This is an apps world, no news there. The iTunes Appstore has reached 1.2 million downloads, same as its competitor, Google. Apple reports 75 billion downloads to date. These updates should be received with mixed feelings among app developers. The greater the market, the better. But then it’s also so much harder to shine in the crowd… The key to cracking this paradox lies in the metrics.
Your app is up and running and data is accumulating in horrifying quantities. How should you approach and translate this data to vital metrics? What are these key metrics? You drown in an ocean of initialisms, terms, misuses and innovation. Not so long ago it was all about the number of downloads; nowadays downloads is merely the beginning. Let’s try to make some sense out of the mess. What are the most important metrics every app owner can’t ignore?
To simplify, we divided metrics into three groups which parallel the user’s journey. A user is acquired, then he/she uses the app (or not) and finally, hopefully generates revenue.
Cost of Acquisition (CAC): Calculated as the total amount of money invested in acquiring registered users, divided by the number of users actually acquired. Various channels are utilized for user acquisition, such as paid campaigns, word of mouth and organic search. These campaigns’ correlated expenditure provides us with meaningful information as to ROI. The goal is to keep this figure lower than LTV.
Active Users: As we mentioned, the number of downloads doesn’t tell us enough anymore. We are interested in those who downloaded, opened, signed up and came for more. The number of DAU (Daily Active Users) and MAU (Monthly Active Users) is valuable for a high level glance. Different apps define active user differently. Define the profile of your active user: how many times he/she opens the app in a set period of time, the length of a session and what goals define if he/she is active. The definition of ‘active’ could be a result of a comment, a referral, a purchase… Defining your active users helps define your inactive ones as well, so that you can do something about their inactivity.
Engagement: Measure different usage parameters to assess how engaged users are and to create deeper engagement. Know your audience to reach out to it and target it. Basic information like demographics, the device they use, their location and the time they use an app is a baseline to work with. Let’s linger on a few deeper parameters:
- Session length: measured between app open and close. It is the averaged time users spend in an app at any given session. Usually the more time spent in an app, the better, but don’t rule out the possibility that long sessions are due to poor UX or slow conversion funnels, so make sure to set the right goal for your app.
- Session interval: the frequency of an app’s usage. Session interval is the time between any user’s two successive sessions. Knowing the patterns of time lapses between sessions per user segment, is the first step of encouraging a targeted audience to come back for more frequent usage.
- Conversion: converting a visitor into a costumer. Each app has its own unique conversion funnel and screen flows which it entails, but you must know and track yours. If yours is an eCommerce app, your goal is quite clear: at the end of the conversion funnel there’s a purchase, and in this case you must track checkouts, abandonment and the events in between. Other apps goals can be referrals, shares or completing a task, depending on the nature of the app. Tracking enables the identification of problems and more efficient funnel conversion.
- Retention: 65% of people stop using apps three months after installing them, making retention one of the greatest challenges for app developers. Retention is measured as the percentage of users who stay in an app from one period of time to another. So, if at the beginning of the month you had 100 new users and only 80 of them are still around at the end of the month, you have 80% monthly retention. CoolaData’s cohort analysis (here) will help you identify these returning users or those who are prone to churn, segment them and expose them to different marketing campaigns.
And last but not least: money.
Lifetime Value (LTV): the king of metrics. LTV is the total amount of revenue generated from all users through the lifetime of the app in all revenue streams, such as advertising and purchases, divided by the total number of users. The revenue-per-user number is then multiplied over the lifetime of a user. The tricky part is to predict the user’s lifetime on the app. Relying on retention combined with granular segmentation will enable a prediction which is as accurate as possible. Understanding LTV is critical for optimizing marketing channels to focus on finding the customers that create long-term value for a business. The value could vary from in-app purchases to e-commerce purchases, time spent in app, content sharing or ad views. It all depends on the vertical of your app. Use analytics to compare between different users, evaluate which users provide the most value and what user segments need improvement.
Knowing these basic metrics of your app is a starting point. Set the right objectives, track your users’ behavior, segment your user base and cohort analyze it to be personalized and effective. Measure, analyze, improve and measure again!