Monthly Active Users (or DAU) is not always a right measure. Why?
6 mins read
As a Product Manager, it’s critical to track and analyze the right metrics to ensure the product is moving toward business goals. Among the most commonly used metrics in digital products are Daily Active Users (DAU) and Monthly Active Users (MAU). While these metrics provide insights into user engagement and growth, they can be misleading if not applied in the right context.
Let’s explore:
The definitions of DAU and MAU.
When a PM should focus on these metrics.
The types of products where these metrics are most relevant.
Real-life examples of the correct and incorrect usage of DAU and MAU.
Defining DAU and MAU
Daily Active Users (DAU) refers to the number of unique users who engage with a product on a given day. Engagement is typically defined by a key action, such as logging in, completing a task, or interacting with core features.
Monthly Active Users (MAU) refers to the number of unique users who engage with the product over a 30-day period.
To calculate engagement levels, many companies use the DAU/MAU ratio, which indicates how frequently users interact with a product. A DAU/MAU ratio of 50% means that users engage with the product approximately 15 days out of 30.
When should a PM focus on DAU and MAU?
DAU and MAU become relevant when user engagement and retention directly impact the success of the product. However, they should not be treated as universal benchmarks for all types of products. A PM should focus on DAU and MAU when:
1. The product relies on high frequency of use
For products designed to be used frequently—often multiple times a day or at least daily—tracking DAU and MAU is critical. These products thrive on habitual usage, and measuring daily engagement provides insights into whether users are forming habits around the product.
For eg:
Social media platforms: Products like Facebook, Instagram, and Twitter are built for daily interactions. DAU is a critical metric because success hinges on users logging in multiple times a day to engage with content.
Messaging apps: WhatsApp and Slack rely on DAU because their core value lies in real-time communication. A drop in DAU is an early indicator of disengagement or potential churn.
2. The business model depends on Ad-revenue
If a product’s revenue model is built around ad impressions and clicks, high DAU and MAU are essential to maintain ad inventory and revenue streams. More active users mean more opportunities to serve ads and monetize user engagement.
For eg:
YouTube: A high DAU indicates more video views, which translates to more ad impressions.
TikTok: Continuous daily engagement ensures more ad views and sponsored content visibility.
3. Virality and network effects drive growth
For products that rely on network effects to scale, DAU and MAU are critical for understanding the health of the ecosystem. A higher DAU indicates a thriving network, while a decline may signal a weakening network effect.
For eg:
Clubhouse (during its peak): DAU was a key metric to assess whether the network was growing and sustaining high engagement. When they launched in India, it hit its peak DAU.
Snapchat: DAU provides insights into how actively users engage within their network, which fuels growth through peer-to-peer interactions.
4. The product is designed for habit formation
Products that rely on habit loops or trigger-based engagement need to measure DAU and MAU to validate whether users are building habits.
For eg:
Duolingo: DAU is an essential metric to assess whether users are returning daily to practice language skills and maintain their streaks.
Headspace: Meditation apps like Headspace track DAU to see whether users are forming consistent habits around mental wellness.
When DAU and MAU are less relevant
1. Low-frequency products or transactional models
For products that are used occasionally or on an as-needed basis, DAU and MAU can be misleading. Measuring daily engagement for a product that is inherently infrequent does not provide meaningful insights.
For eg:
E-Commerce platforms: Amazon or Flipkart users may only shop a few times a month, making DAU irrelevant. Transaction frequency and conversion rates are more important than DAU in this context.
Travel booking platforms: Expedia or MakeMyTrip is used occasionally for booking trips. Measuring DAU or MAU offers limited value compared to focusing on conversion rates and repeat bookings.
2. B2B SaaS products with periodic usage
B2B products often operate on weekly or monthly usage cycles, where users log in primarily to perform specific tasks. Focusing on DAU can create the false impression that the product is underperforming when, in reality, users engage at expected intervals.
For eg:
Project management tools (e.g., Asana, Jira): Users may engage multiple times a week, but not necessarily every day.
Accounting software (e.g., QuickBooks): Used primarily during month-end closing or quarterly financial reviews.
Real-life examples
Correct usage: Facebook’s focus on DAU for Ad revenue and engagement
Facebook’s business model thrives on ad impressions and user engagement. Tracking DAU helps Facebook gauge how well it retains and engages users daily, which directly impacts ad revenue.
Why it works:
High DAU means more time spent on the platform, leading to more ad views and higher ad revenue.
DAU is a reliable indicator of engagement and potential revenue growth.
Incorrect usage: Airbnb’s focus on DAU instead of conversion rates
Since users typically book accommodations infrequently, conversion rates and booking frequency are far more relevant.
Why it is wrong:
DAU was misleading because users don’t engage daily with Airbnb.
Tracking DAU did not provide insights into booking behavior or conversion trends.
Correct usage: Duolingo’s habit-driven growth using DAU
Duolingo’s success is built on habit formation and maintaining learning streaks. DAU is a perfect metric to track engagement and gauge the effectiveness of its gamification strategies.
Why it works
High DAU indicates that users are forming a habit of practicing daily.
DAU is a proxy for long-term retention and course completion.
Incorrect usage: SaaS CRM focusing on DAU instead of adoption metrics
A CRM platform that helps sales teams manage leads was tracking DAU to measure engagement. However, users only logged in to update deals or review reports, which occurred a few times a week.
Why it is wrong
DAU did not capture the real value users derived from the platform.
Adoption, feature usage, and renewal rates were more relevant metrics for understanding user success.
How PMs can avoid misusing DAU and MAU
1. Align metrics with business goals
Ensure that DAU and MAU align with the company’s overarching goals. If the product’s success depends on frequent engagement, focus on DAU. Otherwise, choose metrics that better reflect product success.
2. Understand product usage patterns
Analyze user behavior and identify whether the product is high-frequency or low-frequency. This helps determine whether DAU/MAU is a relevant success metric.
3. Focus on outcome-oriented metrics
Instead of solely tracking DAU and MAU, complement them with outcome-focused metrics such as retention, conversion, and revenue growth.
4. Leverage DAU/MAU ratio for stickiness
For products where DAU and MAU are relevant, focus on the DAU/MAU ratio to assess stickiness. A ratio above 50% typically indicates strong daily engagement.
DAU and MAU are powerful metrics for products that thrive on daily engagement, network effects, and habitual usage. However, they can be misleading when applied to infrequent-use products or transactional platforms. Product Managers should evaluate whether these metrics align with their product’s goals and usage patterns before making decisions.
By focusing on the right metrics at the right time, PMs can ensure that their decisions lead to growth, improved retention, and long-term product success.