This article was authored by Joseph Waring, and was originally posted on telecomasia.net.
Just as telcos’ fixation with ARPU hasn’t led to improved profitability for the majority of mobile operators, the messaging and social media giants’ reliance on metrics such as monthly active users (MAUs) is a worrisome sign.
WhatsApp reported recently that its MAUs rose from 450 million in mid-February to 500 million. So now the $19 billion Facebook plans to spend acquiring the company seems so much more reasonable!
That’s less than half of Facebooks’ 1.23 billion in Q4, which were up 16% year-on-year. Its mobile MAUs hit 945 million in Q4, after expanding 39% year-on-year. WeChat had 272 million active users according to Tencent’s Q3 report. Line, meanwhile, claims 360 million registered users but doesn’t report MAUs or DAUs, which is also the case with Viber and KakaoTalk.
For analysts deeming MAUs too broad, there is DAUs (daily active users). Facebook’s DAUs increased 22% to 757 million during the period. Its mobile DAUs jumped almost 50% to 556 million, now accounting for almost 75% of its total traffic. (Not bad for a company that didn’t have much of a mobile strategy two years ago.)
What do you get when you put MAUs and DAUs together? An indicator of engagement or stickiness. The thinking is the more often users come back, the more likely they are to spend. MAUs is a better measure of retention while DAUs is a better predictor of potential spend. Pundits claim high user engagement has a strong impact on user growth and, therefore, is a more critical metric than growth or mere size.
Facebook has had a DAU/MAU ratio of more than 50% since 2009. WhatsApp claimed its ratio was as high as 70% last quarter. Instagram, with 200 million MAUs, had a 37% ratio.
But just as rising MAUs or DAUs merely indicates user growth, a high DAU/MAU ratio may show strong engagement for an app or website, however, it is no guarantee of commercial (or stock market) success. Yet, it’s a far better indicator than total registered users or total downloads, which startups tend to use to put forward the largest number possible to impress financial analysts and investors.
But one thing is certain, once any of these measures plateau or head south, the market will drop them like yesterday’s MySpace.
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