DAU/MAU Ratio - Why does it matter?

The number of daily/monthly users informs a product team on the effectiveness of their product. By tracking the number of daily and monthly users, companies can view the willingness of users to interact with their products. This metric is mostly used for subscription or SaaS businesses since it is more difficult to track engagement with a physical product.

The number of daily active users (DAU) is the number of different users that engage with your product within a 24-hour window. Similarly, monthly active users (MAU) measure the number of unique users that engage with a product within a 30-day window. 

Most commonly, these metrics are combined to form a ratio of DAU/MAU, measuring how many of your monthly users engage with your product on a daily basis. 

How to Calculate DAU/MAU

Although monitoring both daily and monthly active users separately is a good practice, insights are generated when they're combined. Understanding the proportion of your monthly users that interact with your product daily can help you identify your product's effectiveness over varying time spans. Here's how you calculate the DAU/MAU ratio:

Let's take a SaaS company as an example. Their number of daily users is 200k and their number of monthly users is 600k. After dividing the figures, the company's MAU/DAU ratio is 33%. The higher a product's DAU/MAU, the more engaging and successful a product is. Low DAU/MAU could signify weaknesses in your product or a change in your competition's offerings.

The average company has an MAU/DAU ratio between 10-20%, with only the largest and most successful companies coming in at 50%. If your MAU/DAU ratio is lower than 10%, you may need to strengthen areas of your product that are keeping users away.

Why is the DAU/MAU Ratio Important? 

The most obvious measurement of growth for a company of any size is revenue. But the number and ratios of active users are the second most important metrics to know as a leader of a web-based company. Understanding the correlation between the number of active users and revenue can help a company measure its multiplier of active users to revenue to estimate company value. This makes MAU/DAU especially useful for startups.

There are many proponents of the theory that product usability and interest generation are the most important metrics for any firm. If a company has a high MAU/DAU ratio, its product will generate higher growth and profits.

The only con of DAU/MAU is that it's impossible to see which users are renewing and which users are churning, although, with a little extra work, you can segment users into categories called cohorts.

All in all, DAU/MAU is a useful metric to measure your product's growth and understand your company's trajectory.