Time to profitability is a key metric for a growing app

It's common for app developers to acquire users for their apps by paying 3rd parties (like ad networks). Paying for users is an investment. To measure the success of an investment, an app developer needs to monitor how quickly they can recoup the invested dollars.

Time to profitability (TTP), a.k.a "time to break even", is the precise metric that tells you how long it takes to make invested money back. The faster you can recoup your invested money, the faster you can grow your app's business.

Calculating TTP is simple. If you acquire a user for $5 and the acquired user spends $1 every day, it would take exactly 5 days for that user to breakeven. TTP is 5 days.

When thinking about campaigns, it's the same concept, just with acquiring bunches of users at a time. If you spent $100 on a campaign to acquire 100 users and the average user spent $1 per day, the TTP would be 1 day.

Since Tenjin measures campaign spend (the invested money) and the cohorted total user LTV* (the recouped money), it's very easy to calculate the TTP for each campaign/ad network an app developer invests in. Below you can see a typical LTV curve by source:

You can see that after 461 days from the install date, the average acquired user from Chartboost generates about $1.06 in revenue for my app. If we overlay this LTV curve with the initial cost of the campaigns for each of the ad networks, we would get a chart that looks like this:

My highlighted section shows that 447 days after install my ROI on Chartboost is +44.98%. Cool, but how does this curve tell me anything about TTP? TTP is simply when your ROI goes from negative to positive. In fact, TTP is the precise time when ROI is equal to 0%.

When you zoom in on the curves, you can see that it takes about 2-3 days for my Chartboost spend to get recouped. My TTP is between 2-3 days.

The importance of calculating TTP is to know how quickly you can re-deploy capital to continue growing your business. If you ran two campaigns: one with a TTP of 5 days and another with a TTP of 1 day, it's much more effective to keep buying users from the campaign with a TTP of 1 day so you can deploy the returned capital faster.

*total LTV includes ad revenue and in app purchases

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Save Money on your Mobile Marketing. Seriously.

Christopher Farm

Love building products people want. Working on tenjin.io - a mobile marketing infrastructure and platform for app developers

San Francisco http://tenjin.io

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