Growth Accounting

While a quantitative growth model is used to generate forward-looking projections, the process of Growth Accounting involves keeping track of current and historical user growth.  Active user growth can be considered a simple function:

Active Users = New Users + Retained Users – Churned Users    (for a given period e.g. last 30 days)

(Note:  ‘lapsed’ users is perhaps more correct, since they may not have fully churned in the sense that they will never return, but simply that they were not active in the period).

Another way to think about it, is that growth comes from three separate ‘buckets’ of users:  new users, repeat users and returning users.  Repeat users are those who were active in the previous period and were seen again this period.  Returning users were re-activated after lapsing in the previous period.  Tracking active users in these three buckets provides deeper understanding the active user number and what is driving the growth (or lack of it) in a given period.

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