For simplicity assume conversion rate is 10%, and margin is 50%. How much should I pay for the visitor in relation to the lifetime value of the customer?
PPC/10% < LTV*50% has to be true, but by how much?
Adwords Advertising PPC Customer Value
Technically its when the two marginally equal zero. So cost of aquiring customer marginally = the life time value of the customer marginally. However though that is acurate at day one you will not know your LTV. You can estimate it but you will not know how long the customer will continoue to stay. I believe your main decison making factors has to do with cash on hand for aquiring customers. So that is your limiting factor that is the main focus in the beginning of the business. Later it will be what I first stated because you'll know the various rates of conversion cost price payouts and loss of your customer. So I would focus on postive cash flow at first unless you have another line of cash coming in that would replenish your marketing costs.
The answer has to do with the confidence you have in your assumptions. If you are certain about your conversion rate, your margin, and your lifetime customer value, anything up to PPC/10% = LTV*50% is fine. Furthermore, the period of time over which you will collect this lifetime value is a factor. The fact is you are guessing at all the numbers at this point. You imply in your comment to Genadinik that you need to be profitable from day 1. So let me make this suggestion. You will have to make an investment in advertising with no expectation of a return on that investment as a test. Figure out the amount you are willing to commit. Then run a test and get some actual numbers. You should be able to see your conversion rate and your margin. The LTV will still be a guess but at least it can be a somewhat educated guess. Now you can actually do some calculating.
It depends on what phase of the business growth you are in.
In a "growth" phase you should overpay and try to get as many customers as possible. If you are conservative and have to be mindful of profit margins, then obviously you have to follow the math that makes sense then.
Also it depends on your particular business, and the niche. Just doing random math without knowing what your competition is doing, or the future of your business segment, is like throwing darts into space.