Internet User Defined
In their press call last week, Google obfuscated the various definitions of a user in online terms. The WSJ takes a small swing at the debate.
Billions of dollars swirl around these definitions. Here is a deeper look at the various definitions of an Internet user.
- Definition — visitors are users who visit your site but do not register or make any effort to provide credentials on your website.
- Usage – Many VC’s love this metric because it defines the maximum size of your funnel. Apps like Twitter have thrived on visitors, who can view twitter feeds of others without having to use Twitter themselves. Visiting is a necessary first step before using.
- Value – The only info you can know about a visitor is related to their IP address or cookies on their computer. They are a great audience to remarket to because they can be tracked across the web and see ads from you on any other site that they visit and runs display ads for revenue.
For Google, a visitor is a search visitor who is not logged into gmail or any other google service. If my grandmother went on a computer and searched for “Greek Wine” using Google’s search toolbar at Google.com, she would be a visitor.
This is a very badly used metric that should be stricken from the roles of userdom.
- Definition — a visitor who registers their identity with your website through your own registration process or through an Facebook or Open ID interface.
- Usage — Registered users are not necessarily active. In fact, the vast majority of users are not on almost all websites. The ratio of active user to registered user is a very good indication of the user’s interest in your product. The closer the ratio is to 1.00, the more engaged your users are with your app, even if their return rates drawn out across months.
Unless Google specifies the app, it is super likely that they are bundling all of their google users into this number. It is no indication of Google Plus usage.
- Definition — There is no one set definition but there is a general consensus — An active user is a registered user who uses your application at least once in a 30 day period.
- Usage — The more frequent an active user uses your product, the more engaging your website or application.
- Derivatives — Return rate is a derivative of your active user calculation. If an active user comes back on average every 10 days, then that is also your average return rate. Facebook has one of the highest active user pools in the world.
- Derivatives – Churn Rate is defined as how quickly do active users stop being active. Churn is usually measured in terms of cohorts and averages.
- Confusion — This number is worthless if the time period (daily, monthly, yearly, etc.) is not specified.
Monthly Active User (MAU)
- Definition – Social gaming companies use this number to understand their active users in much more granular detail. It is the count of the number of unique active users in any given month. Facebook publishes this number on a monthly basis.
- Usage — It is used to track the active nature of the gaming app. 1 million monthly active users versus 1 million active users can mean two wildy different numbers.
Daily Active User (DAU)
- Definition – Social gaming companies use this number to understand their active users in much more granular detail. It is the count of the number of active users on any given day. Facebook publishes this number on a daily basis.
- Usage — It is used to track the active nature of the gaming app. 1 million daily active users versus 1 million monthly or active users are very different numbers and indicate very different success rates for the games. DAU’s are used to calculate your revenue trajectory as a game company because it captures the smallest calibration of spending activity. For many social games, if a unique user does not spend money in their first day playing the game, they will likely never spend money.
- Stickiness factor — is understood in terms of the ratio of DAU/MAU. It is an indication of how often a unique users come back. The lower the stickiness factor, the higher the churn and the less successful the game.
- Facebook — No one is quite sure how to read Facebook’s statement that 1/2 of all their active users log in every day. That would seem to suggest that they have a stickiness factor of .5 or 50%. This assumes that their definition of an active user is an MAU.
Daily Active Application User
- Definition: – a daily active user (DAU) for a given application.
- Usage: – this distinction is critical when evaluating publisher pipelines and their ability to deliver the next hit. Too often a publisher will talk in terms of daily active users, instead of by application when the user numbers are highly imbalanced.
Google has made in nearly impossible to decode the number of daily active application users on Google + much like a publisher would in terms of hiding a poorly performing title in light of the overall size of their audience.
- Definition: — where the rubber meets the road for usage. There is no ambiguity with this definition. The Penny Gap post by Josh Koppelman makes this super clear — getting a user to pay anything is like getting a user to pay alot. The threshold to payment is enormous.
- Its the bellweather definition for the freemium and gaming markets. Companies like Dropbox and Evernote pride themselves on understanding the conversion vectors for subscribers. Companies like Zynga and their public market investors care deeply about those same vectors as episodic virtual goods buyers not subscribers. the
- Usage: — Paying audiences in social games are often 1% or less of the total monthly active user population. Zynga claims 3% of their MAU’s are payers and also claims that they think they can double that % in the near future. Freemium companies see anywhere between 1-4% conversion rates to paid accounts.
The definitions above are worth billions. Getting your terms wrong either inflates or deflates the economics of the internet property you are engaged with. Google knows these definitions as well as anyone. Their glossing over these variances makes us ask, “What else are they hidng?”