Many product teams swear by monthly active users (MAU) as a metric to measure the health of their overall product strategy. Others say it’s just a vanity metric that you should ignore. Which of these is closer to the truth? Can any valuable information be gleaned from this KPI, or should it be abandoned for more fine-grained metrics?
In this article, we’ll look at MAU as a metric and discuss how to calculate it.
What Does MAU Mean?
Monthly active user or MAU is a term that refers to the number of unique customers who interacted with a service or product of a business within a month.
Essentially, MAU is a key performance indicator (KPI) that measures online user engagement. Many online businesses use this metric, including online gaming, social networking, and mobile app companies. But other types of companies use MAU as well.
Investors generally look closely at the number of MAUs of a business. Why? Because the metric provides a quick overview of the business’s user growth. Furthermore, MAU delivers some crucial insights into the business’s ability to attract new customers and retain the existing ones.
Although this helpful metric is a measure that is not recognized by current accounting standards, it’s still reported by public companies in their financial reports. For instance, social network titans such as Twitter and Facebook both devote a substantial amount of time to discussing the trends of MAUs in their quarterly reports.
What Can Measuring MAU Tell Me?
From a business standpoint, it’s helpful to know how users interact with your brand’s website or landing pages, and MAU is an accurate metric to determine this. A high MAU number indicates that customers are frequently interacting with your product. It’s an indication that your product receives good customer engagement and retention over a certain period.
By measuring, you can better position your company to assess the efficacy of its marketing strategies and customer experience. Thus, monthly active users come in handy to provide a rough overview of your company’s general health and act as the basis for calculating other essential metrics.
How To Calculate Monthly Active Users
Even though almost all online businesses calculate and report the number of MAUs, there’s still no industry standard regarding the definition of ‘active users.’ Because there is no standard, calculating MAU is not as straightforward as it may seem.
For instance, some businesses define active users as those who just visited their site, while others include only actual users of their product in their MAU figures. Thus, each company uses its methodologies to identify the monthly active users. Twitter’s definition of MAU is the following:
Twitter Monthly Active Users: A Twitter user who logged in or was otherwise authenticated and accessed Twitter through the website, SMS, mobile website, mobile, or desktop apps, or registered third-party applications or websites in the 30 days ending on the date of measurement.
Facebook, on the other hand, defines this metric slightly different:
Facebook Monthly Active Users: A registered active user who logged in and visited Facebook through the website, messenger application, or mobile app in the last 30 days as of the date of measurement.
Generally, the number of MAU is calculated using a business’s internal data. The recognition of unique users is executed using an identifier such as an email or even a username. Additionally, companies must carefully monitor the number of false, duplicate, and spam accounts that can substantially distort MAU data to ensure they are getting accurate information.
Many businesses adjust their MAU figures for such items to prevent the artificial inflation of the metric.
Issues with MAU by Itself
As we’ve mentioned, there are no uniform standards for the individual components of monthly active users. Other metrics used to qualify trends in social media can be highly inaccurate and myopic. You simply won’t get the whole picture.
In 2015 Facebook revised its MAU definition as a response to skepticism about its monthly active users’ accuracy. It would no longer include “third-party pings” — that is, individuals who are not active Facebook users but who share content only via another website integrated within the Facebook login.
Did the other social media sites also make this change in their monthly active user calculation?
For years, social media giant Twitter has asked investors to judge its daily active user (DAU) — not its monthly active user — growth. On its 2015 fourth-quarter earnings call, investors asked Twitter to explain why it had lost a whopping four million monthly active users during the previous quarter.
The reason? It turned out that most of those four million “users” did not use Twitter at all. It turned out that Apples’ Safari web browser counted them when it performed an automatic Twitter data pull.
However, Twitter only began sharing its daily active user data back in February 2019. Switching from MAU to daily active user counts showed that the brand was gaining — not losing.
It’s up to you whether MAU is the best way to measure the number of users on your website. But you should be aware of the pitfalls of using MAU on its own without the insight of other KPIs.
But what other KPIs can you use in conjunction with MAU to more accurately measure user engagement, and ultimately, a successful product?
Key Performance Indicators (KPIs): The Basics
A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. By now, we know that MAU is a powerful KPI — but are there others that go hand-in-hand that are just as important?
- Daily Active Users. We touched on this metric a little earlier. Rather than calculating the monthly active users, DAU calculates active users daily.
- Customer Churn Rate. This crucial KPI is the percentage of customers lost during a given period. For eCommerce, that means customers who fail to make repeat purchases within a time frame established by the company, such as 30 or 90 days. For Saas or mobile apps, that means customers who end or cancel their subscription.
- Customer Acquisition Cost (CAC). CAC is your company’s average expense of gaining a single customer.
- Customer Lifetime Value (CLV). Sometimes referred to as LTV, this critical KPI is the average revenue a single customer is predicted to generate throughout the time they hold an account with your business.
- User Cohort Retention. A cohort is simply a group of users that share a common characteristic. Cohort analysis looks at the retention analytics of those users over time. This metric is so critical because growth distorts MAU and DAU counts — if your app is rapidly growing, new user signups will mask where your existing users are dropping off in your MAU and DAU numbers. And if you only look at MAU and DAU, you’ll be blind to retention issues that’ll kill your app if left unaddressed.
Best Practices for Analyzing and Utilizing KPIs
Like any tool, KPIs — including MAU — are most useful when they’re used and analyzed properly. Any metric is meaningless unless you know what you want it to tell you. Some KPI best practices include:
- Setting KPIs that are aligned with business goals.
- Tracking only the metrics that help answer questions, prove, or disprove hypotheses you have about your business goals.
- Ensuring that key performance indicators are achievable.
- Determining how frequently you will measure each KPI.
- Setting short and long-term goals for the performance indicator.
- Sharing KPIs with the company and stakeholders.
For KPIs to be helpful, you might also consider developing key performance questions (KPQs) or the questions that determine whether you have met the objective.
When crafting these questions, try to avoid simple yes-or-no questions such as, “Have I met my sales quota?” and try to come up with open questions that are thought-provoking such as, “How well am I marketing my product or service portfolio?”
The answers to your KPQs will provide you with the information you need to make well-informed decisions and set more productive goals.
The Bottom Line
The ability to segment your audience is valuable. You can discern between groups of active users — those who are prospects and those that are clients.
When using a powerful analytics marketing tool, you’ll know details of everyone that has visited your site, what they browsed — from the very first time to the last — and you’ll gain a grasp of why the return users keep coming back and why your lost users leave.
Sources:
Facebook, Inc. Class A Common Stock (FB) Stock Quotes
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