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Guide to calculating daily active users: How to analyze DAU & avoid common mistakes to reduce churn

Daily active users (DAU) is a key metric you should follow when you’re in the subscription business. When your DAU is high, it can be a great sign. It’s evidence that your customers are using your product and more customers are signing on. If the number of your daily active users is starting to fall, you could be on the verge of churn. 

Download the complete guide to statistics for the saas executive here.

What are daily active users (DAU)?

Daily active users is a metric used to measure the total number of unique users who engage with your product on a daily basis. It’s also used to measure the success of your product as the number of daily engaged users is very telling of the value you’re providing.  

Though some feel that daily active users is a vanity metric, it's still a common way for SaaS companies to measure their overall performance. Similar metrics include weekly active users (WAU) and monthly active users (MAU).

Each company has a different way of counting what an active user is. Someone who simply logs in is not the same as someone who engages in and completes a specific task that your product was designed for. It isn't uncommon for companies to rely on a meaningful engagement action rather than a simple sign-in.

Why is it important to measure DAU?

In actuality, DAU is far from a vanity metric. User engagement can tell you a lot about your product. And you can increase your number of active users by improving the product. In addition to being a general product health check, your level of engagement can provide you with some direction on how to do that. The metric can help you increase profits and grow your company in other ways as well. 

Perform product health check

DAU functions as a product health check because it lets you know if customers are actually using your product. The launch of a product is the first time it gets widespread use among a diverse range of customers. Its level of engagement on a daily basis is a test of how well it's performing the job customers expect from it.

Uncover product use

Daily active users is also the first step in seeing exactly how customers are engaging with your product. The same is true of monthly active users and weekly active users. If your product is meant to be used regularly, then checking to see how many of your customers do so can clue you in as to whether it is being used as intended. Deeper dives into which features and areas of your product customers are engaging with also provide more significant insights.

Identify areas of improvement

This metric can also uncover areas for improvement and help you spot when and where churn is about to happen. Monitoring DAU can help reveal hurdles, drop-off points, and features in your product that may be unnecessary or overly complicated. Identifying and fixing these issues can help reduce your churn rate. Additionally, it can tell you which aspects of your product are most popular among different demographics, aiding the marketing department in reaching those customers. 

Modify product pricing

Often, SaaS companies will also charge based on active users. This metric then becomes an integral part of business operations by allowing the business to price appropriately for differently sized companies

Attract investment opportunities

As a generally accepted measure of SaaS business health, daily active user counts are also a big part of attracting investment opportunities. Investors want to be able to see how healthy your business is before they decide to give you money. Not only will a higher current DAU value increase the chances of securing funding, but being able to show a rise in DAU over time is also great for illustrating growth potential.

Simple formula to calculate daily active users

“Active user” is a rather broad term. You'll have to define your very own set of credentials that qualify as an active user before you calculate DAU. But you also need to define what a user is. Most SaaS companies will call a user a unique visitor who has logged into the platform (whether desktop or mobile app). Different platforms have different purposes. For an email marketing platform, it may be the act of creating an email, for a business insights platform it may be pulling a report and creating a visualization, and for a social media platform, it might be creating or liking a post. These actions need to be consistent in order to measure your data correctly. 

So how do we calculate daily active users? 

Daily active users are calculated using the total number of unique users on a given day. 

Daily active users formula: [Unique new users] + [unique returning users] = total DAU

Within DAU, there are new users and returning users — together, they equal the total DAU. They both separately allow a window for the product team to look into and measure how fast the platform is attracting new users and keep them coming back. Now, this can be different depending on the functionality of the platform and the access that is granted to users. Slack is a great example of a company that keeps a very close eye on its DAU.

There is no technical formula for DAU as many analytics tools like ProfitWell Metrics and Google Analytics can easily show you your daily active users. If you only have monthly traffic/usage data, you can take the total number of unique visitors (users) and divide it by the days in the month. For example, if you have 2,600 unique monthly sessions in April, divide that by 30 (days in the month) and you have around 87 active users. 

3 mistakes to avoid when tracking your DAU

There are a few common mistakes that people make when tracking DAU. Below, we'll discuss what they are and how you can correct them to ensure your DAU figures are correct. 

1. Your definition of DAU is wrong

There are many ways in which someone might misunderstand DAU, and therefore calculate it incorrectly. A frequent one is failing to realize that you're only supposed to count unique engagements. If the same person comes back to the site 5 times in a day, they are still a single user. 

You can ensure that your DAU calculations are correct by following the instructions laid out in this post.

