What Is LTV? Customer Lifetime Value Formula

What is LTV (customer lifetime value)?

LTV, short for lifetime value and also written CLV or CLTV, is the total value one customer brings to your business from their first purchase or install until they leave. In marketing it answers one question: how much is a new customer worth, and so how much can you afford to pay to get one? The most common formula for a subscription product is LTV = monthly revenue per customer × gross margin ÷ monthly churn.

Some teams report LTV as revenue and some as gross profit. Profit is the version you can safely compare with acquisition cost, and it is the one this page uses.

The LTV formula

For anything that bills monthly, the formula has three inputs:

LTV = monthly revenue per customer x gross margin / monthly churn
Average lifetime in months = 1 / monthly churn

• Monthly revenue per customer is what an average paying customer pays you in a month, after refunds. It is close to ARPPU for a subscription app.
• Gross margin is the share of that revenue you keep after the direct cost of serving the customer: app store commission, payment fees, hosting, content, and support.
• Monthly churn is the share of customers who leave each month. Dividing by it turns a monthly profit into a lifetime profit, because a customer base losing 5% a month keeps an average customer for about 20 months. What is churn rate? shows how to measure it without the usual errors.

This is the same formula the LTV and CAC calculator uses. It assumes churn stays steady, which it rarely does: most products lose more customers in the first months than later. Treat the result as an estimate and replace it with real cohort numbers as they come in.

LTV without a subscription

Free apps, games, and websites have no monthly bill and no clean churn rate, so the formula above does not fit. Use cohort LTV instead: take every user who installed in one week, add up all the revenue they brought by day 7, 30, 90, and 180, and divide by the number of installs. AppsFlyer’s LTV glossary entry gives the same calculation: total revenue since the install date divided by the users who installed in that period. The curve flattens over time, and where it flattens is your working LTV. That cumulative revenue per install is also cohort ARPU.

A worked example

The 15% in the example is not random. Apple’s App Store Small Business Program sets a reduced 15% commission on paid apps and in-app purchases for developers with up to 1 million USD in proceeds in the prior calendar year (checked on November 5, 2026). Larger developers pay more, so look up the rate that applies to you before you set your margin.

For a free game, a cohort version might read: users who installed in the first week of March brought $0.14 each by day 7, $0.36 by day 30, and $0.55 by day 90, mixing ad and purchase revenue. After store and network shares, that is the most a new player is worth so far. These figures are illustrative too.

What LTV means in marketing

LTV matters because it caps what you can spend on growth. The usual uses are:

• Setting a maximum CAC. Divide LTV by your target LTV to CAC ratio. A 3 to 1 target and an $84 LTV allow about $28 per customer. What is CAC? covers the cost side.
• Turning that into a bid. Multiply the maximum CAC by the share of installs or sign-ups that become paying customers to get the most you can pay per result. CAC vs CPA vs LTV walks through the full chain, and What is ROAS? shows the same logic as a return target.
• Comparing channels. Two channels with the same cost per install can bring users with very different LTV. Analytics tools report it by source for this reason: Google Analytics 4’s User lifetime technique shows total and average LTV of users grouped by the medium that acquired them, using all their data since their first visit.
• Deciding where to improve. LTV has three levers: price, margin, and how long customers stay. Churn usually has the biggest effect because it multiplies everything else.

LTV vs ARPU, ARPPU, CAC, and ROAS

ARPU and ARPPU are snapshots; LTV adds up a whole lifetime. CAC is the cost to compare LTV against, and ROAS is the early, partial read of whether you will get there. For free products, keep an eye on retention too, because it decides how long the LTV curve keeps rising.

Common LTV mistakes

• Mixing payers and non-payers. The subscription formula gives LTV per paying customer. For LTV per install, multiply it by the share of installs that ever pay.
• Treating LTV as fixed. Price changes, a new competitor, or a different traffic source all move it. Recheck it every quarter.
• Ignoring when the money arrives. An LTV that takes three years to collect does not pay this month’s ad bill. Look at the payback period next to the ratio.
• Counting pending revenue. Revenue that can still be refunded or reversed is not yet yours. Use confirmed amounts.

Where an offerwall fits into LTV

For an app, game, or community, most users never pay. Their LTV comes from ads, or from nothing at all. An offerwall adds a second source: users complete offers from advertisers, earn your in-app currency, and you are paid per completed offer, which is how a pay-per-result affiliate network like Moonetix works. That money lifts the LTV of non-payers, which raises the CAC you can afford when you buy users. It is not a fix for churn, it pays only when users complete offers, and what they can do depends on their country and device. Measure it in your cohorts like any other revenue, using credited earnings, and see how to monetize free users for the bigger picture.

Frequently asked questions