What is K-Factor and How to Calculate it?
Although many key performance indicators can help you measure a website or application’s performance and user satisfaction levels, today’s app developers currently focus on growing a new metric: the K-Factor.
Learn what the K-Factor is, how to calculate it, and why you should raise your digital property’s K-Factor.
Summary Table: What You’ll Learn About The K-Factor
What is the K-Factor: Optimal Definition
The K-Factor is a metric inspired by the medical field and, more specifically, the concept of the basic reproduction number in epidemiology. The mobile marketing industry created the K-Factor to measure the virality of a digital property, such as an application, a website, or an eCommerce platform’s customer base.
In marketing, “virality” refers to the word-of-mouth potential, or in other words, the number of new users gained through a single existing user at no additional costs to the publisher.
Suppose that 100 existing users of an application talk about it to their friends. If each user can convince 3 of their friends to install the app and become new users themselves, the virality effect has caused the userbase to grow by 300, with an average of 3 new users per existing user.
The higher the K-Factor, the higher the virality, meaning more people talk about your digital property and become new users.
Why is the K-Factor Important for Your Online Business?
The K-Factor is a key performance indicator (KPI) measuring the effectiveness of your ad campaigns’ user acquisition rates.
The best way to understand the importance of the K-Factor is to view it as the equivalent of an interest rate. It helps you assess how your non-organic user growth (users acquired through paid advertising) affects the organic user growth (users acquired without paying fees).
If you need to optimize user acquisition and increase your digital property’s reach, it is crucial to understand how the K-Factor functions and the best ways to boost it.
Calculating the K-Factor
The K-Factor is calculated by taking the number of invites sent by each existing user and multiplying it by the percentage of successful conversions. An invite typically takes the form of a referral URL redirecting the potential new user to a website’s sign-up form or an application’s corresponding app store page.
A conversion occurs when someone completes the sign-up process, installs the new app, or finishes the process to become a new user after clicking on the referral URL.
A high number of sent invites per user indicates that existing users actively recommend the site, app, or digital property to others. A high conversion rate means that the people seeing referral links are highly likely to complete the process and become new users.
The K-Factor formula is as follows:
|I × C = K|
- The I-Factor is the average number of invites sent per user.
- The C-Factor equals the conversion rate of these invites.
- The K-Factor equals I times C.
Suppose you are the publisher of a specific mobile game and know that your user base comprises 2,000 active users. You are starting an invitation cycle to encourage existing active users to invite their friends to install the game by offering in-game rewards for each successful installation.
- If each user invites an average of 5 friends, your app’s I-Factor is 5.
- If each invite successfully converts 1 out of 8 people on average, the conversion rate is 12.5%. Therefore, your app’s C-Factor equals 0.125.
- The K-Factor formula is equal to I × C. In this instance, it is 5 × 0.125 = 0.625. Therefore, the app’s K-Factor is 0.625, or 62.5%.
In the above example, a complete invitation cycle will result in your active user count growing by 62.5%: from 2,000 to 3,250 users. If the second invitation cycle yields the same results, your active user count will increase from 3,250 to approximately 5,281 users. Assuming a steady K-Factor, the game’s active user count will exceed 1 million after 13 cycles.
How is an App’s K-Factor Determined?
Although the K-Factor formula is essential to understand how it works in theory, additional factors make determining a real-world application’s K-Factor more complex. In practice, tracking every single invite is impractical, especially those intended to be shared externally (e.g., referral URLs, codes, etc.).
While technically possible, your application would need numerous permissions (access to the user’s identity, phone call history, text messages, contacts, calendars, etc.) to track the information accurately. Upon installing the app and seeing the extensive list of permission requests, users may feel the app is invading their privacy.
Instead of tracking complete data regarding invites, most app developers use another more practical and more privacy-friendly method to determine an application’s K-factor.
According to the standard formula, K equals the number of invites sent multiplied by the invite conversion rate. However, instead of tracking the number of invites sent, a more straightforward solution is to use an alternative formula based on the number of users gained from accepted invites.
Although encouraging users to send invites is essential, the number of invites sent isn’t needed; only the number of invites accepted is crucial. To illustrate why, consider the following: if a single user sends 30 invites and converts 3, they have effectively achieved the same results as a user that sends three invites and converts three new users.
As a result, the K-Factor can be determined simply by measuring the number of users gained from invites.
In this case, the practical K-Factor formula is:
|K = Number of users converted by invites|
The publisher of a fitness application with an active user base of 3,000 decides to launch an invitation cycle. At the end of that cycle, the app’s number of active users grows to 3,600, representing a 20% increase. As the number of active users started at 3,000, we can determine invites brought in 600 new users. Therefore, the app’s practical K-Factor is 600.
What is the Churn Rate?
The churn rate, also known as the abandonment rate or attrition rate, is the percentage of users that become inactive after a set period has passed.
