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Marketing ROI – what is the (marketing) return on investment and how is ROI and MROI calculated?

ROI, short for return on investment, is a widely used metric in business to assess the effectiveness of investments in generating revenue. At its core, ROI measures the ratio of what you gain compared to what you invest.

What is ROI?

The concept of ROI is straightforward. It enables you to evaluate the financial performance of your investments by calculating the return you receive relative to the cost incurred. By understanding the ROI of your investments, you can determine their profitability and make informed decisions about resource allocation.

To calculate ROI, you need to subtract the initial investment cost from the final value generated and divide it by the initial investment cost. The result is typically expressed as a percentage or ratio, representing the return on your investment.

ROI provides valuable insights into the efficiency and success of your investments. It helps you identify which investments are generating positive returns and which may need adjustments or reevaluation. By analyzing ROI, you can optimize your decision-making process, allocate resources effectively, and drive overall business growth.

In summary, ROI is a fundamental metric that allows you to assess the performance of your investments in generating revenue. It provides a clear understanding of the value you receive in relation to the resources you allocate, helping you make informed decisions to maximize profitability and drive business success.

Marketing ROI (MROI) – what it is?

Companies spend trillions of dollars on marketing each day, yet marketing often gets labeled as a cost center rather than a profit driver. The key to changing this perception lies in proper planning and measurement. The ability to measure and justify marketing spend is what separates a profitable investment from wasteful expenditure.

This is where Marketing ROI (MROI) comes into play. Instead of relying on gut feelings when investing in marketing channels, Marketing ROI provides a way to measure the overall success and returns of marketing campaigns.

So, what exactly is Marketing ROI?

It is a metric that measures the return on marketing investment within an organization. In simpler terms, it quantifies the revenue generated from a company’s marketing spend, which includes various components such as overhead costs, salaries, media buys, creative services, and more.

The ultimate objective of any marketing operation is to accurately measure the return on every dollar invested and the revenue generated from that investment. In the past, this was mostly guesswork, but with the advent of digital marketing, marketers now have the tools to more precisely measure their marketing costs and the resulting revenue.

Why is Marketing ROI so crucial? Successful marketing organizations rely on data-driven decision-making. Understanding attribution, fraud, and misattribution is vital for achieving profitable marketing performance. By leveraging Marketing ROI, companies can gain valuable insights into the effectiveness of their marketing efforts, identify areas of improvement, and optimize their strategies for maximum returns.

In summary, Marketing ROI is a powerful tool that allows organizations to measure the impact of their marketing investments. By utilizing data and analytics, businesses can make informed decisions, drive profitability, and establish marketing as a revenue-generating function within the organization.

MROI vs ROAS comparison and understanding the key differences

ROI and ROAS are two widely used metrics in marketing that provide valuable insights into the effectiveness of advertising campaigns. While these acronyms are often used interchangeably, there are distinct differences between them.

ROAS, or Return on Ad Spend, focuses specifically on measuring the revenue generated per dollar spent on a particular advertising campaign. It provides a granular analysis of the campaign’s performance and helps marketers evaluate the success of their ad investments.

On the other hand, MROI, or Marketing Return on Investment, takes a broader perspective and assesses the overall impact of marketing efforts on a company’s profitability. It considers the collective effect of multiple marketing campaigns and initiatives, providing a high-level view of marketing performance.

The importance of marketing ROI for marketers

Marketing ROI, represented by metrics like MROI, plays a vital role in the strategic decision-making process of marketers. Here are a few reasons why marketing ROI is crucial:

Justifying Marketing Spend: MROI helps marketers demonstrate the value and effectiveness of their marketing activities. By quantifying the impact on the company’s bottom line, it enables marketers to justify their investments and secure resources for future campaigns.
Leading Indicator of Performance: MROI serves as a leading indicator of marketing performance and profitability. It provides executive leaders with valuable insights into the return generated from marketing efforts, allowing them to make informed decisions about resource allocation and strategic direction.
Accountability and Optimization: MROI holds marketing teams accountable for their actions by measuring the tangible impact on the company’s financial success. It encourages marketers to carefully consider how they allocate their time and budget, driving optimization and efficiency in marketing strategies.
Strategic Planning: Accurately calculating MROI enables marketers to establish a long-term strategic roadmap. It guides decisions related to channel investments, budget allocation, and talent acquisition, and tracks spending patterns over time. MROI serves as a guiding principle for aligning marketing goals with overall business objectives.

While MROI is a valuable metric, it should be noted that it is not the sole measure of marketing success. It should be used in conjunction with other key performance indicators to gain a comprehensive understanding of marketing performance and inform data-driven decision-making.

In conclusion, understanding the differences between ROI and ROAS is essential for marketers. MROI provides a holistic view of marketing impact, whereas ROAS focuses on the performance of individual advertising campaigns. By leveraging both metrics effectively, marketers can optimize their strategies, demonstrate the value of marketing efforts, and drive long-term business success.

Let’s break it down – 3 steps to measuring your marketing return on investment (ROI)

To calculate marketing ROI, you can use the following formula:

However, determining the total marketing spend and defining sales growth can be challenging. To ensure accuracy, follow these steps:

Step 1: Identify your key performance indicators (KPIs)

Since every business is unique, measuring marketing ROI requires considering multiple metrics aligned with your campaign goals. To justify your marketing budget, determine the KPIs most valuable to your business. Some examples include:

Cost per lead (CPL)
Customer acquisition costs (CAC)
Customer lifetime value (LTV)
Conversion rates
Average order value (AOV)
Purchase frequency (PF)
Customer average lifespan (CAL)

Step 2: Determine your attribution model

Marketing attribution involves identifying the touchpoints that lead to conversions. Understanding which touchpoints have the greatest impact on conversions helps identify the channels, campaigns, and factors contributing the most to your bottom line. Attribution models can include:

First touch attribution: 100% credit to the first touchpoint
Last touch attribution: 100% credit to the last touchpoint
Time decay: More credit to touchpoints closer to conversions
Linear: Equal credit to all touchpoints
Multi-touch attribution: Considering multiple touchpoints and assigning credit based on specific logic per business

Step 3: Select the metrics to measure

There is no single metric that determines a good marketing MROI, as it depends on various factors such as market conditions, business stage, campaign stage, unique KPIs, and revenue goals. Different organizations may use different formulas to calculate marketing MROI, such as:

Hubspot marketing ROI formula

Hubspot calculates MROI by using the formula:

The alternative marketing ROI formula

In contrast, another organization may use the following formula to calculate MROI:

Marketing ROI formula based on customer LTV

Or when you consider that customer LTV is the most important metric to your business, you will use this formula:

Ultimately, use the metrics that are most relevant to your business and complement your MROI calculations with contextual data to obtain a comprehensive understanding of your marketing returns.

How to determine a good marketing ROI?

As discussed in the previous chapter, determining what constitutes a good marketing ROI (MROI) is highly subjective and specific to each business. There is no universally applicable golden ratio that indicates a good MROI. Instead, marketers should focus on ensuring their data is clean and accurate, identifying their key metrics, and calculating their overall marketing performance based on their unique customer needs and behaviors.

The main challenges of marketing ROI

Obstacles on the path to accurate marketing ROI While MROI is intended to provide a comprehensive view of marketing performance, there are common challenges that can undermine its effectiveness, even with advancements in attribution technology. Often, marketers are unaware that their calculations are inaccurate or incomplete. Here are the four most common reasons for this:

Inaccurate data sources: A significant challenge for marketers in measuring MROI is the accuracy of attribution. Regardless of the sophistication of your business intelligence team, actionable insights rely on measuring the right parameters. Ensuring confidence in your numbers requires reducing fraud and misattribution, which can be achieved by partnering with a trusted mobile measurement platform (MMP) and utilizing predictive modeling.
Not included labor costs: Many marketers only consider advertising costs in their MROI calculations. However, for a more accurate measurement, it is necessary to incorporate all the factors involved in campaign management, from ideation and strategy to creative execution and reporting. This includes accounting for the costs of full-time employees and designers involved in crafting advertising campaigns, in addition to the expenses of placing ads.
Undervaluing brand marketing: MROI calculations can sometimes encourage a narrow focus on short-term results, neglecting the long-term value of building brand equity. Brand recognition plays a crucial role, particularly in highly competitive markets where differentiation is essential. When the primary metric is sales numbers without considering sales cycles and customer lifetime value (LTV), MROI calculations may lead to short-term decision-making.
Ignoring other data: MROI should be considered as just one part of the overall marketing equation. Business decisions should never rely solely on MROI but should be supplemented with contextual information such as market factors, competition, and the company’s stage. For example, the impact of privacy laws like Apple’s App Tracking Transparency (ATT) policy can significantly affect advertising costs. Even if your campaigns are performing well relative to the market, it could still impact your MROI calculations.

Often, marketing efforts don’t yield positive ROI immediately. For instance, Search Engine Optimization (SEO) is a prime example of a strategy that requires six months or more to see positive results. Similarly, there are situations where substantial upfront investment is necessary to kickstart marketing campaigns and build initial momentum.

App Marketing ROI

Measuring marketing ROI can be both challenging and rewarding, especially when it comes to app marketing. App marketers need to adopt a unique approach to calculating ROI due to specific hurdles they face.

Here are a couple of obstacles that make measuring App Marketing ROI (MROI) challenging:

Fragmented cost data

One major challenge for app marketers is obtaining accurate cost data while dealing with various sources. Data reporting across different platforms, such as Twitter, Facebook, and Snapchat, vary in terms of format, frequency, and granularity. This fragmentation and lack of standardization make it difficult to compare and weigh the costs accurately.

Additionally, with the introduction of App Tracking Transparency (ATT), marketers must gather data from multiple sources, including aggregated deterministic data from SKAdNetwork, user-level data from ATT consenting users, and aggregate data from probabilistic modeling, among others. To tackle this challenge, working with a mobile measurement provider (MMP) that can collect, organize, and standardize cost reporting using multiple data collection methods is essential.

Lack of awareness of true ROI

Some marketers are unaware of their true ROI due to distorted data caused by sophisticated fraud and false attribution. This leads to significant financial losses, often amounting to millions or even billions of dollars, creating what is known as “the bleeding cash cycle.”

Addressing this issue requires implementing robust fraud detection mechanisms and attribution models that can accurately identify genuine conversions and attribute them to the appropriate marketing sources.

Overall, app marketers must navigate these challenges to gain a clear understanding of their marketing ROI and make informed decisions to optimize their app marketing strategies.

When fraud compromises your data, your calculations become meaningless and unusable. It not only wastes your valuable time and resources but also sets you back steps, leaving you without any actionable insights to work with.

Essential steps to measure your app marketing ROI effectively

Step 1: Validate your data sources

The initial step involves ensuring the reliability and accuracy of your data sources. As mentioned earlier, partnering with a reputable mobile measurement provider (MMP) is crucial. Take the necessary measures to validate your data sources, eliminating any fraudulent or unreliable data that may skew your calculations.

Step 2: Determine your key performance indicators (KPIs)

Calculating app marketing ROI goes beyond a simple revenue-to-marketing spend ratio. Due to the diverse variables involved in marketing different types of apps, there is no one-size-fits-all formula for measuring app marketing ROI. Embrace the fact that app marketing ROI carries a degree of uncertainty and focus on identifying KPIs that have a direct correlation to your revenue figures.

Consider leveraging the AARRR framework (Acquisition, Activation, Retention, Referral, Revenue) to establish goals, signals, and metrics that define the success of your app marketing campaigns. This framework provides a comprehensive approach to tracking the various stages of user engagement and conversion.

