetime value formula is based on the assumption that you already have enough historical data on the game.
Remember that using a simple calculation like this is in no case a way to get the most accurate numbers – look at it as more of a rough estimate.
The accuracy of LTV calculation also depends on how the game is monetized: it is much easier to measure it if the game is based on IAP revenue rather than ad revenue.
Additionally, there are predictive LTV models that can show you how LTV variables (retention, revenue) might change in the future.
Future calculations are where it all gets more complex. For this reason, there are a number of third-party LTV calculators that can do this for you.
No matter which calculation method you choose, one thing about calculating lifetime value is for sure → the higher the user LTV is, the higher the user retention and total game value.
By all means, there are multiple valid ways to calculate LTV. When you pick the calculation method you like most, make sure to stick to it to ensure result consistency and precision. When choosing a method, consider these factors:
- Game genre
- Data availability
- Audience type
- Competitor benchmarks
Finally, how do you know if your game’s lifetime value is actually good?
You can find this out by comparing your LTV to the average customer acquisition cost (CAC). In the mobile game industry, CAC refers to the average cost per install – CPI.
By ensuring that the average lifetime value is higher than the game’s average customer acquisition cost, you can expect a positive ROI. Once the cost of acquiring a new user is higher than the user’s value, the game is no longer profitable.
For example, if your game’s LTV is $0.55 and your CPI is $0.70, it’s time to pause and restructure your marketing campaigns. At this scale, losing $0.25 for each new user is unacceptable.
Why Is Tracking Lifetime Value Important?
Developers track the lifetime value of their mobile games for different purposes. Here are some things you can use LTV for:
- To estimate the game’s profitability
- Optimize revenue sources for maximum profit
- Determine how much can be spent on user acquisition
- Observe loyal users’ behavior
- Test the effects of content updates
- Evaluate a new game’s potential while in beta
Yes, you can learn all of this from a single metric. Despite that, many developers still don’t give lifetime value proper attention.
Keep in mind that there are some traps to avoid when using LTV for user acquisition and live ops. Some of the most common ones include overly optimistic predictions, and not separating revenue sources.
9 Ways to Boost Your Mobile Game LTV
Measuring LTV is one thing, and finding ways to increase it for your mobile game is another. Our main focus is to help you optimize your game for the best performance, so let’s get to some of the best practices that will surely improve lifetime value of your game’s users. There are some things you can do about the game design and mechanics, as well as others that are related to proper tracking.
Let’s start with things you can do in-game.
1. Simplify the Onboarding Experience
When new users launch your game, they expect a simple starting experience. This is something that you should test while your game is still in the beta phase – try out different onboarding processes to see what works best for your game.
Keep the required steps before they can start playing to a minimum. For example, if you want the users to sign up or log in – make sure they can do it with just a click, by connecting to their social media accounts (Facebook, Google). Remember that what people want from a game is an instant experience.
2. Experiment With Game Difficulty
When you finally get the users to install and play your game, the next challenge is keeping them engaged. This is also something you should do while your game is in the beta phase.
The secret to keeping the players engaged is making the game both challenging and entertaining. The key is finding the right fun-challenge ratio.
That can be done by experimenting with different cohort groups. For example, you can create different versions of the game: a version more difficult than the primary one, and an easier version. Separate these versions and observe how different cohorts react to them.
Testing in-game features can help you discover the golden setting for your game. For example, you might discover at which levels are the users engaged and more likely to spend and why is that so.
3. Create Periodical In-Game Events
If this is possible for your game type, enrich your game with different in-game events. You can base them on seasons, holidays, or whatever you think your audience might like. These kinds of features are proven to have a positive impact on revenue and retention. Consequently, they will do the same for a game’s user LTVs.
For example, a sports mobile game can focus on major sports tournaments. Almost every game genre can do something different around Christmas time – organize special competitions, introduce new skins, or hand out special rewards.
Of course, this is not something you want to do last minute. You can create a yearly timeline of events that will take place in your game.
These are some of the things you can do to improve user LTV inside the game itself. Now let’s get to what you can do in terms of tracking and marketing.
4. Segment Your Players
One of the most important steps for improving your user LTV is segmenting your players.
After doing so, you will be able to better understand the relationship between their characteristics and in-game behavior.
You will notice how different groups behave differently and how you can use this information to meet their needs.
You can segment the users by their:
- Spending habits (high vs. low spenders)
- Behavior over time (e.g. after an update)
- Age and gender
- In-game actions
5. Craft Personalized and Targeted Offers
Once you’ve segmented your players, you can start creating different offers for different players.
