The Importance of User Retention in Mobile Apps and the Strategies for Success

The Importance of User Retention in Mobile Apps and the Strategies for Success

In the ever-evolving world of mobile apps, user retention is a crucial factor in determining the success of an app. New data has revealed some staggering statistics about user retention rates, shedding light on why the best apps consistently outperform others. According to Quettra's data, the average app loses a significant number of its daily active users (DAUs) within a short period of time. Within just three days after installation, the average app loses 77% of its DAUs. This number increases to 90% within 30 days and a staggering 95% within 90 days. These figures highlight the importance of engaging and activating users during the critical first 3-7 day period.

To understand why some apps perform better than others in terms of user retention, it is essential to examine how the product is described, the onboarding flow, and the triggers set up to drive ongoing retention. Top apps that have successfully retained their users are those that offer immediate utility and are repeatedly used within the first week. Interestingly, the drop-off rate for these top apps is similar to that of average apps. Therefore, the key to bending the retention curve lies in user activation rather than spam-like notification strategies.

It is important to note that bombarding users with spammy email notifications with subject lines like "We Miss You" is unlikely to significantly impact user retention. The real challenge lies in targeting the first few days of usage, especially the first visit. This is where the true potential for bending the retention curve lies. Instead of relying on notifications, app developers should focus on creating an onboarding flow that seamlessly guides users through the app's features and benefits. Additionally, how the product is described plays a crucial role in attracting and retaining users. By effectively showcasing the app's value proposition and highlighting its unique features, developers can increase the chances of users sticking around.

User retention is not just a concern for app developers but also for companies operating in two-sided markets. Nobel Prize winner Jean Tirole's paper, "Platform Competition in Two-Sided Markets," co-authored with Jean-Charles Rochet, provides valuable insights into the pricing strategies employed by leading internet companies like Google and Facebook. The paper emphasizes the difficulty in determining the correct pricing strategy and highlights the diverse strategies adopted by firms in two-sided markets.

The internet serves as a prime example of a two-sided market with extremely low marginal costs of serving an additional customer. While it may cost a significant amount of money to run platforms like Facebook or Google, the cost of serving one more customer is minimal. This unique characteristic enables these companies to offer their products for free to customers on one side of the market, thereby maximizing the size of their user base. They then generate revenue from the other side of the market. This approach has proven to be the dominant strategy on the web.

The popular saying "if you're not paying for the product, you are the product" holds true in two-sided markets. Whether the platform owner charges you or not, you are both the customer and the product simultaneously. However, what sets ad-supported web services apart is their ability to offer a free product to one side of the market due to the low variable costs associated with serving additional customers. This economic feasibility creates an environment where a single firm can dominate the entire platform industry.

In conclusion, user retention is a critical factor in the success of mobile apps. The data shows that the average app loses a significant portion of its users within a short period of time. However, the best apps have managed to bend the retention curve by focusing on user activation during the first few days of usage. By creating a seamless onboarding flow and effectively describing the product, app developers can increase the chances of user retention. Additionally, understanding the strategies employed by successful companies in two-sided markets, as highlighted by Jean Tirole's paper, can provide valuable insights into pricing and dominating the industry. To improve user retention, here are three actionable pieces of advice:

1. Focus on the first 3-7 days of usage: Create a compelling onboarding flow that guides users through the app's features and benefits, ensuring they find immediate utility and repeatedly use the app within the first week.

2. Clearly describe the product: Highlight the app's value proposition and unique features to attract and retain users. Effective product descriptions can significantly impact user engagement and retention.

3. Understand the dynamics of two-sided markets: Study the strategies employed by successful companies in two-sided markets to gain insights into pricing, maximizing user base, and dominating the industry.

By implementing these strategies and understanding the importance of user retention, app developers can increase the chances of their apps succeeding in a highly competitive market.