The document discusses three key things to focus on before significantly scaling user acquisition (UA) spending.
1) Understand customer acquisition cost (CAC) and lifetime value (LTV) - the "north star" metric.
2) Determine how to fund increased spending on UA, exhausting least expensive options first.
3) Continually monitor how CAC and LTV change as spending increases so ROI remains high and the "machine" is running at full capacity. The goal is profitable growth through efficient use of capital.
Focus on CAC, LTV, and financing before scaling mobile game user acquisition
1. Ready to Scale?
What to focus on before pushing the button
21st January 2020
Martin Macmillan - CEO
2. Ready to Scale? What to focus on before pushing the button
About Pollen VC
Now!
2
We provide lines of credit to developers which enable
them to fund their business better and grow using paid
UA
Our model is a flexible and non-dilutive alternative to
equity financing, allowing developers to retain control
while growing their business
Our mission is to get start-ups to think about capital
efficiency, using the right type of funding for the right
purpose
3. Ready to Scale? What to focus on before pushing the button
Three Fundamental Questions
3
Do I have a machine?
1.
How do I fund the
machine?
2.
How do I know when
my machine is running
at full capacity?
3.
4. Ready to Scale? What to focus on before pushing the button
CAC and LTV
Now!
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Acquisition cost
CPI, CPA, CPE etc.
Whatever makes sense for
your game
LTV
“North Star” metric
How much will you earn from
a player IAP/Ad revenue
5. Ready to Scale? What to focus on before pushing the button
How to calculate LTV
5
https://ltvcalculator.pollen.vc
6. Ready to Scale? What to focus on before pushing the button
Your UA Recipe
6
$1.00 invested
results in $1.89 of LTV
after 90 days
8. Ready to Scale? What to focus on before pushing the button
Most Expensive $
Least Expensive $Exhaust the least expensive
bucket before moving onto
the next one
How do you fund
the machine?
Now!
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Credit Line from Ad Network
Cash at Bank (eg from free cashflow of an existing app)
Credit Cards
Lines of Credit secured against accounts receivable (AR)
VC Funding
9. Factor in the cost of financing
ROAS ROAS
20%
1. Break out ROAS to a
monthly return
Ready to Scale? What to focus on before pushing the button
10. Factor in the cost of financing
ROAS ROAS
20%
Financing 2%
Break out ROAS to a
monthly return1.
Apply financing cost on
the same basis2.
Ready to Scale? What to focus on before pushing the button
11. Factor in the cost of financing
ROAS ROAS
20%
Financing 2%
PROFIT
18%
Break out ROAS to a
monthly return
Apply financing cost on
the same basis
Focus on PROFIT!!!
3.
1.
2.
Ready to Scale? What to focus on before pushing the button
12. Ready to Scale? What to focus on before pushing the button
Focus on investment and return
Now!
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Increasing Ad Spend - Externally Financed
Monthly
ROI
Monthly
ROI
20% 15%
1
Monthly ROI
Decreases
13. Ready to Scale? What to focus on before pushing the button
Focus on investment and return
Now!
13
Increasing Ad Spend - Externally Financed
Monthly
ROI
Monthly
ROI
20% 15%
1
Monthly ROI
Decreases
Financing Cost
Decreases
2%
1.5%
Cost to
Finance
Cost to
Finance
2
14. Ready to Scale? What to focus on before pushing the button
Focus on investment and return
Now!
14
Increasing Ad Spend - Externally Financed
Monthly
ROI
Monthly
ROI
20% 15%
1
Monthly ROI
Decreases
Financing Cost
Decreases
2%
1.5%
Cost to
Finance
Cost to
Finance
2
Still Generating
Healthy Profit
18% 13.5%
Profit
Profit
3
15. How to know when
your machine is running
at full capacity
16. Ready to Scale? What to focus on before pushing the button
Now!
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CPI
Acquisition costs rise over time
Now!
Installs
$
Demand & Supply characteristics of UA
17. Ready to Scale? What to focus on before pushing the button
Now!
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LTV
CPI
Now!
Installs
$
Acquisition costs rise over time
LTV falls as you scale
Demand & Supply characteristics of UA
18. Ready to Scale? What to focus on before pushing the button
Now!
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LTV
CPI
Acquisition Costs Rise over time
LTV falls as you scale
Model the shape of your curve
Keep buying until min ROI target achieved,
eg X% margin
Each genre has different characteristics
Feed this into your overall strategy of the
games you are building for target audience
Now!
Installs
$
Demand & Supply characteristics of UA
19. Ready to Scale? What to focus on before pushing the button
Now!
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20. Ready to Scale? What to focus on before pushing the button
Takeaways…
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Get realistic estimates
of CPI and LTV
1.
Figure out how you
are going to finance
your growth
2.
Keep monitoring and
measuring your machine
to keep it working at
full capacity
3.