Two Methods for Modeling LTV with a Spreadsheet
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The document discusses two methods for modeling lifetime value (LTV) using spreadsheets, focusing on the importance of LTV in marketing for freemium games. It outlines how to calculate LTV based on retention and monetization data, providing formulas and examples for both timelines of 180 and 365 days. Additionally, it emphasizes refining the model with real data to enhance accuracy.
Two Methods for Modeling LTV with a Spreadsheet
- 1. TWO METHODS FOR MODELING LTV WITH A SPREADSHEET Eric Benjamin Seufert Slush 2013
- 2. WHO AM I?
- 3. WHO AM I? Head of Marketing at Wooga
- 4. WHO AM I? Head of Marketing at Wooga MobileDevMemo.com
- 5. WHO AM I? Head of Marketing at Wooga MobileDevMemo.com Freemium Economics
- 6. DOWNLOAD THE SPREADSHEET 100k rows of fake data
- 7. DOWNLOAD THE SPREADSHEET 100k rows of fake data • Probably doesn’t look like real data!
- 8. DOWNLOAD THE SPREADSHEET 100k rows of fake data • Probably doesn’t look like real data! http://bit.ly/183lFwp
- 9. WHAT IS LTV?
- 12. DIFFICULT TO CALCULATE FOR FREEMIUM GAMES
- 14. GOOD REASONS TO CALCULATE LTV IN A SPREADSHEET
- 15. GOOD REASONS TO CALCULATE LTV IN A SPREADSHEET Prototyping using comparable data
- 16. GOOD REASONS TO CALCULATE LTV IN A SPREADSHEET Prototyping using comparable data Project investment decisions
- 17. GOOD REASONS TO CALCULATE LTV IN A SPREADSHEET Prototyping using comparable data Project investment decisions Sprint prioritizations
- 18. GOOD REASONS TO CALCULATE LTV IN A SPREADSHEET Prototyping using comparable data Project investment decisions Sprint prioritizations General strategic decision making
- 19. WHAT ARE THE INPUTS TO LTV?
- 20. WHAT ARE THE INPUTS TO LTV? Monetization (Value)
- 21. WHAT ARE THE INPUTS TO LTV? Monetization (Value) Retention (Lifetime)
- 25. LTV TIMELINE 180 days or 365 days? Spreadsheet shows both
- 27. RETENTION APPROACH Real Retention Rates
- 29. ESTIMATING LIFETIME Power Function: y = a * x ^ b a -> =EXP(INDEX( LINEST( LN(Known Ys), LN(Known Xs)), 2)) b -> =INDEX(LINEST(LN(Known Ys), LN(Known Xs)), 1)
- 30. ESTIMATING LIFETIME Area under the curve
- 31. ESTIMATING LIFETIME Calculating lifetime: • Retention curve essentially a survival function More info: http://data.princeton.edu/wws509/notes/c7.pdf
- 32. Example survival curves for two groups of patients given different Leukemia treatments Source: Survival Analysis, a Self-Learning Text (Klein 2005) http://books.google.de/books?id=GNhzxRkFnJ0C&lpg=PA262&ots=Z3foUkFg-4
- 33. ESTIMATING LIFETIME Calculating lifetime: • Retention curve essential a survival function • Mean is value of integral More info: http://data.princeton.edu/wws509/notes/c7.pdf
- 34. CALCULATING LTV Build retention function:
- 35. CALCULATING LTV Build retention function: Retention curve power function model (y=ax^b)
- 36. CALCULATING LIFETIME Build retention function: Lifetime (180): Integral (1 -> 180): Y = 0.61x ^ -0.37 = 25.3 Days Lifetime (365): Integral (1 - > 365): y = 0.61x ^ -0.37 = 40.1 Days
- 37. CALCULATING LTV For the trailing 7 days of data…
- 38. CALCULATING LTV For the trailing 7 days of data… …for users in the UK…
- 39. CALCULATING LTV For the trailing 7 days of data… …for users in the UK… …that downloaded the game organically…
- 40. CALCULATING LTV LTV(180): 25.3 * $0.13 = $3.30 LTV(365): 40.1 * $0.13 = $5.21
- 41. HONING THE MODEL More real data
- 42. HONING THE MODEL More real data
- 44. MONETIZATION APPROACH © 2014 Freemium Economics
- 45. MONETIZATION-BASED APPROACH Real Average Daily Cumulative Spend Data
- 47. PROJECTING THE CURVE Logarithmic Function: y = (c * LN( x )) + b c -> =INDEX(LINEST(Known Ys, LN(Known Xs)), 1) b -> =INDEX(LINEST(Known Ys, LN(Known Xs)), 1,2)
- 49. CALCULATING LTV Build monetization function:
- 50. CALCULATING LTV Build monetization function: Monetization curve logarithmic model ( y = ( c * ln( x )) + b)
- 51. CALCULATING LTV
- 52. CALCULATING LTV Using trailing 3 days of retention data…
- 53. CALCULATING LTV Using trailing 3 days of retention data… …for users in the US…
- 54. CALCULATING LTV Using trailing 3 days of retention data… …for users in the US… …acquired through Flurry Video Ads…
- 55. CALCULATING LTV Using trailing 3 days of retention data… …for users in the US… …acquired through Flurry Video Ads… y(180) = ( .45 * ln (180)) + .41 = $2.75 y(365) = ( .45 * ln( 365 )) + .41 = $3.06
- 56. HONING THE MODEL
- 57. HONING THE MODEL