Episode 2: User Lifetime Value, Apple, Spotify, and best-selling phones.

What’s the best-selling phone right now?
What’s the most common music streaming service?
And how much your users are worth?
Found out answers to those questions in our second episode!

Vasily Malyshev

Introduction

Good morning, fellow appreneurs! This is our second episode of 5 Minute Week and today we’ll talk about User Lifetime Value.

But first, let us start with some interesting news.

News

  1. iPhone 8
    1. Remember when Apple released iPhone X and iPhone 8 at the same time and you thought: why would anyone buy iPhone 8 if it’s exactly like iPhone 7 but we have iPhone X now?
    2. Well, according to the latest reports iPhone 8 is now the best-selling phone on the market.
    3. 2 – Galaxy S9 Plus, 3 – iPhone X, 4 – Xiomi Redmi 5A, 5 – iPhone 8 Plus.
    4. Source: https://androidcommunity.com/samsung-relinquishes-top-selling-smartphone-spot-to-apple-for-may-2018-20180706/
  2. Apple Music over Spotify
    1. As a longtime Spotify user, it pains me to say but it seems like Apple Music overtaken Spotify in US subscribers.
    2. With both streaming services having about 20 million subscribers Apple is reportedly surpassed Spotify by a small margin.
    3. Source: https://mashable.com/2018/07/06/apple-music-beating-spotify-us-subscribers/

Concept

User Lifetime Value (LTV).

So what is LTV. LTV is the present value of a new customer, how much that customer is worth to your company.

LTV consists of three components:

  • Monetization – How much customers contribute to your mobile revenue (in the form of ad impressions, subscriptions, or in-app transactions).
  • Retention – The level of engagement a customer has with your app, looking particularly at the length of the average customer lifecycle.
  • Virality – The sum value of additional users a customer will refer to your app.

Three common scenarios of what might be happening in your company.

  • Your revenue is going up but your LTV is going down.
    • You’re likely investing in your app’s marketing but customers don’t find the application engaging enough and are dropping like flies. This will lead to revenue completely drying up ones you stop marketing.
      Start by improving LTV.
  • Your revenue and LTV are both going down.
    • You’re not investing in marketing and at the same time your users are finding the app boring. You are on a collision course with a black hole that will suck every last penny from your pocket.
  • Your revenue and LTV are going up.
    • Your dream scenario. Users are finding your app engaging and are continuing to use it. This leads to more happy users ready to spend money. This in turn leads to more revenue.

And if you want to tackle a hard LTV question go to our website for a little bonus.

Bonus task:

LTV Helps you understand how to multiply your revenue & profit.

Organic downloads: downloads you get without investing in advertising.

Cost-per-install: cost of a user clicking on your ad and installing the app.

Question:
It’s been 6 months since you’ve launched your app.
You have made $100,000 in revenue and profit (all downloads were organic) and you have 25,000 users.
Your rough 6 month LTV is $4.
If you don’t make $200,000 in profit over the next 6 months your investor pulls out.
Assuming average Cost-per-Install of $2 and continuation of organic profit how much do you need to invest to make a total profit of $200,000 in the next 6 months?

Solution:
First 6 months:
Profit from organic downloads: $100,000
Second 6 months:
Profit from organic downloads: $100,000
Buying 50,000 users at $2/user: $100,000
Revenue brought from 50,000 users assuming LTV of $4: $200,000
Subtracting our $100,000 investment from our $200,000 revenue we get an additional profit of $100,000.
Total profit in the second 6 months: $200,000
Total 12 month revenue: $300,000

Conclusion

This concludes our second 5 Minute Week Episode. Since we’re an app company we practice what we preach and this entire show was made, recorded and edited with an iPhone app. Hope you guys enjoyed it.

Don’t just be good. Be the best.

See you next week.