Does it seem to you like the number of acronyms populating app development discussions keeps on relentlessly increasing? We at AdtoApp feel your pain. As new technologies are tested, integrated, and adopted, there are more and more dimensions to study.
The good news is that app developers have more options to monetize than ever between in-app purchases and advertising. Indicators help you to maximize your understanding of how your app is being used and how effectively you are monetising it. The bad news is that there are so many indicators, making it very hard to separate the valuable information from the distracting noise.
Too much of anything is bad. Analytics and measurements are no different. So, here are the 11 most fundamental formulas and metrics for app monetization, divided into two categories: in-app monetization metrics, and advertising metrics.
1. LTV, LT, eCPI, K
LT is ‘lifetime,’ or the period of time, normally calculated in months, for how long someone uses your app before they stop using it. The longer someone uses your app, the better your stats will be. You’ll see why LT is important when calculating the next formulas.
eCPIis the ‘effective cost per install’ or how much it’s costing you to get a new user to use your 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 Kfactor, or the viral coefficient. To figure out your eCPI, divide your CPI by K.
LTV might be one of the most important indicators, and it stands for ‘lifetime value’ of a user of your app, or how much each user is worth to you over the course of the time that they will use your app. It’s easy to calculate your 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, your app is going to be costing you more than it brings in. A good benchmark to shoot for (when earning revenue from advertising) is when your users’ average LTV is 23 times higher than your eCPI.
2. ARPU, ARPPU, ARPDAU
ARPUis ‘average revenue per user’ and is normally cited in terms of months. Therefore, the calculation is monthly revenue divided by MAU (monthly active users). Many apps that have multiple tiers segment their users between paying and non-paying users. If this is the case with your app, then you are 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 your ARPPU much larger than your ARPU because it’s not diluted by all the free users.
Depending on the popularity of your app, you might be able to glean positive insights by measuring ARPDAU, or ‘average revenue per daily active user.’ As a rule, people who use your app every day are most valuable. So if those people have a high ARPU, that bodes well for the future of your app because the challenge to development comes from getting people to use your app every day. If you have a low ARPDAU, then even if your 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 your game. It’s a general scale of difficulty for different levels, and a good gaming app maker will use thisto 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 rateis just like it sounds, it’s the number of people who install your 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 your 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 your users who are activeduring a given time period relative to the size of their cohort group. This is particularly useful for optimizing your marketing because you 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 your app. The established 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!
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 you your 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 and you’ve got your 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 percent fill rate, but certain services like the company I work for, Adtoapp, can provide much more reliable delivery to get as close to 100 percent 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. At AdtoApp we encourage an eCPM approach because it maximizes profits for app makers. Remember this is a combination of CPC and CPM made capable by our advanced delivery software.
9. DAU, MAU
As we talked about above. 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 of your 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 you deliver a new ad to your 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 you create the best possible experience and monetization strategy is the first step towards global mobile domination.
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