Lee, Katherine

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Non-Financial Metrics, DAU, MAU, and DAU/MAU: An Integrative Framework and Analysis
(2022-01-01) Lee, Katherine
This thesis proposes a framework for classifying various applications of daily active users (DAUs), monthly active users (MAUs), and their ratio (DAU/MAU) to evaluate company performance. The metrics are reported widely in financial filings across a number of industries, including social media and gaming, and are thus frequently cited in equity research. As a result, investors rely on these non-financial metrics to guide investment decisions, highlighting the importance of the metrics in investing and evaluating companies. However, there is a general lack of understanding regarding how to interpret such metrics, evidenced by the fact that there is very little published research about the topic. Perhaps due to the opaque definitions and interpretations of such metrics, there have been numerous litigations initiated by shareholders, arguing that omitting DAU and MAU metrics from financial filings is concealing material information. To address the discrepancy between the significance of DAUs, MAUs, and the DAU/MAU ratio in finance and the lack of understanding of the metrics, my thesis proposes an organizational framework that classifies various applications of DAU, MAU, and the DAU/MAU ratio to help improve investor understanding of the metrics, comment on potential ways to improve reporting standards for non-financial metrics, and clarify their role in litigation.