Does it seem to you like the number of acronyms populating app development discussions keeps on relentlessly increasing? We at AdtoApp feel your pain.
So, here are the 11 most fundamental formulas and metrics for app monetization, divided into two categories: in*-app monetization metrics, and advertising metrics.
[b]Monetization metrics
- LTV, LT, eCPI, K[/b]
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).
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.
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.
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!
Advertising Metrics
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.
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.
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.
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.
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.