Unit economics

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Is one player worth it?

Kai has an idea: "Let's spend $300 on ads for Garden Defense!" Smart or not? To answer, we need unit economics: the money maths for one unit, here one player. What does a player cost to get, and what do they bring in?

Start with CPI (cost per install): ad spend ÷ installs from those ads. Example: $300 of ads brings 1,000 installs, so CPI = $300 ÷ 1,000 = $0.30.

Players who find the game by themselves are organic installs and cost nothing. Ad accounts need an adult, so a parent runs any campaign with you.

Read the numbers

ad_campaign.txt
Garden Defense ad campaign (example) Ad spend        $400Ads shown       80,000Clicks          2,000Installs        800

What is the CPI for this campaign?

  1. $0.50
  2. $0.20
  3. $0.005
Show the answer

$0.50

CPI is ad spend divided by installs: $400 ÷ 800 = $0.50. $0.20 is the cost per click, and $0.005 is the cost per ad shown. Only installs bring in players.

ARPU and ARPPU

Now the money coming in. A made-up month for Garden Defense: 10,000 players. Ads earned $500. 200 players bought "Remove ads" or a new world, bringing $400 after store fees.

Only 2% paid, so the two numbers are far apart. In Hyper Shards every player paid $4.99 before playing, so ARPU and ARPPU are the same: about $4.55 each after Stripe's fee.

Quick check

In a free-to-play game like Garden Defense, ARPPU is usually much higher than ARPU.

Show the answer

True

ARPU spreads the money over every player, including the many who never pay. ARPPU only counts the few who pay, so it is much higher.

Lifetime value

LTV (lifetime value) is all the money one player brings in, from install until they stop playing. A simple estimate: money per day played × days played.

Example: a Garden Defense player watches 2 rewarded ads per day they play. Say rewarded ads earn $10 per 1,000 views (a made-up rate; real rates change a lot). That is $0.02 a day. If the average player plays 15 days in total, ads bring 15 × $0.02 = $0.30. Purchases add about $0.04 per player (2% of players spend $2). LTV is about $0.34.

Retention drives LTV. Players who stay 30 days instead of 15 almost double it.

Read the numbers

ad_plan.txt
Garden Defense, ad plan (example) CPI from ads         $0.50LTV per player       $0.34Plan: spend $5,000 on ads

What happens if the studio follows this plan?

  1. Each ad player costs $0.50 but brings back $0.34, so the studio loses money
  2. The studio makes a profit, because 10,000 new players is always good
  3. The studio breaks even, because ads always pay for themselves
Show the answer

Each ad player costs $0.50 but brings back $0.34, so the studio loses money

$5,000 ÷ $0.50 = 10,000 players. 10,000 × $0.34 = $3,400 back. The studio spends $5,000 to earn $3,400, losing $1,600. More players is only good if each one is worth more than they cost.

The golden rule

LTV must be higher than what it costs to get a player. If not, growing faster just loses money faster.

Hyper Shards example: for a pay-once game we measure CAC (customer acquisition cost): spend ÷ buyers. Ads cost $0.05 per click, and 1 in 40 visitors buys. CAC = $0.05 × 40 = $2.00. LTV is about $4.55, so each buyer earns $2.55 more than they cost.

LTV is only an estimate, and servers and salaries cost money too, so many businesses aim for LTV around three times CAC. To fix bad numbers, raise LTV (better retention) or lower CPI (a better store page or ad).

Payback period

The payback period is how long it takes for a group of players to bring in the money it cost to get them.

Hyper Shards pays back on day 0: a buyer pays the moment they buy. Garden Defense earns a few cents a day, so payback takes weeks or months.

Long payback is risky. The studio pays for ads today but gets the money back slowly, so it needs cash in the bank to wait. Ad networks pay late too: AdMob pays out monthly, once earnings reach US$100. And if players quit sooner than expected, some of that money never comes back.

Payback

cohort_may.txt
Garden Defense, players from May ads (example) Players          1,000Ad spend         $300 Money earned from these playersBy day 7         $110By day 30        $240By day 60        $310By day 90        $340

When did this group of players pay back its ad spend?

  1. Between day 30 and day 60
  2. By day 7
  3. Never, because $340 is far less than 1,000 players
Show the answer

Between day 30 and day 60

The ads cost $300. By day 30 the group had earned $240, not enough yet. By day 60 it had earned $310, which is more than $300. So payback happened between day 30 and day 60.

Unit economics in four numbers

Bolt says: These four numbers are exactly what investors ask about in Stage 11. Next: growing the team, and when the money is there to do it.

Fact-checked 9 October 2026