Any assessment is based on the analytical data and statistical information. The questions of how to choose and a
djust a particular analytics and how to determine the required monitored events along with other technical issues are beyond the scope of this article. Here we will focus our attention on interpreting the most crucial indicators only.
The financial indicators of the product are affected by two groups: user activity indicators and profitability indicators.
User activity indicators
Our good friends, DAU and MAU are the first to meet us here. Along with “the more, the better” approach that is quite reasonable here another important aspect is the continuous positive dynamics of these indicators over time (the forming of the “core” of frequent and loyal users).
MAU/DAU are the two most basic and widespread metrics. However, different app analytics systems use different ways of measuring these metrics. Some of them consider DAU as the number of users who visit the app daily while the others treat it as the number of users who have opened the app at least once over the last 7 days.
The higher the value, the more involved players there are, the more likely the users are to buy in-app content. Pay attention to another important indicator, which is the DAU/MAU ratio. It shows the level of involvement of the players into the game. For massive casual mobile games, the DAU/MAU of 18%-25% is considered to be a good indicator.
The second most important indicator is the analysis of User Retention.
Classic Retention is traditionally measured on the 2nd, 7th, 15th, 30th day. The value here can be very different depending on the game/app category. Still, the rule is the same: the higher the value, the better.
Currently, more and more developers prefer a purer value – Rolling Retention.
Rolling Retention day 7 that equals 30% means that 30% of your users keep using the app 6 days after downloading it. Classic Retention day 2 that equals 30% means that 30% of your users keep using your app on the 2nd day and on the following days after installing it. When measuring this value, you can clearly see the real speed and the volume of your user depletion, thus, the higher the value, the fewer users are leaving your app. The Rolling Retention value is, a priori, higher than the Classic Retention value, looking more attractive for potential investors.
If the Classic Retention value is low, the developers have to pay attention to the first session or content/ gameplay (in games).
Profitability Indicators
When assessing the success of their apps, many developers use ARPDAU (Average Revenue per Daily Active User) as the basis. This indicator includes an “average user check” but disregards the Retention or the actual number of users. That is why this indicator should be tracked and measured in conjunction with the following 4 indicators.
- ARPD, $. Average revenue per download (including organic and paid traffic).
- NPU, %. The conversion of installs to paying users. This is the ratio of the number of paying users by cohorts to the number of installs. The lower it is, the more users are not monetized, which means one has to pay attention to the model and mechanics of monetization in the app. NPU valuecan vary, depending on the app mechanics and the monetization model. However, on average, NPU of 2-5% (for gaming apps) is considered the norm.
- ARPPU, $. The average revenue per paying user is the ratio of the total revenue by cohorts to the number of paying users. If the derived ARPPU appears to be low, one should probably re-consider the IAP prices.
- LTV, $. It is the net profit attributed to the entire relationship of an app user with the app. This is the key financial indicator that takes into consideration the lifetime of the app, the conversions and the monetization. To measure the financial efficiency, this indicator should be compared to the CPI. Thus, the higher the LTV is in comparison to the CPI, the more profit the developer will make. Therefore, if the LTV is lower than the CPI, it means that the app at this particular stage is loss-making.
There is a whole range of other indicators that can serve as great KPIs for measuring the user’s activity and financial performance that we will cover in the future posts.
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