Goals	Signals	Metrics
Acquisition	Users understand the benefits and features of your app	– User downloads – Positive social media sentiment – Brand awareness – Downloads – App store ranking – Cost per acquisition Cost per install – CPI per campaign
Activation	Users complete their desired action	– User in-app activity – Number of onboarded users – Goal completions – DAU / MAU – Length per session – Goal completions – Cart abandonment
Retention	Users return and use your app regularly	– Repeat orders – User frequency – Shorter time between sessions – Increased feature usage – Churn rate – Session frequency – Session duration
Referral	Users talk positively about your app and drive more downloads	– App reviews on app store and 3rd party review sites – Positive press – Increased social media and forum sentiment – Number of reviews – User invitations – Customer Lifetime Value – Referral retention rates – Install per invite – Net Promoter Score (NPS)
Revenue	Users spend money on your app	– In-app purchases – Freemium subscription upgrades – Purchase frequency – Average transaction value – Average revenue per user – Customer Lifetime Value – Average order value – MRR / ARR

Step 3: Calculate the most relevant metrics

To measure your app marketing ROI effectively, it is important to select the most relevant metrics for your app. One approach is to consider metrics such as the total value of post-install actions or average revenue per user (ARPU).

If you choose to focus on ARPU, you can calculate your app marketing ROI by comparing it to the cost per loyal customer (CPLU). If your ARPU exceeds your CPLU, it indicates a positive ROI for your app marketing efforts.

Step 4: Analyze and refine your app marketing strategies

Once you have reliable data sources and defined KPIs in place, it’s time to analyze your app marketing efforts and refine your strategies accordingly. Regularly evaluate your campaign performance, align it with your established KPIs, and make data-driven decisions to optimize your app marketing ROI.

By following these steps, you can enhance your ability to accurately measure and improve your app marketing ROI, leading to more effective and efficient marketing strategies for your app.

The best practices for achieving a positive MROI in 2022

Ensure accurate attribution data: Accurate data is crucial for calculating MROI effectively. By utilizing a trusted Mobile Measurement Partner (MMP) and reducing fraud and inaccuracies, you can make informed data-driven decisions with confidence.
Avoid vanity metrics and focus on what truly matters: Metrics like page views, social media followers, and app users alone are not sufficient for assessing the marketing performance. Instead, prioritize revenue-tied metrics such as customer lifetime value (LTV), average order size, retention rates, and daily active users. These metrics provide meaningful insights into the effectiveness of your marketing campaigns.
Look at the entire funnel: A common pitfall in calculating MROI is having a narrow focus on short-term revenue numbers. To maximize the effectiveness of your marketing efforts, consider the entire customer journey and how marketing activities impact various funnel stages. Evaluate metrics such as retention rates, referral rates, and average order values to gain a comprehensive understanding of your MROI.

Key information about the return on investment (ROI) to remember

MROI measures the revenue generated from marketing activities and varies across organizations.
MROI examines overall marketing spend, while return on ad spend (ROAS) focuses on specific campaigns.
MROI justifies marketing investments, offers a holistic view of performance, and aids in long-term strategic planning.
Inaccurate data sources can hinder MROI effectiveness, so partnering with a reliable MMP is crucial.
App marketing ROI poses unique challenges due to fragmented cost data and a lack of standardization across channels.

To maximize your MROI, prioritize accurate data, focus on meaningful metrics, and consider the complete customer journey in your analysis. Remember to approach MROI with a positive mindset and embrace the opportunities it presents.

DAU – what is metric Daily Active Users and how is it calculated?

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Daily Active Users (DAU) refers to the number of unique users who engage with an app within a 24-hour period. This metric is commonly used by businesses where app interaction on a daily basis is expected, such as in the gaming industry.

What exactly does DAU (Daily Active Users) mean?

Let’s break it down. An active app user is someone who has downloaded and accessed an app. The definition of an active interaction may vary across different industries and brands, but the most common example is when a user logs into their account.

For example, an online banking app might consider making a transfer as an interaction, while an eCommerce app might define it as adding an item to the cart. A SaaS company, on the other hand, might focus on software usage as an indicator of user activity.

In any case, active users are identified using personal unique identifiers like IDFA (for iOS 14+ users who have given consent), email, user ID, or cookies for web users. Sometimes, a combination of these identifiers is used to ensure accurate identification.

Many businesses consider DAU as a measure of success. The more users choose to interact with an app on a daily basis, the “stickier” the app is considered.

How to calculate DAU (Daily Active Users)?

The formula for calculating daily active users (DAU) is deceptively simple but can become more complex depending on how the activity is defined. Here are the steps to get started:

Define the criteria for an active user.
Define the frequency of engagement you want to measure (in this case, DAU).
Collect the data using your preferred analytics tool and sum the number of unique users who meet the criteria for being an active users on the selected day.

Let’s take a practical example to illustrate this:

Criteria: The user clicked a button, swiped, or scrolled within the app. Frequency of engagement: DAU. On a specific day, the following engagements were recorded:

User 1 clicked a button and then closed the app.
User 2 logged into the app but remained idle.
User 3 logged into the app, scrolled, swiped, or clicked a button.
User 1 logged back into the app and clicked another button.

Bottom line: In this case, our DAU count adds up to 2. Why?

User 1 is considered an active user and is counted once. User 2 is not considered active. User 3 is also an active user.

It’s important to note that measuring DAU depends heavily on the long-term growth goals and business model of your company. Different business goals require different criteria for defining active users.

Why should you use DAU (Daily Active Users) as a metric?

Monitoring and analyzing your Daily Active Users (DAU) count is crucial for understanding the success and health of your app. Here are some reasons why you should utilize DAU as a metric:

Assessing effectiveness: Tracking your DAU count over time allows you to evaluate the effectiveness of your campaigns and marketing efforts. It provides insights into the popularity of your app and its growth potential.
Customer experience: DAU helps you gauge the satisfaction and engagement levels of your users. By monitoring DAU trends, you can align your app’s features and functionalities with the needs and preferences of your users.
Key metric correlation: DAU is interconnected with other important metrics such as Lifetime Value (LTV) and retention rates. Calculating LTV requires knowledge of retention rates, which rely on DAU data. Understanding your DAU count helps you grasp the overall health of your app and its impact on user retention.

Limitations of metric DAU (Daily Active Users)

While DAU is a valuable metric, it does have limitations that should be considered:

Contextual interpretation: Viewing DAU in isolation can be misleading. The numerical value of DAU depends on how a company defines an “active user.” Fluctuations in DAU should be interpreted in conjunction with other business criteria to gain meaningful insights.
Engagement and satisfaction: Having a high DAU count does not necessarily equate to engaged or satisfied users. Different brands define an “active user” differently, making direct comparisons between statistics unreliable.
Holistic measurement: Relying solely on DAU neglects other important aspects of your app’s performance. It’s essential to complement DAU analysis with metrics like user acquisition (UA), in-app purchases, user reviews, and customer feedback to obtain a comprehensive understanding of your app’s health and identify potential issues.

In conclusion, while DAU is a vital metric, it should be used in conjunction with other relevant metrics to gain a comprehensive view of your app’s performance and user satisfaction. By considering a variety of metrics, you can uncover valuable trends and make informed decisions to drive the success of your app.

The DAU/MAU ratio: Measuring user engagement and stickiness

The DAU/MAU ratio is a powerful metric that, when combined with monthly active users (MAU), allows you to measure the relative volume of monthly active users who engage with your app within a 24-hour time period.

Why is the DAU/MAU ratio important?

The DAU/MAU ratio is not only useful for forecasting traction and potential revenue, but it also provides valuable insights into the value your app brings to users by measuring their frequency of return. A higher ratio indicates that a larger proportion of your monthly active users are engaging with your app on a daily basis, which is a strong indicator of user satisfaction and product stickiness.

How to calculate the DAU/MAU ratio

To calculate the DAU/MAU ratio, divide the number of daily active users (DAU) by the number of monthly active users (MAU) and multiply the result by 100. This will give you the percentage representing the stickiness of your app.

For example, let’s consider a scenario where you had 2,500 DAUs and 10,000 MAUs during the month of August. The DAU/MAU ratio for that month would be 25%. This indicates that 25% of your monthly active users engage with your app on a daily basis, which is considered exceptional, as the industry average for stickiness is around 20%.

How to increase DAU: Effective strategies for boosting DAU (Daily Active Users)

To enhance your daily active users (DAU) count and maximize user engagement, it’s crucial to implement a comprehensive app engagement strategy that utilizes various channels such as email, push notifications, in-app messages, and re-engagement campaigns. Here are some tips and pointers to help you ramp up your DAU rates:

Push notifications: Push notifications are powerful tools for engaging app users, but they should be used judiciously to avoid overwhelming or annoying users. Focus on delivering value through personalized and relevant communication rather than bombarding users with excessive notifications. Monitor your push notification statistics to identify what resonates with your audience and refine your approach accordingly.
In-app messages: Tailor your app experience to align with users’ needs and preferences. Personalized in-app messages have been found to significantly improve user retention rates compared to generic campaigns. Segment your audience based on demographics, preferences, usage, or history, and deliver timely and relevant messages that provide real-time updates and links to personalized content.
Emails/SMS: Maintaining regular communication with users is essential for retention. Send occasional emails to engage new users and keep your app top of mind. Target users who were once active but have become inactive, offering exciting updates and reminding them of the value your app provides. Use email or SMS to deliver personalized content or relevant offers to re-engage users and drive them back to your app.
Deep linking: When utilizing cross-channel strategies like email campaigns, ensure that the links direct users to specific, relevant content within your app rather than just the general home screen. Deep linking enables seamless transitions between channels and ensures a consistent user experience. By removing obstacles and providing a hassle-free user journey, deep linking helps build strong, long-lasting relationships with users and strengthens your competitive edge.

Implementing these strategies and utilizing deep linking will contribute to a cohesive user experience, drive user engagement, and ultimately increase your DAU rates. Remember to continually analyze data, refine your approach, and adapt to evolving user needs to optimize your app’s performance.

Key information about DAU (Daily Active Users) to remember

In the app world, an active user is typically defined as someone who logs into their account. However, the specific types of engagement that constitute an active user can vary across different industries and business objectives.
While calculating DAU may seem straightforward, it can become more complex depending on how you define user activity. Monitoring your DAU over time is essential for evaluating the effectiveness of your campaigns and the overall customer experience your app provides.
To increase your DAU rate, it’s crucial to implement a comprehensive app engagement strategy that spans multiple channels. Utilize email, push notifications, in-app notifications, and re-engagement campaigns to deliver personalized and valuable experiences to your users.
By leveraging these cross-channel efforts, you can offer tangible value and tailored interactions to your users. This, in turn, leads to higher engagement and improved user retention.

By continuously refining your app engagement strategy and adapting it to meet the unique needs of your target audience, you can boost your DAU rate and create a thriving app ecosystem that keeps users actively engaged.

Active user

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An active user refers to a unique individual who interacts with an app or website during a specific period of time. This metric is used to measure growth, churn, and the stickiness of a product.

Understanding engagement Engagement can vary depending on the industry and business model. For example, in an online banking app, engagement might be defined as making a transfer, while an eCommerce app may consider adding an item to the cart as a form of engagement. In the case of a SaaS company, software usage could be the focus.

Identifying active users are identified through personal unique identifiers such as email addresses, user IDs, or cookies for web users. In some cases, a combination of these identifiers is used to ensure accurate identification.

Benefits of measuring active users The number of active users is an important indicator of success. Tracking the number of active users over time helps assess the effectiveness of campaigns and the overall customer experience. It also relates to other key metrics like customer lifetime value (LTV) and retention rates.

Types of active user metrics The definition of an active user and the engagement criteria can vary based on the business. Here are three common types of active user metrics:

Daily Active Users (DAU): The number of unique users who engage with the app within a 24-hour period. This metric is commonly used for apps where users are expected to interact daily, such as gaming apps.
Weekly Active Users (WAU): The number of unique users who engage with the app within a seven-day period. WAU is typically used for apps that expect weekly interaction, like analytics tools.
Monthly Active Users (MAU): The number of unique users who engage with the app within a 30-day period. This metric is commonly used for B2B apps where users interact a few times a month or less, such as banking apps.

