Glossary /
LTV
Efficiency & cost
LTV
The total value a customer delivers over their lifetime—and the signal you feed back into ad platforms to bid smarter.
Attribution & Measurement
Unit Economics
Data Governance & Nomenclature
Creative & Delivery
Audiences & Targeting
Mobile & Privacy
LTV (Customer Lifetime Value) is the total revenue—or gross margin—a customer is expected to generate across their entire relationship with your business.
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What is LTV?
LTV puts a number on a customer beyond their first purchase. A buyer who orders once is worth less than one who reorders monthly for three years, and LTV captures that gap. It's the metric that justifies what you can afford to spend acquiring customers in the first place. LTV lives in your data, not the ad platform. It's computed from order value, repeat behavior, and retention—signals that sit in your CRM, billing system, or warehouse. Ad platforms have no idea what a customer is worth long-term; they only see the conversions that fire on their pixels. That's why LTV is increasingly fed back into Google and Meta as a value signal. Instead of optimizing toward 'a conversion,' you tell the platform how much each conversion is actually worth, so it can chase high-value customers—not just cheap ones.
LTV formula
LTV = Avg Order Value × Purchase Frequency × Customer Lifespan
LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Average order value is revenue per transaction. Purchase frequency is how many times a customer buys per period. Customer lifespan is how long they keep buying. Multiply the three for revenue-based LTV; multiply by gross margin % to get margin-based LTV, which is the version most finance teams care about because it reflects actual contribution.
Worked example
A typical customer cohort, revenue-based.
Avg Order Value
$50
Purchase Frequency (/yr)
4
Customer Lifespan
3 yrs
LTV
$600
$50 × 4 × 3 = $600
This is revenue LTV. Multiply by gross-margin % for the contribution figure finance actually weighs against CAC.
LTV formula
LTV = Avg Order Value × Purchase Frequency × Customer Lifespan
LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Average order value is revenue per transaction. Purchase frequency is how many times a customer buys per period. Customer lifespan is how long they keep buying. Multiply the three for revenue-based LTV; multiply by gross margin % to get margin-based LTV, which is the version most finance teams care about because it reflects actual contribution.
Worked example
A typical customer cohort, revenue-based.
Avg Order Value
$50
Purchase Frequency (/yr)
4
Customer Lifespan
3 yrs
LTV
$600
$50 × 4 × 3 = $600
This is revenue LTV. Multiply by gross-margin % for the contribution figure finance actually weighs against CAC.
How LTV differs across ad platforms
Your CRM / Warehouse
This is where LTV actually lives. Order history, retention, and margin come from your billing system, CRM, or data warehouse—never from an ad platform.
Google Ads (value-based bidding)
Consumes LTV as a conversion value you upload or pass via offline conversions, then optimizes toward high-value customers. Google doesn't compute LTV—it only acts on the value you feed it.
Meta Ads (value optimization)
Uses purchase value or a custom value signal to optimize for higher-LTV buyers. The quality of bidding depends entirely on the accuracy of the value data you send back from your own systems.
Common LTV misconceptions
LTV is a metric I can pull from my ad platform.
Ad platforms only see the conversion event on their pixel. They have no view of repeat purchases, retention, or margin. LTV is computed in your own data and, at best, sent back to platforms as a value signal.
LTV is one fixed number for the whole business.
LTV varies sharply by segment, channel, and cohort. A blended company-wide average hides the fact that some acquisition sources bring customers worth multiples of others—which is exactly what should steer spend.
Frequently Asked Questions
What is LTV in simple terms?
LTV is how much a customer is worth to you over their entire relationship—not just their first order. A customer who keeps buying for years is worth far more than a one-time buyer, and LTV puts a dollar figure on that.
How is LTV calculated?
Why does LTV differ across ad platforms?
How does Clarisights report on LTV?
Attribution & Measurement
Unit Economics
Data Governance & Nomenclature
Creative & Delivery
Audiences & Targeting
Mobile & Privacy
LTV (Customer Lifetime Value) is the total revenue—or gross margin—a customer is expected to generate across their entire relationship with your business.
?
?
What is LTV?
LTV puts a number on a customer beyond their first purchase. A buyer who orders once is worth less than one who reorders monthly for three years, and LTV captures that gap. It's the metric that justifies what you can afford to spend acquiring customers in the first place. LTV lives in your data, not the ad platform. It's computed from order value, repeat behavior, and retention—signals that sit in your CRM, billing system, or warehouse. Ad platforms have no idea what a customer is worth long-term; they only see the conversions that fire on their pixels. That's why LTV is increasingly fed back into Google and Meta as a value signal. Instead of optimizing toward 'a conversion,' you tell the platform how much each conversion is actually worth, so it can chase high-value customers—not just cheap ones.
LTV formula
LTV = Avg Order Value × Purchase Frequency × Customer Lifespan
LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Average order value is revenue per transaction. Purchase frequency is how many times a customer buys per period. Customer lifespan is how long they keep buying. Multiply the three for revenue-based LTV; multiply by gross margin % to get margin-based LTV, which is the version most finance teams care about because it reflects actual contribution.
Worked example
A typical customer cohort, revenue-based.
Avg Order Value
$50
Purchase Frequency (/yr)
4
Customer Lifespan
3 yrs
LTV
$600
$50 × 4 × 3 = $600
This is revenue LTV. Multiply by gross-margin % for the contribution figure finance actually weighs against CAC.
How LTV differs across ad platforms
Your CRM / Warehouse
This is where LTV actually lives. Order history, retention, and margin come from your billing system, CRM, or data warehouse—never from an ad platform.
Google Ads (value-based bidding)
Consumes LTV as a conversion value you upload or pass via offline conversions, then optimizes toward high-value customers. Google doesn't compute LTV—it only acts on the value you feed it.
Meta Ads (value optimization)
Uses purchase value or a custom value signal to optimize for higher-LTV buyers. The quality of bidding depends entirely on the accuracy of the value data you send back from your own systems.
Common LTV misconceptions
LTV is a metric I can pull from my ad platform.
Ad platforms only see the conversion event on their pixel. They have no view of repeat purchases, retention, or margin. LTV is computed in your own data and, at best, sent back to platforms as a value signal.
LTV is one fixed number for the whole business.
LTV varies sharply by segment, channel, and cohort. A blended company-wide average hides the fact that some acquisition sources bring customers worth multiples of others—which is exactly what should steer spend.
Related Terms
Frequently Asked Questions
What is LTV in simple terms?
LTV is how much a customer is worth to you over their entire relationship—not just their first order. A customer who keeps buying for years is worth far more than a one-time buyer, and LTV puts a dollar figure on that.
How is LTV calculated?
Why does LTV differ across ad platforms?
How does Clarisights report on LTV?
See Viewable Impression across every channel in one report
See Viewable Impression across every channel in one report
See viewability and vCPM across every platform—display, video, programmatic— in one normalized report, instead of reconciling vendor numbers by hand.
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