What is Monthly Active Users (MAU)?
Monthly Active Users (MAU) is a user engagement metric that tracks the number of unique visitors that engage with a site, platform, or app within a specified month.
MAU tends to be the most significant metric for modern media companies, social networking platforms, gaming companies, messaging platforms, and mobile application companies.
How to Calculate Monthly Active Users (MAU)
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:
- Daily Active Users (DAU)
- Monthly Active Users (MAU)
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.
Monthly Active Users (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/Monthly Subscriber Count