Customer Acquisition Cost (CAC)

The LTV:CAC ratio measures the relationship between the lifetime value of a customer and the cost of acquiring that customer. It is one of the most important unit economics metrics for subscription app businesses. An LTV:CAC ratio of 3:1 or higher is generally considered healthy, meaning the revenue generated by a user over their lifetime is at least three times what it cost to acquire them. A ratio below 1:1 means the business is losing money on every customer acquired. This metric is critical for evaluating the sustainability of growth strategies — aggressive user acquisition spending only makes sense if LTV sufficiently exceeds CAC. For subscription apps, improving the LTV:CAC ratio can be achieved from both sides: increasing LTV through better retention, pricing optimization, and upselling; or decreasing CAC through more efficient ad spend, higher organic install share, and web-based checkout flows that avoid platform commissions. Investors scrutinize this ratio closely when evaluating subscription businesses, as it directly indicates whether the company can scale profitably.

CPI stands for Cost Per Install, meaning the cost that an advertiser pays each time a user installs their mobile app after clicking on an ad. CPI is a performance-based pricing model, which means that the advertiser only pays for results that directly contribute to their business goals, such as app installations. This pricing model is particularly popular among mobile app developers who want to promote their apps and acquire new users.

Cost Per Action (CPA) is a performance-based pricing model in which an advertiser pays only when a user completes a specific post-install action, such as making a purchase, starting a free trial, or subscribing to a service. Unlike CPI, which measures cost at the install level, CPA ties advertising spend directly to business outcomes further down the funnel. For subscription apps, common CPA events include trial starts, first subscription payments, or registration completions. CPA is particularly useful for evaluating the true efficiency of user acquisition campaigns, since an install alone doesn't generate revenue — what matters is whether the user converts into a paying subscriber. By optimizing toward CPA rather than CPI, growth teams can focus ad spend on channels and creatives that deliver users with higher intent and better downstream conversion behavior, even if those channels have a higher cost per install on the surface.

LTV meaning, Lifetime Value (LTV), is a performance indicator used to evaluate the total earnings generated by a customer throughout their entire tenure of using a mobile application. Historical data on user retention rates is often used to estimate the expected duration of user engagement. Having knowledge of what is LTV and the average LTV of your customers is crucial for executing successful marketing strategies. LTV in marketing for mobile apps is normally used to optimize revenue streams such as subscriptions, in-app advertising, and in-app purchases by determining the amount of money that can be spent on user acquisition while still being profitable.

Return on Ad Spend (ROAS) measures the revenue generated for every dollar spent on advertising. It is calculated by dividing total revenue attributed to a campaign by the total ad spend on that campaign. A ROAS of 2.0 means the campaign generated $2 in revenue for every $1 spent. ROAS is the most widely used profitability metric in mobile user acquisition because it directly connects marketing investment to revenue outcomes. For subscription apps, ROAS calculations must account for the time lag between ad spend and revenue realization — a user acquired today may not generate their first payment for 7 days (if they start with a free trial) and may generate revenue over months or years of subscription renewals. This makes "Day 0 ROAS" (revenue from immediate purchases) an incomplete picture. Growth teams track ROAS at multiple horizons — Day 7, Day 30, Day 90, Day 365 — to understand the full return curve. Target ROAS thresholds depend heavily on a company's margin structure: apps routing payments through app store billing (with 15–30% commissions) need higher gross ROAS than apps processing through web checkout to achieve the same profitability.