What should count as lifetime value here?

The gross profit one funded customer brings over a defined horizon, such as 12 or 24 months, including repeat loans and cross-sell, and net of expected losses from default. A horizon long enough to capture repeat business but short enough to measure works best.

Why is the target bid lower than break-even?

Break-even is the price at which a lead earns exactly nothing on average. The target keeps a share of the expected value as margin, which also gives you a buffer when the lifetime value estimate turns out too high.

Should I bid from the point estimate of lifetime value?

Not for new or thin sources. Estimates for the sources that look best tend to be high partly by chance, so shrink them toward the average for comparable sources, or bid from a conservative value, and recalibrate against realized value as it arrives. The default inputs are an illustrative example, not a benchmark.

How does this relate to value-based bidding on ad platforms?

On Google or Meta you usually report a value per conversion and let the platform set the bid. The same expected value per lead (lifetime value times the chance a lead becomes a customer) is a reasonable value to send, and the maximum cost per click shown here is a check on what the platform ends up paying.

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Max Bid from LTV Calculator

Given what a customer is worth and how often traffic converts, what is the most you can pay per click or per lead and still hit your margin?

Set what a funded customer is worth and how often your traffic converts. The calculator works out the most you can pay per lead and per click at break-even and at your target margin. The starting values are an illustrative example, not a benchmark.

Customer lifetime value (gross profit per funded customer, e.g. over 12 months)$110Lead-to-customer conversion rate10%Click-to-lead rate8%Target margin (share of lifetime value you keep)30%Fixed cost per lead (verification, handling)$1.00Actual price you pay per lead$5.00

Max cost per lead (target)

$6.70

Max cost per click (target)

$0.54

Break-even cost per lead

$10.00

Break-even cost per click

$0.80

Expected profit per lead at $5.00

$5.00

Margin at that price

45%

Expected value of one lead: $11.00

Max you can payTarget marginHandling cost

Max cost per lead = $110 × 10% × (1 − 30%) − $1.00 = $6.70

Max cost per click = $6.70 × 8% = $0.54

Lifetime value here should be net of expected losses, and it is an estimate. Estimates for the best-looking sources tend to be high partly by chance, so bid from a shrunk, conservative value for new or thin sources rather than the point estimate.

How it works

Lifetime value bidding sets what you pay for traffic from the predicted value of a customer over a defined horizon, such as 12 months, rather than from the first conversion alone. This calculator turns that value into the most you can pay per lead and per click, at break-even and at your target margin, after any fixed cost of handling each lead. Use it to sanity-check a cost-per-lead or cost-per-click bid, or to see how much a better conversion rate or a higher lifetime value lets you pay.

Lifetime value is the gross profit from one funded customer over your chosen horizon, net of expected losses. Multiplying it by the share of leads that become customers gives the expected value of one lead. Subtracting the fixed handling cost per lead gives the break-even cost per lead; keeping your target margin (a share of that expected value) first gives the target maximum. Multiplying a cost per lead by the share of clicks that become leads converts it to a cost per click. Expected profit per lead at the price you actually pay is the expected value minus handling minus that price.

\text{CPL}_{\max} = \text{LTV}\cdot q\,(1 - m) - k

\text{CPL}_{\text{even}} = \text{LTV}\cdot q - k

\text{CPC}_{\max} = \text{CPL}_{\max}\cdot s

\pi = \text{LTV}\cdot q - k - p

where

$\text{LTV}$: gross profit per funded customer
$q$: lead-to-customer rate
$m$: target margin
$k$: handling cost per lead
$s$: click-to-lead rate
$p$: price you pay per lead
$\pi$: profit per lead

Frequently asked questions

What should count as lifetime value here?: The gross profit one funded customer brings over a defined horizon, such as 12 or 24 months, including repeat loans and cross-sell, and net of expected losses from default. A horizon long enough to capture repeat business but short enough to measure works best.
Why is the target bid lower than break-even?: Break-even is the price at which a lead earns exactly nothing on average. The target keeps a share of the expected value as margin, which also gives you a buffer when the lifetime value estimate turns out too high.
Should I bid from the point estimate of lifetime value?: Not for new or thin sources. Estimates for the sources that look best tend to be high partly by chance, so shrink them toward the average for comparable sources, or bid from a conservative value, and recalibrate against realized value as it arrives. The default inputs are an illustrative example, not a benchmark.
How does this relate to value-based bidding on ad platforms?: On Google or Meta you usually report a value per conversion and let the platform set the bid. The same expected value per lead (lifetime value times the chance a lead becomes a customer) is a reasonable value to send, and the maximum cost per click shown here is a check on what the platform ends up paying.

Read the articleReal-time Bid Optimization for Affiliate PublishersStop over-bidding for low-intent clicks. Use machine learning to calculate the perfect bid for every impression.

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