Daily Active Users Is Tech’s New Most Important Metric

Since the dawn of time (or at least Facebook), monthly active users (MAUs) have been the go-to metric to measure the success of internet companies. In fact, as pesky business strategies like “making money” and “going public in a timely manner” have become outdated, the ability to attract lots and lots of eyeballs has become all the more important. We live in an attention-based online economy, and the monthly active user has been our currency of choice.

But it may be time for a new dominant metric. If you tune in to quarterly earnings reports or listen to tech executives gloat about their companies’ growth, you’re increasingly likely to hear talk of daily active users (DAUs) rather than monthly active users. Snapchat, which is prepping to launch an IPO as soon as March, is the poster child for this tactic. In an always-on digital world, it’s no longer good enough to prove that people visit your website or app once a month. They have to be a constant habit.

“We have our mobile devices with us all day every day,” says Amir Ghodrati, director of market insights for App Annie. “The touch points are that much higher. … [Daily metrics] are definitely a really big trend with anything that’s related to connecting with other people.”

But let’s back up. How did the MAU become the go-to metric for assessing an internet company’s success in the first place? As with so many things, it can likely ultimately be blamed on shitty banner ads. When the web climbed out of the primordial ’90s ooze, there were way fewer people online. Digital companies looking to amass an audience big enough to attract advertising pretty much had to measure users by the month if they wanted to offer the appearance of scale. The monthly metric also simplified a lot of math-related headaches — it made for simple year-over-year comparisons and straightforward budgeting for fiscal quarters. “It’s easy to decipher and digest,” says Ghodrati. “As soon as you get more granular, the information becomes a little bit harder to communicate.”

A cottage industry of online analytics firms, like comScore, popped up to standardize audience measurement on the web, using monthly visitors as their bedrock metric. “Really, it goes back to almost the beginning of time,” says Andrew Lipsman, vice president of marketing and industry analysis at comScore. “I’ve been at comScore now for 11 years, and the use of the monthly unique visitor significantly predates me.”

While the MAU (or its twin metric, the monthly unique visitor) has been key to advertising dealings for a while, it’s only in the last few years the term has entered common parlance. The internet service provider NetZero was the only major tech company using the phrase “monthly active users” in the press in the early 2000s, according to a search of major news sources on the online database Nexis. The phrase began gaining more traction during the Myspace era around late 2007, when the soon-to-be-doomed social network had 110 million monthly actives (“[Rupert Murdoch] may find that this is the single best investment he’s ever made,” Google’s Eric Schmidt actually said.)

But it’s really Facebook that turned the MAU into a household data point. As the social network grew in its early years, it regularly announced new user base milestones based on monthly metrics. The social gaming companies that built businesses on Facebook, such as Zynga, also opted for MAUs as a standard metric (in large part because Facebook declared it would measure gaming activity on the site using monthly metrics over daily ones in 2008). By the time Facebook passed 1 billion users in 2012, it had become the dominant communication platform of our time. Any other startup whose business centered on capturing user attention online had to be judged relative to Facebook and its billion-plus monthly users (Twitter has tried and failed to get investors and press to judge it based on other metrics).

But then came Snapchat. Way back in 2012, when Snapchat was just an app known for disappearing dick pics, it was already framing its growth story using daily metrics — 20 million messages sent per day that October, growing to 50 million by December. Touting such nonstandard figures was a sneaky way to avoid direct comparisons to competitors like Facebook, but the numbers also presaged the company’s hope to be a daily addiction for its users. Today, Snapchat has grown into its ambitions. While it’s still hard to wring user base metrics out of the company, Snapchat revealed in September that it has 60 million daily users in the U.S. and Canada, about one-third of Facebook’s population.

Why focus on daily metrics? Because Snapchat is not just interested in grabbing digital-marketing dollars — it wants TV money as well. “The daily active user metric kind allows you to compete on the same playing field as TV,” says Lipsman. “If you’re a digital platform and you can boast a lot of the benefits to brand advertisers that TV can boast, I think that’s a compelling reason to do that.”

Indeed, Facebook now regularly touts its daily user metrics before monthly figures in its earnings reports. And the company has even broken out the daily engagement for Instagram Stories, the Snapchat clone it released in August.

Does this mean the monthly active user is dead? Not exactly. Analysts say advertisers will still want to be able to slice audience sizes in multiple ways, so they’ll keep tracking a variety of time windows. And when Snapchat goes public next year, it will probably have to finally divulge how many monthly users it has in its corporate filings. But the biggest internet company of the 2000s and its most dangerous nascent competitor have both embraced the daily active user as the key metric for defining their success. Expect a trickle-down effect.