What are Daily Active Users? How to Increase your DAU and Minimize Churn
Jun 14 2020
Daily active users is a key metric you should follow when you’re in the subscription business. When your DAU is high, it can be a great sign. It’s evidence that your customers are using your product and more customers are signing on. If your DAU is starting to fall, you could be on the verge of churn.
Daily active users, commonly referred to as DAU are the total number of people that login and engage with your SaaS or web product on a daily basis. An “active user” refers to one unique user logging in. Now some may say “active users” is a vanity metric, but almost all SaaS companies use this figure to measure their overall performance.
Simply logging into the platform may not be a defined action, so we often see organizations relying on more specific value-based actions, such as completing a task or creating a report as accurate DAU.
Why is it important to measure DAU?
First off, measuring DAU is a product health check. It's asking the question: Are your customers actually using your product? During the R&D and planning period of creating a product you aren’t really inviting outside users to come in and test to see if it works for an everyday individual. Once the product is up and running and your team is happy with that iteration, your hope is that customers will not only purchase the product, but also use it on a daily basis.
What’s rather important to keep in mind is that you measure DAU to understand what your customers are using your product for. You may have an idea as to what you think they should be doing, but in reality it’s not until you measure and analyze data that you’ll uncover how your product is being used.
SaaS brands alike need to understand this metric to uncover areas for improvement and spot when and where churn is about to happen. Doing this will reveal hurdles, drop-off points, and features in your product that may not be necessary, or too complicated.
The goal for every SaaS business is to build a valuable product that provides a solution leading to a solid, sustainable user base.
How to calculate daily active users
“Active user” is a rather broad term. You will have to define your very own set of credentials that qualify as an active user before you calculate DAU. But you also need to define what a user is. Most SaaS companies will call a user a unique visitor who has logged into the platform. Different platforms have different purposes. For an email marketing platform it may be the action of creating an email, for a business insights platform it may be pulling a report and creating a visualization. These actions need to be consistent in order to measure your data correctly.
So how do we calculate daily active users?
Daily active users are calculated using the total number of unique users on a given day.
Within DAU, there are new users and returning users—together, they equal the total DAU. They both separately allow a window for the product team to look into and measure how fast the platform is attracting new users and keep them coming back. Now, this can be different depending on the functionality of the platform and the access that is granted to users. Slack is a great example of a company that keeps a very close eye on its DAU.
There is no technical formula for DAU, as many analytics tools like ProfitWell Metrics and Google Analytics can easily show you your DAU. If you only have monthly traffic/usage data, you can take the total number of unique visitors (users) and divide by the days in the month. For example, if you have 2,600 unique monthly sessions in April, divide that by 30 (days in the month) and you have around 87 active users.
Determining what your DAU means
Now that you know what your DAU is, here are a few next steps
There is no standard high or low DAU, but if your company regularly has 200 DAU, and in one day it rockets to 270, then you’re obviously on the right track. It’s a sign of growth and that your product has created “stickiness,” and have become a necessity. “Stickiness” refers to a product becoming an essential, everyday tool for an organization where they can’t complete daily activities without it.
Less and less DAU
If your DAU is diminishing each day, you’re going to run into churn. It’s a concerning sign when you start to notice that less users are logging in, and/or not performing actions within the platform. The best way to combat this is not let it happen in the first place, and that begins with communication between you and the customer. Consistent communication will leave zero room for surprises. Understanding what the platform is primarily used for, where they are running into roadblocks, and offering to help proactively, will lead to less churn.
Increasing daily active users
The end goal is always to increase daily active users and ensure that your product is a vital tool for that organization. There are a few ways that you can improve DAU numbers. Here are a few:
Optimize your customer success efforts
As mentioned earlier, being a proactive customer success team rather than a reactive customer success team will help reduce churn and increase DAU. Consistent communication and empathizing with your customer will help you understand their end goal, and then allow you to optimize their experience with the platform. If you’re providing the right support for your customer, usership will increase.
Double down on retention
A sure sign of a successful SaaS company is MRR, which is the direct result of retention. Acquiring a customer is the first step, but providing value and a useful service will lead to the customer renewing for another year. So, in order to help increase your DAU you need to figure out what kind of activities and characteristics lead to retention (which means conducting retention analysis), and build your idea of an active user around those. Retention will also take place if you’re consistently improving the overall customer experience.
Review your customer lifecycle
It’s crucial to consistently review your customer lifecycle. The way you manage it can determine the ability to upsell, cross-sell, and grow an existing customer relationship. And ultimately, it creates opportunities to identify and add value to the user experience. It’s vital to understand who your daily active users are and how they’re using, or not using, your product.
ProfitWell Metrics provides accurate, real-time subscription reporting and analytics, essential for tracking your DAU. Uncovering where your growth comes from will help you replicate your ideal active user. It’s vital to understand which customer segments are driving and detracting from subscription growth.
Retain combines world-class subscription expertise with algorithms that leverage millions of data points to win back customers. Identifying a drop in DAU early on, can help you take the right steps to help retain customers and put a stop to any potential churn.
Tracking your DAU is an important pulse check on your organization and/or platform, but you need to set your own definition as to who your daily active users are. Remember, you generally want a DAU to perform some sort of action rather than just a standard log in. Additionally, in order to improve your DAU, you need to actively connect with your customers, garner their feedback, and implement it to help improve their experience.
By Patrick Campbell
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.