Measuring active users helps evaluate the health of an app or website and enables alignment of user needs with business objectives. It provides valuable insights for growth and retention strategies, allowing businesses to optimize their products and enhance the user experience.

Calculating active users / how to calculate active users as the metric

Calculating active users can seem deceptively simple, but it can become more complex depending on how the activity is defined. Here are the steps to get started:

Define the criteria for an active user: Determine the specific actions or behaviors that qualify a user as active. This could be clicking a button, swiping, scrolling, or any other relevant engagement.
Define the frequency of engagement: Decide the time period you want to measure, such as daily (DAU), weekly (WAU), or monthly (MAU). This determines how often users need to engage to be considered active.
Collect and analyze data: Use an analytics tool of your choice to track user activity and identify unique users who meet the active user criteria for each period. Sum up the number of unique users for each time frame.

Let’s go through an example together:

Criteria – app user clicked a button, swiped, or scrolled
Frequency of engagement – DAU
On day X, the following engagements were registered:
- User 1 clicked a button and then closed the app
- User 2 logged into the app but then remained idle
- User 3 logged into the app, scrolled, swiped, or clicked a button
- User 1 logged back into the app and clicked another button

Bottom line: Our DAU count adds up to 2. Why?

- - User 1 is an active user (counted once)
  - User 2 is not considered active
  - User 3 is also an active user

Remember that measuring active users depends on your company’s long-term growth goals and business model. For example, the UK’s National Health Service might focus on increasing vaccination awareness, so they would measure active users based on unique logins to their app. On the other hand, Uniqlo’s objective might be to drive sales, so they would measure active users as those who completed a purchase within a given period.

Different business goals require different active user criteria, so tailor your measurements accordingly to align with your objectives.

Unlocking product success: Analyzing the DAU/MAU ratio to measure user engagement and stickiness

The DAU/MAU ratio is a metric that measures the proportion of monthly active users who engage with your app within a 24-hour period. This ratio is useful for forecasting traction, and potential revenue, and evaluating the value your product holds for users based on their return frequency.

To calculate the DAU/MAU ratio:

Determine the number of Daily Active Users (DAU) for a given time period, such as a month.
Determine the number of Monthly Active Users (MAU) for the same time period.
Divide the DAU by the MAU and multiply the result by 100 to get the percentage.

For example, if you had 2,000 DAU and 8,000 MAU in the month of August, your stickiness ratio for that month would be 25%. This indicates a high level of user engagement, as a stickiness ratio above 20% is generally considered good, and 25% or higher is exceptional in most industries.

Key information about active users to remember

The definition of an active user can vary depending on the industry and specific business goals.
Tracking the number of active users over time helps assess the effectiveness of campaigns and the overall customer experience.
Active users can be categorized as Daily Active Users (DAU), Weekly Active Users (WAU), or Monthly Active Users (MAU), with the choice of frequency determined by industry and business needs.

IAP – what is in-app purchase?

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The term “in-app purchases” refers to the ability of users to make purchases within a mobile application, such as acquiring additional content, or goods, or subscribing to services.

What is the meaning of in-app purchases? In-app purchases (IAPs) enable users to buy consumable or non-consumable items, as well as subscriptions, directly from within an app. These purchases are made using real currency, typically through the respective app store or an integrated payment system, rather than in-app currency or rewards.

As the majority of apps are now available for free download, app owners heavily rely on in-app purchases as a primary source of revenue. According to a report by data.ai, global consumer spending in apps was projected to reach $33.9 billion in the first quarter of 2023. Although revenues from in-app purchases are still lower compared to those generated from in-app advertising, they can significantly impact the overall financial performance of an app.

Different Types of In-App Purchases In-app purchases (IAPs) can be categorized into four distinct types. Let’s delve into each type for a better understanding.

Consumables in-app purchases

Consumables are products that can be used or consumed once and then repurchased multiple times.

Examples: In gaming apps, consumables often include extra lives or in-app currency like tokens. Dating apps may offer the purchase of additional swipes or profile boosts, while eCommerce apps allow users to order physical items.

Non-consumables in-app purchases

Non-consumables are products that are purchased once and remain permanently available within the app, with no expiration date.

Examples: In gaming apps, non-consumables could include unlocking a new level or purchasing specific features like upgraded tires for a racing car. Other examples include purchasing an e-book within a Kindle app or a bundle of workout videos in a fitness app.

Auto-renewal subscriptions (IAP) – in-app purchases

Auto-renewal subscriptions involve paying for products or services on a recurring basis, providing developers with a steady income stream.

Examples: Streaming services like Netflix and Spotify operate through auto-renewal subscriptions. Popular meditation apps or storage allowances from platforms like Apple or Google also utilize auto-renewal subscription models.

Non-auto-renewal subscriptions (IAP) – in-app purchases

Non-auto-renewal subscriptions run for a fixed period of time, requiring manual renewal once the subscription expires. These subscriptions often have a longer duration and higher cost compared to auto-renewal subscriptions.

Examples: Non-auto-renewal subscriptions are commonly used for magazines (print or digital), physical products (such as three months of wine or coffee deliveries), or access to specific sporting events through streaming platforms.

By offering various types of in-app purchases, app developers can provide users with different options for enhancing their app experience or accessing premium content while generating revenue through these transactions.

Pros and cons of in-app purchases

Pros of in-app purchases:

Increased revenue: In-app purchases help generate revenue for app developers, especially since a large percentage of apps are available for free download.
Alternative to ads: In-app purchases offer an alternative or complementary revenue source to in-app advertising, allowing users to purchase desired items instead of being solely reliant on ads.
Improved engagement and loyalty: In-app purchases provide users with customization options, enhancing their app experience and increasing user engagement and loyalty.
Customer insights: Purchase data obtained from in-app purchases provides valuable insights into customer preferences, pricing preferences, and opportunities for enhancing the user experience.
Easy payment process: In-app purchases offer a convenient and user-friendly payment process, with small transactions often perceived as more manageable and less risky.

Cons of in-app purchases:

Limited user base: Typically, only a small percentage of app users make in-app purchases, which can pose a challenge in terms of revenue generation. It may take time to accumulate significant revenue from these purchases.
Finding the right balance: Determining the appropriate benefits to offer, pricing strategy and timing of approaching users for in-app purchases may require trial and error to strike the right balance and maximize conversions.
Security issues: Easy payment processes can lead to accidental or fraudulent purchases. It is important to ensure the security of the payment system, closely monitor transactions and promptly address any issues that arise.

Understanding these pros and cons can help app developers make informed decisions and implement effective strategies to leverage in-app purchases as a revenue stream while mitigating potential challenges.

Payment mechanisms – methods of making IAP (in-app purchases)

App Store payments (Apple App Store or Google Play): In this method, users connect their credit cards to the app store, allowing them to make purchases within the app with a simple click. The payment is processed through the app store’s payment system. It’s important to note that both Apple and Google charge a commission to the app owner for in-app transactions:

Apple charges a 30% commission on each in-app transaction (excluding physical purchases like ordering a taxi or a pizza). For subscriptions, the commission is 30% for the first year and reduces to 15% thereafter.
Google charges a 15% commission on auto-renewing subscriptions and the first $1 million in earnings per year, with earnings above that incurring a 30% commission.

Direct in-app payments: Some apps offer direct payment options, allowing users to input their credit card details directly into the app itself. This enables users to make payments within the app without going through an app store. Examples include paying for a taxi ride on Uber, ordering a meal on GrubHub, or purchasing clothing on ASOS.
Third-party payments: With third-party payments, users are no longer restricted to providing payment details within the app or app store. Instead, users are redirected to the app’s mobile site to complete their purchase using an external payment processor. Payment issues or refunds are handled through the third-party provider (e.g., PayPal or Stripe), rather than the app or app store.

It’s important for app developers to consider the payment mechanism that best suits their app’s needs and the preferences of their target users. Each method has its own advantages and considerations, such as commission fees, security, and user experience.

In-app purchases in iOS vs. Android

When comparing in-app purchases between iOS and Android, it is evident that iOS users tend to spend more per user despite Android’s larger market share of 72% in the operating system market.

One contributing factor is that Apple devices are generally more expensive, attracting affluent consumers in developed economies. Additionally, Apple’s access to the Chinese market, where Google Play is not available, further enhances its revenue potential.

Furthermore, Apple’s implementation of heightened privacy rules under ATT (App Tracking Transparency) has made it more challenging to target mobile advertising effectively. As a result, in-app purchases have become an attractive revenue stream for developers on the iOS platform.

In-app purchases and engagement metrics

The correlation between engagement and in-app purchases emphasizes the importance of measuring and focusing on in-app engagement metrics.

Consider a scenario in a dating app where a user actively swipes, likes, and messages on a daily basis. This high level of engagement indicates a likelihood of the user being open to purchasing additional features, such as more swipes, to continue connecting with others.

Engaged users also hold significance for apps utilizing in-app ads, as every view contributes to revenue generation, regardless of whether it leads to a purchase.

Several metrics can be employed to measure app engagement and optimize revenue:

DAU and MAU

DAU (Daily Active Users) represents the number of unique users engaging with the app on a daily basis.
MAU (Monthly Active Users) denotes the number of unique users engaging with the app within a month.
Analyzing the DAU-MAU stickiness ratio, which is the ratio of DAU to MAU, provides insights into user retention over an extended period.

ARPDAU

ARPDAU (Average Revenue Per Daily Active User) measures the average revenue generated per user on a daily basis.
Monitoring ARPDAU helps assess user reactions to different campaigns or creatives and their impact on daily revenues.
Spike in revenues resulting from positive user engagement with a specific campaign can inform future campaign strategies, while a drop in engagement and revenues prompts investigation and optimization for improvement.

Average session length

Average session length provides valuable insights into the level of engagement your app offers.
Longer sessions indicate higher user engagement, increasing the potential for them to progress toward making in-app purchases.

Retention tates

User retention is a measure of long-term loyalty.
It’s important to differentiate between users who display intense activity for a short period and those who consistently engage with your app over an extended period.
Users with higher retention rates are more likely to make in-app purchases throughout their lifetime as app users.

By focusing on these engagement metrics, app developers can effectively gauge user behavior, optimize monetization strategies, and drive revenue growth through in-app purchases.

In-app purchase fraud

Unfortunately, the presence of money often attracts fraudsters, and in-app purchases are no exception. As a developer, it is crucial to remain vigilant even after a purchase is made.

Fraudsters employ various tactics, such as using stolen IDs and credit card details to make unauthorized purchases. They may also engage in deceptive practices, including faking payments or manipulating your app to gain access to paid content for free.

Cost-per-action (CPA) campaigns, which involve advertisers paying for specific actions like clicking on an ad that results in a purchase, are particularly susceptible to fraudulent activities due to the potential for generating high revenues. Additionally, subscription events in entertainment apps and gaming apps, especially in the social casino and hardcore genres, can attract fraudsters seeking monetary gain.

How to protect against in-app purchase fraud?

Safeguarding your app against fraud is essential to protect both your revenue and your users. Consider implementing the following measures:

Backend data and logic: To enhance security, it is recommended to store sensitive data and logic on your backend infrastructure rather than bundling them within the app. This reduces vulnerability to hacking attempts and unauthorized access.
Server-to-server notifications: Utilize server-to-server notifications to detect and flag any suspicious activity. These notifications can help identify potentially fraudulent transactions, allowing you to take prompt action to mitigate risks.
Chargeback Monitoring: Monitor chargebacks, where users request to cancel or void a purchase, as they can indicate fraudulent behavior. While some chargebacks may be legitimate due to user errors, others may be indicative of scams or hacks. Ensure that all transactions are clearly labeled, and provide receipts for transparency and accountability.

