Today, we talk about when NOT to use LTV for decision-making. LTV is a useful tool in a marketer’s toolbox, but it’s not the only game in town.

In this episode, we explain why.

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LTV as a concept is fundamental to a lot of marketing – mobile or otherwise. This is understandably so because LTV is an important determinant of how investable a product is. 

But it’s worth noting that dX LTV is not the only game in town.

And dX LTV is a made-up number. It is an estimate.

So there are instances where you should not use dX LTV as a tool for decision-making. Here are 3 examples of instances where you should avoid using dX LTV as a metric for decision-making or budgeting:

1. If you are an early-stage product with low dX LTV because you have low content depth – BUT you have a strong roadmap to improve your LTV, you can be justified in ignoring your LTV and investing in your acquisition based on your future LTV, not present LTV.
   For instance, if you have only 30 days of content in your game or app, users are bound to churn after 30 days – and your d60 or d90 LTV will be poor.
   But if you have a roadmap to add new content so there is enough depth to keep users engaged for 60, 90 days, or beyond – you can invest in your acquisition *now* based on what you expect to be your future d60, d90, or d180 LTVs.
   You might lose money based on your current d60 or d90 LTVs, but you know it’s a worthwhile investment as product investments are coming.

2. If you have a wildly profitable product with seemingly poor unit economics, it might make sense to ignore the dX LTV.
   I noticed this while at a large gaming company – that the d180 and d365 LTV for one particular game seemed to be very poor. 
   But this was the most profitable game in their portfolio – in part because it was many years old – and there were legacy/die-hard players from years ago that were continuing to monetize and contribute to the game’s profits.
   Once we looked more closely at the data, we realized that even though the d365 LTV for this game was poor, most of the revenue for this game came once the users had stayed in the game for 2+ years. And this game had very strong organics and virality, neither of which had been accounted for in the LTV calculations.
   The result? We decided to invest heavily in this game because it was profitable – since the d365 LTV did not tell the full story.

3. If your cash flow constrains spending, you may want to ignore LTV considerations.
   If LTV is a made-up number, cash flow is very very real.
   I’ve seen a number of products and studios have very very strong d180 or d365 LTVs – but almost no cash in the bank. These situations are unfortunate, but products like these should not invest in UA – and should instead address their cashflow constraints instead.
   Relying on LTV to attempt to grow a product can often mean you run out of money before you make money back in d180 or d365.

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Ultimately, LTV is a tool to make financial decisions – and it’s not a solution to all problems. Sometimes you have to look at financial realities to make decisions, not just LTV.

A REQUEST BEFORE YOU GO

I have a very important favor to ask, which as those of you who know me know I don’t do often. If you get any pleasure or inspiration from this episode, could you PLEASE leave a review on your favorite podcasting platform – be it iTunes, Overcast, Spotify, or wherever you get your podcast fix? This podcast is very much a labor of love – and each episode takes many many hours to put together. When you write a review, it will not only be a great deal of encouragement to us, but it will also support getting the word out about the Mobile User Acquisition Show.

Constructive criticism and suggestions for improvement are welcome, whether on podcasting platforms – or by email to shamanth@rocketshiphq.com. We read all reviews & I want to make this podcast better.

Thank you – and I look forward to seeing you with the next episode!