Faced with the task of optimizing a freemium product’s performance, a developer must choose a metric that has the largest impact on the amount of revenue generated over the course of a user’s lifetime in the app. There are many candidates for the one metric that matters (Mobile Dev Memo has a great post about the minimum viable metrics to track in mobile, which include day retention, monetization, engagement, and virality metrics), but retention rate takes the cake as the metric that has the largest influence on an app’s success.
Retention rates reflect how well an app meets the needs and desires of users - a good retention profile to shoot for is 40-20-10 for day 1, 7, and 28. In addition to helping developers discern the extent to which users engage with an app, retention rates determine half of the equation for customer lifetime value: the customer’s lifetime.
Retention rates can be greatly influenced by the app’s user source and how well the users were targeted, whereas ARPU and monetization metrics take more effort to maximize because changes may have to be made to the apps mechanics and catalogue. For example, an app for Instagram users will have higher retention rates if the user acquisition strategy focuses only on Instagram users than if it were marketed to a broader audience. Therefore, retention should be regarded as the most important metric to maximize in order to create the best user experience while maximizing revenue.