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Monthly Active Users (MAU)

Understand the Monthly Active Users (MAU) KPI

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Monthly Active Users (MAU)

Monthly Active Users (MAU) — User Engagement KPI

MAU tracks the number of users that have interacted with a platform or application within a one-month time frame.

MAU stands for “monthly active users” and counts the number of unique users that actively engaged with a site throughout a given month.

Two common key performance indicators (KPIs) used to track user engagement are the following:

In particular, metrics like DAU and MAU are of the utmost importance to modern media companies (e.g. Netflix, Spotify) and social networking platforms (e.g. Meta, Twitter).

For these sorts of attention-oriented companies, active user engagement is the foundation that determines their future financial performance, growth prospects, and ability to monetize their user base.

Consistent, high user engagement on a platform or application implies that existing users are going to continue to be active, which has a positive impact on the potential rates charged to advertisers.

Advertising is typically the primary source of revenue (and one of the top contributors) for many social media companies, especially those that are free to sign-up for and use.

In theory, rising user engagement leads to more new user growth and less churn, which should result in more recurring, predictable revenue.

MAU in Valuation Multiples

When evaluating high-growth media companies in the present day, operational KPIs can often be more informative than traditional GAAP metrics, which can fail to capture the positive (or negative) aspects of such companies.

Because many of these companies, especially early-stage startups, are very unprofitable, the traditional financial ratios and metrics fall short of capturing the actual value of many of these companies.

Given an unprofitable company — even on an adjusted EBITDA basis — it would be unreasonable to use accrual accounting-based profit metrics in valuation multiples.

Often, EV-to-Revenue can be used, but revenue does not capture user growth (i.e. to gauge whether the user base is expanding or shrinking).

And as mentioned earlier, strong growth in new users, an active community of highly-engaged users, and minimal churn are the underpinnings of a profitable company.

Some examples of user-engagement-based valuation multiples include the following:

  • EV/MAU
  • EV/DAU
  • EV/Monthly Subscriber Count

DAU/MAU Ratio

The DAU/MAU ratio compares a company’s daily active users to its monthly active users.

Simply put, the DAU/MAU ratio indicates how active the monthly users are on a daily basis, i.e. the “stickiness” of the platform or app in which users repeatedly engage with it each day.

Thereby, the DAU/MAU ratio is the proportion of monthly active users that consistently engage with a site, platform, or app.

For example, if a social media platform has 200k DAU and 400k MAU, then the DAU/MAU ratio — which is expressed as a percentage — equals 50%.

The 50% DAU/MAU ratio suggests that the typical user engages with the platform around 15 days in a typical 30-day month.

For most companies, the ratio ranges between 10% and 20%, but there are outliers such as WhatsApp that can easily top 50% on a consistent basis.

Arguably, the month-over-month trend is the most important, as a month-to-month drop-off implies more customer churn is likely on the horizon.

However, the ratio is only useful if the app or platform is intended to be used on a daily basis, as opposed to products such as Airbnb where users are not expected to engage with the app every single day.

Limitations of Tracking Monthly Active Users (MAU)

One problem with the MAU metric is the lack of standardization with regard to what an “active” user is.

Each company has unique criteria for what qualifies a user as being active (and counted within the total MAU calculation).

For example, a company could consider engagement as logging into the app, spending a specific amount of time on the app, viewing a post, and more.

The difference in how MAU is calculated among different companies can make comparisons among comparable companies challenging, so it is important to understand what constitutes an active user for each company.

MAU must be viewed alongside various other metrics to provide further context.

Twitter mDAU Example

One example depicting the lack of uniformity in how MAU is calculated is Twitter (TWTR).

Twitter announced around 2018 that it would no longer publicly release MAU data under the reasoning that the monetizable daily active users (mDAU) metric is a more accurate measure of its user growth, monetization capabilities, and overall outlook.

In all likelihood, Twitter was attempting to present its user engagement in a better light in an effort to avoid comparisons to its peers, namely Facebook.

“Monetizable DAU are Twitter users who log in and access Twitter on any given day through twitter.com or our Twitter applications that are able to show ads. Our mDAU are not comparable to current disclosures from other companies, many of whom share a more expansive metric that includes people who are not seeing ads.

Source: (Q4-2018 Shareholders’ Letter)

Twitter mDAU

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