Unveiling the Secrets to Benchmarking Social App Growth and Quantitative Product Market Fit

Unveiling the Secrets to Benchmarking Social App Growth and Quantitative Product Market Fit

Introduction:
The success of a social app hinges on its ability to attract and retain users. To achieve this, it is crucial to benchmark growth and determine if the product has achieved quantitative product market fit. In this article, we will explore the key metrics and benchmarks that can help social app developers and growth engineers gauge their app's performance and potential.

Defining Core Metrics: Daily Active Users (DAUs) and Weekly Active Users (WAUs)
The core metric for most consumer social apps is the number of daily active users (DAUs). This metric indicates the frequency with which users engage with the app, ensuring its relevance in their daily lives. For apps with less frequent use cases, weekly active users (WAUs) can also serve as a starting metric. However, the ultimate goal for social apps is to secure a coveted slot on the home screen, which requires a focus on DAUs. The benchmarks for monthly user growth in seed-stage consumer social companies are as follows:

• OK: 20% growth
• Good: 35% growth
• Great: 50% growth
  It is essential for this growth to occur organically, as social apps often lack the resources for extensive paid marketing. Organic growth also aligns with the viral nature of social apps, where users invite their friends to enhance the overall experience. If a significant portion (more than 10-20%) of users come from paid sources, it may be necessary to reassess the acquisition strategy and ensure that growth is driven by the product itself.

DAU / MAU Ratio and L-ness Curve
The DAU / MAU ratio is another important benchmark for social apps. It measures the proportion of monthly active users (MAUs) who engage with the app on a daily basis. The benchmarks for this ratio are as follows:

• OK: 25%
• Good: 40%
• Great: 50% or higher
  Best-in-class social apps exhibit an L-ness curve that "smiles" or has a "crooked smile" that skews right. This indicates that users make the app a regular part of their lives. For weekly L-ness curves, the focus shifts to L5+, which represents the number of users who engage with the app five, six, or seven days a week. This behavior suggests near-daily use and contributes to the overall success of the app.

Retention Metrics: N-Day Retention and Weekly Retention
Retention is a critical aspect of product market fit, and two primary metrics help evaluate it: n-day retention and weekly retention. N-day retention, also known as bounded retention, measures the percentage of the original cohort that continues to use the app on specific days (d1, d7, and d30). The benchmarks for n-day retention are as follows:

• OK: d1 50%, d7 35%, d30 20%
• Good: d1 60%, d7 40%, d30 25%
• Great: d1 70%, d7 50%, d30 30%
  Typically, the retention curve starts to flatten between d7 and d14 and plateaus around d20. For companies transitioning from a tool to a network, weekly retention becomes relevant. The benchmarks for weekly retention are as follows:
• OK: w1 40%, w4 20%
• Good: w1 55%, w4 30%
• Great: w1 75%, w4 50%
  Analyzing these retention metrics helps determine the stickiness of the app and its ability to retain users over time.

Cohort Analysis: Unveiling the Trend
While point-in-time numbers provide valuable insights, cohort analysis offers a deeper understanding of user behavior and product performance over time. Evaluating metrics across cohorts allows for trend identification and the observation of stability or improvement. A good social app exhibits strong network effects, where the product becomes more valuable as more users join.

Quantitative Product Market Fit: The Cohort Retention Rate
Determining quantitative product market fit is crucial for shifting focus from product improvement to distribution. The cohort retention rate emerges as the most important metric for this purpose. It minimizes false positives and false negatives, indicating when the product is good enough to start working on acquisition channels. A commonly used benchmark is when "40% of users would be 'very disappointed' if they could no longer use your product." This metric, along with a great cohort retention rate, indicates that the product has achieved product market fit and is ready for distribution.

Benchmarking and Growth Strategy
To find the right benchmarks for cohort retention rate, it is essential to evaluate comparable products that have achieved significant growth. Consumer products typically aim for a floor of 25% retention, while B2B SaaS products target 70%. However, it is important to remember that a great cohort retention rate opens doors for effective growth strategies and execution.

Actionable Advice:

1. Focus on organic growth: Prioritize product-driven growth and ensure that users are naturally attracted to your app. A strong viral component can enhance the overall user experience and drive organic growth.
2. Implement cohort analysis: Assess user behavior and product performance over time by analyzing cohorts. Look for stability or improvement in metrics to determine the success of your app.
3. Strive for quantitative product market fit: Aim for a cohort retention rate that aligns with industry benchmarks. When a significant percentage of users would be disappointed without your product, it indicates a strong fit for the market.

In conclusion, benchmarking social app growth and achieving quantitative product market fit are crucial steps for success in the competitive app market. By defining core metrics, analyzing retention rates, and conducting cohort analysis, developers and growth engineers can gain valuable insights to drive growth strategies and maximize user engagement. Remember, it's not just about acquiring users but retaining them and creating a product that becomes an integral part of their lives.