LTV and Cost of acquisition

Posted by

I a few years back I read a story or blog post stating that not all paid app users are the same. The story went something like this: you can buy two users at $2.00 but one user would bring you back $3.00 for his/her lifetime of playing while the other users would only bring you back $1.98. With one user you would make money and with the other, you would lose money.

What if you could track each user as they install your game all the way through to when they stop playing your game? You could then know for example that the average lifetime value (LTV) of a woman acquired via Facebook ads is higher than the same type of user acquired via Google Ads. There are services / APIs that do just that and after reading the article, I figured this was the ticket to actually making some money with my hobby. Because I thought that if I can spend $1.00 and get even $1.30 back then I can make a business out of that.

I tried two services both available to Corona users and both free to a certain point. One of them was AppsFlyer. They charge .05 per non-organic installs. The other service that was available to me was Tenjin. For the free plan, you get 1M events. The AppsFlyer pricing seemed at first a very steep price especially when I usually bid for users at .15 or lower, but I figured if this scheme actually makes me money it would pay for itself. I can give 0.05 cents per install to AppsFlyer if that install brings me in .30 or even .20.  Interesting enoughAppsFlyer has never charged me a single cent. I don’t know if my volume is so low that it would cost them more to send an e-mail or they only charge you after you reach a certain threshold.

Both APIs are very easy to set up and both customer services are excellent. I think Tenjin customer service is a bit better, but it might be just the size of the operation. With Tenjin, I felt that I was in contact with the actual team running the show. This is just my perception and maybe it was an illusion but that is how it felt. When you are paying exactly $0 dollars for a service and you getting e-mails and phone calls from the actual engineering team trying to help you out, it feels special.

If this was one of those over-hyped marketing blogs, this is where I tell you how well it all worked out and how I made my first million. The reality was completely different. I think both services are excellent and I plan to add Tenjin back into the mix soon.

Here is the problem I encountered and maybe there is a simple solution, but one I could never figure out. I would spend $5.00 a day on Facebook for iOS version of cuadros and according to Facebook and the services that would result in 15 installs. Sometimes one would say 14 and another would say 13. When the services would calculate the LTV of those 15 users, I would undoubtedly lose money. According to the services they would bring in let us say $3.00. So I just lost $2.00 on those 15 users on that day.

When you looked at the revenue for any particular day for cuadros across platform the revenue would be far more than $5.00. Usually between $10 and $20 and sometimes in the low $70s. Of course, there were more users than the 15 installs that were attributed to Facebook. The Android version would get an additional x organic installs and the iOS version would get an additional x organic installs. Those were “free installs” because apparently, I didn’t pay for them.

So why pay for the paid users? I am losing $2.00 a day on the paid users! Guess what disappeared when I stopped paying for those 15 users, the rest of the organic installs not only on iOS but also on Android. I have run this experiment multiple times. Even advertising on Android will result in some installs occurring on iOS. Advertising on a completely different app in your portfolio might cause organic installs in other apps in your portfolio. Maybe it should have been obvious, but advertising is like dropping a drop of ink in water it disperses and touches many molecules.

In no way does this mean that the services are useless, they provide other data that should be extremely useful in more capable hands, and maybe this dispersion doesn’t matter with bigger budgets.








One comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.