What Is the Active Users Rate and How to Use It Posted on October 11, 2019 by Dave Fowler   #business intelligence #data
This article was originally posted on Chartio Blog

Looking at active useres rate

What Are Active Users?

An active user is a key performance metric (KPI) used by social networking sites and other companies measure the number of unique visitors using an application or visiting a website within a given window period. Active users are a measure of stickiness, which is how often people engage with your product. In most cases, users are considered "active" when they download an app or view the product.

Variations to Active Users

  • Daily Active Users (DAU): The measure of unique users that interact with your product within a 24-hour window.
  • Weekly Active Users (WAU): The measure of unique users that interact with your product within a 7-day window.
  • Monthly Active Users (MAU): The measure of unique users that engage with your product within a 30-day window.

How to Calculate Active Users

Usually, the DAU to MAU ratio is the measure of your product's stickiness. For startups without initial charges, this ratio can be used to measure their growth rate. The first step in finding the DAU/MAU ratio is defining 'active' users. The definition will vary depending on the type of product.

Number of Daily active users / Number of Monthly active users = (%) DAU/MAU Ratio

In case you are wondering how to measure active users more effectively, get yourself a data analysis tool. It will improve your efficiency and accuracy.

How to Interpret Active Users

Applications with a 20% DAU/MAU are said to be good, while those with a 50%+ DAU/MAU are world-class. Facebook popularized this metric because its ratio has always been above 50%. According to Facebook, a user does not have to be on Facebook to be an active user. Their measures also include actions through third-party integrations. Therefore, the only way to ensure that your product is sticky is to define your active user. However, Facebook's method of calculating active users might not work for your business.

There are different ways to define an active user. You can use the following two methods:

Be the User

Put yourself in your customer's shoes by analyzing the features you enjoy from other applications. Users stick to applications because they have irresistible features. Pay attention to how your usage varies between apps. For example, on Instagram, you are most likely sharing pictures, using filters, adding tags and locations, and searching for other users. On Twitter, you will post comments and tweets, retweet your favorite tweets, and follow trends in your region.

Despite the number of new accounts or logins, Twitter thrives thanks to continuous users who make posts, comment, and share. The same goes for Instagram. When you analyze your application, you need to identify the core features your users should come back for. In so doing, you can create a stronger app and create a better definition for your active users.

Find the Metrics That Relate to Your Business Goals

It is challenging to create a uniform definition for an active user. If your app or website supports several features, you need to pick at least five different ways to measure active users. Choose metrics that you will use in your quantitative part of the business.

For example, if you are running an online publication, an active user can be identified through visits, saving a story, or creating a library. If you are running a game, an active user is a unique person that plays the game, creates an account, and shares the game with friends. If your startup provides SaaS, an active user can add tasks, assign tasks, or invite team members.

Best Practices For Measuring Active Users

google analytics showing website traffic of active users rate

Metrics such as visits, downloads, and logins can be deceiving because they do not show the number of users actively using your product. For example, if you have developed an app to help users find rental houses, your metrics will be different from Facebook's. While the social networking platform can use newsfeed, chats, and posts as a metric, the same parameters may not define stickiness for you.

Actions Over Time

The key is not the number of actions over some time, but the number of repeated acts over that time. First, you may want to analyze the number of users that opened your application every day over seven days. Map your findings on a graph. For example, your conclusions may be as follows:

  • 70% of the users returned more than two days in the week
  • 50% of the users returned more than three days in the week
  • 30% of the users returned more than five days in the week
  • 10% of the users returned every day.

Remember that these are metrics for visitors that opened your application. They do not define what users did with your app, or if they even did anything. You now need to identify the features that are driving your usage. Narrow down your DAU to real usage to determine how users interact with your app.

Filter

Now, filter your stickiness to show the number of users that searched your website. Among all the users that searched during the week, you will find that 75% searched for houses on one day of the week, 52% used the search feature three days in the week, 33% searched five days in the week, and 3 % did searches every day of the week.

Upon analyzing your statistics, you will quickly recognize that while 10% of your users visited the app every day, only 3% searched for houses during the week. These statistics mean that even if your search metrics may be increasing, the core usage of your app may be dwindling or stagnating.

Focus

Maybe, you created the app primarily to help users locate rental houses within your district. However, your users may be more interested in other functions your app offers. In this case, you should measure your stickiness against another feature in your application. For example, 'Add Rental House' could be a valuable aspect of your app.

According to the results, 40% of the users added a property one day in the week, 30% of them added a house three days of the week, 18% added a home for five days of the week, but only, 1% added properties for seven days in the week. This information can be disheartening because if more realtors add properties to your application, then there is a chance that more people will use it to search for rentals.

Goals

However, the goal, at this point, is to find a good definition for your active users and figure out how to measure active users. Since there are other features on your application to analyze, set the first two aside and move to another function. Analyze each element to identify the one with the highest stickiness. Once you identify the feature, use it to define your active user.

How to Visualize Active Users

With the right data analysis tools, visualizing active users is easy. You can create different charts to display active users over given periods.

Common Misuse

Using DAU as a measure of success is highly unreliable. First, it is not actionable. Whether your DAU is rising or falling, you cannot identify which aspects of your business you need to work on. Second, DAU varies from company to company. You, therefore, cannot use it to compare apps or to measure a company's success unless you understand their 'active' users.

For example, if you create a rental house app, you may receive plenty of downloads over the first few months. If you provide better value for customers, you may even secure features in magazines, which will increase your DAU significantly. While the news may be exciting, more downloads do not directly translate to more usage. Some users will download the application only out of curiosity. Others will download it to see the features available but have no intention of using it.

In the short term, media attention will drastically improve your registration, but it does not convert to stickiness. If you strictly focus on your DAU/MAU ratio, you will lose focus on the lack of engagement. Consequently, your app may fail.

Daily active users or monthly active users are pointless metrics by themselves. To improve their usage, you need to use them with other parameters that define retention. User Cohort Retention is a metric that helps you identify when your users leave the app but also why they leave the app.

The Customer Acquisition Cost (CCC) is another reliable metric. You can calculate CCC by dividing the cost of acquiring a customer by the period you spent the money. You can also use your daily active users against monthly active users ratio with the Customer Churn Rate (CCR). The churn rate refers to the number of customers that stop using your product within a given time frame.

Tools for Measuring Active Users

  1. Chartio is a cloud-based data analysis tool that is useful for interaction, data visualization, and exploration.
  2. Excel is an excellent platform for analyzing data, especially in small quantities.
  3. Tableau offers attractive charts designs and a user interface that simplifies usage.

Conclusion

Calculating active users and measuring DAU and MAU is vital in analyzing the growth of your startup. With the right data analysis and visualization tools, you can stay ahead of your key performance indicators and invest accordingly. With Chartio, visualizing MAU and visualizing DAU has never been easier.