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7 App Metrics Behind the Mobile Business

12/05/2016
7 App Metrics Behind the Mobile Business

Pundits of blooming mobile industry know that developing and releasing a mobile app is just the first step in a long journey of an application. No matter how its success may be defined, the key app metrics are vital to measure the app performance.

There’s obviously a lot of data, types of metrics, factors to dive in for weeks, though no one has time for that (well, except app metrics analysts and mobile app developers). Performance metrics, user metrics, engagement metrics, business metrics, churn rates, custom metrics and analysis… it all matters. The starting point is performance, and the highest value have user/engagement metrics.

We attempted sifting through all of this breaking it down to key, most essential app metrics for everyone to apprehend. With these you can track the operation of a mobile application from the very beginning of its life.

268 billion: the projected number of app downloads by 2017 – Statista

Monetization is the endgame for most of the apps introduced, and it requires knowledge of the math behind the app business. The understanding of metrics and revenue drivers is the ground base for the business model. It highlights the areas to work on and issues to be optimized – to achieve your business goals. Ultimately, the objective is to evaluate user lifetime value, retention and the frequency of app use.

Seven app metrics described below, altogether answer the question of monetization. One additional factor, not covered in detail are app stores. It is evident that getting into good ranks of the app stores is crucial because it is where the users find the app. In this regard, the number of installs in the first 72 post-launch hours, reviews and ratings play a big role.

$41.1 billion: worldwide mobile app revenue in 2016 – Statista

Key App Metrics & Math

#1- Installs

You have a certain number of users who have downloaded your app. But how many of them have actually taken the next step and installed it? Statistically saying, the average figure of total downloads conversion to installations is 30 per cent. And this metric is crucial. No installs means no revenue. The basic data here to track are daily installs and their sources.

Knowing what the sources of installs are is as important as the quantity. With it you’re able to  evaluate your advertising campaigns and channels. It is recommended by industry experts to work with an independent tracker of installs, thus eliminating a conflict of interest that comes with a tracking solution from an advertising network. Check services like MAT, Adjust or Google Mobile App Analytics.

Image: Thinkmobiles
Image: Thinkmobiles

#2 – Monthly active users (MAU)

This is the number of users who have actively engaged with your app during the last month. MAU – is the coarse metric that highlights the user base of the app. There is also a practice to track DAU – daily active users, to see more closely how truly indispensable the app is for those who have installed it. DAU can be calculated for a specific day or as average over a timeframe.

Not diving into intricacies around the term “active users” lets say it is commonly considered any customer who has launched your app at least once is an active user. For instance, if the app has been used 40.000 times by 10.000 people in the last 30 days, the MAU is 10.000.

#3 – Customer retention

Retention rate equals to the total number of users within a set period of time divided upon the total number of users who engaged with the app in a previous period of time. So, when 200 new  people from April used your app in May / 1.000 new people in April, your retention rate is 20%.

This metric is the measurement of app’s ability to engage and maintain its customers over a period of time, usually 1 month. Customer retention differs by category, while common statistics show an average 40% 1-month retention rate and a 4% 1-year retention rate.

Image: Thinkmobiles
Image: Thinkmobiles

The retention metric is based on the frequency of app sessions – which is the act of a user opening the app. Contrary to the retention rates, there is also the “churn rate”, meaning the percentage of users who do not return to the app. Together with “user lifetime” metric (the average number of days a user spends interacting with the app), this set of app metrics is vital to understand what is actually happening in the app.

#4 – Average revenue per user (ARPU)

The average amount of money each customer contributes to the revenue from an app over a given period. ARPU is commonly calculated in monthly terms and by monthly active users. A simple math to measure your ARPU is:

Image: Thinkmobiles
Image: Thinkmobiles

In some cases it can also be done using total lifetime values, by dividing lifetime revenue of the app by total number of app users. For example, if your app has made $5.000 from in-app purchases since the launch / app has been used by 2.500 people in total, ARPU = $2.