By implementing these strategies and maintaining a proactive approach, you can strengthen your app’s defenses against in-app purchase fraud, safeguard your revenue streams, and provide a secure environment for your users.

How to increase in-app purchase revenue

Offer rewards to boost engagement: Provide timely, relevant, and personalized rewards, deals, and discounts to keep users engaged and encourage purchases.
Use rich in-app events for deeper insights: Track user actions such as level achievements, tutorial completion, invites, and social shares to understand user preferences and shape your marketing strategies.
Remarket and re-engage: Re-engage existing users with reminders of what they’re missing out on and offer relevant incentives to entice them back.
Personalize the experience: Create a personalized app experience by addressing users by name, allowing customization options, and tailoring messages to make them feel valued.
Nudge at the right time: Deliver customized offers at the right moment, such as birthday discounts or reminders for abandoned cart items, to prompt users toward conversion.
Focus motivation of users: Identify the characteristics and motivations of users who make in-app purchases and allocate your marketing spend accordingly.
Don’t neglect free users: Provide a positive experience for non-paying users, as they may eventually become paying customers.

Key information about IAP (in-app purchase) to remember

In-app purchases can be consumables, non-consumables, or subscriptions and offer benefits such as revenue growth, engagement building, and customer insights.
In-app purchases can be made through app stores, directly in-app, or via third-party platforms.
Apple users spend more through in-app purchases, despite Android having a larger market share.
Engaged app users are more likely to make purchases, so it’s important to measure engagement metrics and optimize retention.
Prevent in-app purchase fraud by keeping sensitive data separate, monitoring transactions, and providing clear transaction records.
Increase in-app purchase revenue by focusing on users who are most likely to spend, offering a personalized experience, loyalty rewards, and customized offers to boost engagement.

ARPPU – what is average revenue per paying user and how is it calculated?

Calculation of ARPPU – how to calculate average revenue per paying user?

To calculate ARPPU, you can use the following formula:

ARPPU = total revenue (in time period X) / number of paying users (in time period X)

By dividing the total revenue generated within a given time period by the number of paying users, you can obtain the average revenue per paying user, which serves as a valuable performance indicator for app marketers.

It is important to consider the time period when analyzing Average Revenue Per Paying User (ARPPU) since monthly ARPPU and daily ARPPU can yield different results.

For instance, in monthly ARPPU, a user may make multiple payments throughout the month. However, if you are calculating the ARPPU for a specific day and that user did not make a purchase on that day, they will not be included in the calculation.

In the case of subscription-based businesses, the first step is to calculate Monthly Recurring Revenue (MRR), which serves as the numerator in the ARPPU calculation. When calculating MRR, it is crucial to include various user segments such as upgrades, existing paying users, new users who paid the full price, and new users who paid a discounted price (e.g., quarterly or annual upfront payment).

ARPPU for mobile games

When it comes to mobile games, the freemium model dominates the app market, relying on in-app purchases (IAP) and in-app advertising (IAA) to generate revenue.

In the gaming industry, a significant portion of revenue is derived from a small percentage of users, often ranging from 2% to 5%. Within this small percentage, there is an even smaller group of users who spend substantial amounts, typically through microtransactions. These users are commonly referred to as “whales,” akin to high rollers in real-life gambling.

Given this revenue structure, user segmentation becomes crucial as marketers need to identify and isolate these whales. This process also allows marketers to determine which acquisition network or channel was responsible for acquiring these valuable users, enabling them to focus their efforts on maximizing return on ad spend (ROAS).

Introducing an advanced measurement: Cohort ARPPU

The conventional method of calculating ARPPU, as described earlier, provides valuable insights for product managers, business executives, and marketers by considering all revenues generated within a specified date range, regardless of the acquisition date.

However, many marketers are interested in metrics based on cohort groups, which involve analyzing the revenue generated by users acquired during specific periods. For instance, they might want to compare the revenue generated by users acquired in May versus June.

To calculate Cohort ARPPU, you can utilize the following formula:

Total revenue generated in time period Y by users acquired in time period X / Total number of paying users acquired in time period X

Cohort analysis proves particularly useful in understanding user acquisition (UA) efforts.

For example, let’s suppose you implemented new messaging in May, resulting in an ARPPU of $15. In June, you reverted to the original messaging (without any other changes), and your ARPPU decreased to $12. This comparison indicates that the new messaging in May was more successful in attracting paying users compared to the original messaging in June.

It’s important to note that advanced ARPPU calculations based on cohort analysis are not yet an industry standard. However, cohort metrics offer exceptional value to marketers, allowing them to gain deeper insights into user behavior and acquisition strategies. Therefore, understanding your ARPPU through this cohort-based prism can provide valuable information for optimizing marketing efforts.

Comparing ARPPU to other common metrics

ARPPU, with its unique focus on paying users and their revenue generation, holds significant value, particularly for gaming apps. However, let’s compare it to some other popular measurement metrics to gain a broader perspective.
ARPPU vs. ARPU – as mentioned earlier, the key distinction between ARPPU and ARPU lies in the exclusion of non-paying users and revenue derived from advertising. Separating paying and non-paying users is crucial for identifying successes and areas that require optimization, as their in-app activities differ.
ARPPU vs. ARPDAU – Average Revenue Per Daily Active User (ARPDAU) is useful for testing different creatives, ad placements, or introducing new ad formats to observe how these changes impact revenue on a day-to-day basis. In contrast, ARPPU examines revenue over a longer timeframe, such as on a weekly, monthly, or quarterly basis.
ARPPU vs. LTV LTV (Lifetime Value) – takes into account the value of a user from acquisition until churn, spanning a range of time, whether it’s two weeks or two years. ARPPU, on the other hand, focuses on a specific time period, such as 30-day ARPPU or 60-day ARPPU.

It can become confusing when a user installs the app, makes a purchase, and churns within the same time frame as the ARPPU calculation. In such cases, ARPPU and LTV can be used interchangeably.

By understanding the nuances and differences between these metrics, app marketers can gain comprehensive insights into user behavior, revenue generation, and long-term user value. Each metric serves a unique purpose and contributes to a holistic understanding of app performance and monetization strategies.

Strategies to increase your ARPPU

Your Average Revenue Per Paying User (ARPPU) reflects your business’s monetization strategy and the willingness of users to pay for your service. Here are some approaches to growing your ARPPU:

Converting non-payers into payers: One effective way to increase your ARPPU is by converting active non-paying users into paying customers. Offer incentives, such as special discounts or offers for first-time purchases, to encourage users to make their first payment. Additionally, incentivize occasional paying users to become loyal customers by inviting them to become brand ambassadors or influencers, or by providing exclusive perks and discounts. In the case of a gaming app, consider inviting these players to join tournaments as a way to incentivize their engagement.
Celebrating your “whales”: Acknowledge and appreciate your highest-spending users, often referred to as “whales,” to foster their loyalty. Recognize their achievements through ranking statuses or provide them with exclusive perks and rewards to incentivize continued purchasing. Additionally, actively seek feedback from these users to involve them in the product conversation, making them feel valued and providing valuable insights.
Adjusting pricing models: Gradually adjusting your prices can help increase your ARPPU, but be mindful of potential churn that may result from price changes. Keep in mind that although your ARPPU may increase, revenue will be divided among fewer users. When raising prices, transparently communicate the added value and extra services that justify the price change. This can also help identify premium features that users are willing to pay for. Additionally, experiment with different bundles tailored to different user profiles to attract varying segments.
Introducing new advertising formats: Experiment with different advertising formats, such as rewarded videos or playable ads, to increase engagement and, subsequently, your conversion rate of non-paying to paying users. Vary the placement of ads and test whether interstitial ads are more effective than banner ads. In the case of apps, consider incorporating native content that seamlessly blends into the app’s user experience, minimizing disruption and enhancing conversion rates. Programmatic advertising, which automates the buying and selling of online ads, can help streamline the process and create a smoother user experience. Utilize targeting tactics to ensure the delivery of the right advertising format to the right user at the right time, minimizing disruption and maximizing effectiveness.

By implementing these strategies, you can optimize your monetization efforts and drive growth in your ARPPU.

Key information about ARPPU to remember

ARPPU is a crucial metric for mobile marketers, especially for apps that are free to install and have a low proportion of paying users.
Understanding the characteristics and spending habits of paying users enables informed decision-making regarding effective campaigns to engage and re-engage with high-value users.
Differentiate between ARPPU and ARPU, as the former focuses on paying users while the latter considers all active users.
Prioritize the analysis of monetizing users since they are the most important segment for revenue generation.
Utilize cohort-based segmentation for advanced ARPPU measurement, which aids in understanding user acquisition efforts.
For gaming apps, identify and cater to “whales,” the users who spend the most. Celebrate and incentivize them to drive a positive return on investment (ROI).
When changing pricing structures, anticipate some customer loss. However, transparency and demonstrating the added value of the price increase can help mitigate the churn rate.

ATT – App Tracking Transparency – what is it?

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App Tracking Transparency (ATT) is Apple’s privacy framework that requires iOS apps to obtain user consent before sharing their data. It introduced a popup where users can choose to allow or deny tracking.

What is the purpose of ATT (App Tracking Transparency)?

ATT was implemented on Apple devices with the release of iOS 14 and enforced after iOS 14.5. Its objective is to restrict the amount of user data that app developers can share with third-party companies, significantly impacting the mobile advertising industry.

Previously, iPhone users were automatically opted-in for data tracking, unless they actively opted-out through the Limit Ad Tracking setting. This allowed developers and marketers to access user-level data and attribution through the IDFA (iOS advertising identifier).

With ATT, users must actively opt-in to data tracking through the in-app popup. As a majority of users choose to opt out, it poses a challenge for advertisers, publishers, and developers to target specific audiences and optimize campaigns based on user-level data.

What does ATT (App Tracking Transparency) look like?

The core component of ATT is the in-app popup, known as the ATT prompt, which asks users if they want to allow the app to track their activity across other apps and websites. Users have the option to opt-out or opt in, with opt-out being the default setting. While the wording of the prompt cannot be changed, there are strategies to improve opt-in rates.

Note that apps are not obligated to display the ATT prompt since it is opt-in. If developers choose not to show it, they will not gather user-level data in return. However, the prompt provides an opportunity for apps to gather data that can enhance performance and inform benchmarking and extrapolations. This is why most apps (around 70%) choose to display the prompt.

The ATT (App Tracking Transparency) prompt is not a requirement for apps

The display of the ATT prompt is optional for apps. Developers have the choice of whether to show it or not, as it is an opt-in feature. If they decide not to show the prompt, they will not gather user-level data in return. The ATT prompt presents an opportunity for apps to collect user-level data, which can enhance performance and provide insights for benchmarking and extrapolations. This is why the majority of apps (approximately 70%) choose to display the prompt.

How did things work before the introduction of ATT (App Tracking Transparency)?

Before the introduction of ATT, app developers, and publishers had access to a vast amount of data. Apple operated under the Limited Ad Tracking (LAT) model, which allowed users to opt out of personalized advertising.

Despite the option to opt-out, the majority of users (around 70%) did not exercise this choice. As a result, publishers and advertisers were able to sell and share user data with other companies, apps, and advertisers, enabling highly targeted ad campaigns based on user behaviors, demographics, and interests. This approach optimized performance but compromised user privacy.

What impact does ATT (App Tracking Transparency) have on advertisers?

The transition from an opt-out to an opt-in model on iOS has resulted in decreased tracking rates, but global adoption of ATT stands at a respectable 46%. However, this figure only represents users who have actually encountered the prompt. The main challenge for advertisers lies in the low IDFA attribution rate.

