LTV / CPI vs. cashflow – Mobile Dev Memo

Good article on the cash flow requirements to scale paid marketing:

What this example illustrates is that, despite making roughly 50% ROI on all marketing spend (earning back $1.52 for every $1 spent on marketing), this developer is spending more money than it is making for more than a month (48 days) after launch. The total spend of $365,000 produces revenues of $553,848, for an operating profit of $188,848.

But the developer had to float a loss of $11,454 before it started generating positive cash flow (eg. was making more money than it was spending). Even at a massive profit margin, this developer needed 6% of two-year profits and 2% of two-year sales up front (that is, offset by cumulative recoup) to fund its marketing campaigns. Before launching a product, every developer needs to consider its ability to do the same.

Source: LTV / CPI vs. cashflow – Mobile Dev Memo