What you should know before tracking DAU/MAU Ratio
Metric Stack 11: DAU/MAU Ratio and more!
At first glance, DAU/MAU Ratio seems straightforward: divide your daily active users by monthly active users to understand how many days per month your customers use your app. But then you find yourself asking:
How do you define an active user?
Is it accurate to track a customer’s daily activity?
Do we track all users versus paying customers only?
If you’re having these concerns while trying to navigate this metric and other product engagement metrics, don’t worry. I’m Priyaanka Arora, your personal metric assistant and Content Researcher & Writer at Klipfolio. You’re asking the right questions and I hope to answer them all in this edition of Metric Stack.
What is DAU/MAU Ratio?
Daily Active Users (DAU) to Monthly Active Users (MAU) Ratio measures product engagement or stickiness by tracking the number of days per month users were active within your product. Here’s the formula:
DAU/MAU Ratio = Daily Active Users / Monthly Active Users
A quick bit of history and context before we dig into the specifics. DAU/MAU Ratio was first introduced by Facebook as a metric of engagement. It makes a lot of sense for a platform like Facebook to track daily activity because most social apps rely on product usage bordering on addiction or obsession. That’s something to think about when you’re scrolling through your feed for hours, every single day of the week.
While DAU/MAU Ratio is generally used in the context of consumer products, there’s nothing that prevents you from tracking this metric for your B2B product. However, you may want to adjust how you define meaningful activity and fully understand your customers’ lifestyles and usage patterns before you draw conclusions on the basis of this metric. Let’s dig in:
What’s a good DAU/MAU Ratio benchmark?
You’ll come across this number quite a bit: a good DAU/MAU Ratio benchmark is around 25%, with the gold standard being 50% and above. However, this holds mostly for consumer businesses, more specifically, social apps where daily usage is much more common. If you want to get a wider view of DAU/MAU benchmarks, take a look at this product benchmark report from Mixpanel. The chart below gives the average, 50th percentile and 90th percentile DAU/MAU across industries with a mix of B2C and B2B companies. You can see that the average DAU/MAU for the SaaS industry is actually higher than eCommerce, finance, and media.
Keep in mind that benchmarks for metrics such as DAU/MAU Ratio, which can vary greatly based on product application use cases and internal methodologies of calculating active users, should act only as a guideline to assess your app performance.
What DAU/MAU Ratio really tells you
You’ve heard me use a few different words while defining DAU/MAU, including “engagement”, “stickiness”, and “active”. This metric does tell you all of those things about your app - how sticky it is, how frequently users engage, and the number of days in a month users are active on your platform.
While DAU/MAU Ratio does indeed measure stickiness (the likeliness of users consistently returning to your app), what it can really do for you is measure the true value users get from your app.
If you think about DAU/MAU ratio as the percentage of users who frequent your app to solve a particular problem each time that problem arises - you have a direct insight into how well your app performs the function it was designed to fulfill.
As always, there are conditions to how you can interpret this metric, based on your specific context. DAU/MAU Ratio can vary based on multiple factors from industry, to target user segment, subscription type, and average frequency of app. This is why it makes much more sense to track the percentage change in DAU/MAU Ratio over time to get data corresponding specifically to your business.
As you can see, there are many nuances that go into getting the best quality insights from this metric. Finally, I'll leave you with the answers to the questions we asked ourselves at the beginning of this article. Make sure these are topics you think about in your specific business context before you start tracking DAU/MAU Ratio:
Identify if DAU/MAU is appropriate for the frequency of use for your app. Daily usage is higher for social and messaging apps, while being lower for B2B functions such as analytics, accounting, or ticketing. You may want to track Weekly Active Users (WAU) instead.
Define active users by activity correlated with success rather than arbitrary actions such as logins. This avoids inflating your DAU/MAU Ratio with numbers irrelevant to user value. Of course, if your app achieves success through daily logins, then that’s exactly how you should define an active user.
Distinguish between freemium, trial, and paying customers. You may see your DAU/MAU Ratio increase significantly when you start focusing on paying customers only. Other metrics, such as trial conversion rate and won customers, may be better suited to track your freemium and trial users.
What’s new on MetricHQ?
Have you checked out MetricHQ? It’s a growing collection of every metric you could think of with new metrics added every week. This week, there are two new financial metric comparison pages: EV/EBITDA vs P/E Ratio and EV/EBITDA vs ROIC. You can also learn more about Price-to-Earnings Ratio to complete your understanding of these popular financial ratios.
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Stay tuned for the next edition of Metric Stack Newsletter to get the latest scoop on all things metrics! Send feedback, comments, questions here: parora@klipfolio.com