Measuring Revenue in F2P Games – Cheatsheet

measuring game revenue with virtual currencyIf you are just getting into freemium or free to play mobile games  and considering being self-published you can get easily confused by all the terms that you will hear about calculating your revenues.
Before you start, you might want to understand why some companies get so obsessed with figuring these out. It’s usually not because they like counting their dollars. There is something else going on here – in order to have a successful game these days they need to do marketing and balance the marketing costs vs. revenue so they don’t end up loosing millions of dollars. The way this is done is by focusing on the average of a single user. What does it cost to get someone to use your game (buying a user)? How much will that user end up paying (how much is he worth to you)? These are the essential questions that all these terms for measuring revenue are trying to answer.
DAU – Daily active users, what is the average number of users playing in a single day
MAU – Monthly active users, what is the average number of users playing in a given month. Note that this is usually not 30 x DAU as some users come back to play during the month.
ARPDAU – Average revenue per daily active user. Calculated as the average daily revenue divided by the number of daily active users.
D1, D2, … Revenue – The ARPDAU grouped by days since signup rather than grouping by calender day. This can be calculated on a monthly basis by looking up all the users who joined in the last 30 days, aggregating all the revenue they contributed in their first day of playing and dividing by the number of users who joined. This parameter is important in many calculations that try to predict the overall worth of the user early on.
ARPMAU – Average revenue per monthly active user. Calculated as the average monthly revenue divided by the number of monthly active users.
ARPU – Average revenue per user. Usually means ARPMAU.
ARPPU – Average revenue per paying user. The total revenue from users who pay divided by the number of users who pay.
ARPP – Average revenue per purchase in your in-game store. How big are the transactions on average?
Conversion rate – How many of your users are actually paying.
LTV – Life time value of a user is the total revenue that an average user will contribute before he completely stops playing the game. While this is a key parameter, it is technically impossible to calculate in time for it to actually matter. The LTV is often estimated using different formulas and calculations that relay on one or more of the metrics above.
CPI – Cost per install, the amount of money paid for a new install.
CAC – Customer acquisition cost. The entire user acquisition budget divided by the amount of new users for the same period.
Churn – the amount of users that stop playing as percentage of the total number of users
Magic number – CAC divided by ARPMAU – this gives you a sense of how many months it takes you to recover your user acquisition investment. The lower this is the better. If it’s more than 3 you are likely to be losing money.
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