Funnel Analysis and Drop-off
By the end of this lesson, you should be able to: read a funnel's step and overall conversion, decide which step is worth fixing, split a change in overall conversion exactly across the steps, and find where a drop really happened by segmenting the funnel.
What a funnel is
A funnel is the sequence of steps users take toward a goal, like placing an order. At each step, some people move on and some drop off.
Here's an illustrative funnel for a shopping app, starting from 100,000 visits.
Two numbers describe it.
Step conversion is the share of people at one step who make it to the next. Here, 70% of people who searched went on to view a product.
Overall conversion is the share of people at the top who reach the end. Here, 6,615 out of 100,000 visits ended in an order, so 6.6%.
The overall rate is just all the step rates multiplied together.
A real funnel: Duolingo
Funnels aren't only for checkout pages. Any path from a large group to a smaller, more valuable one works the same way. Duolingo, for example, reported these numbers for the third quarter of 2024.
| Step | Users | Share of monthly users |
|---|---|---|
| Monthly active users | 113.1 million | 100% |
| Daily active users | 37.2 million | 33% |
| Paid subscribers | 8.6 million | 7.6% |
So about one in three monthly users comes back daily, and fewer than one in ten pays. That's a funnel from casual use to habit to paying. Duolingo's growth depends on moving people down it, and each step points to a different kind of work: daily habits, then reasons to subscribe.
These groups aren't measured in exactly the same way, since subscribers are counted at the end of the quarter and active users are averaged across it. So treat the shares as approximate. The shape is still clear.