In the fast-paced world of game marketing, there are two metrics every marketer, developer, and publisher should tattoo on their brain: Cost Per Install (CPI) and Lifetime Value (LTV). These key performance indicators (KPIs) are more than just numbers; they’re the foundation of any successful user acquisition strategy. 

CPI captures the cost of bringing new users through the door, while LTV determines the revenue they generate during their stay. Together, they tell the story of your game’s profitability and sustainability. But how do these metrics interact, and why is their relationship vital for scaling your game to success? Let’s dive into the interplay of CPI and LTV to uncover the secrets of crafting a winning formula.

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What is Cost Per Install (CPI)?

Imagine this: you, the ambitious advertiser, hand over your hard-earned cash to a publisher every time someone installs your game after seeing one of your ads. Sounds simple, right? Wrong (as you’ll soon see!).

First, let’s start with the formula for CPI. It’s so straightforward it feels like cheating: Campaign Spend ÷ Installs = CPI. Boom. Math. (P.S. Sometimes CPI is used interchangeably with CAC – customer acquisition cost.)

CPI campaigns are the bread and butter of many game marketers because they’re a low-risk, high-reward strategy (well, sometimes). You’re paying for results – literal installs. None of that wishy-washy “impressions” nonsense. But here’s the kicker: Not all installs are created equal. Sure, you’ve got a shiny new user on your app, but what if they uninstall after two minutes or, worse, never open it at all? Congratulations! You just paid for a ghost!

Need to get your CPI under control? Reach out to see how we can help!

Why Bother with CPI?

Here’s the upside: it’s a brilliant way to generate buzz, fast. Need your app to climb those app store rankings? CPI campaigns are like rocket fuel. They’re also a pretty decent litmus test for your campaign’s overall effectiveness. But remember: just because your installs are rolling in doesn’t mean you’re rolling in cash. If those users aren’t sticking around to spend money or watch ads, your lifetime value (LTV) will tank faster than a free-to-play game with pay-to-win mechanics.

        • Low Risk, High Buzz: You’re paying for results – actual installs, not vague impressions or clicks.
        • Climbing the Ranks: A great way to boost app store visibility and generate early momentum.
        • Effectiveness Check: Provides a solid measure of your campaign’s performance.

The Dark Side of CPI

Let’s talk about fraud for a second. It can really mess with CPI. Fraudsters out there love nothing more than inflating install numbers with any number of shady tactics. Pro tip: if your installs spike unnaturally during an ad campaign, it’s probably not because your game suddenly went viral in the Philippines.

        • Install Quality Varies: Not all installs are equal – some users might vanish faster than your New Year’s resolutions.
        • Fraud Risks: Fake users and bots can inflate your numbers, leaving you with a costly mirage.
        • Retention Woes: If users don’t stick around, your Lifetime Value (LTV) will tank – and fast.

How to Win at CPI

Want to nail your CPI campaigns? Make ROAS (return on ad spend, aka actual money) your ultimate KPI, not just installs. Keep a hawk’s eye on incentivized traffic – yes, that includes those “Install this app for 50 free gems” deals. And for the love of all things holy, don’t forget scenario planning. A soft launch isn’t just trendy; it’s crucial for ironing out your game’s quirks before you go global. Plan for the best (bull), worst (bear), and somewhere-in-between (mid) cases, and only then dive into CPI campaigns with both feet.

        • Focus on ROAS: Make revenue, not just installs, your ultimate KPI.
        • Guard Against Fraud: Keep a close eye on suspicious activity – because bots don’t buy in-app purchases.
        • Master Incentivized Traffic: Understand the behavior of users who install for rewards; not all convert into long-term players.
        • Prepare Properly: Use soft launches to identify issues with game mechanics, monetization strategies, and infrastructure.
        • Plan for Success: Create growth scenarios – bull (best case), bear (worst case), and mid (somewhere-in-between).

What is Lifetime Value (LTV)?

LTV is all about understanding the true worth of your players. It’s not just about the upfront cash grab (if you even have one) but the ongoing revenue flow a player brings to your game over their entire in-game existence. Yes, existence – because once they uninstall, they’re dead to you, right? (Kidding. Sort of.)

Here’s the simple math for this very important task: Average Revenue Per User Per Day × Average Days Retained = LTV.

LTV measures how much revenue a player will generate across their lifetime in your app, whether it’s through in-app purchases, ads, premium subscriptions, or a mix of revenue streams. You always want your LTV to soar higher than what it costs to acquire those players (e.g. CPI / CAC) – otherwise, you’re playing a game of financial chicken with your marketing budget. Spoiler alert: That’s not fun.

Want to take your LTV to new heights? Schedule a call today to see what we can do!

Why LTV Matters

Let’s put it bluntly: If you don’t know your LTV, you’re flying blind. LTV gives you the blueprint for forecasting profits. It also allows you to drill down into campaign optimization. Finally, it provides a strategic focus – something to continually aim for and keep an eye on.