An inactive user is a user that stops engaging with the app, website, or digital property. The most typical forms of abandonment include failing to log in and uninstalling the application.
The churn rate period is typically equal in length to that of an invitation cycle, as it helps an app publisher compare how many users they’re gaining from word-of-mouth with the number of users they’re losing to abandonment.
During the last 30-day invitation cycle, the fitness application’s analytics dashboard recorded that 145 users stopped using the app regularly, meaning they are no longer considered active users. In this instance, the app’s churn rate is 145.
How to tell a good K-Factor value from a bad one?
On its own, the K-Factor tells you the number of users you’ve gained through virality instead of ad campaigns. While user growth is a generally positive effect, you ideally want to ensure that you gain more users than you lose for each invitation cycle or set period.
The best way to use the K-Factor is to compare it to your churn rate and calculate whether your user base is naturally growing or declining. To do so, divide your practical K-Factor by your churn rate.
- If the ratio is superior to 1, your user base has naturally gained more users from invites than it has lost to abandonment, resulting in overall growth. The higher the number, the faster and more exponential the growth.
- If the ratio is equal to 1, it means you are gaining as many users from invites as you are losing to churn. Your app’s virality compensates for its churn.
- If the ratio is inferior to 1, you are losing more users to churn than you gain from invites, which may indicate an overall user base decline.
In other words, a good K-Factor is superior to the churn rate, whereas a bad one is inferior. If both values are equal, your K-Factor is neutral.
K-Factor Chart Example
Below is a chart illustrating 3 example applications, one with a good K-Factor, one with a neutral K-Factor, and one with a bad K-Factor.
App 1 (Good)
How to Boost your App’s K-Factor
If you’re looking to boost your app’s virality, it is critical to identify and understand which elements affect your K-Factor. Here are the 5 best practices and recommendations to optimize your digital property’s K-Factor and boost your app’s user growth.
1. Build a High-Quality App
Although it may seem like general advice, a high-quality application that is well-designed, attracts its intended audience, and is as easy to use as possible generally tends to be shared and talked about by its users.
Consequently, the first and most critical step to increase your application’s virality and K-Factor is to ensure it is the best possible product. Users who enjoy using your application and recognize it as a quality product are naturally more likely to recommend it to friends, family, and others.
2. Optimize your App’s Shareability
The shareability of an application is the combination of features and elements that make it easy for users to share content or talk about the application. These features can take on many forms, depending on the type and purpose of your application.
For example, if your app is a mobile game featuring an in-game achievement system, social media integration is a typical example of a shareability feature. Users can, for instance, connect the game to their social media accounts and automatically send a post to the platform of their choice when they obtain a specific achievement.
It is also crucial to consider whether your app has elements that decrease shareability. A critical part of making an app more shareable is to make it as easy and convenient to use, with as few hurdles between the user and the content and features they enjoy. This principle is especially true for new users; enhancing the first-time user experience is crucial to ensure new users continue using the app and become active, regular users.
For example, users usually dislike apps that repeatedly ask to leave comments or reviews, as it interrupts their experience. They may also view your app negatively if it requests too many privacy permissions or overly complex login systems.
3. Encourage Users to Invite Newcomers
A highly effective method of ensuring your active user base sends more invites is to offer in-app incentives for inviting newcomers onto the application. Typically, the condition for a successful conversion is when the newcomer has installed and opened the app for the first time, creating a new user.
For example, a mobile game may incentivize sending referral codes by offering users free quantities of in-game currency in exchange for each new user they invite. Developers can modify this method according to the specifics of the game; the rewards offered can be sent to both inviter and invitee, premium currency instead of standard, etc.
Although this method is most well-known for its use in mobile games, developers of non-game apps can also take advantage of this method, provided there is a reward or a bonus of some sort for users that do so.
4. Understand Your Audience
The K-Factor is a key performance indicator providing you with crucial information regarding user acquisition. As your user base grows, analyzing the data and profiles of the new users acquired through virality can help you obtain valuable insight into who your audience is and what types of users drive your K-Factor.
The information obtained is critical to understanding your user base’s demographics, allowing you to adapt, modify, and improve your application and user acquisition campaigns accordingly.
5. Never Stop Experimenting
It is a good practice to regularly experiment, optimize, or modify your application or digital property to try and find novel methods of bringing in users. Don’t hesitate to use all the tools at your disposal: analyze your UA campaigns, ad creatives, and other analytics resources to find actionable data and information, then implement changes according to your findings. Afterward, monitor your user base statistics to see what helps the K-Factor grow more efficiently.
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Whether you are the developer or publisher of a mobile application, a website, or another type of digital property, CodeFuel’s team is here for you. We can help you optimize your revenue streams, increase the effectiveness of your monetization strategies, and help you grow your app’s user base and profitability. Contact us today to get started.