Every App Monetization Metric Explained

With so many acronyms out there, it’s not always easy to keep track of what metrics you should be paying attention to if you are building, scaling, or managing an app. Every app has a different goal and is therefore judged by different KPIs (key performance indicators). Whether an app is powered by advertising or in-app purchases determines the significance of any given metric. It’s up to the project leader to determine which metrics weigh most heavily in the analytics suite — but it’s safe to say the strongest metrics are those that correlate directly with the bottom line.

Here is a lengthy list of app metrics and how to calculate them, if you find this list useful, please share!

smartphone app metrics and analytics

1. LTV, LT, eCPI, K

LT is “lifetime” or the period of time, normally calculated in months, for how long someone uses an app before they stop using it. The longer someone uses an app, the better the stats will be. LT is important to calculate the next formulas.

eCPI is the “effective cost per install” or how much it’s costing to get a new user to use an app. It’s different from CPI (cost per install) because a good app maker does not pay for each and every new user, there is a viral effect of word-of-mouth that helps drive installs too. This is known as the K factor, or the viral coefficient. To figure out eCPI, divide the CPI by K.

LTV might be one of the most important indicators, and it stands for “lifetime value” of a user of an app, or how much each user is worth over the course of the time that they will use an app. It’s easy to calculate a LTV = (monthly revenue per user – monthly expenses per user, like CPI) x lifetime (in months).

The most important takeaway here is that if the LTV is not higher than the eCPI, an app is going to cost more than it brings in. A good benchmark to shoot for (when earning revenue from advertising) is when users’ average LTV is 2-3 times higher than the eCPI.

2. ARPU, ARPPU, ARPDAU

ARPU is “average revenue per user” and is normally cited in terms of months. Therefore, the calculation is monthly revenue/MAU (monthly active users). Many apps that have multiple tiers segment their users between paying and non-paying users. If this is the case, then an app team is probably looking at ARPPU, or “average revenue per paying user.” This is dividing the revenue by the number of people who paid something, which will end up making the ARPPU much larger than the ARPU because it’s not diluted by all the free users.

Depending on the popularity of an app, the next level of insights come from measuring ARPDAU or “average revenue per daily active user.” As a rule, people who use an app every day are the most valuable. So if those people have a high ARPU, that bodes well for the future of an app because the challenge to development comes from getting people to use an app every day. If an app has a low ARPDAU, then even if the app becomes very popular and people use it every day, it won’t project much revenue.  

3. FUUU Factor

In gaming, the FUUU Factor is an important measurement of how people continue to interact with a game. It’s a general scale of difficulty for different levels, and a good gaming app maker will use this to their advantage. The formula is  the number of tries until won / number of times you almost won a level. According to PocketGamer: “the more frustratingly close calls, the lower the FUUU factor – and a lower FUUU factor leads to a more motivated, enraged, and engaged player.”

4. Churn Rate, Retention rate, Return rate

The retention rate is just like it sounds, it’s the number of people who install an app today, use it, and then come back and use it tomorrow. And the day after that, etc. Since it’s a percentage, retention of a cohort (the people who sign up on any given date) will decline over time. This is due to churn, or when people stop using an app and switch to something else. The formula to calculate churn is 1 minus your retention rate.

The return rate is a ratio of the number of users who are active during a given time period relative to the size of their cohort group. This is particularly useful for optimizing marketing because app makers can see which users became more active depending on when and from where they installed.

5. Duration and Engagement

Duration is similar to LT, it’s the average number of months someone uses an app. The official calculation is 1 divided by your churn rate. Engagement is probably the most straightforward. It’s usually measured by DAU (daily active users) or MAU (monthly active users), whichever number sounds better is usually the one to go with!

6. eCPM

eCPM is “effective cost per mille (thousand)” which is a variation on the traditional CPM or how much it costs to reach 1,000 users. When a campaign is expressed in CPM, then the eCPM is exactly the same. When a campaign is CPC (cost per click) there is an effective CPM because even users that don’t click still see an ad. The formula is in three parts. First multiply the CPC rate by the number of clicks. This gives the total revenue. Then divide the total number of impressions by 1,000 to get the number of CPM units. Divide the total revenue by the CPM units to get the eCPM.

7. Fill Rate

Fill rate is the efficiency of delivery of the actual ad to the eyes of a user. Fill rate is calculated as the number of ads delivered divided by the number of ads requested. Due to various technical issues like poor connectivity or bugs, it’s impossible to have a 100% fill rate, but certain services can provide much more reliable delivery to get as close to 100% as possible. This is critical for app makers because when an ad doesn’t get delivered, it doesn’t get paid for either!

8. CTR, CPC, CPI

These are all classic measurements from the online space that apply to mobile apps as well. CTR is “click through rate” or how many people click a link. It’s used to measure the effectiveness of advertising campaigns. CPC is “cost per click” and results on a payment being made from the advertiser to the publisher each time a user clicks through to their content. CPI is “cost per install” and is another way of publishers being paid when one of their users clicks an ad in their app which results in the download and installation of another app.

Depending on your type of app and your audience, you will probably have to make a decision between CPC and CPM when working with your advertising partners. Advertisers themselves each have their own preferences, depending on what they want their ad to achieve. 

9. DAU, MAU

DAU (daily active users) or MAU (monthly active users) are a measurement of engagement. With these numbers, the higher the better. Usually, an app maker that is starting out will count in MAU, and then as their popularity increases they switch to DAU because, quite frankly, it’s much more impressive. Having these stats at the ready will help with all partnership and monetization efforts.

10. Length of Session

While it has much less importance than DAU or LTV, length of session will help you segment your users to study how people use your app differently. It’s more helpful for product development than monetization or advertising.

11. Refresh Rate

The refresh rate is how often an ad is delivered to a user. This can range from every 30 seconds to every 180 seconds. Common sense would say to have ads refresh as much as possible, in order to increase revenue. But this can come at the expense of user experience, and so optimization is important. Advertisers also prefer to not have their impressions cut short and to give the user enough time to engage with the ad.

Remember: not all apps are created equal. Each app has its own personality, userbase, utility, and potential. Understanding which metrics help create the best possible experience and monetization strategy is the first step towards global mobile domination. 

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