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In previous articles, Tappx has been analyzing important metrics for monetization of apps and mobile games, such as Fill Rate and eCPM. This time, the metric that we will submit to our analysis has the particularity, and the importance, that it revolves around the most important of the metrics oriented to monetization: income.
It is strange to discuss metrics that have a direct impact on the income derived from advertising in apps, but do not explicitly calculate the derived income. In the end, every developer expects to live from their apps, right? For this, we must employ metrics which conceptualize our income based on the effectiveness of our advertising.
The metric we present today evaluates the effectiveness of advertising in apps based on the daily income generated by it from the active users that an app has. This metric is called ARPDAU, or Average Revenue Per Daily Active User.
The formula to calculate the ARPDAU is very simple:
ARPDAU = daily income / daily active users
If we take as an example an application that generates $3000 daily among its 250,000 active users that it has every day, we would be talking about an ARPDAU of $ 0.012 per user.
The appearance of the “D” in the acronym of the metric is not circumstantial, since as a general rule, users who engage with a specific app on a daily basis have much more value than sporadic users. It also connects with the engagement metrics, which every developer must control if he wants his apps to be used better.
Thus, ARPDAU aspires to be one of the most efficient metrics to analyze the income of an app, and in turn, one of the most useful for forecasting since it depends on the income generated by a user, or a selected group of users. (for example the top 10% heaviest users of the app). Any decision or change relative to the monetization experienced by the app (ad formats, position changes, user acquisition quality, etc.), will affect the ARPDAU metric and therefore, its impact, whether positive or negative, will be obvious.
ARPDAU is also important because it is not influenced by fluctuations of user traffic or by the number of impressions. The fact that your app or game tomorrow doubled its audience could continue to keep the ARPDAU constant, and this would give us many clues about the quality of the audience we would be capturing.
Following with the previous hypothetical example, supposing the number of daily users of our app doubles but revenues do not grow at the same rate (not multiplied by two), would mean that the performance of our audience in monetary terms has diminished in quality. On the other hand, if with the same audience that we have daily, we obtain a higher sum of income due to certain implementations made in the app or game, it would communicate that we are monetizing each user more skillfully.
For all the reasons aforementioned, we consider the ARPDAU to be a fundamental and significant metric when building the monetization strategy of our app or game. The ARPDAU should be considered at all times, in conjunction with the Fill Rate and the eCPM. In the next session of the Tappx Mobile Monetisation series, we will look at LTV, or Lifetime Value.