Active users – an introduction
Active users is an important metric for businesses offering a user-accessible platform. The number of active users is measured by either daily active users (DAU), weekly active users (WAU) and/or monthly active users (MAU).
Mostly seen in the SaaS space, active users is a KPI to determine user engagement. In most cases, engagement determines value experienced by customers – with customers only willing to purchase products and services deemed valuable, engagement equates to revenue. Therefore, understanding how to increase active users in turn will help understand how to increase revenue. Active users is a much more relevant metrics to track than users, as it focuses on those that actually use your platform.
What is active users?
Active users is the number of unique users interacting with a platform over a fixed duration (day, week or month). Simply creating an account, or logging into a platform, does not generate value for the customer, therefore each platform has its own definition of ‘active’ when measuring this.
Examples of active users:
- Ticking off a daily to do
- Reacting to a post
- Purchasing an item
- Commenting on an image
- Recording 5+ minutes of workouts
Why is active users so important?
A software business operates with a targeted desired outcome. A valuable active user is one that meets the desired outcome, including the desired frequency – either daily, weekly or monthly.
Setting active user goals, tailored to your business and competition, helps measure business performance. Customisation is key when goal-setting, for example DAU goals for a daily habit app vs video streaming service targeted at professionals will be significantly different. A daily habit app expects a similar number of DAU vs WAU, whereas a video service is likely to see less DAU compared to WAU – typically used on weekends only.
What is considered good active users?
Good performance is relative to the business’ intention and if they are seeking daily, weekly or monthly users however a mostly universal measure is the DAU/MAU ratio. The ratio measures how active monthly users are each day and their ‘stickiness’. The higher the ratio, the better stickiness and engagement performance.
20%+ is deemed good for B2C SaaS (e.g. 20 daily users for every 100 monthly users) and anything above 50% is deemed outstanding. TikTok, the leading social media platform, has an exceptional 90% ratio (Tik Tok user statistics, Demand Sage, July 2022) with 9 out of 10 of its 1 billion users interacting with the app daily!
On the other hand, 13% is deemed good for B2B apps.
Revenue is earned by a constant value of active users, so the more total monthly users interacting daily the more likely revenue will be generated. A large deviation from daily to monthly could also indicate churn potential, where customers are frequenting apps less than the intended average to maintain long-term engagement.
What does active users look like?
How do you calculate active users?
The formula to calculate active users is:
Active users = unique active users within a day (DAU), week (WAU) or month (MAU)
The formula to calculate the DAU/MAU ratio is:
DAU/MAU ratio = DAU / MAU
Active users worked example
In the examples above, both platforms appear equally successful when viewing the actual DAU/MAU ratio in isolation. However, the daily habit app’s intended use is daily so actual performance (20%) of this app is not meeting target (50%).
Limitations of active users is that new, retained and churned data is hidden – active users and ratios may remain static with a constant high flow of churn, which costs money and needs to be addressed, so best to view active user alongside other key SaaS metrics.
Conclusion
Overview of active users allows you to meet your intended targets, by actively targeting users performing below target to improve engagement and revenue.
DAU, WAU and MAU are industry standard metrics, and when viewed alongside other metrics, give a clear view of actual SaaS performance and clear forecast targets to reach for.
