NB! The bitly link in the deck DOES NOT WORK, please use this one: http://bit.ly/1JTymzd This is the presentation I gave at Slush 2013 in Helsinki, Finland. It describes two methods for modeling Lifetime Customer Value (LTV) in Excel. Linked within the presentation is a spreadsheet exemplifying both methods against 100k rows of fake user data that I generated with a Python script to "look" real (although they probably don't).

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?

10. FUNDAMENTALLY A
PROJECTION

11. PRIMARILY USEFUL FOR
MARKETING

12. DIFFICULT TO CALCULATE FOR
FREEMIUM GAMES

13. USUALLY CALCULATED
PROGRAMMATICALLY

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)

22. WHICH DIMENSIONS?

23. WHICH DIMENSIONS?

24. WHICH DIMENSIONS?

25. LTV TIMELINE
180 days or 365 days?
Spreadsheet shows both

26. RETENTION APPROACH

27. RETENTION APPROACH
Real Retention Rates

28. ESTIMATING LIFETIME
Power function

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

43. MONETIZATION
APPROACH

44. MONETIZATION
APPROACH
© 2014 Freemium Economics

45. MONETIZATION-BASED
APPROACH
Real Average Daily Cumulative Spend
Data

46. MONETIZATION-BASED
APPROACH
Logarithmic Function

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)

48. MONETIZATION-BASED
APPROACH
LTV

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

58. THANKS!
eric@ufert.se