        • Forecasting Profits: Know when you’ll finally recoup that eye-watering UA (user acquisition) budget.
        • Campaign Optimization: Funnel your dollars into campaigns that actually deliver ROAS, instead of throwing cash into the abyss of bad ads.
        • Strategic Focus: Prioritize activities that boost retention and profitability – because whales (high-value players) don’t grow on trees.

How to Boost LTV

There are a few things you should absolutely be doing to increase your player retention and make sure you’re getting the most out of every player who downloads your game.

        • Refine Onboarding: Hook ‘em from the start. Nobody wants to play a game that feels like a digital DMV line.
        • Personalize Offers: Push notifications that actually mean something. No one’s falling for “Special deal just for you!” unless it actually feels special.
        • Upsell Like a Pro: That $2.99 sword is nice, but have you seen the $49.99 “Dragon Slayer Ultimate Bundle”? Hello, aspirational pricing!
        • Earn Their Loyalty: Delight them with rewards, timely updates, and yes, fixing the bugs they keep highlighting in their detailed reviews.

The Secret Sauce: Retention

Remember, high retention is the BFF of a high LTV. Players who stick around longer have more chances to spend, watch ads, and become walking revenue streams. So, keep them happy – or at least entertained enough not to rage-quit.

At the end of the day, LTV isn’t just a number; it’s your strategy compass. Ignore it, and you’ll be out of the game faster than a player who dies on level one. Embrace it, and you’ll unlock not just profits, but the true magic of long-term success.

How to Use CPI and LTV to Your Advantage

Now that you understand the basics of CPI and LTV, it’s time to dive headfirst into these game marketing metrics. These two KPIs are the Dynamic Duo of any good user acquisition strategy: one is all about what it costs to get players in the door, and the other’s about how much cash they’ll drop while they’re hanging around. Play your cards right, and these two metrics can be your best pals for scaling your game to new heights (or at least keeping the lights on). Let’s break it down.

CPI and LTV – a dynamic duo

Understand CPI: Not All Installs Are Created Equal

So, CPI is the cost of a user installing your game, plain and simple. We also touched on the hard truth that a low CPI isn’t always a win. A flood of installs from bargain-basement campaigns might sound good, but if your users are uninstalling faster than they can say “This game has ads?” you’ve got a problem.

Here’s the trick: target smarter, not broader. Granular targeting is your secret weapon. Hone in on the audience that actually sticks around, engages, and spends. Otherwise, you’re just throwing dollar bills into the digital void. Again, keep an eye out for fraud too – fake installs are the marketing equivalent of buying a “Rolex” out of someone’s trunk.

Crack the LTV Code: Cash is King

Quick refresh: LTV, or Lifetime Value, measures the total revenue a player generates while they’re basking in the glow of your game. And guess what? It’s not just about squeezing every penny out of players. It’s about keeping them happy, engaged, and spending – a trifecta of delight that makes your game a long-term success.

Retention is the name of the game here. Good retention means high LTV. Bad retention? Well, let’s just say that’s why “free-to-play” games sometimes vanish faster than they launch. Focus on smooth onboarding, meaningful engagement, and timely monetization. Remember, whales (the big spenders) are real, and they’re out there – just waiting for the right game to hook them.

CPI vs. LTV: The Ultimate Smackdown

Here’s the deal: if your CPI is higher than your LTV, you’re burning money. If it’s lower, congrats, you’re in the black. But don’t let those numbers lull you into a false sense of security. Timing matters. You might have a stellar LTV over 12 months, but if you’re bleeding cash upfront (hello, marketing budgets), you’re in for a rough ride.

The magic happens when you align these metrics. Treat CPI as your entry fee and LTV as your jackpot. Soft launches are your testing ground for this balance. Test, tweak, and make sure you’ve got the infrastructure to handle the cashflow timeline. Oh, and remember: CPI and LTV are not static. Keep recalibrating as your game grows.

Pro Tips for Winning the CPI-LTV Game

        • Play the Long Game: CPI campaigns are perfect for creating buzz, but don’t throw your entire budget at it. Use them strategically, especially when you’re ready to scale.
        • Scenario Planning: You’re not Nostradamus, but you can still predict outcomes. Build best-, worst-, and middle-case scenarios for your campaigns to avoid surprises.
        • Retention is Your Secret Sauce: Day 1 and Day 7 retention rates are your canary in the coal mine. If users are sticking around, they’ll likely stick long enough to spend.
        • Optimize Your Game: Happy players spend more. Use feedback, analytics, and reviews to keep your game fresh, fun, and profitable.

CPI or LTV: Which Matters Most When Scaling?

So we’ve learned some ways to take advantage of CPI and LTV – but when you’re scaling your game, which metric deserves the most focus? Spoiler: it’s a complicated love story, not a clear winner-takes-all.

Don’t just survive, thrive with a better CPI:LTV ratio. Schedule a call to see what we can do for you!

