What is the “total revenue trap”? It’s when game developers look at the total revenue of a game for a specific time period – day, week, month, etc. and thinks that’s the ultimate measure of a successful monetization strategy.
But as Niklas Herriger points out in his
article, “Why calculating Lifetime Values (LTV) is Key for Game Developers,” total revenue tells an incomplete story, what he deams the “total revenue trap.”
He demonstrates this with an example app that makes $100 on Monday, then $200 on Tuesday. As he puts it, “Sounds like we are making a killing, doesn’t it? Well, the real answer is maybe.”
But what if the user based tripled on Tuesday, what does the $200 mean then – could it actually forewarn of a problem. How can you differentiate real success from impending disaster? As Niklas points out, “Don’t look at revenue alone, look at user Lifetime-Value (LTV) as well. Calculating and comparing LTVs is the only way to truly measure the financial performance of your game.”
And so he goes on to provide a very detailed explanation of how to take advantage of revenues by using analytics to maximize LTV. Check out the full article
here.