R2 - the metric that separates the wheat from the chaff
"Who cares?" about day one retention, it's all about day two retention.
First things first, R2 stands for retention on the second day. Sounds simple enough, right? Wrong. Some people might think R2 means the percentage of users who come back the day after they first encountered the product. But for me, R2 means the percentage of users who return the day after their first return.
To break it down, R0 refers to the user returning on the same day they first encountered the product (aka second session on the same day). R1 refers to the user returning the next day, and R2 refers to the user returning the day after the first day of their return. Got it?
So, what is retention, you ask? It's a measure of how well a product or service retains its users over time, usually measured as the percentage of users who continue to use the product or service after a certain period of time. It's become a key metric in the tech industry, especially for consumer-facing products.
"Retention is the most important metric for any consumer-facing product. It's the ultimate test of whether your product is delivering value and whether your users are engaged." - Andrew Chen, General Partner at Andreessen Horowitz.
But why do I think R2 is one of the most important product metrics? Well, R1 is more of a marketing metric, if you ask me. It just shows how relevant an audience your advertising activity has brought in. The real test is R2, which shows whether users are finding real value in your product and whether they'll stick around.
While 1-day retention is useful for immediate user engagement, 2-day retention is more valuable for several reasons. It provides a more accurate view of user engagement, allows for more accurate comparisons between products, and helps identify potential retention issues earlier.
"2-day retention is the most important metric for early-stage startups. It's a good indication of whether you're building something people want and whether you're solving a real problem for them." - Sean Ellis, founder of GrowthHackers and former Growth Lead at Dropbox.
So, forget about day one retention. R2D2 is where the real value lies. And if you're a B2C product, the conversion from R1 to R2 is one of your main product metrics. In B2B, the counterpart is subscription renewal of an already paid (read: engaged) customer.
Appendix:
Social media: According to a 2021 report by Mixpanel, the average 1-day retention rate for social media apps is around 25%, while the average 2-day retention rate is around 15%.
E-commerce: According to a 2020 report by AppsFlyer, the average 1-day retention rate for e-commerce apps is around 35%, while the average 2-day retention rate is around 20%.
Streaming services: According to a 2020 report by CleverTap, the average 1-day retention rate for streaming apps is around 40%, while the average 2-day retention rate is around 25%.
Ride-hailing: According to a 2019 report by Adjust, the average 1-day retention rate for ride-hailing apps is around 40%, while the average 2-day retention rate is around 25%.
Fitness apps: According to a 2020 report by CleverTap, the average 1-day retention rate for fitness apps is around 30%, while the average 2-day retention rate is around 20%.