Are you planning to get investment for your business from some venture capitalists? Are you taking stock of the health of your SaaS business? In both cases, you need to keep an eye on certain numbers.
Monthly active users or simply MAU is one of the key numbers that can provide you with deep insights into the health of your business. In this post, we will try to figure out the answer to the following questions.
- What is MAU?
- Why are Active users important?
- How to calculate it?
- Why is it important for your SaaS company?
The Significance of Active Users
If you are running a business, you need to find that your product or services are in use and how they are useful to your clients. Active users indicate that people are interacting with your products and hiring services. If it’s a healthy number then it’s a good sign for your SaaS company. It indicates that your company is doing right and is on the rectitude path.
Determining the number of active users timely helps you figure out how successful are your marketing campaigns and how they are helping to grow your business.
Apart from that other valuable SaaS metrics such as customer lifetime value (LTV), can also be calculated by knowing the number of active users. You cannot calculate LTV and other critical SaaS metrics without knowing the retention rates. And it hugely depends upon the active users’ numbers over time.
So, in simple words, you can say that active users help you in predicting the health of your business and assist in calculating some essential SaaS metrics.
Monthly Active Users
MAU is a unique number. It represents the number of customers who used your products or apps for a month. They are customers who perform actions in your app in the last 30 days.
There are three main components of calculating MAU. Let’s delve into their details.
It’s the number of users who have performed an action in your app in the last 30 days. It doesn’t matter how many times they sign in or use your app. The only thing you have to count is the number of customers who acted at least once in the last month.
The next thing you have to focus on is the action. You need to know what type of action will enable customers to count in MAU. In most cases, only signing in or opening the app is considered an action.
The time frame is actually the time you have to consider when calculating MAU. It is simply the previous 30 days leading up to the date of calculating MAU.
Calculating Monthly Active Users (MAU)
Unlike other SaaS metrics, MAU indicates how successful your app is and how it’s developing. This performance indication helps you in tracking, attaining, and retaining new users or customers.
The easiest way to calculate is to simply track the number of unique users who opened your app in the previous 30 days or simply last month. This calculation will tell you how many unique users are signing in to your app or performing the action using it.
The observed data is represented in the form of graphs and then further calculations are performed to estimate your app’s growth and other SaaS Metrics such as LTV.
What Makes MAU a Useful Metric?
When you start a Saas business or company, you need to estimate relevant metrics and KPIs. The key figures you need to track are:
- User Cohort Retention
- Churn Rate
For VCs looking to invest in a SaaS company, knowing the MAU/DAU ratio is important. Here’s why
They are looking for stickiness indicators to estimate how many users are repeat users of your products or apps. They also want to look for signs of growth as well.
Estimating revenue is the best way to figure out the growth of your company. The next best thing you have to focus on is to estimate the initial active users. It is probably the appropriate method to estimate growth as when every starting company tends to grow, its revenue is multiple active users. Revenue can be estimated in both monthly and annual terms.
To figure out the stickiness of your products or services, the daily active users to monthly active users ratio is often considered. It gives you insights into the No. Of monthly active users who get in touch with your products or services in a single day.
MAU is an easy-to-calculate and comparable metric. However, there are numerous issues associated with it. Therefore, many experts suggest the retirement of its use to estimate the company’s growth. It is not a solution. Instead, you need to figure out these issues and try to eliminate them. These issues are:
For recently launched start-ups, this metric may not be dependable
Putting stocks in MAU at the start of your company is a mistake. From the definition of MAU, it’s obvious that promotional activities such as PR, publications, being featured on app stores, advertisements, and word of mouth, etc. hugely impact the figures. Therefore, you must estimate MAI when the traffic normalizes after the initial few months. It’s a better option to get more realistic ideas about the growth of your business.
The metric doesn’t consider the extent of usage
To qualify for MAU calculation, a user has to sign into your app or product or simply open it. Users don’t have to necessarily do something to count in as MAU. Therefore, MAU cannot predict the engagement of customers with your products.
When we see this in terms of monetization, we can only monetize those users who have been engaged with your products, channels, services, or apps. So, you need to estimate the unique users count who are using at least one in-depth feature of your products.
The metric doesn’t factor in the caliber of users
All users are different from each other. Your resources for attaining users hugely impact their engagement with your app product. Let’s say, you are getting a lot of users from a source that offers quick and cheap sign-in. However, most of them are not using a unique feature of your products. So, you can say that all these users are just raising the MAU value and doing nothing to improve the value of your business.
Interpreting Fluctuations in Monthly Active Users (MAU)
With time, MAU figures will fluctuate. It is basically due to churned customers, retained customers, acquired customers, and reactivated lapsed users.
So the main point is what’s the rise and downfall of MAU and how startups can utilize it.
Increase In MAU
MAU will improve when the number of new users and the reactivation of lapsed customers is higher than customer churn.
(New users + Reactivations of lapsed users) > Churn of existing users
A sudden rise in this metric’s value can be driven by:
New campaigns, advertisements, listings, and other marketing moves can engage new customers and help you in acquiring them.
A start-up with a large number of inactive users can opt for reactivation by sending emails and pursuing their inactive customers to become reactive.
It is the number of customers who stop using your services or products. Decreasing it will ultimately improve the MAU.
Decrease in MAU
It happens when the sum of reactivations and new users’ numbers is less than the churn rate.
(New users + Reactivations of lapsed users) < Churn of existing users
It is basically driven by:
This number may fall when there is a downfall in your advertisements and campaigns, or when you stop listing your app in different stores.
A decrease in reactivations or simply affected engagement campaigns will ultimately lead to a decrease in MAU numbers as well.
A higher churn means more customers are leaving your app or product over time. It may be due to technical problems or other issues, but higher churn will decrease the MAU value.
What to Do Next?
Now, you know MAU and how to calculate it, so you can factor it into your engagement strategies. Knowing how to estimate churn, analyze it, and engage users by pursuing them via Emails will help improve MAU and overall engagement.
What’s MAU for SaaS companies?
In terms of SaaS companies, MAU refers to the number of unique customers or users who are engaged with your products in the last 30 days. It is one of the most crucial metrics to estimate customer engagement and popularity of your SaaS products or apps.
Why is tracking MAU important for new SaaS companies?
As a startup, you need to check out how your company is growing. MAU tells us about the unique users who perform an action using your app in the last month. Tracking it is important for startups as it helps them in checking the health of their business and aids in improving marketing effectiveness.
How can you define the MAU acronym?
It is a shorthand for the monthly active users.
Are there any benchmarks for MAU?
No, there are no specific industrial benchmarks or standards for the MAU. However, you can compare your MAU with other similar companies to check how other businesses are growing. Allying it with market research and case studies will help you gain insights and set realistic goals.
What are the pitfalls in measuring MAU?
There are some problems in estimating MAU. Firstly, it cannot be calculated during the initial days of a startup. Secondly, it doesn’t tell if a customer is adding value or not. And thirdly, it gives no clear ideas about the quality of usage.