What are Monthly Active Users (MAU)?
Monthly active users (MAU) is a term that refers to the number of unique customers who interacted with a product or service of a company within a month. Essentially, monthly active users is a key performance indicator (KPI) that measures online user engagement. The metric is primarily used by internet businesses, including social networking, online gaming, and mobile app companies.
Investors generally close look at the number of monthly active users of a company. The metric provides a quick overview of the company’s user growth. Furthermore, MAU delivers some insights into the company’s ability to attract new customers and retain the existing ones. Commonly, a considerable change in MAU can affect the stock price of a company in the social media industry.
Although MAU is a measure that is not recognized by current accounting standards, it is still reported by public companies in their financial reports. For example, social network titans such as Facebook and Twitter devote a substantial amount of time to discuss the trends of monthly active users (MAU) in their quarterly reports.
Importance of Active Users
From a business standpoint, it is useful to know how users interact with the company’s website. A high number of active users indicate that people are frequently interacting with a product. A high number of users is, therefore, an indication that a product enjoys good customer engagement and retention over a period of time.
By measuring the number of active users, a company is better positioned to assess the efficacy of its marketing strategies and customer experience. Thus, MAU comes in handy to provide a rough overview of a business’ general health and acts as the basis upon which to calculate other key metrics.
How Monthly Active Users is Used
The use of dissimilar parameters when calculating MAU varies by company. Critics of MAU use such an argument to support their claims that MAU is a biased KPI compared to its competitors. At one end of the spectrum, supporters of MAU argue that it can only provide an accurate picture of active users when paired with other qualifying metrics.
Since it is a quantitative variable, MAU only tabulates the traffic number. It excludes any component that considers the quality, intensity, or depth of the users’ experience. Accounting standards do not recognize MAU because it lacks universal standards for defining key terms such as “active” and “user.”
Based on this controversy, companies define the terms in different ways. One of such definitions is that site visitors qualify to be a user, provided they have login credentials. Other companies have different requirements that one must meet before qualifying to be an active user.
How to Calculate the Number of Monthly Active Users?
The identification of a number of monthly active users is not as straightforward as it may seem. Despite the fact that the number of monthly active users is calculated and reported by almost all Internet businesses, there is still no industry standard regarding the definition of active users.
For example, some companies define active users as those who just visited their website while other companies include only registered users in their MAU figures. Thus, each company uses its own methodologies to identify the monthly active users. Facebook’s definition of monthly active users is the following:
MAU: A registered active user who logged in and visited Facebook through the website, mobile app, or Messenger application in the last 30 days as of the date of measurement.
On the other hand, Twitter’s definition of the metric is slightly different:
MAU: A Twitter user who logged in or were otherwise authenticated and accessed Twitter through the website, mobile website, desktop or mobile applications, SMS, or registered third-party applications or websites in the 30-day period ending on the date of measurement.
Generally, the number of monthly active users is calculated using a company’s internal data. The recognition of unique users is executed using an identifier such as a username or email.
In addition, companies must carefully monitor the number of duplicate, false, and spam accounts that can substantially distort MAU data. Many companies adjust their MAU figures for such items to prevent the artificial inflation of the metric.
Issues with MAU
The lack of industry standards is one of the key problems with using the MAU metric. Since every company relies on its own methodology to calculate MAU, it can be challenging to use the metric for a meaningful comparison.
The individual components and other MAU metrics used to quantify trends on social media mean that it does not provide a level playing field for competitors. For example, the skepticism leveled against Facebook’s MAU in 2015 forced the company to adjust its definition of MAU.
In its statement, the social media company expunged “third-party pings” from its system. Such a rapid response from one of the social media giants begs the question of whether other social media websites also followed suit regarding MAU calculations.
In the same framework, for years, Twitter’s been advising investors to evaluate it based on its daily active users (DAU) as opposed to MAU. During the previous quarter of Twitter’s 2015 earning call, it lost about four million MAUs. The company argued that a majority of the “users” did not use the website entirely. Instead, their measure was captured when the Safari web browser, which belongs to Apple, conducted an automatic data pull on Twitter.
Nevertheless, Twitter only started sharing data about its DAU in 2019. The company recorded a gain of users after it switched from MAU to DAU. Even so, one question that often arises is whether or not competitors will also stop sharing MAU data should Twitter stop.
MAU discloses only the quantity of the users, not their quality. In many cases, some of the users included in MAU may not use the company’s service or platform frequently, and only a small portion of users generate the most revenue. Therefore, the metric does not provide detailed information on user engagement.
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