Last Updated: November 2024
Introduction
When it comes to App Store Optimization (ASO), it is crucial to understand your app’s performance metrics to optimize app downloads and user retention. Two of the most important metrics to track are the Lifetime Value (LTV) and Return on Ad Spend (ROAS). In this article, we will explain what these metrics are and how to calculate them for your iOS app.
Understanding LTV: Explained
According to ASO expert, Moritz Daan, “the Lifetime Value (LTV) of a user is an extremely important metric to understand the health of your business.” LTV is the total revenue a user generates for your app throughout their lifetime, from the moment they download it to the moment they stop using it.
Calculating LTV can be complex, as it depends on various factors such as retention rate, average revenue per user, and the length of the lifetime of your users. Here is a formula to calculate LTV:
LTV = ARPU x (1 / Churn Rate)
ARPU stands for Average Revenue Per User and is calculated by dividing the total revenue by the number of active users. Churn rate is the percentage of users who stop using the app in any given period.
What is ROAS?
Return on Ad Spend (ROAS) is the ratio of revenue generated by ad spend. It is a metric that measures the effectiveness of your ad campaigns. To calculate ROAS, you need to know the total revenue generated by your app and the total cost of your ad campaign. Here is the ROAS formula:
ROAS = Total Revenue / Ad Spend
If your ROAS is greater than 1, it means that your ad campaign is generating more revenue than the cost of the ad campaign.
How to Calculate LTV and ROAS for Your iOS App
Now that you understand what LTV and ROAS are, it’s time to calculate them for your iOS app. Here are the steps to follow:
Step 1: Determine your ARPU
To calculate your ARPU, divide the total revenue generated by your app by the number of active users. For example, if your app generated $10,000 in revenue in a week and had 1,000 active users, then your ARPU would be $10.
ARPU = Total Revenue / Active Users
Step 2: Determine your Churn Rate
To calculate your churn rate, divide the number of users who stopped using your app in a period by the number of users you had at the beginning of the period. For example, if you had 1,000 users at the beginning of the week and 200 stopped using your app during the week, then your churn rate would be 20%.
Churn Rate = Users Lost During a Period / Users At the Start of the Period
Step 3: Calculate your LTV
Using the formula mentioned earlier, calculate your LTV by multiplying your ARPU by the inverse of your churn rate. If your ARPU is $10 and your churn rate is 20%, then your LTV would be $50.
LTV = ARPU x (1 / Churn Rate)
Step 4: Determine your Ad Spend
To calculate your ad spend, you need to take into account all the costs associated with running your ad campaign, such as the cost of running the ads, the cost of setting up the ads, and any other costs associated with the campaign.
Step 5: Determine your Total Revenue
To calculate your total revenue, add up all the revenue generated by your app, including in-app purchases and ad revenue.
Step 6: Calculate your ROAS
Using the formula mentioned earlier, calculate your ROAS by dividing your total revenue by your ad spend. If your total revenue is $20,000 and your ad spend is $5,000, then your ROAS would be 4.
ROAS = Total Revenue / Ad Spend
Summary
In summary, LTV and ROAS are crucial metrics to track for your iOS app’s ASO strategy. LTV measures the total revenue generated by a user throughout their lifetime, and ROAS measures the effectiveness of your ad campaigns. By calculating these metrics, you can optimize your app for better user retention and higher revenue.
Conclusion
Calculating LTV and ROAS for your iOS app can be challenging, but it is essential for optimizing your ASO strategy. By understanding these metrics and tracking them regularly, you can make better-informed decisions about your app’s future development and marketing efforts. So, make sure to calculate your app’s LTV and ROAS today to take your ASO strategy to the next level.