Your players all have different playing styles, engagement, and spending habits.
Every user segment is more or less willing to spend money on your in-app purchase offers. Besides that, some of them respond better to IAPs, while others prefer ads.
The rules for creating special offers are simple.
They should appear at the right moment in the players’ journeys and bring good value for money.
When it comes to special offers and LTVs, one offer makes the biggest difference – the players’ first purchase.
This is usually some kind of “starter bundle” or “starter pack”. You need to tweak and adapt this offer to fit all of your user segments.
Once you get your users to make their first purchase, this should decrease churn rates and boost player LTVs.
6. Re-Engage Players
The most common way of re-engaging users is by using push notifications. When sending out push notifications, don’t forget to segment the users by their behavioral data to ensure maximum personalization. Equally important, they have to include valuable content.
For example, you can provide the players with:
- Time-limited offers
- Special deals for loyal customers
- Important game updates
When using push notifications, be careful. You want to attract the users that already installed the game, but not annoy them to the point where they decide to uninstall it. Keep in mind that there is a fine line between the two. A good practice to determine push notification frequency is to track user activity. For example, if they launch the game once a day, send one notification, if they launch it three times, send three, etc.
7. Include Rewarded Video Ads
Wondering how in-app advertising affects customer lifetime value? According to Ironsource, rewarded video ads can significantly increase user LTV.
This comes as no surprise since they are known to boost engagement, ARPDAU, and user retention rates, all of which affect lifetime value. To make things even better, rewarded video ads cost 86% less than interstitial video ads (Mobile Marketer).
It is common that some users don’t feel ready to pay when they start playing a game.
For this reason, it’s a great idea to introduce rewarded video ads relatively early. Especially if your game falls into the casual category. According to Appodeal, if users engage with rewarded video ads during their FTUE, they are more likely to spend money afterward. More precisely, five times more likely!
It’s important to give players a reward valuable enough to motivate them to watch the ad. Depending on the game type, you can offer them free coins, extra lives, or the unlocking of special features in return for watching an ad.
Giving them a peek into the content they would usually have to pay for might encourage their future purchases. In the long run, it can also boost their loyalty.
8. Encourage Social Sharing
You can encourage your players to share their gaming experiences on social media. For example, after accomplishing something big in the game, integrate a share button. Features like this contribute to the virality factor of your game’s lifetime value.
What you can do outside the game is to create an engaged gaming community for your game across social media channels. The ultimate goal of your game’s social media marketing should be to encourage gamers to share their experiences, challenges, and goals.
9. Attribute Non-Paying Users
There are players that won’t make any in-game purchases or even click on in-game ads, but will still drive game engagement. A common example of this are players in MOBA (massive online battle arena) games.
Sometimes, users that play frequently and have long play sessions can be equally important as paying users. If you have a MOBA or a similar game, you should keep this in mind and attribute this properly when calculating LTV.
Lifetime Value Benchmarks
As we mentioned before, a player’s lifetime value depends on different factors, including the nature of the game. Different genres come with a different understanding of good lifetime values.
For example, just think about hyper-casual games.
These kinds of games can monetize really quickly after launch, however, they mostly come with a short lifespan,i.e., they lose players shortly after. For this reason, you will be able to calculate LTV with less historical data. According to Department of Play, hyper-casual game lifespans vary from 1 to 5 weeks.
On the other hand, the lifespan in mid-core games is significantly longer, often even surpassing 12 months’ time. This means you won’t be able to calculate LTV properly without months of data.
Here’s a genre breakdown of LTV range values (Department of Play):
- Hyper-casual games: $0.20 to $0.40
- Casual games: $1 to $3
- Mid-core games: $2 to $5
When it comes to lifetime values, they vary not only between genres but also between markets and even devices, according to a report by Appmagic.
In this overview of lifetime values in the Western market, you can see some genres come with significantly higher LTV than others: Role-playing games and Strategy games. On the bottom half, Word games and Hyper-casual games naturally have the lowest LTV.
If you take a look at the Asian market numbers, you may notice that more game genres have high average lifetime values. Here, the best performers also include RPG games, Strategy Games, but also Dance/Rhythm games.
Putting It All Together
We hope we’ve given you enough reasons to track your mobile games’ customer lifetime value.
To put things in perspective, LTV helps you better understand your players, and consequently how you can use those insights to maximize your game’s profits.
If your competitors are only tracking CPI, measuring LTV can give you a competitive advantage. Therefore, make sure to take a look at the genre benchmarks and use the techniques you can apply for getting the most out of your mobile game.