What are ROAS and LTV Part 2 | Easy-to-Understand Explanation of App Advertising Terms!

October 16, 2022

In the first part of the article, we explained indicators such as CPI and CVR and the factors that change them, with the aim of "not only superficial understanding, but taking appropriate action according to the indicators"!


This time, I will mainly explain the indicators that lead to the evaluation after installation, such as DAU and ROAS, which I could not introduce last time.


*This article is based on app marketing. Please note that the definition may differ from general advertising operations.


1. What are DAUs/MAUs?

DAU/MAU is the number of active users in a certain period of time.


Active users are users who are using the app, but are they actually using the app after installation? Since most apps generate revenue not only by installing the app but also by using the app, DAU/MAU, which measures the actual usage of the app, is an indicator that marketers should pay close attention to!


Difference between DAU/MAU

Let's take a look at the differences between DAU/MAU and app genres suitable for evaluation.




DAU is an abbreviation for "Daily Active User" and represents the number of active users per day. It is easy to use for apps that are often launched multiple times a day, such as SNS, game apps, and manga apps.




MAU is an abbreviation for "Monthly Active Users" and represents the number of active users per month. It is easy to use for apps that are often launched multiple times in a month, such as e-commerce apps and travel reservation apps.


As you can see, the metrics to be looked at differ depending on the app genre, and the numerical value varies depending on the metric to be compared, such as "DAU is low but MAU is high", so let's check the appropriate metric for the app genre!


* As some of you may have noticed, the index showing the number of active users per week is called "WAU (Weekly Active Users)"!


How to increase DAU/MAU?

So, what measures should be taken to increase DAU/MAU? Here, using the case study of the App Marketing Institute, we will introduce two measures!


1. App name for which push notifications are allowed


In the Gunosy news app “Gunosy,” the usage time of users is greatly biased, and the result is that it matches the time zone when push notifications are sent. Therefore, it is important to ensure that push notifications are allowed when the app is first launched, and that there is a way to continuously reach out to users.


Click here for more details:

https://markelabo.com/n/n2c3273108ba1   / App Marketing Institute


2. Improved UI


App name: Minu In - an app that allows you to create menus for up to a week by changing the default number of days to create menus from 1 day to 7 days. The number of people who spent 30 days or more in 45 days increased by 2.3 times. This seems to be due to the fact that many households use "one week's worth" as a guide when planning menus or shopping.


In this way, changing the UI considering the usability of users will lead to an increase in the number of users who use the site regularly for a long time.


Click here for more details: https://markelabo.com/n/n29d0b940fe7b  / App Marketing Institute


The above two measures alone are important measures for increasing DAU/MAU, but it is necessary to take measures according to the genre of the app and the characteristics of the user.


2. What is the Retention Rate?

The retention rate is the continuation rate, starting from the day the app was installed, but how many users are using the app a few days later? 


Retention rate = (number of active users after X days / number of installations) x 100


For example, if there were 500 installs on April 1st and 100 active users after 14 days (April 15th), the retention rate after 14 days is 20%.


[Calculation method]

Retention rate after 14 days

= (number of active users on April 15th / number of installations on April 1st) x 100

= (100/500) x 100

= 20(%)


This means that 20% of users who installed the app on April 1st are still using the app 14 days later.


Also, here we calculated the retention rate after 14 days, but in the case of app ads, retention rates after 1, 3, 7, and 14 days are often evaluated.


3. What is ARPU/ARPPU?

This is a metric that represents revenue per user, and for daily/monthly terms, it is written as daily ARPU/monthly ARPU, etc.


Let's take a look at the differences between the two.




Abbreviation for "Average Revenue Per User", which represents the average revenue per user.


ARPU = sales / number of users




Abbreviation for "Average Revenue Per Paid User", which indicates the average revenue per paying user.


ARPPU = sales / number of paying users


For example, if there are 50,000 daily users, 500 paying users, and sales of 500,000 yen, the daily ARPU is $10 and the daily ARPPU is $1,000.


[Calculation method]

Daily ARPU

= 500,000 yen ÷ 50,000

= 10 (yen)


= 500,000 yen ÷ 500

= 1,000 (yen)


Also, at this time, there are 500 paying users out of 50,000 users, so the conversion rate to paying users is 1%


In addition, when ARPU is high, there are two factors that can be cited: "there are many paying users" or "high ARPPU (=high billing amount per person)", and it is necessary to consider which is the cause.


4. What is LTV?

LTV is an abbreviation for “Life Time Value” and represents the revenue generated by one user over his or her lifetime. By grasping this indicator, how much CPI should be set?


LTV is basically calculated by dividing ARPU by withdrawal rate. For example, if ARPU is $500, the LTV of an app with a withdrawal rate of 20% is $2,500.


[Calculation method]


= $500 ÷ 0.2 (= 20%)

= $2,500


If you want to collect 100% revenue here, you need to stay within CPI $2,500, which is an important indicator to know your CPI tolerance!


Difference from ARPU

ARPU is an index that shows the average revenue per user, but not all users will necessarily use the app for the long term, and it is possible that they will stop using it in the middle. We can say that LTV is the average revenue per user that takes into account these users who leave.


5.What is ROAS?

ROAS is an abbreviation of "Return On Advertising Spend" and represents the cost effectiveness of advertising. It is also said to be a recovery rate to represent how much you can collect as sales against advertising expenses!


CPI, which was introduced in the first part, shows how much it costs to acquire installs, but ROAS can measure whether or not sales are actually generated from billing after installation and viewing of advertisements.


For example, if you are using a million dollars for advertising expenses in a month and sales are two million dollars, ROAS is 200%.


[Calculation method]


= (sales from apps / advertising expenses) x 100

= (2 million / 1 million) x 100

= 200(%)


This indicator can be used as a guideline for advertising expenses, and if ROAS falls below 100%, it means that investment in advertising and other expenses has not been recouped in sales. Your approach may need to be reviewed.


In terms of ROAS, there are many cases where ROAS is tracked not only for the current month, but also for 2 months, 3 months, and 4 months


Relationship between ARPU/ROAS/CPI

In addition to the above formula, it is also possible to calculate ROAS = ARPU ÷ CPI, and it is good to understand the relationship between the three indicators.


*ROAS and ARPU need to match the period.


For example, an app with a monthly ARPU of $300 and a CPI of $150 will have a monthly ROAS of 200%.


At this time, in the case of an app with a monthly ROAS of 300% as the KPI for advertising, the target will not be achieved.


In this way, ROAS is a figure calculated from indicators such as CPI and ARPU, and is it a good figure compared to the target? By judging, it becomes an element for thinking about the next action.



What did you think?


In Part 1 and Part 2, we have introduced indicators related to app advertising! By all means, please try to use it for actual advertising operations together with the numbers and terms on the management screen introduced in the first part!