KPI's 101

The purpose of this article is to introduce you to critical aspects of KPI’s which are popularly used in mobile games, apps, social media, marketing, and websites.

Introduction

Business can estimate the risk work represents and the precise objectives needed to be reached in order to be successful. One of the tools business users to track and measure progress are Key Performance Indicators (KPI’s).

What Are Key Performance Indicators?

KPI’s are metrics that are used to measure performance. The metrics used are defined by the business to measure something specific which is quantifiable and of value

KPI’s are metrics that:

  • Are quantifiable and relevant, they help you understand how you are doing against a specific goal, project or activity.

  • Help you to evaluate the success of your product or service.

  • They can provide a broad understanding of the current position of your service,  product or business.

  • They show your progress towards key goals.

DUMB

KPI objectives must be DUMB;

  • Doable.

  • Understandable.

  • Manageable.

  • Beneficial.

KPI’s should be as simple and focused as possible, do not dilute them by trying too measure to many complex things at once.

KPI Data

It is not just about collecting all data. You must define what data you want to collect, who you are collecting the data from, how to collect it, how to store it, costs involved and how to translate it into meaningful information which can be measured against your KPI.

To do this you may choose to use 3rd party tools but in many instances, you will need to write custom code to collect specific data and create custom analytics tools.

KPI Common Terminology

Relevant Formulae:

  • Reach = Number of unique users who saw the ad

  • Frequency = How many times on average the ad was served per person

  • Impressions = Reach * Frequency

  • Installs = number of installs received from the campaign

  • CTR (%) = Click through rate = Clicks/Impressions

  • CVR (%) = Conversion rate = Installs/Clicks

  • CPM = Cost per 1000 impressions.

  • Amount Spent on Ad = Impression/1000 * CPM

  • CPI = Amount Spent on Ad / Bought Installs

  • ARPU = Average Revenue per User

  • ROI (%) = [(Gain - Cost) / Cost] * 100

  • ROI = LTV – CPI (Negative value means that your game is alive at a loss).

  • LTV (lifetime value)

  • Bought Installs (Users) = Installs acquired as a direct result of the ad

  • Organic Installs (Users) = Every install that is not bought

  • Retention =  Ability to retain customers and generate recurring revenue from existing customers.

  • Churn = Rate at which you are losing customers.

  • MAU = Monthly Active Users.

  • DAU = Daily Active Users.

  • ASL(PU) = Average Session Length per User

  • Sticky Factor = DAU/MAU. (A sticky factor of 0.1 or 10% means that for each new player that starts playing your game, you have 10% chance to turn him into a daily user. And your daily users will be the ones who will most likely spend money on your game).

KPI's In Practice

In the entertainment industries, KPI metrics will mostly be feed by user data, studied through the use of analytic tools.

Studios making Free to Play games often have to invest a certain amount of money in ads in order to keep reaching new users. So each person who downloads the game has at least a virtual cost called CPI (cost per install).

Studios making Free to Play games also have to focus on Retention and conversion. ARPPU (Average Revenue Per Paying Users) is also meaningful whenever your game features In-App Purchases.

If we bought 100 installs on Facebook for $2 CPI. We had an attributable increase in organics of 10 downloads as a result of this campaign. Our ARPU is $10. What is our ROI?

Answer:

We spent $200 total ($2 CPI * 100 Installs), and increased revenue by $1,100 ($10 ARPU * 110 installs). This means that our ROI is 450% ( [($1,100 revenue - $200 cost)/ $200 cost] * 100)

Conclusion

Regarding games it is important not over-focus on Performance Indicators, they are a great tool but shouldn’t distract us from creating good products or services and from keeping in touch with our players.

Tracking a few relevant metrics are enough to get a good sense of your progress towards any given objective. And although KPI’s will give you solid insights, you shouldn’t spend too much time tracking them. You want to filter the metrics that are the most relevant to your specific goals and define the frequency at which you are going to get updates on them.

When it comes to games there are many tools available to care of the tracking for you but they are useless unless you are frequent and consistent in checking the evolution of your statistics.