7 things Digital Startups Need to Know - User Engagement

Are Operating Metrics Indicating High User Engagement (Especially for Companies with an Indirect Monetisation Model)?

If users are not engaged, user growth may not lead to business success. Higher user engagement may enable a company to charge a premium price from advertisers to target its users. One of the most common methods is to track the number of daily active users (DAU) divided by monthly active users (MAU). For example, DAU to MAU for Facebook has been reported to be over 60%. This indicates that over 60% of its users access Facebook every day.

There is also a need to track industry-specific operating metrics. A social networking site needs to know if its users are spending more time on the site, and which activities they like to spend more time on. Both factors can determine what related ads should be displayed. For an Internet radio service, such as Pandora, user listening hours can help determine ad revenue. For an Internet video streaming service, such as Netflix, the amount of new content added each month will help determine if users will want to pay ongoing subscription fees.

YouTube, a leader in online video, benefits from advertising revenues. The company earned more than US$5 billion in ad revenues in 2013 and this is growing strongly. It has more than 1 billion unique visitors per month, making it one of the digital world’s most engaged viewer communities. Viewing time increased from 4 billion hours in September 2012 to 6 billion hours by mid-2014. These types of operating metrics shed key insights on these companies.

Report produced by: Asian Insights Office, DBS Group Research