Another version of this metric, ARPPU, can also be applied. It means average revenue per paying user, aimed at calculating the impact of paying users on the generated revenue. ARPPU = revenue / # of paying users.

#5 – Lifetime value (LTV)

Lifetime value is considered by most to be the primary revenue metric. It represents the value of the app and how much each app user is worth during their lifetime. LTV revenue can be measured in a dollar amount, social sharing, articles read etc., and can be split by average monthly value or value per customer across all channels.

LTV formulas will help you assess the efficiency of your spendings to gain customers with the app. The main factor here is that LTV should be greater than CPA – cost per acquisition. Measuring lifetime value of a customer is aimed at figuring out how much profit you can expect from him (or a segment of customers) during the entire time.

Factors of the LTV equation include frequency of user transactions, the monetary value of those, and the time customers continue to interact. So a projected LTV might be equal to average value of a conversion multiplied by average number of conversions multiplied by average customer lifetime.

Example: the average in-app purchase is $5 x the average user makes 5 purchases a year x the average customer stays with your company for 10 years = $250 LTV per customer.

#6 – Customer insights & personalization

Beside figures, rates and percentages it is still important to collect customer feedback and app analytics. Customer insights underpin the needs and behaviors, the appeals and dissatisfactions. When a proper reaction for such insights is in place, the product roadmap or individual areas of the app can be improved. Consequently, it can boost customer engagement, loyalty, and drive more revenue.

Based on this, you can reach great unity between the customer experience and the individual user preferences. The app experience can be then personalized by bringing out relevant and valuable content respectful of your customer’s preferred style of brand communication.

#7 – App revenue

The final and the most decisive app metric, which equals to the amount of revenue generated by customers over a given time period – a month, a quarter, a year, a decade. Advertisement revenue, in-app transactions, subscriptions, or downloads (paid apps) – forms of app revenue may be in various forms.

All app metrics listed above are interconnected, and bring together a simple formula for the app revenue. All the variables (metrics) play their role and can affect the revenue, but in the essence the equation is simple: MAU multiplied by monthly ARPU forms the total revenue. Keeping it in mind at all times will allow you to quickly track the issues and adjust accordingly.

Image: Thinkmobiles
Image: Thinkmobiles

There’s More

By tracking basic app metrics and ensuring your actions benefit and drive them up one can optimize resources and improve the revenue. Keeping focus on installs, good retention rates, and monetizing is the fine way to gain more loyal and valuable customers, as well as high app ratings. But just naming key app metrics and dropping a simple equation of success is not the work itself. The work and the effort requires investment and commitment. More factors are present too.

Regarding performance, the app stores (iTunes and Google Play) provide basic performance metrics, though those are somewhat limited, providing crash data only. App development teams should seek solutions with a comprehensive set of app metrics, including crashes, app latencies, API latencies, network errors, load periods etc. to solve all issues affecting user experience.

Abandonment rates – the ratio of transactions annulled to transactions initiated. Transactions may be abandoned because of many reasons: the performance and experience of the app not up to the user expectation, app crashes, etc. Whatever the reason, it must be analyzed to understand the user journey.

App metrics review would not be complete without the most public of all metrics – the app store ratings. It’s a hallmark of the effect app has on its customers. So doing all you can to improve app store rating is a must.

Cost per acquisition (CPA) and return on investment (ROI) are the metrics to calculate the effects of overall mobile marketing efforts or a specific campaign. Session length and intervals illustrate the level of engagement and can signal the immediate value gained from downloading and running the app. The geography aspect of app use should be taken into account too, depending on app business model. With geo-metrics and/or scale of use (domestic, regional, global) you can identify issues better and faster.

Looking for more advice on app performance?

App developers also may have specific requirements for metrics depending on their tasks. While not all analytics services offer ready-to-use metrics, there is an option to set up custom metrics to create custom reports (e.g. Google Mobile App Analytics).

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