Product-Market Fit: Can You Determine With Active Users Metrics
As we sign off for the week….
Will you ever measure the DAU vs MAU ratio to determine the users’ loyalty to an income tax filing application?
Tracking DAUs and MAUs, probably popularized by Facebook, shifted the focus to user retention from vanity metrics like app download etc.
The ratio between Daily Active Users (DAU) and Monthly Active Users (MAU) reflects how frequently the users are returning to use an app/website over time. Usually measured in percentage, it reveals the level of engagement or loyalty to a product. It is generally believed that it is the key indicator of product market fit.
Well, it is indeed a significant metric, but in a more probabilistic way than deterministic.
What is a good DAU/MAU ratio?
DAU (Daily Active Users): the number of active users who visit your app in a single day.
MAU (Monthly Active Users): the number of unique users to your app over a 30-day period.
Popular product analytics tool, Mixpanel says, the average DAU/MAU Ratio benchmark for e-commerce and media products, DAU vs MAU ratio varies between 9% – 12%.
For B2B SAAS products, it is 13%, whereas, consumer-focused SAAS products are likely to have a considerably higher ratio.
The DAU/MAU benchmark for B2C apps, however, varies widely, between 20% – 50%.
That is understandable as a social network app like Facebook consistently has had DAU/MAU ratio >50%, but a professional network like LinkedIn will have it much lower. A popular game or a music streaming app likely has a far higher DAU/MAU than a travel/holiday booking app, say Airbnb.
This applies to the B2B space as well. A workplace communication product like Microsoft Teams will have a reasonably higher DAU/MAU than a cloud-based design tool.
The primary limitation of the DAU/MAU ratio as a KPI is that the metric may not be applicable to all businesses.
For the metric to be meaningful, it is extremely important that the use case of the product is built around daily usage.
Don’t fret over tiny things in life. Have a fabulous weekend.