ARPU is an acronym for Average Revenue Per User. This metric is important for app developers and their business stakeholders alike to help understand the average number of dollars each one of their active users generates over a certain period of time. With this metric, decision makers can better understand the sustainability of their app and their path to profitability and wealth.
The formula for calculating ARPU is simple—you divide the total revenue by the number of subscribers or paid customers in that period. Usually, ARPU is calculated for either a monthly or annual time period, but it could be done for any interval of time.
For example, let's say that a cable company generated $10 million in revenue last year, and that the average number of paying customers during the month was 100,000. Then, the ARPU could be calculated as $10M/100,000 = $100/user.
There are a few reasons calculating ARPU can help your business—it can be used when comparing similar companies in order to determine which company does the better job of generating revenue from its users. ARPU in a vacuum does not tell the whole story. How profitable a company is also is highly dependent on the margin that company makes from its users.
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