What are Daily Active Users (DAU)?
The Daily Active Users (DAU) metric measures user engagement by counting the unique users or visitors that interacted with an app or site on a particular date.
Daily Active Users (DAU): User Engagement Metric
DAU captures the total number of unique users on a website or mobile application on a specific date.
DAU, short for “daily active users”, counts the number of unique users that were active on an app or site on a given day, i.e. captures the total number of unique users that opened a site or app in the past 24 hours.
Unique users are defined as a visitor to a website or users of an app (i.e. downloaded and accessed the app), where the user actively participated/used the website or app.
The term “unique” means that users that engaged with an app over ten times in one day are only counted as a single active user.
Metrics such as DAU measure the engagement level of customers with a specific product, such as a website, mobile application, or online platform.
The DAU metric is categorized as a consumer metric used to track user engagement, which is why media companies (and the market) pay such close attention to the metric.
In short, higher user engagement indicates greater revenue upside potential, with the opposite true for low user engagement.
Importance of DAU KPI: Unpaid vs. Paid Users
Higher user engagement implies that users derive more value from the product, which creates a cycle of continued usage.
- Unpaid Users → More Opportunities to Monetize and Convert to Paid Users
- Paid Users → Source of Recurring Revenue and Upselling Opportunities
Even if the cause behind a company’s high DAU is from offering a free product or having a freemium model, the active engagement suggests there is a valid value proposition and sufficient demand from consumers, i.e. proving a potential “product-market fit.”
Once users are engaged and there is minimal churn, the company now has the option to monetize the user base, i.e. attempt to convert the free users to paid users.
Specific to startups, a high DAU — even if the startup is unprofitable and burning capital at a rapid pace — can raise more capital from venture firms due to the accumulation of monetizable customers.
Moreover, those investors provide capital under the assumption that the startup will become more efficient operationally later on and figure out how to monetize its user base.