Many businesses have the question, who are my active users, and has that number gone up or down?
For any successful business, it’s really important to understand who your active users are, as well as whether you’re getting more of them or less. Typically, getting and retaining more active users correlates well with business outcomes such as monetization and retention.
Step 1: Define who an active user is. This is a deceptively simple question but is actually quite deep. To determine an active user,
First, you need to understand how users get value from your application
Second, you need to figure out the natural frequency of getting that value.
For example, with a video-streaming application like Netflix, a user gets value by watching videos. We’d probably assume that Netflix’s users watch shows at least on a weekly basis. So we might start with a definition of an active user as someone who has “watched at least one video in the last week.”
This differs for each industry and varies with companies’ business models, so choose your active user definition wisely.
Step 2: Think about how the active user metric ties with your product / business goals. For example your business goal might be retention. You should check whether the active user metric does tie in with retention since you’d expect an active user to be highly likely to be retained. There are qualitative and quantitative aspects to this.
Qualitatively, we might want to weed out edge cases. What if the Netflix user was someone who just started watching a lot of shows but never really found anything interesting. This person would count as an active user but is not really active since they’ve not found value. To remedy this, you may want to put in a higher bar such as someone who watched a video for at least 20 minutes. So your active user metric would be “user who watched at least 1 video that was longer than 20 minutes, in the last 7 days”
Quantitatively, we want to check that this correlates with our business goal of retention. For example, we might want to check our active users cohort retention.
And here, we see that the active user cohort is much more likely to retain 6 months later. Its helpful at this stage to test a few other definitions and see if one is better at predicting retention than the other.
Step 3: Now that we have aligned on the definition of an active user and defined that cohort, the next question becomes - how has my number of active users changed over time. This is very easy to do in insights, by plotting a trend of the cohort of active users.
Of course, one question keeps leading to another and you might have more questions such as - how do users become active users, or what platforms show more activity, and its easy to keep digging deeper and deeper into Mixpanel to get those answers.
The ‘Why’: Doing this analysis helps understand how your active user base is growing, and what impact the work you’re doing in converting users to active users is going to drive your business goals. In addition, you could also use the insights from key actions to encourage users to become more active, such as showing them suggested videos, or getting them to interact with videos.