2. You're not tracking user activity

We've already discussed the need to determine what exactly counts as an active user. For most products, someone simply logging in to the site isn't using it in any significant way. It isn't until they perform some action in the product that their use of it actually begins. 

By examining the ways in which users can interact with your product and picking those which indicate real usage, you will know which metrics to track to get a more accurate view of your daily number of users. 

3. You're comparing yourself to others

It can be frustrating to look at your numbers and then see that a competitor's numbers are higher. But it shouldn't be. For one thing, as we've seen, each company will calculate active users in a different way. Without knowing the exact method others use, any comparison will be apples to oranges. How you stack up to others is also largely irrelevant. Your goal is to get your user numbers up. You should only be comparing your numbers to your own numbers during a previous time period. As long as your user base is constantly growing, your business is on the right track. 

How to analyze results of your DAU calculations

Now that you know what your DAU is, here are a few next steps.

High/low DAU

There is no standard high or low DAU, but you can set benchmarks based on previous performance: if your company regularly has 200 DAU, and in one day it rockets to 270, then you’re obviously on the right track. It’s a sign of growth and that your product has created “stickiness,” and has become a necessity. “Stickiness” refers to a product becoming an essential, everyday tool for an organization where they can’t complete daily activities without it. 

Less and less DAU

If your DAU is diminishing each day, you’re going to run into churn. It’s a concerning sign when you start to notice that fewer users are logging in, and/or not performing actions within the platform. The best way to combat this is not to let it happen in the first place, and that begins with communication between you and the customer. Consistent communication will leave zero room for surprises. Understanding what the platform is primarily used for, where they are running into roadblocks, and offering to help proactively, will lead to less churn.

How to increase daily active users

The end goal is always to increase daily active users and ensure that your product is a vital tool for that organization. There are a few ways that you can improve DAU numbers. Here are a few:

1. Identify your ideal user

The ideal user for your product is someone who's needs are met by your product. But in order to find that ideal user, you first need to thoroughly understand your product or service. Now, that may sound obvious but if you don't have a solid understanding of what you're offering and what problems you're solving, you can't really identify your ideal users.

This knowledge will help you better understand and interpret the actions your customers take through the customer journey.

2. Optimize your customer success efforts

As mentioned earlier, being a proactive customer success team rather than a reactive customer success team will help reduce churn and increase DAU. Consistent communication and empathizing with your customer will help you understand their end goal, and then allow you to optimize their experience with the platform. If you’re providing the right support for your customer, usership will increase.

3. Double down on retention

A sure sign of a successful SaaS company is MRR, which is the direct result of retention. Acquiring a customer is the first step, but providing value and a useful service will lead to the customer renewing for another year. So, in order to help increase your daily active users, you need to figure out what kind of activities and characteristics lead to retention (which means conducting retention analysis), and build your idea of an active user around those. Retention will also take place if you’re consistently improving the overall customer experience. 

4. Review your customer lifecycle

It’s crucial to consistently review your customer lifecycle. The way you manage it can determine the ability to upsell, cross-sell, and grow an existing customer relationship. And ultimately, it creates opportunities to identify and add value to the user experience. It’s vital to understand who your daily active users are and how they’re using, or not using, your product. 

Track and increase DAU with ProfitWell Metrics

ProfitWell Metrics, provides accurate, real-time subscription reporting and analytics, essential for tracking your DAU. Uncovering where your growth comes from will help you replicate your ideal active user and identify KPIs. It’s vital to understand which customer segments are driving and detracting from subscription growth.

Daily active user FAQs

How to measure daily active users? 

Measuring DAU is simple, and most analytic software integrations will perform the task for you. It is important, however, to decide on how you will determine whether a user is active or not.

How to determine who are the 'active' users?

The definition of 'active' may be different from company to company, depending on what management decides to focus on. Merely logging into the site might be too basic an activity to count. Some companies prefer to wait until the user has completed some product-specific action before counting them as being active. 

What is the difference between daily active users (DAU) vs. monthly active users (MAU)?

The only difference between DAU and MAU is the period of time that the metric is measured for. Both are designed to tell you how much of your user base is actively engaged with the product. Measuring users on a daily basis is typical, though a different period of time might make sense for your product's use case.

How to calculate average daily active users?

Calculating DAU is simply the number of new users for the day plus the number of unique returning users for that day. This is typically something that's automatically calculated for you by your analytics software.

Related reading

Why gross margin is important and how to calculate it
What is service revenue and how to calculate it
User engagement: How to measure & analyze