Main Metrics. Social LTV

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What is Social LTV or Social Lifetime Value: its components, calculation formula and examples
Published
26.03.2020
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devtodev

Social Lifetime Value (Social LTV) - is a rather rare metric that cannot be measured using conventional analytical systems.

It is an alloy of two other metrics - Lifetime Value (LTV) and k-factor. What do they measure and how are they combined?

LTV is one of the most important financial metrics that shows the “efficiency” of an average user, that is, the amount of money that they bring while using the project. For example, a user spends 60 days in your game (this is their Lifetime) and a total of \$29.9 (this is their Lifetime Value).

This metric is not calculated on the basis of actual data since we cannot monitor each and every user and wait for them to leave the project. Therefore, we use less accurate calculation methods.

K-factor is the virality indicator that we can use to track a project's popularity. That is, this is the number of people who came to it on the recommendation of a person who already uses the project. The higher the k-factor, the better: if it equals 70, it means that 100 users invite 70 new people on average, if it is 1.2, then they invite 120 people and, thanks to this, this project fully and absolutely free replaces churned users. The k-factor value cannot fall below 0; and if it equals 0, it means that the project does not have any virality.

It is difficult to assess this indicator since we usually give either word-of-mouth recommendations or use personal messages in social networks or messengers.

Due to difficulties in evaluating LTV and k-factor, analysts usually use the method that they consider most suitable for a particular project and later they calculate the Social Lifetime Value based on these data.

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Double user value

A paying user is valuable in itself, but if they also invite a friend, then their value increases greatly because this friend can also start making payments. Social LTV is this new value that takes into account both the LTV of the user and the value of the invited friend.

Calculation formula:

For example, if:
K-factor = 0.6
Then:
Social Lifetime Value = 29.9 * (1+0.6) = 47.84.

It’s clear that the true value of the user is much higher than just their LTV.

Please note, that for Social LTV calculation we only consider the first-line users. Thus, unlike k-factor, we do not take into account those people who come to the project on the recommendation of a person who themselves entered it on a recommendation.

This is an unusual metric, and although it is a convenient combination of LTV and k-factor, it is rarely used by analysts and developers.