Mar 22, 2024
Metrics and calculation formula :Month-over-month growth
Many metrics, such as conversion rates, retention rates, and monthly active users, should be measured month after month to assess the performance of your mobile app.
Tracking these metrics monthly and comparing their performance month after month allows you to connect the changes you see to the things you tried during those periods and understand what works. If something appears to work, you can determine whether it is repeatable and can help you achieve immediate short-term success. Averaging these metrics' month-over-month performance over a reasonable time period allows you to understand how your app is growing and set reasonable growth goals (with accurate projections). Monthly growth trends can help you adapt your strategy and ensure long-term growth.
Overall, month-over-month growth analysis is critical for your mobile app's short- and long-term success. In today's mobile app growth primer, we'll define month-over-month growth and explain how to calculate it. We'll also look at the common errors that occur in month-over-month analysis and how to avoid them. And more.
What is the month-on-month growth rate for App Revenue?
The month-over-month growth rate of a metric is the amount it changes (increases or decreases) from one month to the next. Month-over-month growth rates can be calculated for a variety of metrics across the mobile app marketing funnel stages, such as user base from acquisition, revenue from conversion to churn, and active user base from retention.
Advantages of month-to-month growth metrics
MoM growth analysis is an excellent tool for controlling rapid growth
When it comes to growing your mobile app, especially if it's new, you need to use a variety of channels, including ASO, PR, and referral marketing. Many of these strategies, such as paid advertising, produce immediate results. When you track your month-to-month metrics, you can easily connect your growth to your sales and marketing efforts. Knowing what works for you can help you keep your business going, at least in the short term. This is especially true when you compare your returns to the investment you make, such as looking at user acquisition while keeping track of your acquisition costs. Month-over-month analysis is a useful tool here.
MoM growth analysis improves agility.
Month-over-month growth rate analysis enables more agile decision-making. So you can fine-tune your sales and marketing strategies and see results almost immediately, within a month. This means you don't keep doing things that yield low returns.
When done correctly, month-over-month analytics can help you identify trends, make adjustments, and continuously improve your strategies for long-term growth. Furthermore, by closely monitoring your spending and returns, you can make informed decisions and create a comprehensive growth engine to achieve compounding growth.
How to compute the growth rate (MoM) from month to month
To calculate your MoM growth rate for a metric, take the current month's value, subtract it from the previous month's value, and divide the difference by the last month's value. MoM is expressed as a percentage, so the formula for month-over-month growth rate is as follows:
MoM growth rate is calculated by dividing the current month's value of a metric by the previous month's value and multiplying by 100.
For example, if you reported adding 500 users in January and 750 in February, your month-over-month growth rate is calculated as ((750-500)/500)*100, which equals 50%.
Let's say you only had 500 users in March despite reporting 750 in February. In this case, your month-over-month growth rate is -33% ((500-750)/750*100). This represents "negative" growth.
Finally, assume you added 650 users in April after 500 in March. So, in this case, the month-over-month growth rate is 30% (((650-500)/500)*100).
These calculations highlight a few limitations when calculating month-over-month metrics.
Common caveats when working with month-over-month growth rates
Month-over-month metrics can fluctuate significantly.
As we saw in the preceding example, month-over-month metrics can fluctuate significantly.
Assume you have a new app and are investing money in several different strategies each month. And that your successful mobile app PR in January resulted in hundreds of new users. You tried paid advertising in February, but it did not perform well. In March, you worked on app store optimization and SEO, but no new users were added right away.
While these experiments across different channels can help you decide which ones to prioritize, the numbers they produce are directly reflected in your month-over-month analysis, skewing the entire analysis.
Monthly metrics may not be useful on a small scale.
If you start with 500 users in January and add 500 more in February, you will see a 100% month-over-month growth rate (from 500 to 1000 users). Calling this your month-over-month rate, even though it is for this example and time period, is incorrect. This is common when dealing with small numbers.
Archana Madhavan of Amplitude puts it succinctly: "Huge MoM growth is much easier to achieve with smaller numbers." That means it's easier to create a narrative around your MoM growth for small numbers, but more difficult to sustain that rate as your business grows."
Here, Adapty reports a great new subscription acquisition for an app in its first month.
Almost always, month-over-month metrics require absolute numbers as context.
Assume you calculate your app's month-over-month metrics over the course of a year and find a consistent 25%. This appears stable and good, but you may only have about 1000 users by the end of the year. So, even with a 25% month-over-month growth rate, how many users could you expect to have by the end of the year? By the way, it's probably around 15000. This “future value” is calculated using the future value formula, which we’ll see in the next section.
In most cases, month-over-month growth rates can be misleading. For more context and accuracy, report MoM alongside absolute numbers.