By 2025 experts estimate there will be roughly 7.49 billion mobile users across the globe.
Do you want to make sure your business’s app is on track to reach as many of these people as possible? If so, then you need to make sure you’re monitoring mobile app growth consistently.
Don’t know how to measure month-over-month growth for mobile apps? Read on to find out.
What Is Month-Over-Month Growth?
Month-over-Month (sometimes abbreviated to MoM) growth is the smallest unit of measurement one can use to track a business’s rate of growth. Larger metrics might include Quarter on Quarter or Year on Year growth.
MoM growth is most commonly used for startup companies that don’t yet have a lot of data to reference. Looking at MoM growth helps these businesses to create projections and get a sense of where they’ll be in the future.
You can use the MoM growth formula to monitor all kinds of growth, from the number of people using an app to the amount of revenue your company has generated since launching its app.
Why Should You Measure MoM Growth?
It’s important to note that the figures generated by measuring month-over-month growth are fairly granular. They typically don’t (nor should they) hold as much weight as the figures generated by measuring quarter on quarter or year on year growth. This doesn’t mean they don’t matter, though.
Measuring MoM growth is a beneficial practice, especially for new businesses that have just recently launched an app or another product for a few reasons.
First, tracking MoM growth is better than not doing any tracking at all. In the beginning, you won’t have a lot of data to work from, so any information you can gather about your business’s performance will give you and your team (as well as potential investors) something to work with.
Second, tracking MoM growth allows you to see the power of compounding and exponential growth in action. Even if your MoM growth is small at first, you’ll still be able to tell if you’re moving in the right direction and getting closer to achieving your goals.
How to Measure MoM Growth
The formula for calculating month-over-month growth is pretty simple. Let’s start by defining the variables:
- X: Percent increase or decrease
- Y: Month 2 numbers (users, revenue, etc.)
- Z: Month 1 numbers (users, revenue, etc.)
The formulate is as follows: X = (Y – Z) / Z * 100
In other words, to calculate the percent increase or decrease, you will subtract your Month 1 numbers from your Month 2 numbers, then divide that amount by the month 1 numbers. Finally, you’ll multiply that amount by 100.
For example, let’s say you had 1,000 users in Month 1 and 2,000 users in Month 2. This means your number of users increased by 100 percent.
Measuring MoM Growth Over Multiple Months
It’s great to find out that your company has seen 100 percent growth in user numbers in just one month. However, that data point, by itself, doesn’t tell you very much about your company’s long-term potential. This is why tracking MoM growth over multiple months is valuable.
Compounding Monthly Growth Rate
When looking at MoM growth over multiple months, one of the most important figures is your business’s Compounding Monthly Growth Rate (or CMGR). This number refers to the average MoM growth over a given period (usually between 6 and 18 months).
Before we get into the formula to calculate CMGR, let’s break down the variables, just like we did in the previous section:
- X: CMGR percent increase or decrease
- A: First-month measurement (number of users, amount of revenue, etc.)
- B: Last-month measurement (number of users, amount of revenue, etc.)
- Y: Last month
- Z: First month
The formula to calculate CMGR is as follows: X = B/A 1/[Y – Z] – 1
For example, let’s say at the end of the first month, your app only had 100 users. By the end of the 12th month, though, you’d increased to 5,000 users.
Here’s how you would calculate your CMGR over 12 months: CMGR = 5,000/100 1/[12 – 1] – 1
Based on these calculations, the compounding monthly growth rate over 12 months is 42.71 percent.
Another way to measure growth over multiple months is to look at exponential growth. Exponential growth looks at the cumulative effects of compound growth over a longer period of time.
The variables used for calculating exponential growth are as follows:
- X0: The starting value
- r: the rate of increase or decrease
- t: = time in equal intervals expressed as an integer
The formulate for calculating exponential growth is as follows: Xt = X0(1+r)t
For example, let’s say your app acquired just 500 users in its first year. In year 2, the number of users increased by 10 percent, reaching 550 users. If this rate of growth continued, by the end of 5 years, the formula mentioned above suggests that you would have 805 users.
On the other hand, if you achieved exponential growth of 100 percent over that same 5-year period, your number of users could increase far more dramatically.
Using the same formula and assuming your number of users increased by 100 percent instead of 10 percent, you could expect to have 16,000 users at the end of 5 years. That’s a pretty big difference, isn’t it?
How to Achieve Exponential Growth
After reading through the examples in the last section, you might be itching to set your business up for exponential growth. How can you achieve it, though? How can you see continuous increases in users, revenue, etc. of 100 percent?
In terms of business growth, exponential growth is often attributed to “viral coefficients.” Let’s use word-of-mouth marketing as an example.
