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Key Mobile App Metrics in 2023: Evaluating Performance through Retention, Engagement, Conversion, and Revenue

GOOVER DAILY REPORT September 8, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Importance of Mobile App Metrics
  3. Key Metrics for Evaluating Growth
  4. DAU/MAU Ratio: Understanding User Stickiness
  5. Monthly Active Users (MAU): Key Performance Indicator
  6. Conclusion

1. Summary

  • The report titled 'Key Mobile App Metrics in 2023: Evaluating Performance through Retention, Engagement, Conversion, and Revenue' examines crucial metrics for assessing and improving mobile app performance. It focuses on metrics including DAU/MAU Ratio, Cost Per Install (CPI), Customer Lifetime Value (CLTV), and Monthly Active Users (MAU) to provide insights into user engagement, retention, and overall business growth. The report emphasizes the importance of aligning these metrics with business goals to achieve sustainable success, highlighting Retention, Engagement, Conversion, and Revenue Generation as key areas of focus. Insightful examples and industry benchmarks, such as the significance of a high DAU/MAU ratio and strategies to increase MAU, are provided to aid in the practical application of these metrics.

2. Importance of Mobile App Metrics

  • 2-1. Retention

  • Retention refers to the number of users who return to use the app after installation within a specified timeframe. It is a crucial metric for assessing the long-term viability of an app, as it indicates whether users find ongoing value in the application. High retention rates suggest a positive user experience and the app's ability to meet user needs effectively. Retention is often preferred over acquisition, as it does not incur additional costs, making it essential for fostering a loyal user base.

  • 2-2. Engagement

  • Engagement metrics, such as Daily Active Users (DAU) and Monthly Active Users (MAU), are vital for understanding how users interact with the app. DAU tracks the number of unique users accessing the app daily, while MAU tracks unique users over a month. These metrics help companies gauge the app's usefulness and engagement level, as 28% of apps are reported to be uninstalled within the first 30 days. Increased engagement often correlates with higher revenue potential and user retention.

  • 2-3. Conversion

  • Conversion metrics are critical for measuring how effectively an app turns user interactions into desired actions, such as purchases or sign-ups. The Goal Completion rate is a key indicator of conversion success, allowing businesses to track specific user activities that have direct implications for revenue. Understanding conversion rates assists in identifying areas of improvement within the user journey, which is crucial for optimizing the app's performance.

  • 2-4. Revenue Generation

  • Revenue generation metrics, including Cost Per Install (CPI) and Customer Lifetime Value (CLTV), provide insights into the financial viability of the app. CPI measures the cost associated with acquiring a new user, while CLTV estimates the total revenue expected from a customer throughout their relationship with the app. These metrics are vital for assessing the return on investment (ROI) of marketing efforts and for ensuring that the cost of acquiring users does not exceed the revenue they generate.

3. Key Metrics for Evaluating Growth

  • 3-1. Cost Per Install (CPI)

  • Cost Per Install (CPI) is a critical metric that measures the average cost incurred to acquire a new app download. It is calculated using the formula: Total Marketing Cost / Total Acquired Users. For instance, if a company spends $100,000 on marketing campaigns and successfully acquires 100 users, the CPI would be $1,000. It's vital to maintain a low CPI to ensure profitable user acquisition, allowing the app to deliver a healthy return on investment.

  • 3-2. Customer Lifetime Value (CLTV)

  • Customer Lifetime Value (CLTV) assesses the total revenue expected from an average customer during their entire relationship with a company. This is calculated as: Average Value of Conversion X Average Number of Conversions over a Time Period X Average Customer Lifetime. For example, if an e-commerce app user spends $500 on average with three purchases per year over two years, their CLTV would be $3,000. A healthy business model demands that CLTV exceeds Customer Acquisition Cost (CAC).

  • 3-3. Average Revenue Per User (ARPU)

  • Average Revenue Per User (ARPU) is crucial for understanding the revenue generated per user and is key to achieving revenue targets. It is calculated as: Lifetime Revenue / Number of Lifetime Users. If an app generates $50,000 in total from 100 users, the ARPU would be $500. ARPU, alongside CLTV, helps in forecasting revenue growth and assessing user engagement efficiency.

  • 3-4. Daily/Monthly Active Users (DAU/MAU)

  • The Daily Active Users (DAU) and Monthly Active Users (MAU) metrics are essential measures of user engagement. DAU represents the number of unique users who interact with the app daily, while MAU counts unique users over a 30-day period. The ratio of DAU to MAU indicates the frequency of user engagement and is a critical indicator of app 'stickiness.' A higher DAU/MAU ratio signifies better user retention and engagement. For instance, apps achieving over 20% in this ratio are typically seen as good performers, while those exceeding 50% are exceptional.