Adapting to the new data landscape

User-level data and attribution have played a crucial role in optimizing ad campaigns. However, the shift to aggregate-level data has made it challenging for advertisers and publishers who were accustomed to working with granularly targeted campaigns. This lack of detailed data has had an impact on their advertising strategies.

It’s important to note that the industry is still undergoing a transition, and as we adapt to the new reality of aggregate-level data insights, measurement capabilities are expected to be largely retained while innovating in this space.

Missing out on a significant user cohort

One major challenge arises from the large cohort of users who cannot be tracked. Users who previously opted out of personalized advertising under the Limited Ad Tracking (LAT) model are now automatically labeled as “denied” to advertisers. This cohort represents over 30% of global iOS devices. Additionally, approximately 14% of Apple users utilize restricted devices, which are used by underage or unknown-age users and for educational purposes. Some corporate-owned devices also limit tracking capabilities.

User experience concerns

Certain app developers have expressed concerns regarding the wording of the ATT prompt (“allow the app to track your activity across other companies’ apps and websites”) and its potential negative impact on user experience. The perceived negative language may increase churn and hinder the overall user experience.

Friction from the dual opt-in process

Another significant factor contributing to low IDFA attribution rates, despite relatively high ATT opt-in rates, is the dual opt-in requirement. When advertising on different apps, users need to opt into tracking twice: once from the advertiser’s side and once from the publisher’s side. This dual opt-in process adds friction and complexity to the attribution loop, affecting the overall IDFA attribution rates.

How to increase ATT opt-in rates

Increasing opt-in rates for App Tracking Transparency (ATT) is crucial for advertisers looking to gather user data. Here are some strategies to help boost opt-in rates:

Build trust: Trust is a key factor in users’ decision to opt-in. If your app or brand is well-known or trusted, users are more likely to feel comfortable sharing their data. For new apps, focus on creating a safe and trustworthy user experience.
Experiment with a pre-prompt: Consider using a pre-prompt, a popup that appears before the ATT prompt, to educate users about the benefits of personalized advertising. Customize the messaging to highlight how it enhances their app experience. Keep the message concise, genuine, and compelling.
Prompt strategy: Determine when and why to show the prompt based on user behavior and the value your app provides. Here are three possible stages to consider:a. Early funnel: Display the ATT prompt during the first app launch, first session, early level completion, or when users return to the app for the first time. This approach reaches a larger audience but may feel intrusive to new users.b. Mid funnel: Trigger the ATT prompt after specific actions or milestones within the app, such as account creation or when users experience the first value moment. Capitalize on positive user experiences to increase opt-in rates.
c. Bottom funnel: Target users who have already made in-app purchases or engaged deeply with the app. This smaller audience segment is highly trusted and more likely to opt-in.
Customize your approach: Remember that there is no one-size-fits-all solution. The optimal prompt strategy depends on your objectives, target audience, and familiarity with your brand or app. Consider the tradeoff between audience size, campaign optimization, and opt-in rates unique to your situation.

By implementing these strategies and continually refining your approach, you can increase the likelihood of users opting into ATT, allowing you to gather valuable data while respecting user privacy preferences.

What about Android? Following Apple’s significant announcement, Google introduced increased privacy measures for all Android devices starting with Android 12 and future versions.

Similar to Apple’s previous model, Google’s update allows users to opt out of personalized advertising.

With Google’s plans to deprecate cookies in 2023, it is expected that Google will also restrict user-level data sharing through its Google Advertising ID (GAID), which is Android’s equivalent of IDFA. However, the restrictions are not anticipated to be as stringent as Apple’s policy.

Good to know: Practical tips for users Now that you understand the implications and significance of App Tracking Transparency (ATT), let’s discuss what this means for you as a user. For iPhone, iPad, and tvOS users, you don’t need to take any action to opt out of ad tracking.

Apple has updated its informational guide called “Day in the Life of Your Data,” which outlines the benefits of ATT for everyday users.

How to ensure ATT is enabled on your device On your iPhone, open Settings, then select Privacy. You will see an orange icon labeled Tracking. Tap on it, and you will find a toggle switch that reads “Allow Apps to Request to Track.”

The master toggle enables or disables app tracking for all apps. You can also individually select the apps for which you want to allow tracking.

How to modify a specific app tracking decision If you change your mind, it’s simple to prevent the ATT popup from appearing on your iOS or iPad OS devices. Just follow the same steps mentioned above: go to Settings, Privacy, and then Tracking. Toggle the tracking switch on or off to make the desired changes.

Key information about ATT (App Tracking Transparency) to remember

App Tracking Transparency (ATT) requires iOS 14.5+ apps to seek permission through a popup before sharing user data.
Prior to Apple’s privacy push, app developers and publishers had access to substantial amounts of user-level data.
ATT opt-in rates are relatively high, but there are challenges with attribution and campaign measurement due to dual opt-in requirements and user experience concerns.
To increase opt-in rates, app developers should identify the most appropriate funnel stage for showing the prompt.
Google is also taking steps to enhance privacy on Android devices, allowing users to opt out of data tracking starting with Android 12 and future versions.

MAU – what is metric Monthly Active Users and how is it calculated?

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Monthly Active Users (MAU) represent the count of unique users who interact with your app or website over a 30-day period. Unlike Daily Active Users (DAU), which is more applicable for apps that expect daily interaction, MAU is commonly used by apps in industries such as travel or finance, where users engage a few times a month or less, such as banking apps.

What does MAU (Monthly Active Users) mean?

MAU is a metric that provides insights into the number of distinct users who engage with your app or website within a defined 30-day timeframe. Brands typically track MAU using unique identifiers like user IDs, usernames, or emails.

The definition of an active user can vary based on the vertical or business requirements of a brand. To gain a comprehensive understanding of user engagement, it’s important to analyze MAU in conjunction with DAU.

Let’s explore the three components that contribute to MAU calculation:

Users: When calculating MAU, a user must engage in an in-app action within a 30-day period, such as logging in, completing specific actions, or performing a certain number of actions. Each unique user is counted only once, regardless of the number of logins.
Action: The specific actions that qualify a user as an MAU are determined by your business. Typically, opening the app or logging in is considered sufficient for measurement and comparison purposes.
Time frame: MAU is calculated based on either the last month or the 30 days leading up to a specific event or date.

How to calculate MAU (Monthly Active Users) as a metric?

While calculating Monthly Active Users (MAUs) may initially seem straightforward, its complexity can increase based on how the activity is defined.

To calculate monthly active users (MAU), follow these steps:

Define your criteria for an active user: While a simple log-in can be measured easily, it may not provide sufficient information about whether the user actually engaged with your app. Consider defining an active user as someone who performs a specific in-app action. The more precise your definition, the clearer the data will be when tracking MAU growth or decline.
Determine the frequency of engagement you want to measure: In this case, it is MAU. Decide how frequently you expect users to engage with your app within a month.
Collect the data using your preferred analytics tool: Use your chosen analytics tool to gather the necessary data. Identify the number of unique users who meet your criteria for being an active user on a selected day and then for the entire month. Remember, the goal is to measure unique users only, not repeated actions.

By following these steps, you can effectively calculate MAU and gain valuable insights into user engagement with your app over a 30-day period.

Why should you monitor Monthly Active Users (MAU)?

Monitoring monthly active users (MAU) is crucial for several reasons. Firstly, it provides valuable insights into how users interact with your app, which is essential for assessing its growth. A high MAU typically indicates a healthy level of app engagement and positive user retention over time.

By measuring MAU, you can effectively evaluate the effectiveness of your marketing strategies and customer experience. It serves as an important indicator of your app’s overall health and can help you identify areas for improvement.

In combination with other engagement-related metrics, monitoring MAU allows you to assess various aspects, including:

App engagement
Success rates of specific marketing campaigns (user acquisition)
Retention rate
Churn rate
Growth rate (current and potential)
Revenue growth rate (current and potential)

Moreover, MAU serves as the foundation for other metrics like lifetime value (LTV) and cost per action (CPA). However, it’s important to note that while MAU provides an indication of your app’s perceived value, there are numerous other factors that contribute to its overall value, such as installs, average revenue per user (ARPU), retention, churn, and purchase frequency.

DAU/MAU ratio (Daily Active Users vs Monthly Active users ratio)

The DAU/MAU ratio provides a measure of the proportion of daily active users (DAUs) to monthly active users (MAUs) who engage with your app within a 24-hour time frame.

This ratio is valuable for forecasting traction and potential revenue over time. Additionally, it plays a crucial role in assessing the perceived value of your product to users by measuring their frequency of returning to the app.

Here’s how the DAU/MAU ratio is calculated:

To illustrate, consider the following practical example:

In the month of August, your app had 2,500 DAUs and 10,000 MAUs. The resulting stickiness ratio for that month would be 25%.

Achieving a stickiness average of 20% across industries is considered good, while a ratio of 25% or higher is regarded as exceptional.

Limitations of MAU (Monthly Active Users)

While MAU is a relatively straightforward metric to calculate, it is important to be aware of its limitations. Here’s a brief overview of the main four:

Lack of industry standardization: One significant limitation of using MAU for comparative analysis is the lack of industry standardization. Different companies employ their own terminologies and methodologies to calculate MAU, making it challenging, and some argue deceptive, to use MAU for meaningful comparisons. The absence of uniform standards for the individual components of MAU makes it a somewhat elusive target.
The unreliable metric for young businesses: Relying heavily on MAU during the early stages of launching a new app can be problematic. Given the nature of MAU, promotional activities associated with the app launch, such as paid ads and social media campaigns, can inflate MAU figures significantly without reflecting a true trend indicative of steady growth. It is advisable to assess MAU once traffic has normalized over a few months to obtain a more accurate representation.
Lack of depth of usage measurement: Simply logging into an app does not guarantee user engagement. From a monetization perspective, the users who actively engage with the app are the ones that can be effectively monetized. This makes MAU a somewhat superficial metric when considered as a standalone figure, as it does not provide insights into the depth of user engagement.
Absence of user quality measurement: Not all users are equal in terms of their value and engagement behavior. Different media sources used for user acquisition may attract users with varying engagement levels. While certain regional campaigns may result in a high number of rapid installs, the associated users may exhibit poor engagement or lead to a sudden increase in churn. Therefore, even if MAUs appear substantial for a specific campaign, the quality of acquired users could be subpar, potentially damaging brand reputation, app store ratings, social media reviews, and overall customer satisfaction.

It is important to consider these limitations and complement the MAU metric with additional measures to obtain a more comprehensive understanding of an app’s performance and user dynamics.

How to increase Monthly Active Users (MAU)?

To effectively increase your monthly active users (MAU) and enhance app engagement, it’s essential to adopt a comprehensive strategy that utilizes multiple channels. Here are some tips and pointers to help boost your MAU rates:

Push notifications: Push notifications can be highly effective for engaging app users, but they should be used judiciously to avoid generating uninstalls. Focus on providing actual value to your audience rather than bombarding them with frequent notifications. Personalize and tailor your push notifications to improve user experience and track the statistics to understand what resonates with your users.
In-app messages: Aligning your app experience with users’ needs and preferences increases the likelihood of continued app usage. Research indicates that brands using personalized in-app messages achieve higher retention rates compared to generic campaigns. Use in-app messages to provide important notifications such as app issues, payment failures, or version upgrades. Segment your audience based on regions, preferences, usage, or history to deliver tailored messages with real-time updates and links to personalized content.
Emails/SMS: Retaining users and keeping your app top of mind requires serving them well and maintaining regular engagement. Utilize email campaigns to support user onboarding as an ongoing process. Target users who were previously active but have become less engaged, sending occasional emails with exciting updates and useful information. For content apps, sending emails with links to trending articles can re-engage users. Proper audience segmentation is crucial in transitioning idle users to engaged users.
Deep linking: When utilizing channels like emails with specific offers or promotions, ensure a seamless user experience by implementing deep linking. Deep linking allows you to direct users to relevant content within your app rather than simply sending them to the general home screen. By seamlessly integrating different channels and providing a cohesive user experience, deep linking reduces obstacles along the user journey and strengthens user engagement. Implement deep linking as part of your cross-channel strategy to build lasting relationships with users and gain a competitive edge.

