{"id":6941,"date":"2026-10-20T21:45:57","date_gmt":"2026-10-20T14:45:57","guid":{"rendered":"https:\/\/adtek.agency\/glossary\/lifetime-value-ltv\/"},"modified":"2026-10-20T21:45:57","modified_gmt":"2026-10-20T14:45:57","slug":"lifetime-value-ltv","status":"publish","type":"mona_glossary","link":"https:\/\/adtek.agency\/en\/glossary\/lifetime-value-ltv\/","title":{"rendered":"Lifetime Value (LTV)"},"content":{"rendered":"

LTV (Lifetime Value, also called CLV or customer lifetime value) is the total value a customer brings to a business over the whole period they keep buying from it or using its product. When you use LTV to set ad budgets, calculate it on profit, not just revenue.<\/p>\n

What is LTV?<\/h2>\n

Andreessen Horowitz (a16z) defines LTV as the present value of the net profit a customer generates over the entire relationship. It points out a common mistake: calculating LTV on revenue or gross margin, which pushes the ceiling on what you can pay to acquire a customer far too high (a16z, 16 Startup Metrics, August 2015<\/a>).<\/p>\n

There are two kinds of LTV. Historical LTV is what a customer has actually spent up to today. Predictive LTV estimates what they will spend in the future, based on a model or a retention<\/a> curve.<\/p>\n

LTV formula<\/h2>\n

The a16z method has four steps:<\/p>\n

    \n
  1. Revenue per customer per month = Average order value \u00d7 Orders per month.<\/li>\n
  2. Monthly contribution margin = That revenue minus the variable costs of serving the customer (cost of goods, shipping).<\/li>\n
  3. Average lifetime (months) = 1 \/ Monthly churn rate.<\/li>\n
  4. LTV = Monthly contribution margin \u00d7 Average lifetime<\/strong>.<\/li>\n<\/ol>\n

    If you only have a few months of data, a16z recommends measuring actual LTV at the 12-month and 24-month marks instead of guessing the lifetime. The app equivalent is cohort LTV at Day 30 and Day 90: cumulative revenue from a group of users who installed in the same week, divided by the number of people in that group.<\/p>\n

    LTV in analytics and ad bidding tools (2024 to 2026 updates)<\/h2>\n