4. DAU/MAU Ratio: Understanding User Stickiness

  • 4-1. Definition and Calculation

  • The DAU/MAU Ratio measures the stickiness of a product by comparing the Daily Active Users (DAU) to Monthly Active Users (MAU). DAU represents the number of unique users engaging with the product within a single day, whereas MAU represents the number of unique users over a 30-day window. To calculate the DAU/MAU Ratio, the formula used is: DAU/MAU = (Number of Daily Active Users) / (Number of Monthly Active Users). However, it is essential to define what constitutes an 'active' user for the product, which could include actions like purchases, page views, or logins, depending on the context.

  • 4-2. Significance for Startups

  • The DAU/MAU Ratio is critically significant for startups. According to various venture capitalists, knowing the growth rate, indicated by the DAU/MAU Ratio, is fundamental for assessing a startup's performance. Paul Graham emphasizes the importance of understanding this ratio as a proxy for revenue growth, especially for early-stage startups. The ratio provides insights into user retention and engagement levels, which are vital for determining the product's value to its users. A higher ratio indicates better user retention, suggesting that the product is effectively fostering repeated engagement among users.

  • 4-3. Industry Benchmarks

  • Industry benchmarks for the DAU/MAU Ratio vary widely depending on the type of product and engagement method. Sequoia Capital indicates that the typical DAU/MAU Ratio ranges from 10% to 20%, with only a few companies exceeding 50%. Achieving a higher ratio is preferable, as it reflects superior user engagement and retention. When evaluating a startup's performance, it is crucial to compare the DAU/MAU Ratio against similar companies or industry standards to gain meaningful insights.

5. Monthly Active Users (MAU): Key Performance Indicator

  • 5-1. Definition and Importance

  • Monthly Active Users (MAU) is a vital sign that gauges the health of a digital platform. It measures the number of unique users who interact with the platform over a given 30-day period. MAU serves as a Key Performance Indicator (KPI) that businesses use to track engagement and engagement patterns, providing essential insights into user interaction, platform vitality, and overall success.

  • 5-2. Measurement Methods

  • The measurement of MAU varies across platforms, yet the core idea remains constant: it counts unique users who perform an action within a month. For social media platforms, actions may include liking, sharing, or commenting on posts. E-commerce platforms like Amazon may define active users as those who make purchases or browse products. Streaming services measure interactions through video views or music streams, while gaming platforms count users who participate in games or make in-game purchases.

  • 5-3. Strategies to Increase MAU

  • To increase MAU, businesses can adopt several effective strategies: 1. User-Friendly Design and Experience: Creating an intuitive and easy-to-navigate platform can significantly enhance user engagement. 2. Regular and Relevant Content Updates: Providing fresh content keeps users interested and encourages return visits. 3. Personalized User Experience: Tailoring offerings to individual preferences makes users feel valued. 4. Gamification: Implementing game-like elements encourages interaction among users. 5. Push Notifications and Reminders: Sending timely alerts about new content or features can prompt users to return without being overwhelming. 6. Community Building: Fostering a sense of community through forums and user interactions can maintain user engagement. By employing these strategies, businesses can effectively attract and retain more users, thereby driving platform success.

6. Conclusion

  • The report underscores the importance of essential mobile app metrics—including the DAU/MAU Ratio, Cost Per Install (CPI), Customer Lifetime Value (CLTV), and Monthly Active Users (MAU)—for tracking and enhancing app performance. These metrics provide invaluable insights into user engagement, stickiness, and financial returns, which are critical for sustained growth and revenue. The significance of DAU/MAU Ratio in understanding user stickiness, CPI in budgeting acquisition costs, and CLTV in planning long-term customer retention strategies are particularly emphasized. However, a key limitation is the need for more personalized metric strategies to fit specific business needs. For future research, granular cohort analyses and emerging trends in metrics could be beneficial. Practical applicability of these findings includes tailoring strategies to improve user retention and financial efficiency, thereby driving better market positioning and investor interest.

7. Glossary

  • 7-1. Cost Per Install (CPI) [Metric]

  • CPI measures the cost incurred by a company every time a user installs the mobile app. It helps in understanding the financial efficiency of acquisition campaigns and is crucial for budgeting and financial planning.

  • 7-2. Customer Lifetime Value (CLTV) [Metric]

  • CLTV estimates the total revenue a business can expect from a single customer account. It is instrumental in evaluating long-term business success and planning customer retention strategies.

  • 7-3. Average Revenue Per User (ARPU) [Metric]

  • ARPU is calculated by dividing the total revenue by the number of active users. This metric helps in assessing the revenue generation capability of the app per user, aiding in financial projections.

  • 7-4. Daily/Monthly Active Users (DAU/MAU) [Metric]

  • DAU/MAU measures user engagement by comparing the number of daily active users to monthly active users. A higher ratio indicates higher user stickiness and engagement, which is critical for the app's growth and investor interest.

  • 7-5. Monthly Active Users (MAU) [Metric]

  • MAU measures the number of unique users engaging with the app over a month, indicating the app's reach and user retention. It is a key performance indicator for assessing the app's health and predicting its market valuation.

8. Source Documents