Decoding the Maze of Metrics in the App Economy
DAU, MAU, downloads, usage, open rate, retention -- these terms can sound like a foreign language to those new to the app space.
Mobile apps are at the center of digital transformation and increasingly contribute to the success of businesses across nearly every industry. On average, Americans spend more than 2 hours and 15 minutes per day in apps -- that equates to more than one month out of every year of our lives. There is no other medium that is as direct, as personal or as omni-present to meet your customer whenever and wherever they need you.
As more mobile and app-centric business strategies come to fruition, companies are flooded with metrics like DAU, MAU, downloads, usage, open rate, retention and more. These terms can sound like a foreign language to those new to the space, and can cause confusion when you're attempting to vet the numbers, draw a clear business picture and evolve your strategy. What do these numbers really mean? Which ones are the most important for judging business success? What should companies pay attention to and prioritize?
As a researcher and former analyst in the mobile market, I've been navigating my way through this maze of metrics for years now and can help bring a bit of clarity.
Usage is the new currency of success.
When talking about app success, the first thing that comes to mind for many is downloads. And earlier in an app's lifecycle, this metric is critical. When downloads begin to slow, the assumption is that the business is losing steam. However, the reality is that downloads don't tell the whole story as they don't signal the engagement levels of your users. Downloads alone don't equate to dollars, as usage is the new currency of success.
In 2016, users downloaded over 90 billion apps on the iOS App Store and Google Play, but spent nearly 900 billion hours in apps. Downloads are an important metric to measure an app's potential breadth and reach, while usage tells us the level of activity and engagement. What happens after the download is what ultimately matters: What is the retention rate for the app post download? How much time are they spending in the app? How frequently are they opening it? High usage metrics (for a given app over time and when compared to a competitive set) demonstrate a satisfied customer base and one that is more likely to generate revenue (through app stores, advertising and/or commerce), and for advertising revenue, strong competitive metrics are critical for higher CPMs.
The importance of MAU, WAU and DAU varies based on the type of app.
As websites became a critical channel for companies over the past 20 years, MAU (monthly active users) became a key metric to track. For any company with mobile apps, MAU is a still an important datapoint to keep an eye on, both in terms of growth over time and relative to a competitive cohort. But, MAU is not enough for those whose apps deliver value that is realized more frequently, and this is where WAU and DAU (weekly and daily active users, respectively) come into play.
For social, communications, utility, photo/video, entertainment and news/media apps, DAU is a key metric to track in order to truly understand relative value delivered to users. For many other categories including shopping, finance, quick-serve restaurants, productivity and transportation, weekly active users are important to monitor to better understand the engagement and reach of your app.
Sessions and time spent per user signal user attention.
Frequency of an app's use indicates how that app is or isn't becoming a part of its users' digital habits, and sessions per user can be your key to understanding this. Clearly, for social and communications companies, sessions per user are the highest, but this metric matters for many verticals. For services related to quick-serve restaurants, finance and banking, ride-sharing and shopping, sessions per user is a critical competitive metric and one that indicates customer satisfaction and revenue growth. For some apps, it's about delivering a more immersive experience -- think entertainment and video, education, media and oftentimes shopping as examples -- so time spent per user is a pivotal metric to benchmark against.
Focus on retention for revenue.
While gaming publishers have known retention is key for some time, it is a metric that is often overlooked by many companies that aren't mobile-first. When an app initially launches, downloads are the top metric to watch, but what happens post-install is critical to know. Understanding what best-in-class app retention is at Day One, Day Three, Day Seven and Day 30 helps a company plan out its app's growth trajectory and guide critical product, marketing and investment decisions. Extending out one's retention curve has a material impact on the app's ROI.
Apps are transforming virtually every industry from mobile-first startups to stalwart mainstream companies that long predate mobile. Today, there are more than three billion smartphones globally, and we anticipate this number to double to more than six billion by 2020. As the app revolution continues, we will see app metrics increasingly cited as indicators of businesses' growth and success. Hopefully, this article helps demonstrate how these metrics can be applied to your digital and mobile strategy as tools to help you connect with your customers and enable your business to thrive.
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