The Value of the Long Term Value of App Users

The long-term value of mobile gamers is the most meaningful metric a developer can employ to determine if your app has real profitability. It is a game changing metric for those that are paying attention. Standard model metrics that determine the overall profitability of your app that have been used up until this point fail to take into account future revenue. From a business stand point this has not always been a go-to technique, as it feels like counting your chickens before they are hatched. But the industry has had a long enough time-line now that future revenues are a reliable metric. As with anything new and shiny in an industry, paying attention to this metric can have profound effects on your income.

To take advantage of this metric we first have to figure out how to calculate it. To do this you first calculate three metrics that more than likely you are probably already obsessed with.

Monetization (how much cash revenue you are pulling in). This is determined mainly by calculating three things: The amount of revenue each user will bring in, the amount of revenue that paid users bring in, and the average daily revenue of each active user. This may seem like a lot of calculation of different overlapping areas of revenue but trust me this number is literally gold.

• Retention (people coming back to your app). You get this metric by breaking it down into three areas just like we do with Monetization. The first is how often people come back to your game, be-it daily, weekly, or longer. 

• The second is how many people return to the game overall, and the third is how long they stay logged into the app. (the last is very important for targeted ad revenue which we will get into later).

• Vectoring (how viral your app is). Much like the CDC tracks the path of an outbreak of the flu, you can track the viral potential of your app by calculating the ephemeral quantity of free users that “infected” users will bring in with word of mouth and personal interaction media.

Congratulations! With these macro-metrics in hand you can determine what the LTV of your app users are. You have gained a magic ability that is much sought after in the business world. You can see the future!

Now before you plotting to take over the world there are a few things you need to do first to get the most out of your newfound super powers. The biggest thing and probably the elephant in the room is targeted marketing. Once you know how many customers you will retain over a quarter you can stop wasting advertising dollars on customers you know wont be coming back and focus them like a precision laser at those customers you are going to retain. For app developers the correct balancing act of how much advertising dollars to spend and where is the life and death difference between success and the herd.

With the metrics you now have you can also see where you lose retention of your customers. If everyone is leaving your app after 4 months of regular play, then you now know where your app needs improvement or alteration. You can objectively address the use of your app and make targeted changes to keep your audience coming back for more. The more they come back the better the rest of your metrics will do as a byproduct. Which as we all know is the name of the app developing game.

There are potentially dozens of ways that this metric can help the app developer in ways that standard model metrics cant begin to touch. I only described some of the big umbrella effects that are readily apparent. If you want to maximize your income potential then any information is power when planning for the future. Calculating the LTV of your users is an iceberg disguised as a sundae cone and it can mean the difference between following your own dreams in creating a real foothold in the industry or sinking like the Titanic.


Other posts that might be of interest:
Are Apps Really Money Makers

Turning Apps into Money Makers

Most people create apps for one reason: to make money. But before you start developing that code, there are a few realities you should know in order to understand revenue modeling for free apps. 

It’s not easy to make it. And it’s going to take persistence and money to get off the ground and get the word out for people to find your app. Don’t fall in to the trap of assuming that your app is so amazing that people will find it on their own. As of May 2015, there were 1.5 million apps available for Android devices; and 1.4 million available apps on Apple’s App store (source: Statistica).  There’s no market where competition is fiercer than the app world. You will need to be ready to create buzz, visibility and traffic to generate downloads and this will require a dedicated budget spend.

So how do you start money coming in? Here are 3 key factors to building financial success:

1.  APP UPGRADES

Attract downloads with a free, ‘lite’ version of your app which allows users to try out the app and get used to the features. Promote the benefits of a full/premium version of the app to generate conversions and paid upgrades.

2.     IN-APP ADVERTISING

This is perhaps the easiest way to generate revenue from your app, as well as build engagement for your app.  The way it works is by allowing advertising with linking to be integrated within your app. A successful strategy is to offer a free version of your app with advertising and offer users the option to remove the ads by upgrading to a paid app version. An easy way to do this is to tap into the services of a mobile advertising network like InMobi. In addition to handling effective integration of ads, they can also ensure that the advertising is delivered with the right ad experience for your app users.

3.     IN-APP PURCHASES

Your app may be free yet you can make money by providing and charging for special features or content, subscriptions and bonus offerings that can be purchased directly through the app.  Make sure that your app is set up to facilitate easy payment and delivery of purchased products. An easy an effortless integrated experience increases the opportunity for continued purchases.

Launching an app is hard work and real success is limited to the few. In addition to gaining downloads and users, you need to maintain them. Statistics show that there is often a drop off after three months. App developers need to be persistent and woo their users. The dream payoff is to make a sale like SnapChat or WhatsApp. It only happens to a few, but it's not a bad vision to have in your rear view mirror.