By implementing these strategies, you can effectively increase your MAU and create a more engaged user base for your app.

Key information about MAU (Monthly Active Users) to remember

Definition of an active user: The definition of an active user can vary across different business sectors and goals. While commonly considered as a user logging into their account, the specific types of engagement that constitute an active user may differ.
Assessing campaign effectiveness: Tracking the number of active users over time allows you to evaluate the success of your campaigns and the overall customer experience provided by your app.
Quantity vs. quality: MAU represents the number of users but does not indicate their quality. In many cases, a small portion of MAU users generates the most value, while others may have lower levels of engagement.
Comparative challenges: Due to variations in defining an active user, comparing the success of different brands based solely on MAU can be challenging. However, when combined with other metrics, MAU provides insights into app engagement, user acquisition, retention rate, churn rate, and growth rate.

Monitoring MAU alongside other relevant metrics can provide a more comprehensive understanding of your app’s performance and user dynamics.

Push notifications

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Push notifications are clickable messages sent by an app to your mobile device or desktop. They are designed to capture user attention and deliver time-sensitive or important information, even when the app is not open.

What are push notifications?

Push notifications, also known as server push notifications, are short text messages sent from apps to mobile devices. They resemble SMS messages or mobile alerts and can appear as full-screen messages or top/bottom banners, depending on their function or purpose.

Introduced in 2009 for iOS and Android devices, push notifications have gained significant popularity. They serve as a rapid communication channel for conveying essential information or limited-time offers. Since users don’t need to actively use the app or have their mobile phones open, app developers can send push notifications at any time.

Anatomy of push notifications: Push notifications consist of several elements:

Icon: Must be in PNG, JPG, or non-animated GIF format. Once set, it cannot be changed for individual messages.
Title: A short and attention-grabbing one-liner.
Content: A concise summary of the offer, crafted to entice the user to take the intended action.
Call-to-action (CTA): The desired action the user should take, such as “Watch now” or “Reserve your spot!”

Push notifications should ideally be visually appealing and engaging messages that motivate users to take action, even when they are not actively using your app.

It is important to note that the title and content should be within the recommended character limit, and if desired, you can also include a URL or image.

The importance of sending an opt-in message

The opt-in message serves as your initial notification to users, seeking explicit permission to send them push notifications. It is crucial to effectively communicate the value of your push notifications and ask users if they would like to continue receiving them in the future. By adding users who agree as subscribers, you can start engaging with them and encourage their return to your app.

Why give users the choice to “opt-in”?

Providing users with the choice to opt-in to receive push notifications is essential for building trust. Brands that seek approval before sending any form of brand communication are more likely to be trusted by users. By customizing your opt-in message to clearly highlight the benefits for users, you increase the chances of gaining their approval easily.

Push Notifications vs. SMS Messages Push notifications and SMS messages are both effective marketing tools, but they have distinct differences:

Audience: Push notifications target app users exclusively, while SMS messages are for anyone who has opted-in to receive them.
Delivery: Users need to install the app to receive push notifications, whereas they have to send a specific phrase to a specific number to officially opt-in for text messages.
Intent: Push notifications are primarily promotional, educational, or location-based, whereas SMS messages are transactional and primarily used to convey urgent information.

For example, a push notification could announce a surprise sale on footwear, while an SMS message would be ideal for providing an update on the delivery of the footwear.

In-app notifications vs. push notifications

In-app notifications and push notifications are two different types of messages used by app creators to engage users, but they have distinct characteristics:

In-app notifications: In-app notifications are short messages displayed within the app to draw attention to new features, highlight special offers, or onboard new users. They are specifically designed to guide users while they are actively using the app.
Push notifications: Push notifications, on the other hand, are messages sent to users’ devices from outside the app. They aim to bring users back to the app by providing timely updates or encouraging them to take action. Push notifications work even when the app is not open.

Key differences to note:

Working principle: Push notifications can be received and acted upon at any time, while in-app notifications require the app to be open for users to see and engage with them.
Purpose: Push notifications are intended to re-engage potentially inactive users by enticing them to return to the app. In-app notifications, on the other hand, serve as triggered communication to guide users within the app itself.
Audience: Push notifications target users who may not be actively using the app at the moment, aiming to bring them back. In-app notifications focus on the active audience who are already using the app.
Notification disablement: Users have the ability to disable push notifications, but they cannot turn off in-app notifications since they are displayed within the app itself.

A typical example of a push notification would be sending an app update notification, while an in-app notification might provide users with recommendations on how to use a specific feature.

How do push notifications work?

Understanding the working of push notifications involves three key components:

Operating system push notification service (OSPNS): Each mobile operating system (e.g., iOS and Android) has its own push notification service.
App publisher: App publishers enable their app with the appropriate OSPNS and upload it to the app store.
Client app: The client app is an OS-specific application installed on users’ devices that receives and displays push notifications.

The process of push notifications can be divided into four phases, with each component playing a vital role in delivering the notifications to users’ devices.

Phase 1: OSPN registration

The app publisher completes the registration process with the OSPNs.
The OSPN provides the app publisher with an application programming interface (API) to facilitate communication with the service.
The app publisher integrates the OSPN-specific software development kit (SDK) into the app.
The app publisher submits the app to the respective app store for distribution.

Phase 2: App installation

Users visit the app store for their operating system and install the app.
Upon opening the app, unique identifiers (IDs) for both the app and the device are registered with the OSPN.
The OSPN sends the IDs back to the app and shares them with the app publisher.
The app publisher stores the registration details, including the IDs, for future reference.

Phase 3: Sending push notifications

The app publisher composes push notifications manually using a message composer user interface (UI) or sets up automated messages via the API.
The app publisher defines the target audience for the push notifications and decides whether to send them immediately or schedule them for later. Note: To send targeted and personalized push notifications, user identification data and a specialized interface for writing, targeting, and sending messages are required.

Phase 4: Opting-in

Each OSPN has its own opt-in process.

For example, iOS follows an explicit opt-in model where users need to grant permission to receive push notifications. In contrast, Android automatically opts users in to receive push notifications, requiring a manual opt-out.

Once users agree to receive push notifications, you can engage with them and encourage their interaction with your app.

Types of push notifications

Push notifications come in various types, including mobile app push notifications, web push notifications, desktop push notifications, and wearable device push notifications. Let’s explore each type in more detail:

Mobile app push notifications: These are the most common type of push notifications triggered by an installed app on a user’s mobile device. Mobile app push notifications can be displayed as traditional alerts that stay on the screen until manually dismissed, or they can be styled as banners or badges.
- Banner notifications: Brief messages that pop up on the screen and disappear shortly after. They may contain a preview of a message or time-sensitive alerts.
- Badge notifications: Red badges are displayed on the app’s icon, usually indicating the number of unread notifications.

Appearance may differ between iOS and Android devices, with iOS notifications appearing on the lock screen and then moving to the Notification Center, while Android users have more control over notification settings.

Web push notifications: Web push notifications are delivered to users through their desktop or mobile web browsers, regardless of whether they are actively browsing the website. These notifications slide in at the top or bottom right-hand side of the desktop screen and are similar to mobile app push notifications on the mobile web.

Marketers utilize web push notifications to increase website engagement and drive visitors back to their websites, leading to improved conversions.

Desktop push notifications: Desktop push notifications are specific to installed apps on users’ desktop devices. They are used to promote customer engagement and can only be sent to users who have downloaded the corresponding app on their desktops.
Wearable device push notifications: Push notifications for wearable devices are designed to be concise due to the smaller screen size of wearables. Users can adjust notification settings for their wearables, choosing to receive notifications from specific apps while disabling others.

These different types of push notifications provide opportunities for businesses to engage with their users across various platforms and devices, delivering timely and relevant information.

Types of push notification campaigns

Push notifications can be utilized in various campaigns to keep users engaged and interested. Here are different types of push notification campaigns:

Time-bound push notifications: Send friendly reminders for time-sensitive events to create a sense of urgency. Examples include limited offers, exclusive previews, and flash sales.
Reminder push notifications: Remind users about important moments that add value to their lives. Examples include reminders to meditate or set an alarm for their morning run.
Triggered push notifications: Design campaigns based on users’ real-time behavior in the app. For example, send a congratulatory notification to users who have been using your app for seven consecutive days.
Transactional push notifications: Update users on the latest status of their transactions. Examples include reminders for upcoming bill payments or order status updates.
Abandoned cart push notifications: Retarget users who have left items in their carts and encourage them to complete the purchase. Examples include messages like “Hey, your favorites in your cart are now on sale. Get them today!”
Rich push notifications: Engage users by including images, audio, videos, and interactive elements. Examples include sending weather updates or price alerts.

By utilizing these different types of push notification campaigns, you can effectively engage your audience and drive them back to your app or website.

What are push notifications used for?

Push notifications serve various purposes and provide multiple benefits to businesses. Here are the different ways push notifications are utilized:

Customer engagement and retention: Push notifications keep users engaged with personalized offers, reminders, and relevant notifications, ensuring your app remains top of mind. They also contribute to retaining new customers, with onboarding notifications resulting in increased app retention rates.
Action-based marketing: Push notifications provide a channel for users to take specific actions such as checking out abandoned carts or completing app onboarding. They serve as timely reminders to re-engage with the app or website. Effective use of push notifications, through segmentation and data-driven strategies, can enhance mobile marketing efforts and reduce customer churn.
Identity authentication: Push notifications offer a convenient and secure form of authentication. Industries like healthcare and online banking utilize push notifications as an additional authentication factor before granting access to the app or sensitive data.
Civic communication: Utility push notifications have seen increased user engagement, with 37% of users actively interacting with them. Local government bodies and utility agencies leverage push notifications to provide timely updates and urgent news, such as local government updates, safety alerts, weather updates, and power outage notifications.
Connected user experience (UX): Push notifications help bridge the gap between online and offline channels, enhancing the overall user experience. Real-time transactional notifications keep users informed about their purchases, creating a seamless omnichannel experience and reducing friction along the customer journey.

By utilizing push notifications effectively, businesses can boost customer engagement, retention, and loyalty, drive conversions, and scale their operations.

The benefits of push notifications

Push notifications offer a range of valuable benefits that can enhance your communication and marketing strategies. Here are the key advantages of using push notifications:

Reach users anytime, anywhere: Push notifications provide immediate distribution, allowing you to connect with users wherever they are. This helps you cut through the noise and stand out from the competition.
Engage users with highly personalized content: Push notifications are highly engaging channels that can be scaled to increase brand awareness, customer attention, and conversion rates. They allow for personalized communication that resonates with users, such as sending tailored reminders or timely updates based on their preferences.
Drive traffic: Push notifications help drive traffic to your mobile app or website, ensuring continuous user engagement with your content. By sending alerts and updates, you can encourage users to visit your platform and explore new offerings. This can lead to increased site traffic, reduced bounce rates, and longer session durations.
Create monetization opportunities: Push notifications offer guaranteed impressions as they appear directly on users’ screens. This makes them an effective monetization tool that can generate revenue and provide value to advertising partners. For example, partnering with an apparel brand to sponsor push notifications on a shopping app can promote special offers or new products to target audiences.
Maintain a positive user experience: It is important to note that 75% of customers are open to relevant push notifications. By ensuring the content of your push notifications remains valuable and aligned with users’ interests, you can maintain a positive user experience without compromising on monetization efforts.

