Regardless of how successful your value proposition is, it’s a dead-end if you can’t monetize it successfully. The end date for the period isn’t used for the denominator because it could fail to capture fluctuations throughout the period. The start date and the end date of the period are typically averaged instead. A company isn’t compelled to produce or track ARPU to comply with generally accepted accounting principles or GAAP. Now you understand the meaning and significance of ARPU, you’ll want to know how to calculate it.

Subscriptions provide a consistent revenue stream, while tiered pricing lets customers choose plans based on their needs and circumstances. If customers aren’t forced into a costly option, they’re more likely to opt for the higher-priced plan—especially if it’s deemed valuable. ARPU shows how much money a company makes on average from each customer within a specific period, usually monthly or yearly. While lifetime value is the ultimate indicator for assessing customer acquisition channels, ARPU plays a vital role in benchmarking against direct competitors and similar businesses in your vertical. Utilizing ARPU in this context facilitates the identification of potential customer acquisition channels that have proven successful for comparable companies.

LTV can be more complex to calculate, as it involves predicting future customer behavior. You’ll need to consider the average purchase value, purchase frequency, , and the average lifespan of the customer relationship. Likewise, wellbeing or streaming apps relying on monthly subscription fees will present a different ARPU profile.

Average Revenue Per Paying User is calculated as the monthly recurring revenue divided by the total number of active paying customers. ARPU-driven measurement helps to determine which media sources could bring the top-paying users and which are underperforming and should be stopped. It also allows you to keep track of your annual growth progress and determine which premium offers stimulate revenue the most. Average revenue per paying user (ARRPU) is a non-GAAP metric used as an alternative to average revenue per user (ARPU). The fundamental difference between ARPPU and ARPU is the fact that the former only takes into consideration paying customers. Relying heavily on ARPU, or Average Revenue Per User, as the main success indicator can lead to complications.

This means that ad monetization has become an increasingly important revenue stream for developers today, supplementing the revenue from paying users by monetizing non-paying users through ads. In the context of ad monetization, metrics like ARPDAU arppu formula and ARPU can be helpful in that they include revenue generated from ads. While this could boost your average revenue from paying users, it might also reduce the number of paying users your app has, also known as your conversion rate. You can improve ARPPU by consistently refreshing your content, removing revenue ceilings, rewarding your highest paying users, and even by adding in-app mechanics that encourage spending. Implement remarketing campaigns targeted at users showing signs of disengagement to rekindle their interest.

ARPPU for mobile games

Remember, every price increase has to be followed by an obvious added value. Understanding the factors that influence ARPU (Average Revenue Per User) is essential for optimizing revenue generation strategies in mobile apps and games. Useful for understanding daily revenue generation, especially for apps or games with high daily engagement.

Common Challenges in ARPU Calculation

What works for a hyper-casual title is going to be different to an RPG. After uploading your file, you can create a report and access the editing tools. Look for “Create KPI or metric” and click “Add new measure.” This will open a window where you can easily calculate ARPU by selecting the relevant columns from your data. The first step involves organizing your data in an Excel or Google Sheets spreadsheet.

ARPU: Final Thoughts

• In the subsequent step, we’ll calculate the average revenue per paying user (ARPPU), which only includes customers that are on paid monthly subscription plans.
• For a gaming app you could incentivize these players by inviting them to join a tournament.
• By multiplying forecasted user numbers with ARPU, businesses can generate a revenue forecast.
• Just because someone opens up your game probably doesn’t make them an active user.
• The ARPU is useful for determining if the current monetization strategies are working as intended, which would be reflected by the ARPU trending upward over time as improvements are implemented.
• More high-value customers you have, the better for your ARPU indicator.
• Perhaps your incentives aren’t very clear or maybe your business model doesn’t work for your genre.

Fortunately, there’s a range of strategies available to enhance your ARPU. For example, ‘StartGame’ or ‘StartSession’ could be an event that you use. Count the number of unique players doing any action in your app on each day. Programmatic advertising is one method used to achieve a smooth experience by  automating the buying and selling of online advertising and creating a more streamlined process. LoopMe acquires Chartboost from Zynga, accelerating its mission to power brand advertising across the digital ecosystem.

Adjusting your pricing models

• This metric removes those users who don’t actively spend any money during the app cycle (for example those who drive revenue for an app developer through engaging with ads).
• Gather feedback through surveys, reviews, or direct communication and act on constructive comments to improve your product and justify the higher price point.
• If you’ve decided to place ads in your app, choose wisely where you place them.
• For example, in a monthly ARPPU one user may make a number of payments over the course of the month.
• These players are referred to as whales, just like in real-life gambling.
• Each company defines ARPU differently, however, and this goes some way toward explaining the large gap in the valuations of the two companies.

It serves as a key metric for understanding the financial health of the business, forecasting future performance, and comparing it to competitors. This metric provides valuable insights for strategic decision-making and ensuring the sustained success of the business. ARPU is not just a number; it’s a key to understanding your business better. It encompasses the total income generated from all sources, such as subscriptions, sales, or fees, within a specific period.

Resources library

Generally, users are more likely to interact with this kind of ad because they like getting something in return for watching the ad. Whether it’s in-game currency, extra lives, or something else, it will do the trick. One of the ways of increasing ARPU and ARPDAU is by boosting ad engagement. Not only do they come with a higher CTR, but their cost is 86% lower than interstitial video ads.

Instead, it should be compared to industry standards and competitors’ ARPU figures to gain meaningful insights. If a company’s ARPU is significantly lower than the industry average, it may indicate potential areas for improvement in pricing or customer acquisition strategies. On the other hand, a higher ARPU could suggest a strong customer base and effective revenue generation tactics.

Formula for Average Revenue Per User

After all, one of the most common reasons why players churn is repetitiveness and lack of new content. Obviously, if you can’t even get your users to continue using your app, you can’t really expect great ARPU and ARPDAU. Calculating ARPU for different user segments helps identify which groups are the most valuable. Therefore, a company’s ARPU essentially sets a ceiling on the amount that can be spent to fund growth and expansion plans. Take it even a step further and recommend the best extensions and add-ons depending on your user activities and problems within the product. Ensure you understand your user segments well and offer a tailor-made package for them.