In 2017, you are more likely to win the lottery than to click on a display ad. Despite this fact, some advertisers still measure the success of their display ads using the CTR (clickthrough rate) metric—and by doing so, they're ruining customer experience with bad advertising.
Clickthrough is as simple as metrics come. It measures how many people clicked on an advertisement out of how many people overall saw the advertisement.
Most advertisers don't realize this, but metrics have a direct effect on the type of ads they create. For example, display ads that are measured by CTR tend to interrupt people's experience with obvious click-bait tactics to entice a click. In this scenario, there are no winners. Consumers are annoyed and brands don't sell more.
Advertising metrics are not just a way to measure performance, they directly affect the type of content in the ads, which in turn affects the customer experience. If you alienate your audience with bad advertising, you will ruin your brand.
The takeaway: Choose your metrics wisely.
This has never been truer than with advertising in applications, where the app's livelihood relies on continuous user engagement to survive. Advertisers and app developers can't risk ruining their user experience. The best way to accomplish this is to avoid vanity metrics and dig deeper into true engagement metrics.
How do you measure engagement that will lead to more effective advertising? We offer up three ways to approach user engagement metrics within an application that hinge on the quality level of the user experience.
Stickiness Metrics: Forget Users, Context Matters
The most common metric that advertisers use to judge the size and health of an application is active users. While this metric is the simplest way to get a read on engagement, it is also the most dangerous when taken out of context.
Active users are defined as a unique user who has completed an action in an application within a certain time period. The danger is that ‘completed an action’ is a made-up phrase that can be manipulated to mean anything and inflate performance.
If ‘active’ means that the user merely signed in, the metric becomes a vanity metric and doesn’t equate to user engagement. For ‘active user’ to hold weight as an engagement metric, the action should be defined in context to the desired outcomes of the application. Is the user getting value out of the application?
For example, Facebook defines their active users as:
A registered Facebook user who logged in and visited Facebook through our website or a mobile device, or used our Messenger app (and is also a registered Facebook user), in the last 30 days as of the date of measurement.
An active user must go beyond login and use one of Facebook's applications within a specific time frame to be considered 'active'. This distinction matters when you consider there are over 270 million fake accounts and millions of idle users that are logged in but not active.
As an advertiser, once you understand and accept the application's definition of active user, you can start to measure deeper engagement trends by segmenting the active users into daily active users (DAU) and monthly active users (MAU).
The Stickiness Ratio
DAU and MAU on their own as absolute numbers will give you a temperature read on the health and growth of the application, but a more telling metric to calculate “stickiness” is the DAU/MAU ratio. By comparing the daily active users with monthly active users you can see how much users are engaging with the application.
The DAU/MAU ratio is the proportion of monthly active users who complete an action in a single day. When you can measure how frequently users are active, you can establish an engagement benchmark for the application.
This ratio is helpful for determining if the application drives consistent value for its users, which has long-term implications. Instead of focusing too much on DAU or MAU, use the ratio to understand the numbers in context to the level of engagement.
Retention Metrics: True Engagement Kills Churn
Don’t be blinded by a high number of downloads and new users when reviewing an app. The ability to attract users has little to do with app engagement.
If an app is opened only once within the first week, there is a 60% chance it will never be opened again. An app that adds value retains users, and the best retention strategy is for the application to be relevant and useful right from the start.
It might seem strange for an advertiser to ask about a business metric like retention, but it is a strong indicator of the quality of the user experience. The easiest way to calculate and get a quick read on retention is by using the Day N Retention Rate, which is the percent of new users who come back on a designated day.
For example, you have 100 downloads on the first day of the month. 70 of those users come back the next day, and 50 come back the third day. Your Day 1 retention rate is 70/100 (70%). Your Day 2 rate is 50/100 (50%). You can then average all the days of the month to calculate the average retention rate of new users who first used the app for the month.
Visualizing the monthly retention rate in a tool like DataHero gives you a quick snapshot of how well the application is performing. While the retention rates of different types of apps will vary, over time you can see if rates improve, which indicates that the app is delivering value and the experience is positive.
Keep An Eye on Churn Rate
Customer churn is the other side of the coin to retention. The big difference is that churn ignores the effect of focusing on new users to include all users. As an advertiser, the customer experience is paramount. If an app is churning through tons of users, they might have some major issues that are turning people off.
It's really hard to grow an app with a high churn rate, which makes it an important metric to determine if there is something wrong with the user experience. Advertisers should understand an app’s churn rate by considering:
- Is the app attracting the wrong types of users?
- Are there technical issues like downtime, crashes, and other performance flaws?
- Is the app not delivering on its promise and leaving users annoyed?
Don't risk associating your brand with an application that has user experience issues. Their acquisition rates might be through the roof, but the potential brand damage of a high-churn environment might not make it worth the opportunity.
Behavioral Metrics: Event Tracking That Goes Deeper
Active users and retention rates measure overall engagement, but those metrics don't give you insight into why users engage or abandon a site. To go a level deeper into how people are using the application, behavioral event tracking can show you the actions that users are taking while in the app.
This type of analysis goes beyond screen views or average time spent in the app to pinpoint how users behave inside the application, revealing the engagement levels of different features.
These deeper insights enable you to develop advertising that complements the users' actions. Event tracking actually maps how users flow through the app.
You can customize performance metrics by segmenting users into cohorts and measuring how each group interacts with a feature or how they flow through the application. You’ll see how different actions affect engagement among different target audiences, which will inform your advertising.
Imagine developing ads that anticipated the user's behavior within the app. Not only will you be able to craft a more relevant message, you will deliver the ad in the natural flow of the user. Instead of interruption, you'll be able to measure if your advertising enhances the experience.
Event Data Requires A Special Analysis
Technically, behavioral event tracking is not a standard metric that you can use across applications. Each application will have unique use cases. To uncover insights from the behavioral data, you'll need an analytics tool like Interana that is designed to handle the challenges associated with event data.
Event data is unique. Actions take place in rapid successions, generating enormous volumes of data. Think about the number of times a user toggles back and forth from different features in an application. There could be hundreds if not thousands of events in a day.
Interana processes this raw data to answer event-driven questions like which cohorts took a specific action. This allows you to explore behavioral data trends through cohorts by asking questions that will help you better understand their behavior and the affect of your advertising.
Using the Right Metrics Changes Everything
At the end of the day, you want to implement metrics that will improve your advertising. By identifying the engagement metrics that get to the core of the user experience, you will create ads that contribute to the user-centric environment.
Your ads are focused on engagement. The application is focused on engagement. The user isn't put off by either. Everyone wins.