What is Average Revenue Per Paying User (ARPPU)?
Average revenue per paying user (ARPPU) refers to the average amount of revenue generated from each paying customer. ARPPU is similar to the marketing metric Average Revenue Per User (ARPU) except it only counts users that have spent money with the company. ARPPU is a metric commonly used by mobile app businesses in order to identify their most valuable customer segments and buyer profiles.
As described in our guide to ARPU vs. ARPPU:
ARPPU is a measure that was originally designed for subscription-based apps, like a game that you pay a fee to use every month. The core idea was to be able to understand the quality of paying game users by eliminating the free or non-revenue users from the math.
How to calculate ARPPU?
Average Revenue Per Paying User is calculated by dividing the current monthly recurring revenue by the number of active paying users:
ARPPU = Monthly Recurring Revenue / Active Paying Users
For example, if an app is generating $10,000 per month with a total of 200 active paying customers, ARPPU would be $50. In order to calculate ARPPU, it’s important to remove all free users, cancelled subscriptions, and inactive subscriptions.
What are the uses of ARPPU?
ARPPU is a critical metric for app businesses as it highlights the value of each customer in revenue terms. By having a clear understanding of how much a paying user is worth to the business, this allows marketers and advertisers to know exactly how much they can spend to acquire a customer and still be profitable.
In addition to providing insights into how much advertisers can spend to profitably acquire customers, the eCommerce analytics company Putler identifies several reasons why ARPPU is so important:
- ARPPU indicates the business’ financial health: A low ARPPU can indicate that the product isn’t resonating with the audience, whereas a high ARPUU indicates the business is growing.
- ARPPU reflects buyer personas: Another use case is focusing your marketing on the highest value (i.e. highest ARPPU) buyer personas and avoiding distraction with low revenue customers.
- ARPPU validates sales and marketing efforts: ARPPU also provides validation that the sales and marketing team are targeting the right customers and deals to maximize revenue over time.
As Putler writes:
ARPPU determines loyalty among all users, those who are more loyal will pay you every month. In other words, the higher ARPPU has the potential to fetch more money from the existing customers.
In short, ARPPU is an essential metric for understanding a company’s financial health and ensures that sales and marketing efforts are targeting the right users to optimize for revenue growth.
How Singular helps facilitate ARPPU analytics?
As a leading mobile analytics and attribution provider, Singular helps app businesses calculate and report on their ARPPU. This is done through accurately attributing app installs, revenue, as well as the source of each install. In particular, ARPPU can be broken down by marketing channel, organic vs. paid advertising, campaign, and more. By breaking down ARPPU into subclasses, Singular helps mobile app businesses determine their most profitable channels and improve ad budget allocation.
As many advertisers know, one of the most challenging parts of revenue attribution is determining the original source and campaign of each paying customer. Since ARPPU is focused on paying customers, without knowing where these users are coming from it can be difficult to scale those marketing efforts.
To solve this, Singular collects and attributes revenue data including in-app purchases, ad revenue, and subscriptions. In short, by combining revenue data with other solutions such as cost aggregation, marketing analytics, and mobile attribution, this ensures that marketers know exactly how much a user is worth to their business and where these users are coming from.