CPI: The Quick Win

While CPI campaigns can feel like a quick win, the long-term costs can pile up if you’re not laser-focused on granular targeting. Remember, your job isn’t just to win installs but to ensure those installs don’t turn into churn statistics. To improve CPI, prioritize revenue as your KPI, sniff out ad fraud like a bloodhound, and don’t skimp on soft launches to avoid rookie mistakes.

LTV: The Long-Game MVP

LTV isn’t just about cash; it’s about forecasting your game’s future. From monetization tests in soft launches to retention tweaks, everything revolves around getting the most out of your players. Optimize your user experience, re-engage with push notifications, and build loyalty like it’s your life’s work – because it kind of is.

So, Which Matters More?

When scaling, the truth is you need both. CPI tells you how much it costs to bring users in, but LTV determines whether you’ll make enough money to justify those costs.

The secret sauce? Focus on the delta between the two. If your CPI is climbing faster than your LTV, you’re in trouble, my friend. Balance is key – invest in campaigns that don’t just get downloads but attract users who will stick around, spend, and rave about your game to their friends.

And, once again, don’t forget cashflow. Even if your LTV looks mighty profitable, it’s stretched out over time, while your CPI costs hit your wallet yesterday. Plan for that, or you might end up with great ROAS but no money left to scale.

How do CPI and LTV Interact?

We know that CPI gets people through the door and LTV lets us understand what they can expect to spend while they’re in our game. So how does this Dynamic Duo interact with each other? Well, if your CPI exceeds your LTV, congratulations, you’ve just unlocked the “Bankrupt Your Studio” achievement.

Keeping LTV higher than CPI is the rule of survival in mobile gaming. Every dollar you spend on user acquisition should gain you more than that in return. Ideally, the more the better! Anything less? Better start praying to the app store gods.

Cashflow and Payback Windows

The real drama lies in the timing of cashflow. You pay CPI costs upfront – like a nervous gambler putting all their chips on the table. LTV, meanwhile, takes its sweet time to show up. This can create a cashflow crunch that small developers often can’t afford. 

If you want to survive in the games industry it’s critical you can stomach those initial losses until LTV starts pulling its weight. So you better have enough capital to do so – and you better be tightening up your payback windows as much as possible.

For instance, you shouldn’t use fuzzy math or an attitude of “we’re hitting our goals… eventually” if you don’t achieve return on ad spend (ROAS) until D180. Such a long payback window often means you need to further optimize your game and marketing campaigns or risk losing everything.

What is the CPI:LTV Equation?

Just in case you’re jumping straight to this section, let’s break down everything above like you’re cramming for a pop quiz – quick and condensed: CPI is what you’re shelling out to convince someone to hit “Install” on your app. LTV, on the other hand, is how much cash that user brings in over their gameplaying lifetime. So, it makes sense that the magical formula is:

CPI < LTV

Translation? You want to spend less on getting a user than the sweet moolah they’ll generate over time. If you’re spending $2 to acquire a user and they’re only coughing up $1.50 in revenue, you’re not building an empire – you’re digging a hole. It’s super simple math, really.

CPI and LTV – scales that require balance

Optimize and Iterate

As mentioned earlier, the CPI:LTV ratio isn’t just about profitability – it’s about survival, and it requires smart budgeting.

Big-time developers with Scrooge McDuck levels of cash can afford to play the long game, floating CPI costs until LTV revenue comes in. But regardless of a game studio’s size, if your CPI doesn’t stay firmly in check against a higher LTV, you’re basically funding your own demise.

So don’t rest on your laurels. Adopt a mindset of continual iteration and optimization. Improve your KPIs. Tighten your payback windows. Adjust your ad creatives. Tweak your game mechanics. There’s always something you can do to improve your CPI:LTV ratio.

What is a Good CPI:LTV Ratio?

As mentioned above, you want your LTV to be higher than your CPI – the higher, the better! Why? Because you need to account for development costs, operational expenses, and your ambition to keep the lights on. If your LTV is below your CPI, your business is on an unsustainable trajectory and you need to take a hard look at your game’s retention and monetization mechanics.

And, once again, I can’t restate this enough (it’s that important): Don’t forget about your cashflow. Even with a really comfy CPI:LTV ratio, you’re fronting the CPI cost upfront while your LTV trickles in over time. Can you survive the waiting game? If not, your “profitable” marketing could bankrupt you faster than you can say “user acquisition.” Pay attention to your payback windows and continually optimize your game mechanics and marketing strategies to make those windows smaller.

Key Takeaways

Here’s the bottom line: A good CPI:LTV ratio isn’t just a number – it’s a philosophy. It’s about aligning your marketing spend with your app’s earning potential and making sure you’re not working for peanuts. So go forth, analyze your metrics, and remember – mediocre CPI:LTV ratios are for games nobody plays twice.

Achieve better CPI:LTV – reach out to us now!

 

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