Monetization Metrics: ARPU, LTV, DAU Quiz Quiz

Assess your understanding of core monetization metrics like Average Revenue Per User (ARPU), Customer Lifetime Value (LTV), and Daily Active Users (DAU). This quiz covers definitions, calculations, and key insights into measuring and optimizing digital product revenue.

1. Definition of ARPU

   Which metric represents the average revenue generated per individual user during a specific period, such as a month or quarter?

   1. LTV
   2. ROI
   3. DAU
   4. ARPU

   Explanation: ARPU stands for Average Revenue Per User and is used to find the average revenue each user contributes in a given time frame. LTV measures the total revenue from a user over their whole relationship with the product, not just one period. DAU stands for Daily Active Users, which counts active users but does not measure revenue. ROI is Return on Investment, which calculates profit relative to investment, not per user revenue.

2. Calculating LTV

   If an app expects a user to stay for 12 months and spend $5 per month on average, what is the user's Lifetime Value (LTV)?

   1. $12
   2. $5
   3. $55
   4. $60

   Explanation: LTV is calculated by multiplying the average monthly revenue per user by the number of months they are expected to remain active; $5 per month for 12 months equals $60. $5 and $12 reflect either the monthly spend or the time frame, not the total value over the user's lifespan. $55 is close but does not multiply the correct numbers accurately.

3. DAU Significance

   Why is tracking Daily Active Users (DAU) important for digital products or apps?

   1. It measures only the monetary spending of the users each day.
   2. It determines the total number of downloads since launch.
   3. It shows how many unique users engage with the product daily, reflecting user retention and activity levels.
   4. It directly calculates the total profit generated by the product.

   Explanation: DAU tracks daily unique user engagement, helping teams monitor retention and usage trends. It does not measure profit (that would relate to net income), nor does it count all-time downloads (which is a different metric). DAU also does not focus on daily revenue, but rather on active usage.

4. Improving ARPU

   If a streaming service wants to increase its ARPU, which strategy would most directly affect this metric?

   1. Only increasing server capacity to support more simultaneous viewers.
   2. Lowering the number of advertisements for free users.
   3. Reducing the minimum contract period for new customers.
   4. Introducing premium features and encouraging upgrades to higher-priced plans.

   Explanation: Encouraging users to upgrade or purchase more directly increases average revenue per user, thus raising ARPU. Lowering ads might improve user experience but does not necessarily grow revenue. Shortening contracts could make it easier to leave, possibly reducing revenue. Increasing server capacity is about infrastructure, not user spending.

5. Interpreting ARPU Trends

   What could a declining ARPU over several months indicate for a subscription-based mobile app?

   1. Existing users are downgrading or spending less over time.
   2. There is a decrease in DAU but a rise in total revenue.
   3. User LTV is guaranteed to be increasing.
   4. The app is experiencing higher profit margins from existing users.

   Explanation: A lower ARPU suggests users are either buying less or choosing cheaper options, which can signal issues with product value or engagement. A decrease in DAU with higher total revenue would usually not lower ARPU. Higher profit margins or increasing LTV would not cause ARPU to drop; these often track together if user spending is rising.