First tools available: The Ad Library + Competitor Tracking
Lifetime Value (LTV)
The total revenue a business can expect from a single customer throughout their entire relationship.
Tags:metricscustomer valueROIretentionunit economics
Lifetime Value (LTV) is the total money you'll make from one customer over their entire relationship with you. It's one of the most important numbers in your business.
Simple formula: LTV = Average Order Value × Purchase Frequency × Customer Lifespan
For subscriptions: LTV = Monthly Revenue × Average Months Before Churn
Example: If customers pay $50/month and stay for 12 months on average, your LTV is $600.
Why LTV matters for ads:
LTV tells you the maximum you can spend to acquire a customer (CAC) and still be profitable.
If your LTV is $300, you know you can spend up to $100 on acquisition (for a 3:1 ratio) and still make money.
The LTV:CAC ratio:
- Below 1:1: You're losing money on every customer
- 1:1 to 3:1: Unsustainable — too expensive to grow
- 3:1 to 5:1: Healthy — this is the target
- Above 5:1: You might be under-investing in growth
How to increase LTV:
- Improve retention (reduce churn)
- Increase purchase frequency
- Raise average order value
- Add upsells and cross-sells
LTV is a prediction, not a guarantee. Use historical data and be conservative with estimates, especially for new businesses. Overestimating LTV leads to overspending on acquisition.