yetizen presentation on ltv
DESCRIPTION
Presentation given to Yetizen on LTV: the importance of it, what to measure and how to affect it, and the predictive nature of LTV. Similar to previous presentation at Groundworks Lab with an added section on Uncertainty.TRANSCRIPT
![Page 1: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/1.jpg)
HOW LIFETIME VALUE DETERMINES YOUR SUCCESS AND HOW TO IMPACT IT
Lifetime Value
![Page 2: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/2.jpg)
Presentation Overview
Relevant background
Why Lifetime Value
Importance beyond social media
Virality
Retention
Monetization
The Cost Side
LTV varies among customers
Uncertainty of LTV
![Page 3: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/3.jpg)
FROM START-UP TO BIGCO
Relevant Background
![Page 4: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/4.jpg)
• Grew to top-5 casual game company • Initiated and negotiated sale to Playdom, which was then rolled into $570
million Disney acquisition
Co-founded Merscom CCO, led all marketing/sales/distribution
• Responsible for Europe, Latin America, Russia and India• Grew it from scratch to 25 percent of Playdom’s revenue
GM of Playdom’s International Publishing team
• Joint venture of EW Scripps and Capitol Broadcasting• Launched Facebook and mobile games
CEO of FiveOneNine Games
• Lead UA, analytics, monetization and community• Social Casino space
Currently Chief Growth Officer at Spooky Cool Labs and Chairman of Globalization Committee at NC Central’s School of Business
Been there, done that
![Page 5: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/5.jpg)
THE THREE MOST IMPORTANT LETTERS FOR YOUR BUSINESS: LTV
Why Lifetime Value
![Page 6: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/6.jpg)
Based on three performance metrics
Monetization
Virality
Retention
![Page 7: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/7.jpg)
Interdepence
![Page 8: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/8.jpg)
Relationship between LTV and CPA
• Success
LTV > CPA
• Failure
LTV < CPA
![Page 9: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/9.jpg)
Think of LTV starting day 1
Green-light
Design and develop
focused on LTV
Beta and other
testing to optimize
LTV
Post launch to focus on improving
LTV
![Page 10: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/10.jpg)
CRUCIAL TO ANY BUSINESS
Importance beyond social media
![Page 11: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/11.jpg)
Online offerings
NetflixEbatesFarmville
![Page 12: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/12.jpg)
B2B
Square
Rackspace
Bronto
![Page 13: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/13.jpg)
SaaS
SalesforceHootSuiteBasecamp
![Page 14: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/14.jpg)
Retail
Restaurants
Department stores
Car dealers
![Page 15: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/15.jpg)
WORD OF MOUTH’S EXPONENTIAL EFFECT
Virality
![Page 16: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/16.jpg)
Definition of virality
K-scoreK=i*conv% (conversion percentage), where
“i” is the number of invites sent out by each new customer and “conv%” is the percentage of invites that convert into costumers
![Page 17: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/17.jpg)
An advanced look
![Page 18: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/18.jpg)
Importance of virality
Lowers cost of customer acquisition
Exponential growth
![Page 19: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/19.jpg)
Improving Virality
K=i*conv%
• Generate virality quickly• Cater to Connectors
Increasing I
• Quality of communication• Provide value for virality
Increasing conv%
![Page 20: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/20.jpg)
CRUCIAL AND HARD TO FIX
Retention
![Page 21: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/21.jpg)
Definition of retention
Customer lifetime
N-day retention
Churn rate
![Page 22: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/22.jpg)
Importance of retention
If they do not come back, monetization improvements are virtually useless
![Page 23: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/23.jpg)
Improving retention
Product qualityGet in their headsMake it socialMake it globalUse email and
advertising for re-engagement
![Page 24: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/24.jpg)
SHOW ME THE MONEY
Monetization
![Page 25: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/25.jpg)
Definition of monetization
ARPU (Average revenue per
user)
ARPDAU (Average
revenuer per daily active user)
Percentage of customers
who monetize
Average transaction
Average number of monetization
events per customer
![Page 26: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/26.jpg)
Importance of monetization
![Page 27: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/27.jpg)
Improving monetization
Product quality
Value
More selection
Balancing
Shopping experience
Promotions and sales
![Page 28: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/28.jpg)
DO NOT FORGET VARIABLE COSTS
The Cost Side
![Page 29: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/29.jpg)
Cost Drivers
Running Costs
• Hosting • Support
Payment Processing
• Platform fees• Payment processors
Software Royalties
• Engine, such as Epic’s UDK• Analytics
IP Licensing
• Properties• Talent
![Page 30: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/30.jpg)
THERE IS NO SINGLE LTV
LTV varies among customers
![Page 31: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/31.jpg)
Cohorts
Time of year
Stage of product lifecycle
Holidays
![Page 32: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/32.jpg)
Segments
Age
Sex
Income
Interests
![Page 33: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/33.jpg)
Sources
Incentived ads
Targeted search ads
Television
Virality
Press Cross promotion
![Page 34: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/34.jpg)
IT IS A PREDICTION
Uncertainty of LTV
![Page 35: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/35.jpg)
Uncertainty Principle
Quantum Mechanics • The universe is random• Perfect predictions are impossible if the universe is random
Not a function that creates a value
You are predicting a future event
Create a range, not a number• Albert Pujols is likely to hit 30-40 home runs is more accurate than
Pujols is likey to hit 36 home runs
Models are simplifications of the world
![Page 36: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/36.jpg)
Risk vs Uncertainty
RiskSomething you can put a price on
Uncertainty Risk that is hard to
measureDo not confuse uncertainty for risk
Correlation of past data does not create certainty
![Page 37: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/37.jpg)
The major difference between a thing that might go wrong and a thing that cannot possibly go wrong is that when a thing that cannot possibly go wrong goes wrong it usually turns out to be impossible to get at
or repair,” wrote Douglas Adams in The Hitchhiker’s Guide to the Galaxy series.
Wrong assumptions can have profound effects• Independence of variables• Mortgage industry
Chaos Theory• Not a synonym for the game industry• A small change in initial conditions can produce a
large and unexpected divergence in outcomes• Major risk when modeling against past
performance
![Page 38: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/38.jpg)
Do not discount qualitative information
More data is better than less
This includes non-quantitive measures
Billy Beane has dramatically increased scouting
The Smell Test
![Page 39: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/39.jpg)
Avoid Overfitting
Mistaking noise for signal
Fitting a statistical model to match past
observations
Test how much of the variability of the data is accounted for by your
model
![Page 40: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/40.jpg)
Solutions
• Think probabilistically • Distribution shows honest uncertainty
Create LTV range
• Can validate assumptions
A/B Test
• Regularly (weekly or monthly) compare data with predictions• “When the facts change, I change my mind”, John Maynard Keynes
Surveillance
Avoid Overfitting
Include qualitative data
![Page 41: Yetizen presentation on LTV](https://reader033.vdocument.in/reader033/viewer/2022061221/54bfb6294a79596c298b462c/html5/thumbnails/41.jpg)
WWW.LLOYDMELNICK.COM@LLOYDMELNICK
Thank you