73% of mobile app users churn after 90 days in average. Sounds scary? That’s the hard truth every mobile app founder needs to face.
Whilst all mobile apps are unique and don’t share the same characteristics nor the same users, it is very important for anyone running or launching a mobile app to be aware of industry average metrics.
Do you want to estimate an accurate and realistic churn rate for your new mobile app business? Or do you simply need to assess how your retention rate is vs. competitors? Read on!
What is retention rate for Mobile Apps?
Retention rate is the percentage of users who continue using your mobile app over a given period of time. You might have heard of churn: it’s simply the inverse of retention. For instance if 90-day retention rate is 20%, then 90-day churn rate is 80%.
Marketers and venture capital firms usually compare day 1, 7, 30 and 90 retention rates to assess whether a mobile app has a successful retention strategy. Why so early? Because mobile apps, unlike other businesses (e.g. SaaS) have a very unique retention curve. In short, if users churn, they do very early. This is mainly true for the following reasons:
- Mobile apps are business-to-consumer (B2C) and as such, consumers are more likely to churn early vs. B2B businesses. Read on our article about B2C vs. B2B SaaS churn here to understand why is that so
- Most mobile apps offer a free plan (or at least, a free trial) which make it easier to acquire users. Yet offering a free plan also triggers a lot of ‘impulsive’ downloads: how many times did you download an app which you deleted the same day?
How to calculate retention?
The simple formula
There are multiple approaches to calculate retention depending on your business, and the timeframe you are looking at. Yet the easiest way to calculate retention rate is to divide the number of retained users (the users who did not churn) over a given a period by the total number of users at the start of the period.
Retention rate = # of users retained at end of period / Total # of users at the start of the period
Going a little bit deeper: cohort analysis
Whilst the simple formula above is correct, it assumes all your customers are on the same level.
Instead, it makes sense to compare retention evolution for the same cohorts. Indeed your product, onboarding process, pricing, billing cycle, discounts, and a lot of other factors might evolve along the way. This means different cohorts (i.e. different users downloading your app at different times) do not necessarily get the same customer experience.
For instance, you would look at cohort January 2021 and see the evolution of monthly retention throughout the year vs. the same analysis six months later for June 2021. If you can demonstrate both your overall retention (simple formula using total customers) and the retention rates of the respective cohorts are increasing over time, you are doing a great job.
What’s a mobile app good retention rate?
73% of users churn within the first 90 days
In 2019 Uplandsoftware ran a study across 37,000 mobile apps in various industries and measured retention over time. Retention is defined here as the number of users who opened the app at least once over a given period. The study measured retention over 1 month, 2 months and 3 months.
As you can see in the chart below, out of 100 downloads, in average only 27 users kept using the app after 90 days.
Benchmark per industry
All mobile apps are unique and share different characteristics: pricing, users, etc. As such, they do not the exact same retention curve.
The same study observed retention rates for 37,000 mobile apps and segmented them by industry. Interestingly, some sectors seem to perform better than others. For instance, financial services mobile apps (financial planning, investing, banks, etc.) seem to have stickier users over time vs. media and travel. This can be explained for a number of reasons:
- Some financial services mobile apps are the extension of another business. For example, a bank who creates its own app for users to check their balance on their smartphone benefit from existing customers. As such, these customers are less likely to churn.
- Financial services apps tend to be more important, day-to-day services to the consumer vs. other discretionary (or even luxury) services. Checking your bank balance and making a payment to a friend or a supplier on your smartphone is a more of a day-to-day need vs. scrolling through a digital newspaper mobile app.
Amongst all industries, gaming is by far the most challenging to create retention. Indeed, for a number of reasons such as:
- Oversupply: the number of gaming apps vs. the number of gamers is quite high. Therefore the consumer can be very picky when choosing a game
- Short lifetime usage: most gaming apps are impulsive downloads and, as such, users either finish the game or are bored of it within a few days, if not a few hours only
- Revenue model: most gaming mobile apps do not offer subscriptions but in-app purchases instead (see below). Therefore, consumers are easier to acquire yet less sticky as well (unlike subscription apps e.g. fitness).
- Pricing strategy: many gaming apps have in-app purchase revenue model whereby the first few minutes, if not hours are designed so the users does not need to pay. This is a very common technique marketers use to ‘hook’ the users before conversion (before they make their first purchase) as they are more likely to be repeat buyers that way (they will likely buy multiple times over their lifetime)
As you can see below, churn rate is all the more high for gaming apps as it happens early: in average, only 4% of users are using a gaming app after download. This is really important to understand where budgeting your acquisition strategy, especially if you opt for paid acquisition. For more information on customer acquisition costs, customer lifetime value read our article on the 9 most important mobile apps metrics.
When assessing your churn rate, whether you have an existing mobile app or you are planning to launch one, have a look at industry benchmarks first. Select the industry that makes more sense to you, and list all the elements that can drive up or down retention vs. the average. These factors can be anything such as pricing, onboarding, one-off vs. subscription product, etc. This will give you a pretty good churn and retention rate estimates which will allow you to make better decisions for your mobile app business.
Do you need help in building a realistic, yet rock-solid financial model for your Mobile App startup? Check out our template below: