Recently, we had discussions at RapidMiner if we are too obsessed with one of our most important KPIs. This KPI is the Monthly Active Users (MAU).
I am indeed obsessed with it. So let’s dig a bit deeper and start with the definition of this KPI:
Monthly Active Users is the total amount of all users who started the product at least once in a given month.
Based on the definition of Active User, you can break this group down into several interesting subgroups:
- Active User: started the product at least once in the given month, i.e. this is the complete group
- New User: Active User who registered in that particular month
- Resurrected User: been inactive for a while (at least for the previous month) but became an Active User again
- Retained User: been an Active User in the past month and remained to be an Active User
You can define the same KPIs for weeks or days instead of months. They then become WAU and DAU (for Weekly / Daily Active Users). In any case, the result should be a chart like the following one:
As you can see in this example, roughly a third of the MAU each month are coming from new users. And in this case the company retains almost 50%. If your data looks like this, a direct consequence of this should be to improve your user retention rate. The impact of the retention rate compounds over time. This will have a significant impact on the growth of your MAU.
My colleague Tom Wentworth created a great summary about our experiences with Product Qualified Leads (PQLs). The idea of PQL is to turn people into users and raving fans before they become customers. Check out his article, but a main learning from our change to PQL is that the user needs to be at the center of the business. The MAU is a great and simple KPI to measure if your activities have an impact in that regard.
And here are even more reasons why most businesses should pay a lot of attention to their MAU:
- It puts the user at the center. This should be the case for any subscription business, especially for those which are using PQLs.
- For freemium business models, the user base often is the top of the funnel. As such it becomes the baseline of a predictable business. For example, you might find that you can convert 3% of your user base into paying customers with a time delay of 3 months.
- It grows if the new user rate grows, which measures the impact of your marketing efforts.
- It grows even faster if you can retain or resurrect old users. This measures the impact of product, onboarding, and education efforts.
- It is very easy to understand.
No other one-number-KPI I can think off covers all 5 aspects at the same time. This is why I am currently so obsessed with it.