Customer lifetime value is a numeric representation of the net profit you predict will be attributable to a given customer over the duration of your relationship with them. You can break it down into a few factors:

• How often a customer makes a purchase within a typical purchase cycle
• How much a customer spends each time they make a purchase
• How much you project a customer will spend over the duration of your relationship with them
• The potential length of a customer's relationship with you

You shouldn't use your prediction for any one of these factors alone as a representation of a given customer's lifetime value. You should combine each relevant estimation into a formula appropriate for your business goals and use the result it produces.

For Facebook advertising, customer lifetime value is especially relevant for value-based Lookalike Audiences. If you add a customer lifetime value column to a file you're uploading to create a Custom Audience, you can use that Custom Audience as a source for a value-based Lookalike Audience (you can also use a pixel, SDK, catalog, or mobile app as a source). That Lookalike Audience will then be made up of the people most similar to your highest value customers. A regular Lookalike Audience (one that does not take customer lifetime value into account) can only find people similar to all your customers.

Note: Your business may not track customer lifetime value. If you don't, you can still use Custom Audiences and Lookalike Audiences to reach your customers and people similar to them. However, you won't be able to use value-based Lookalike Audiences.

Value-based lookalikes versus value optimization

If you're not sure whether to create a value-based lookalike or use value optimization, please consider the following:

• Generally, if you need more than a week to be able to predict the lifetime value of your customers, you should choose create a value-based lookalike audience instead of using value optimization. Value optimization uses up to 7 days to predict value. If you can confidently predict the lifetime value of your customers in 7 days or less or have a 7 day return on ad spend as your primary business goal, we recommend that you try creating a value-based lookalike, with value optimization as the optimization goal.
• Value optimization is great for companies with shorter purchase cycles that are up to 7 days, while value-based lookalikes are a great option when value optimization doesn't work (due to purchase cycles that are longer than 7 days). Value-based lookalikes can look back on up to 60 days in the past.