Three Key Insights on LTV, ROI, and Gross Profit Margin
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Three Key Insights on LTV, ROI, and Gross Profit Margin
- 1. Three Things We Learned Raf Keustermans, CEO & co-founder, Plumbee @raf_keustermans
- 2. 1. LTV = long term retention x ARPU A B D30 = 9.2% D90 = 8.3% D30 is not long term LTV A: $9 vs B: 2.50 D30 = 9.1% D90 = 0.2%
- 3. 2. Payback Time > ROI (for startups) • ROI on ad spend is (obviously) a key metric. • But startups can go bankrupt running ad campaigns with 300%+ ROI... • Cash reserves required to run $200K/month ad spend for 12 months with 10 month payback time = $1.5M+
- 4. 3. Gross Profit Margin is a thing • Gross Profit Margin drives Net LTV Income Mobile revenue Total Income Cost of Sales Chargebacks & Credits Platform Fees Hosting IP Licensing Rev Share Total Cost of Sales Gross Profit 1,961,070 1,961,070 21,572 588,321 84,326 196,107 890,326 1,070,744 55% • 10% IP/content licensing gross rev share = 10% lower Net LTV = 10% impact on CPI/LTV arbitrage • Can be worth it, e.g. if IP drives higher CTR, conversion click/install, spender conversion • Ideally rev share after Marketing spend (agree max marketing spend as % of gross revenue with IP owner)