Average Revenue Per Daily Active User (ARPDAU) is an industry-standard metric that tracks a mobile game’s monetization performance. It tells a mobile app developer or marketer how well a freemium mobile game converts its players into cash.
On the face of it, it looks like a simple metric to interpret. The calculation is simple. An app developer simply totals the revenue between 00:00 and 23:59 and divides it by the number of unique users in that same time period.
App developers use ARPDAU to compare monetization performance over time. Every day they calculate the ARPDAU figure. If they release a new version of their mobile game, they hope that ARPDAU will increase.
Many app developers are aware that focus on a short-term metric like ARPDAU is slightly problematic. They know that lifetime value (LTV) is a better metric to measure long-term monetization performance. But many app developers are not aware of the bias in the way they calculate the ARPDAU metric.
To show why there is bias in the ARPDAU metric, consider a mobile game that only has two users. User A is active between 11.00 and 13.00 every day and they spend $1 during this period. User B also spends $1 per day, but they are active between 23.00 and 01.00.
In this contrived example, we know the average revenue on each day is $2. And the number of daily active users is 2. So the ARPDAU is $1.
But now suppose that User A and User B each skip a day after their activity. On the first day, user A is active and user B is not. On the second day, user A is not active and user B is active. But, on the third day, both users are active. This is because user B’s activity crosses the midnight boundary that separates days.
Now something strange happens. When you calculate ARPDAU for day 1, you get $1. But when you calculate ARPDAU for days 2 and 3, you get $0.50 and $0.75, respectively. If you took an average ARPDAU over a period of time, you would get a figure of $0.625.
To take this even further, consider now that we have groups of User As and User Bs. If we looked at the ARPDAU for Group A, we could expect a figure of $1. But if we did the same calculation for Group B, we would get a figure of $0.50. This is despite each group being identical as far as monetization behavior is concerned.
In actual fact, the problem is in the way that most app developers calculate daily active users (DAU). This is usually calculated as the number of users that are active in a 24 hour period of time.
This 24 hour period of time could be a day in the Pacific Time Zone if the app developer is in San Francisco. That timezone is UTC-08.00. If you expect most users to be American and be active midday, you do not have a problem.
But suppose you want to compare how monetization is performing in Europe, which is more like UTC+00.00 to UTC+03.00. You might think you can simply look at ARPDAU for this specific segment of users. But many of these users’ activity will cross the Pacific Time day boundary. And so there is a small bias to under-report revenue from this group.
This bias will be present whenever you use a fixed timezone as your definition of ‘day’.
For the vast majority of mobile apps, this bias should be small. In fact, you can probably forget I ever said anything.
ARPDAU and DAU are extremely important metrics to mobile app developers. And I do not think that should change. They are a great way to compare performance over time and, if you are cautious, to compare performance between mobile apps and groups of users.
The key point I am making is that performance metrics can look simpler than they actually are. ARPDAU and DAU seem like simple and easy-to-interpret metrics. But, once you start thinking about the definitions in more detail, you see minor flaws. It is important to know what the limitations of your metrics are.