What is ARPU?

Definition

The average revenue per user (ARPU) is a metric used by businesses to measure the average amount of revenue generated by each individual customer. This figure can be used to gauge how successful a company is at monetizing its customer base and to identify opportunities for growth. The calculation takes into account all revenue generated by customers, including subscription fees, product sales, and other payments. It can be broken down by product or service line, geography, or other factors.

Calculation

The ARPU calculation is the total revenue earned divided by the number of active users. Generally, it is calculated on a monthly basis.

Importance

The most obvious benefit of calculating ARPU is that it allows companies to quickly and easily compare how much money they are making per customer on an individual basis. By tracking ARPU over time, businesses can also identify trends and spikes in customer spending, which can help inform product or pricing decisions. Additionally, ARPU can be used to compare a company’s performance with its competitors. This metric is especially useful for businesses that rely heavily on subscription revenue, such as SaaS companies.

Summary

Overall, ARPU is a useful metric for businesses to track and measure their performance on an individual basis. It is especially useful for companies that rely heavily on recurring revenues such as subscription services. ARPU can provide valuable insights into customer behavior and help inform future sales and marketing decisions.