Imagine one person downloads your app. Then, they invite 10 friends or family members to download the app. Then, those 10 people each invite 10 more people to download the app. Pretty, soon, the number of downloads you’ve experienced has increased dramatically.
Keep in mind, too, that products like apps typically become more enticing as more people begin to use them.
If only 100 people were posting on Instagram, it wouldn’t be too intriguing. Because over 1 billion people use this app, though, there’s a practically endless number of pictures and videos to be viewed, which makes it incredibly entertaining for people of all ages, genders, etc.
Most Common Mistakes Made When Tracking MoM Growth
If you’ve never tracked month-over-month growth, it’s easy to make mistakes when performing the equations listed above or interpreting their results. Here are some of the most common mistakes businesses make when tracking MoM growth and how to avoid them:
Ignoring Absolute Figures
In the early days of your business, you may be tempted to rely too heavily on the percentages you’ve calculated while looking at month-over-month growth.
For example, saying that your number of users has increased by 20 percent sounds a little more impressive than saying that you gained 20 new years this month (up from 100 the previous month).
If you rely too much on percentages, you may accidentally misrepresent your company’s performance. This won’t make you look very good to potential investors.
Calculating “Vanity Metrics”
The term “vanity metrics” refers to metrics that don’t truly matter to your investors, your accounting team, or other professionals.
Every business has different KPIs that contribute to revenue and growth. If you are ignoring these metrics and focusing on others, that would be an example of assigning too much weight to vanity metrics.
Don’t get so bogged down by the number of page views you’ve received or the number of people who have subscribed to your newsletter to distract from a decrease in revenue or a decrease in the number of your app’s monthly active users. Focus on what’s most important to your business’s long-term success.
Ignoring Other Valuable Metrics
At the same time, while it’s helpful to look at MoM growth, this figure is not the end-all-be-all. The same goes for related data, such as CMGR and exponential growth.
Don’t let yourself be so sucked in by these numbers that you ignore other relevant and valuable metrics that can provide insight into how your app and business are performing.
What Other Metrics Should I Be Tracking?
As we mentioned above, there are other valuable metrics you can (and should) look at in addition to month-over-month growth. When looking at your app’s performance and predicting its long-term success, here are some other key metrics to keep in mind:
User Retention Rate
Your retention rate lets you know how many people are sticking with your app and continuing to use it after initially downloading it. Most experts say that a retention rate of 25 percent or higher is ideal.
To calculate your app’s retention rate, divide the number of monthly active users by the number of monthly installs. For example, if you had 3,000 monthly active users and 12,000 monthly installs, you’d have a retention rate of 25 percent.
The way you measure your app’s conversion rate will vary depending on the specific KPIs (key performance indicators) you’ve set for your business.
For example, if your app operates based on a freemium model, you’ll want to look at the number of upgrade conversions. You may also want to track other metrics like the number of opt-ins in a month or the number of people who sign-up for the app in a given month.
Monthly Active Users
The term “monthly active users” (or MAU) refers to the number of people who have engaged with your app within the last month.
When you experience significant MAU growth and a significant increase in your app’s retention rate, there’s a good chance your business is doing well. This can also be a sign of a strong viral coefficient and increases your chances of experiencing the benefits of exponential growth.
Customer Acquisition Cost
The customer acquisition cost is the amount of money your company has to spend to onboard a new app user. To calculate customer acquisition cost, you’ll need to add the cost of sales and marketing, then divide that amount by the number of new customers you’ve acquired in a given period.
For example, let’s say your business spent $10,000 on sales and $20,000 on marketing. If this was the case, you’d have spent $30,000 in total. If you acquired 10,000 new app users in that period, your customer acquisition cost would be $3 (for reference, the average customer acquisition cost for a mobile app is $3.52).
If your customer acquisition cost is too high, you’re going to have a hard time seeing returns on your marketing and sales investments. This, in turn, eats into your business’s profitability and affects your bottom line.
Some businesses might be hesitant to track error reports. After all, who wants to focus on the negative?
However, tracking the number of errors your users encounter in a month (or any other given period) provides a lot of insight into how your business is performing when it comes to addressing customer concerns and creating a more positive user experience.
If the number of error reports you receive is decrease month after month, that’s a sign you’re on the right track. If the opposite is true, that might be a sign that you need to go back to the drawing board and address some bugs.
Get Help Measuring Mobile App Growth Today
Now that you know more about how to measure month-over-month growth for mobile apps, are you ready to make some changes to your data monitoring system?
Keep the tips listed above in mind and you’ll have a much easier time tracking growth and making sure you’re on the right track toward achieving your business goals.
If, after measuring mobile app growth for a few months, you decide that you want to make some changes, reach out to us at Alpha Bravo Development. We can’t wait to sit down with you and help you create a plan to take your app to the next level.