By leveraging the benefits of push notifications, you can effectively engage users, drive traffic, and create valuable monetization opportunities while maintaining a positive user experience.

Push notification best practices and strategies To enhance the effectiveness of your push notifications, it’s important to follow key strategies and best practices. Here are some recommendations:

Create compelling content: Craft engaging and persuasive copy for your push notifications. Address the questions and needs of your target audience, use clear and concise language, and include compelling calls to action. Creating a sense of urgency or exclusivity can also drive user action.
Use social proof: Include links to your website or social media platforms to provide social proof of your app’s value. Highlight positive feedback from satisfied users to build trust and encourage others to join your community.
Segment and customize your push notifications whenever possible: Personalize your push notifications by segmenting your user base and sending targeted messages based on user behavior and preferences. Conduct A/B testing to determine which types of notifications resonate best with your audience and align with your business goals.
Optimize opt-in and opt-out options: Respect users’ preferences by providing easy-to-use opt-in and opt-out options. Clearly communicate the value of your push notifications in your opt-in messages to generate interest. This allows you to focus on engaging users who are genuinely interested and more likely to convert.

Common push notification mistakes to avoid

Sending too many push notifications: Quality matters more than quantity. Be selective with the messages you send and avoid overwhelming users with excessive notifications. Find the right frequency for your specific case and conduct A/B tests to determine optimal notification frequency.
Not personalizing notifications: Tailor your content to individual users by segmenting your subscriber base and personalizing messages based on their behavior and characteristics. This ensures that your notifications are relevant and valuable to each user.
Skipping onboarding notifications: Use push notifications to guide new users through your app or website. Send onboarding notifications at different intervals to help users explore and understand the features of your platform, increasing engagement and retention.
Sending notifications manually: Automate your push notification campaigns to save time and improve user experience. Schedule messages for specific dates and times to maximize engagement and minimize friction between users and your campaign.
Failing to track the right metrics: Look beyond click rates and consider other key performance indicators (KPIs) such as form completion, free trial signups, and purchases. Measure how many of these actions are driven by push notifications to assess their impact on your overall goals.

By following these best practices and avoiding common mistakes, you can optimize your push notification campaigns for greater engagement and effectiveness.

But to make sure that your push notification campaigns are successful, you need to monitor and analyze all key metrics, which are…

Push notifications performance metrics When tracking the performance of your push notifications, it’s important to monitor specific metrics to assess their effectiveness. Here are the key metrics you should consider:

Opt-in rate: This metric measures the percentage of users who subscribe to your web or mobile app push notifications. It helps you understand how well your opt-in message resonates with your audience and allows you to make adjustments for better results.
View rate: The view rate indicates the percentage of users who saw your push notification out of the total number of recipients. While viewing is not the same as clicking, a high view rate suggests that your notifications are capturing users’ attention. If the view rate is low, consider refining your notifications using best practices.
Click rate: The click rate, or click-through rate (CTR), measures the percentage of users who clicked on your push notification to engage with your content. Aim for a CTR of at least 28%, although average rates vary by industry. A higher click rate indicates greater user interest and engagement.
Push notification revenue: If your marketing goal is to drive revenue, it’s important to track how much revenue each push notification generates, especially for e-commerce apps or websites. This metric helps you assess the financial impact of your push notification campaigns.
Opt-out rate: The opt-out rate shows the percentage of users who unsubscribe from your push notifications. Monitoring this metric helps you evaluate the effectiveness of your content and the timing of your campaigns. While some unsubscribes are natural, focus on minimizing the opt-out rate if it becomes excessively high.

Key information about push notifications to remember

Push notifications are effective for conveying time-sensitive and important information to users’ mobile devices.
Obtaining explicit user consent through an opt-in process is essential for push notification campaigns.
Sending too many or non-personalized notifications can lead to higher opt-out rates.
Automating push notification campaigns can improve engagement and efficiency.
Opt-in rate, view rate, click rate, revenue, and opt-out rate are valuable metrics for evaluating the performance and success of your push notification campaigns.

ARPU – what is a metric average revenue per user used for and how is it calculated?

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The average revenue per user (ARPU) is a vital metric that helps businesses assess the amount of money they generate, on average, from each customer during a specific timeframe.

What is ARPU?

ARPU is calculated by dividing the total revenue of a business over a given period by the number of users within the same period. This metric provides insight into the average monetary value contributed by each user or customer.

Why is ARPU important? ARPU holds significant importance as it enables businesses to understand the average revenue generated from individual users within a specific time frame. This information empowers businesses to take action to enhance their success in the following ways:

Optimize marketing activities: By determining higher-value and lower-value users based on ARPU, businesses can evaluate their marketing channels, networks, and campaigns to identify the most fruitful sources of revenue. This allows them to allocate resources effectively and eliminate underperforming strategies.
Boost return on ad spend (ROAS): Comparing ARPU with acquisition costs such as cost per install (CPI) or cost per action (CPA) helps businesses evaluate their marketing performance and ROAS. This analysis helps in determining the efficiency of marketing expenditure and provides insights into areas that require improvement.
Identify revenue opportunities: Analyzing the characteristics of high-value users allows businesses to explore strategies for increasing the number of customers in that segment. This can involve promoting higher subscription tiers, adjusting prices, or bundling services to offer enhanced value propositions that resonate with the target audience.
Fine-tune business strategy: ARPU serves as an indicator of how well a business is meeting its customers’ needs. A declining ARPU may indicate customer dissatisfaction or potential churn, signaling the need to revamp product offerings. If acquisition efforts are successful but ARPU remains stagnant, it may be an indication of underpricing or ineffective communication of the value proposition.
Assess business health: ARPU provides business leaders with a quick overview of performance, allowing them to gauge the overall revenue generation, compare against competitors, and make informed predictions about future performance.

By leveraging ARPU as a key metric, businesses can gain valuable insights into their revenue streams and make data-driven decisions to optimize marketing efforts, enhance customer value, and ensure long-term success.

Calculating ARPU – average revenue per user formula

Calculating ARPU is straightforward – you can use this simple formula:

Text formula – how is average revenue per user calculated: ARPU = total revenue/number of users

The time period you choose for calculating ARPU depends on your business model. Many mobile businesses and apps find it suitable to calculate ARPU on a monthly basis, especially for monthly subscription models like Netflix or Spotify, where monthly recurring revenue (MRR) is measured.

For example, let’s assume your subscription business generated $20,000 in revenue between June 1st and June 30th, and you had 10,000 users engaged with your brand during the same period. By dividing the revenue ($20,000) by the number of users (10,000), you would calculate an ARPU of $2.

For businesses that experience more sporadic usage patterns, such as those in the travel or eCommerce industries, opting for quarterly time periods may be more suitable. This is because their users tend to make purchases based on specific needs or desires rather than at regular intervals.

Regardless of the business type, it’s important to remember that when calculating ARPU, the total revenue should include contributions from new users, existing users, upsells, and cross-sells. This provides a comprehensive view of the revenue generated from various sources within the business.

Advanced calculation: Cohort ARPU

In addition to activity-based ARPU, mobile marketers often find it helpful to analyze cohort-based ARPU. A cohort refers to a group of users who share similar characteristics, such as the date of installation, geo-location, device type, and more.

Cohort-based ARPU focuses on the revenue generated by new users within a specific period of time. This analysis can provide valuable insights into the return on investment (ROI) of your mobile user acquisition (UA) efforts.

To calculate cohort-based ARPU, you can use the following formula:

Text-based formula – how is cohort average revenue per user calculated:

Cohort ARPU = Total revenue generated in time period X by users acquired in time period Y/Total number of users acquired in time period Y

To provide a more granular analysis, you can calculate the average revenue per user within a specific timeframe, such as 30 days (referred to as Day 30 ARPU), for all users acquired during a particular month. It’s important to note that even if a user installed your app or visited your website on the last day of the month, the revenue they generate over the subsequent 30 days would still be counted towards the cohort ARPU of that specific month.

What’s a good ARPU? How is the good result of ARPU determined?

Determining what constitutes a “good” ARPU depends on your business and industry. For example, a gaming app might rely on frequent, small in-app purchases, while an eCommerce app may generate less frequent but high-value orders. A streaming or well-being app with a monthly subscription fee will have a different ARPU profile altogether.

Ultimately, what matters is that the revenue generated by your customers covers your operational costs and ensures profitability. If your ARPU falls short, it’s essential to explore strategies to increase revenue per user and/or reduce expenses to achieve a sustainable business model.

What factors affect ARPU?

ARPU, or average revenue per user, can be influenced by several factors that are important to consider in order to make informed decisions and take appropriate actions:

Pricing model: The pricing structure you choose for your products or services has a direct impact on ARPU. Regularly reviewing and adjusting your prices ensures that you provide value to your customers while maintaining profitability. Introducing premium subscription tiers with added benefits can help increase ARPU over time.
Churn rate: High customer churn, where customers leave your business after a short period, can negatively impact ARPU, especially if these customers were high spenders. By focusing on customer engagement, continuously improving your offerings, and providing exceptional experiences, you can reduce churn and ultimately increase ARPU.
User base: The spending habits of your user base play a significant role in determining ARPU. If the majority of your users have low spending levels, it can drag down the overall ARPU. To improve ARPU, it’s important to prioritize the satisfaction of your higher-spending customers and work on growing their numbers. Conversely, be cautious of relying too heavily on a small number of high-value users, as they can skew your ARPU figures. Analyzing user behavior and segmentation can help identify opportunities for improvement.
Account set-up: In the case of professional services or B2B businesses, where a single paid account may include multiple users or seats, it’s essential to consider this when calculating ARPU. Including multiple users in a single account can lower the average revenue per user, so it’s important to factor this into your pricing strategy.
Business strategy: ARPU can vary depending on the stage of your business and your specific goals. In the early stages, the focus may be on raising awareness and acquiring customers, which could involve offering discounts or free trials while your product or service is still evolving. As your business matures and establishes a solid customer base and reputation, you can shift your focus to revenue growth by offering additional features, upgrades, or higher-value packages.

By understanding these factors and their impact on ARPU, you can make informed decisions and implement strategies to optimize your average revenue per user, driving the overall financial success of your business.

ARPU for mobile devices

ARPU in the mobile ecosystem is crucial for app owners who heavily rely on in-app events to generate revenue. There are four primary ways to generate revenue from in-app events, each of which contributes to the overall ARPU calculation.

In-app advertising (IAA): App owners can earn revenue by displaying relevant and well-designed ads within the app. In-app advertising is a growing market, and when executed properly, it can bring in significant revenue that increases with every view.
In-app purchases (IAP): Encouraging users to make purchases within the app can significantly improve ARPU. However, it’s important to note that only a small proportion of users typically make in-app purchases. Analyzing user behavior and understanding who, where, when, and why users are making purchases can help increase the number of users making IAPs.
Subscriptions: Offering regular app subscriptions can provide a steady income stream, particularly if users perceive the value they receive as worthwhile. Analyzing ARPU can help identify which pricing models resonate best with customers. Additionally, implementing a tiered subscription model allows for upselling opportunities, further growing ARPU.
Paid apps: While a small percentage of apps in app stores are paid, users who download paid apps tend to be more loyal. However, meeting their expectations can be challenging. These users may expect an ad-free experience or resist paying for additional content. While ARPU may remain stable with paid apps, it can be difficult to significantly increase it.

By considering these four revenue streams and analyzing ARPU in each category, app owners can find the right balance to optimize their overall revenue and drive the financial success of their mobile app.

ARPU vs other metrics: what’s the difference?

ARPU vs ARPPU

ARPU (average revenue per user) and ARPPU (average revenue per paying user) may sound similar, but they have distinct differences. ARPPU focuses specifically on the average revenue generated by paying customers within a given time period. This metric is commonly used by app marketers operating under a freemium model, where revenue is generated through in-app purchases or advertising. ARPPU helps identify the high-value users, often referred to as “whales,” and determine which strategies are most effective in generating revenue. It is particularly useful when offering free trials, as non-paying users can be excluded from the calculation.

