What is Average Revenue Per User (ARPU)?
Average revenue per user is the amount of revenue your app generates from each active user. In simple terms, ARPU tells you how much revenue the average user is generating over a particular period of time. It’s closely related to ARPPU, but more on that later.
How to calculate ARPU?
Calculate ARPU by dividing the total revenue by the number of active users over the course of a certain time period, usually a week or a month. ARPU is most commonly calculated on a monthly basis and is similar to monthly recurring revenue (MRR), although it is a more granular metric that is measured at user level, not app level.
ARPU can be calculated on a monthly basis in the following way:
ARPU = MRR / Number of Active Users
For example, if you have a $50,000 MRR with 15000 users, ARPU for the period is $3.33.
What are the uses of Average Revenue Per User?
In the context of mobile analytics, ARPU measures how much revenue was driven for each app install. This information is used by marketers, management, and investors to analyze how effectively the company is turning individual users into revenue. Businesses can use ARPU to extract more ROI from their mobile apps by analyzing revenue data on a per-customer basis in order to identify potential issues and new monetization strategies. You can also use ARPU to calculate how many new users you need to acquire in order to hit specific revenue targets.
ARPU is powerful for evaluating both the app’s overall financial viability and as a comparative business metric. One primary use case of ARPU as a comparative metric is to evaluate campaigns and ad networks against one another on a per-user basis, which provides insight into the quality of users from each source.
Since the focus of some apps may not be to maximize revenue but instead augment the overall customer experience—for example a complementary app at a hotel—the goal may be to simply break even. In this case, ARPU can be useful to set acquisition cost limits based on how much revenue you generate on a user-by-user basis.
Conversely, if your app’s goal is to maximize revenue, ARPU can be compared against annual revenue per customer targets. If ARPU is below a certain threshold, this can indicate user experience or other productrelated issues that must be addressed to reach these goals.
As Baremetrics highlights, another reason that ARPU is such a crucial metric to track is that it has a direct impact on your ability to scale. For example, if your ARPU is relatively low compared to your customer acquisition costs, this doesn’t leave much room for paid ad spend or customer support without severely impacting your profitability and long-term business viability.
Another ROI-related metric that is similar to ARPU is ARPPU, or average revenue per paying user.
In our article comparing ARPU vs. ARPPU, we highlight that ARPPU was originally designed for subscription-based businesses, for example a game in which users pay a monthly recurring charge. The idea of using ARPPU is to examine the value and quality of paying users by removing non-paying users from the equation, while ARPU gives you an average including all users. For mobile app businesses, ARPPU is particularly valuable for those using the “freemium model.” Just like many other marketing metrics, using both ARPU and ARPPU in conjunction provides marketers with a much more complete picture of the overall ROI of their business.
How Singular helps you use ARPU?
With a mobile analytics and attribution company like Singular, ARPU can be calculated based on total app installs, as well as by paid and organic installs. This metric can then be further broken down into by country, vendor, and campaign for deeper insights. By breaking down ARPU into these subclasses, Singular helps marketers improve budget allocation with data-driven insights into where their revenue is actually coming from.
One of the main challenges for app publishers is tracking and attributing revenue by its original source.
ARPU is only useful if you actually can track and measure all your revenue. While in-app purchases (IAPs) are critical here, subscription revenue is as well, and for many apps, so is ad monetization. IAPs and subscriptions are relatively easy to track. But, as discussed in our guide to ad revenue monetization, unlike in-app purchases which are linked to an individual, ad revenue is generally calculated in bulk … making it much more challenging to tie back to an individual. In the context of ARPU, this makes it much harder to know how much a user is worth or how valuable a recent cohort of acquired users is.
Fortunately, Singular can help with this.
Singular collects average ad revenue per session on a cohort-level basis and combines with with your in-app revenue, subscription revenue, and any other revenue you generate in your app …providing you with more accurate user data. In particular, we connect with Ironsource’s mediation platform, MoPub for impression-level revenue data, and Soomla for ad monetization calculation. This means you have complete coverage regardless of the ad network or monetization partner you’re using.
In summary, with over $7 billion in digital marketing spend being tracked on Singular, our focus is on providing marketers with the insights they need to drive ROI. ARPU is just one of the metrics that’s measured to help marketers achieve their revenue targets.