Which should you focus on first: monthly active users or revenue?

This article is part of our series on using the flywheel model to grow your business. Check out the complete collection here.

Not long ago, it could take as long as a year for a company to bring in a new piece of workplace software. First, they had to identify the need, then they had to research vendors, then there were contract negotiations… and if all of that went smoothly, months later they could begin the actual rollout. Even in the best-case scenarios, it’d be a minimum of six months before the customer organization was (in theory) getting any value out of the software.

This was a massive leap of faith for the organization. Meanwhile, if you were on the vendor side, you were crossing your fingers that the customer didn’t churn out. After all, you’d just invested a ton of resources in landing that sale.

Fortunately for everyone’s stress levels, the flywheel model turns all that on its head. Getting people to use the product and experience its value is job #1 for a flywheel business. In fact, I’d even say that usage is so important that payment can wait.

That’s a bold statement, I know. Keep reading to learn why it’s true, how we’ve used this idea to grow our business, and how you can do the same.

Why MAU trumps everything else

MAU is a leading indicator of revenue, which means that if you have to prioritize one over the other, you should prioritize MAU. If people are using your product, you know they’re getting value out of it. Once they’re getting value out of your product, either in a free edition or during the trial period, you’ve earned the right to charge for it. So you always want MAU to grow on pace with revenue, if not outpace it.

If the value you deliver is greater than the price you charge, customers will stick with you and drive even more revenue growth over time. This is the dynamic that has helped Atlassian build a strong, rapidly expanding customer base. We’re constantly evaluating how pricing affects retention.

Focusing on MAU also increases your company’s credibility and word-of-mouth buzz. Every user is an ambassador, so getting them into your product is one of the best advertising spends you can make.

2 guiding principles for growing MAU

Every time you reduce friction for customers, it drives more and more benefits for your business. There are two guiding principles to follow:

1. Use low-touch marketing tactics to build interest in your product.
2. Remove every possible barrier between your product and prospective customers.

Attracting people to your site with helpful content that is easy for them to discover through SEO is the most effective way to get their attention and earn their trust. It’s an approach that empowers customers to move at their own pace and it scales almost infinitely. A single piece of content can touch thousands (if not millions) of prospects over time.

Once you’ve attracted someone to your site, make it as easy as possible for them to get into your product and start using it. This is something we’ve iterated on since the beginning. When Atlassian started, anyone could download a copy of Jira or Confluence from our website, install it, and use it free for 30 days. While this later became par for the course across the software industry, it was groundbreaking back in 2002.

Now, the cloud has made things even easier because there’s nothing to download or install. Customers can just go to our website and step through the sign-up flow, which we’ve also simplified over the years. Cloud has even let us replace trial periods with a “freemium” pricing model that doesn’t require a credit card upfront – which means the actual purchase decision is delayed until customers reach deeper levels of adoption.

How do you encourage customers to reach that deep adoption? Atlassian uses a three-pronged approach:

1. Make it easy for users to invite other users. This can be as simple as a button in your product that says “Invite your team” and sends an invitation email to any address you plug in. You can also use fancy machine-learning capabilities to suggest specific people based on what you can intuit through the user’s activity. Partnerships are great here, as well. If I send someone I like to a Jira ticket in Slack and that person isn’t already a Jira user, they’ll get a prompt to sign up right there within Slack. And, of course, there’s a corresponding button inside Jira prompting users to try Slack.
2. Send email notifications. When someone comments on my Confluence page, I get an email. That not only alerts me to the comment, but reminds me that Confluences exists, as well. Because maybe I created that page a year ago. And maybe (ideally!) it gets me thinking that I really should take advantage of Confluence more often.
3. Roll out the red carpet. Atlassian’s customer success team uses backend-analytics events to look for high-value customers whose activity level has dropped off. When they identify these customers, we engage with them one-on-one to find out where they’re struggling and how we can help.

The power (and limits) of a free pricing tier

One of the biggest points of friction in growing MAU is payment. So eliminating the initial payment step is the ultimate way to reduce friction. It’s also a great way to boost your word-of-mouth buzz even more. If there’s one thing we love more than getting a great deal, it’s telling our friends about it.

Here’s where another leap of faith comes in, but this time it’s you, the vendor, who’s taking it. Atlassian has millions of people using our products for free. And we have no idea if a free customer actually refers someone. We can’t track that on a balance sheet. But we do know that if we have a bunch of happy users, they’ll bring in more users. And we do have customer satisfaction metrics we can track. So we focus on delighting our customers, then trust that it’ll develop into a virtuous cycle that drives more MAU.

That doesn’t mean we optimize for free at all costs. There’s a balance. Price and growth rate will always be at odds with one another. But the reality is, you can go too far and give away so much value that you end up losing revenue. That means you’ll struggle to hire great people to improve your product, which will eventually lead to decreasing MAU.

There’s no magic formula for finding the point where you start charging. Some companies make you pay after you’ve spent a certain number of days using the product, or when you want access to premium features, or when you reach limits around data storage. Atlassian sets a threshold around user seats (although we actively explore and debate other approaches). Teams of 10 or fewer can use the full-featured version of our products free for as long as they want, but teams of 11 or more need to pay.

We landed on those numbers after a lot of financial modeling and testing, with an eye toward erring on the side of generosity. We want our free users to have a solid chance to kick the tires before they encounter a paywall.

Growing MAU is a team effort

As with other aspects of running a flywheel business, growing MAU takes patience and discipline. Atlassian’s CEOs aren’t just looking at a handful of top-line metrics. They’ve got dashboards tracking sign ups, paid user conversions, and growth rates for each product.

Our product teams use back-end analytics to study users’ activity patterns, which then guides product strategy. Our marketers and technical writers crank out content designed to help customers be more proficient users and get more value out of the products. The whole company has to be bought in for this to work.

It all comes back to a customer-centric mindset, codified in our “don’t #@!% the customer” value. If we see the ratio of free users to paying users declining, we know we’re letting the customer down in some way. We do our best to prevent that situation by delivering more value than we charge for. It starts with our content, continues with letting people start for free and keeping our prices as low as possible, then goes all the way through to our user groups and virtual events.

It’s a constant balancing act. You’re always evolving your campaigns, packaging, and the systems that give you insight into where you’re trending. But it all starts with MAU.

Hungry for more? Check out the other articles in this series.

Thanks to Sarah Goff-Dupont for her contributions to this post.