ARPU vs LTV

While ARPU looks at the average revenue per user over a specific time period, LTV (lifetime value) considers the entire duration of a user’s engagement with a brand, from the initial interaction to churn. Although the timeframes can be the same, LTV provides a more comprehensive analysis of a user’s value, including their behavior before churn and customer retention. LTV is crucial for optimizing return on ad spend (ROAS) and achieving a state where revenue per user exceeds the cost per user, indicating profitability.

ARPU vs ARPA

ARPA (average revenue per account) is a metric commonly used in Software-as-a-Service (SaaS) businesses. It is similar to ARPU but takes into account the fact that one account can have multiple users. It is valuable to analyze both new and existing ARPA to assess how accounts perform over time and address any issues. Further segmentation, such as by industry, client size, or onboarding date, can provide deeper insights into client preferences, engagement strategies, and opportunities for revenue growth.

ARPU vs ARPDAU

While ARPU provides an overview of revenue over any given time period, ARPDAU (average revenue per daily active user) focuses on the active revenue generated per user on a daily basis. ARPDAU is a short-term metric that allows real-time monitoring of results. For example, during a time-limited campaign offering discounted paid subscriptions, ARPDAU can immediately show the impact on the bottom line. However, ARPU provides a broader perspective on performance across channels and platforms over time, making it a better indicator of long-term success.

Potential limitations of ARPU

While ARPU (average revenue per user) is a valuable metric, it’s important to be aware of its potential pitfalls. Here are a few limitations to consider:

ARPU only represents revenue: ARPU alone doesn’t provide a comprehensive view of your business’s profitability. Even if your ARPU is high, it’s crucial to analyze the cost of acquiring those users. Assessing ARPU alongside customer acquisition costs will give you a more accurate picture of your overall success.
ARPU is based on a specific timeframe: Unlike metrics like LTV (lifetime value), ARPU captures a snapshot of revenue within a limited timeframe. It doesn’t reveal how long customers stay with your business or how their value may change over the long term. Temporary fluctuations in customer numbers can also impact the average for that period.
ARPU is an average metric: Since ARPU calculates an average, it may not capture the full range of user behavior. It’s possible that a few high-spending users significantly skew the average, while the majority of users have lower spending patterns. By focusing on your highest-revenue users and understanding their characteristics, you can enhance retention strategies and aim to replicate that success across different user segments.

6 strategies to improve your ARPU

Improving your ARPU (average revenue per user) is crucial for maximizing revenue and business growth. Here are six effective strategies to enhance your ARPU:

Adjust pricing plans: Evaluate your pricing structure and consider offering different tiers or plans. This could involve adding exclusive features to higher-priced plans or offering discounts for longer subscription commitments. Experiment with different pricing strategies to find the optimal balance that encourages users to upgrade and increase their spending.
Optimize user acquisition (UA) campaigns: Analyze the performance of your UA efforts and identify the channels, creatives, or campaigns that attract high-value users with a higher ARPU. Allocate more resources to the successful channels and optimize your advertising spend to target audiences that align with your desired ARPU goals.
Focus on retention: Prioritize retaining your most valuable users to maximize their lifetime value and increase ARPU. Implement retention strategies such as personalized remarketing campaigns, loyalty programs, and incentives for ongoing engagement. Address churn trends and proactively engage with users at risk of leaving to encourage their continued loyalty.
Boost engagement: Keep your brand top of mind and increase user engagement by leveraging various tactics. Utilize push notifications to communicate new features or time-sensitive offers. Leverage your owned media channels, such as social media and email, to share relevant content that captivates your audience. Incorporate gamification elements to reward and engage users, encouraging regular usage and interaction with your product or service.
Understand your customers: Develop comprehensive user personas to gain a deep understanding of your target audience. Tailor your product or service to meet their specific needs and preferences. Craft targeted marketing messages that resonate with your ideal customers and deliver them through the most effective channels. By connecting with your customers on a deeper level, you can improve acquisition and retention efforts, ultimately increasing ARPU.
Explore cross-selling and upselling opportunities: Encourage existing users to upgrade or purchase additional products or services through upselling and cross-selling techniques. Offer premium subscriptions with enhanced features or suggest complementary offerings that align with their interests and needs. By effectively cross-selling and upselling, you can expand your revenue per user and boost overall ARPU.

By implementing these strategies, you can optimize your ARPU and drive sustainable revenue growth for your business.

Key information about average revenue per user (ARPU) to remember

ARPU, or average revenue per user, is a vital metric in marketing that provides insights into your revenue generation. Here are some key points to remember:

ARPU is calculated by dividing your total revenue by the number of users within a specific time period. It gives you an average value of how much revenue you generate from each user and helps identify successful channels. Cohort-based ARPU focuses on the average revenue from new users, offering valuable insights into your user acquisition efforts.
ARPU serves as an indicator of your business’s health and informs your strategic decisions. By analyzing ARPU, you can optimize your marketing activities, identify potential revenue opportunities, and adjust your strategies accordingly.
It’s important to differentiate between ARPU and other similar metrics. ARPPU, or average revenue per paying user, looks specifically at revenue generated from paying users during a given period. ARPA, or average revenue per account, is commonly used in account-based SaaS businesses. ARPDAU, or average revenue per daily active user, is a short-term metric often employed by mobile apps.
While ARPU focuses on a specific timeframe, LTV (lifetime value) covers the entire customer journey from the initial interaction to churn. LTV provides more comprehensive insights into customer value and retention.
For mobile businesses, revenue generation typically occurs through in-app advertising (IAA), in-app purchases (IAP), subscriptions, and paid apps. ARPU helps assess the effectiveness of each revenue stream and guides decision-making.

Introduction to Google Analytics 4

Google Analytics 4 vs. Universal Analytics – comparison

Google Analytics 4 aims to address some of the concerns raised in Universal Analytics and introduce new concepts that are both scalable and adaptable. Here are the key differences:

Data Processing: The Shift from Session to Event-Based Model

Universal Analytics used a session-based data model, wherein data is categorized based on a user’s engagement within a specified time frame. This results in a structurally-complex and computationally-expensive model to manage. As many analysts have likely experienced, trying to merge unstructured or semi-structured data with structured data can be difficult in UA, especially with the consistent increase in data volume. Additionally, there is a recurring requirement to efficiently organize, store, and query vast amounts of data without losing any details.

Google Analytics 4 tackles this issue by implementing an event-based schema approach where every interaction is treated as an event. Consequently, GA4 processes each user’s event as a unique model with its specific parameters, ensuring its database is flexible, scalable, and remarkably swift during querying.

This presents a notable schema divergence between Google Analytics 4 (employing a user-centric event model) and Universal Analytics (utilizing a session model).

Defining audiences

Google Analytics 4 provides expanded options for defining audiences, including the use of “User ID” from your CRM. If User IDs aren’t being captured, enabling Google Signals allows the utilization of anonymous user information gathered from users logged into Google platforms. Audience definition optimizes the potential of remarketing. When Google Analytics 4 supplies data to the Google Marketing Platform, Google users with enabled Ads Personalization can be targeted with remarketing ads across various devices.

Specifications of identity reports

Universal Analytics offers limited cross-device and platform reporting. This is only available in views enabled with User ID, using the User ID to create cross-device reports. Some Google Signal reports are available in non-user ID views, but these reports are relatively isolated in Universal Analytics.

Google Analytics 4, on the other hand, is a genuinely cross-device property that offers user-centric reporting. It integrates traditional User ID, Google Signals data, and Device ID, making this information accessible in all reports. This data can also be de-duplicated to view a singular user journey.

With Google Analytics 4, you can answer user-related questions regardless of the platform used. For instance, “How much revenue was generated by a user, regardless of the device category?”

Custom GA tracking

In Universal Analytics, custom dimensions serve as additional layers on standard reporting, rather than core dimensions driving the analysis. Google Analytics 4 alters this approach. In GA4’s analysis hub, custom metrics are equally considered alongside standard metrics for reporting and analysis. Moreover, GA4 automatically records extra events, particularly in apps.

The user interface for new reporting

Universal Analytics prearranges data into some preset visualizations referred to as standard reports. But, if you have more specific business needs, you can craft custom reports. One major drawback in Universal Analytics is that groups of dimensions and metrics for custom reports must share the same scope, which limits their adaptability and usability. This constraint nudges users to concentrate more on key performance indicators (KPIs) and reporting rather than thorough analysis.

Google mitigates some of these reporting issues in Google Analytics 4 by incorporating just a few standard reports. The details are distilled down to summary cards or overviews offering a single insight about your website or mobile app. It’s now simpler to pinpoint users at each phase of their purchasing journey, and the analysis hub feature allows you to construct personalized custom reports and analysis.

It’s worth mentioning that GA4’s analysis hub and reporting user interface are fundamentally driven by machine learning to generate valuable insights for your business. The new GA4 property empowers analysts to focus on inquiries rather than merely reporting.

Screenshot showing some of the simplified reports in Google Analytics 4.

Here are several streamlined reports in Google Analytics 4 which are easy to use:

Life Cycle Reports – these reports assist in examining data corresponding to the stage of the purchasing journey your customers are currently in.
User Reports – these offer insights into the demographic details of your users and the technologies they utilize to browse your website.
Events Reports – these reports display information regarding the default automatic and/or custom tracking configured on your website or mobile app. They also reveal the frequency of these user actions. Furthermore, they provide valuable insights into the conversions that you’ve identified as crucial to your business.

Advantages of the innovative Google Analytics 4 event-modeled properties

Google Analytics 4 is constructed using state-of-the-art technologies, like machine learning algorithms, offering the following benefits:

Flexibility and data-informed choices – with rapid advancements in technology, issues related to user privacy inevitably arise. The machine learning algorithms of GA4 remedy data voids observed in previous analytics platforms because of cookie limitations. Consequently, you obtain intelligent insights spanning devices and platforms that more precisely portray your customers and assist in accomplishing your marketing objectives.

Scalability – with the availability of Google Signals and user ID features (sourced from your CRM), GA4 enables you to delve deeper into your users’ journey. In essence, it allows you to visualize your KPIs at a consolidated or de-duplicated level across multiple devices and platforms.

Streamlined, structured, and integrated reporting – the incorporation of data streams permits the merging of app or website data into a singular Google Analytics 4 property, providing a comprehensive view of your business. The reports are also less intimidating and more user-friendly, making it straightforward to uncover insights by customer stage in the purchasing life cycle and/or across devices and platforms.

User properties – these resemble user-scoped dimensions and exist alongside event parameters/custom dimensions and metrics, but are defined slightly differently (particularly with apps). In GA4, they are employed to depict segments of your user base, with some being collected automatically. You also have the capacity to generate your own unique user properties (up to 25 for now) and utilize them in your report.

Metrics and dimensions in GA4 – GA4 introduce fresh metrics and dimensions that can enhance your analytical scope. You now have the capability to identify potential revenue from a specific user group. Furthermore, by understanding the churn probability, you can strategically direct your marketing budget toward retaining customers.

The conclusion of Google Analytics 4 introduction

Evidently, Google Analytics 4 brings substantial benefits to your business. Here’s how:

The application of machine learning offers more relevant and impactful insights for your business.
It offers a user-centric reporting interface that is straightforward, allowing you to track the complete user journey at any stage of the marketing funnel.
The event-based data model enables scalability, and flexibility, and enhances the user experience.

If you’re already a Google Analytics user, it’s recommended to set up a Google Analytics 4 property alongside your existing Universal Analytics property. This way, you can start gathering historical data and begin enjoying the enhancements that GA4 offers.

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