What can be learned by calculating Social LTV, as well as how to do it, – says devtodev analyst Vera Karpova in our series of materials “Performance indicators of games”.
The publication is published as part of a series of materials about game metrics from App2Top.ru and devtodev. Articles are divided by seasons, each of which is dedicated to a specific topic. The second season is called “Users”. In it, we talk about those business metrics that reflect the effectiveness of the application in terms of working with the audience.
Vera Karpova
In this article we will talk about a rather rare metric, but nevertheless interesting for user analysis – Social lifetime value or Social LTV.
This metric does not exist by itself, but combines two others – Lifetime value and k-factor. Once again, let’s remember what these metrics are, and then let’s see how they form Social LTV.
Lifetime value is the most important financial metric of the project, which shows how much the average user brings in his entire life in it. For example, on average, a user spends 80 days in the product (lifetime) and during this time makes payments totaling $23.6 – this will be his lifetime value.
k-factor is an indicator of virality, which indicates how many friends/relatives/colleagues/acquaintances one user invites to the project on average. Its value can only be positive (or 0 if there is no virality). If it exceeds 1, it means that each user invites more than one friend to the project and such a k-factor leads to an independent growth of the audience due to virality. Well, if the k-factor is, for example, 0.6, it means that 100 users of the project invite 60 of their friends.
It is worth noting that the calculation of both of these metrics has certain nuances.
Lifetime value is not calculated based on actual values, since for this it would be necessary to wait until all users of the cohort stop logging into the project, which is long and almost impossible.
The complexity of measuring the k-factor lies in the fact that it is not easy to accurately track the user invitations sent, because some of them occur during personal communication or through messengers, as well as the conversion from the received invitation to the installation.
Therefore, there are several approaches to calculation for both k-factor and LTV, and based on our experience, developers usually choose the most suitable one for their product.
Let’s go back to Social lifetime value and assume that we still considered LTV and k-factor the most suitable way for us.
It turns out that if a user brought his friend to the project, this means that the value of this user increases: he not only paid an amount equal to LTV himself, but also brought a friend who will also pay something. And this new value of his, taking into account the payments of a friend, will be Social LTV:
Social lifetime value = lifetime value * (1 + k-factor)
Using the above examples we get:
- Lifetime value = $23,6
- k-factor = 0,6
- Social lifetime value = $23,6 * (1 + 0,6) = $37,8
Thus, the true value of the customer increases.
When calculating the k-factor, you can use a geometric progression to calculate how many in turn will be attracted by those who were invited to the project, but for Social LTV they are usually limited to a one-time calculation.
Here is such an unusual metric.
Social LTV is not often used by developers, but it is very convenient because it combines both the main indicator of the quality of the project (LTV) and the indicator of its virality (k-factor). Therefore, tracking the dynamics of this metric will allow you to evaluate both the effectiveness of the changes made and the attitude of the audience towards them.
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