The Complete Guide to ARPU

ARPU stands for Average Revenue Per User. It is a metric that helps businesses determine how much revenue they can expect from their customers in the future. This guide will teach you what ARPU is and show you how to calculate it using Excel or Google Sheets.

What is the Average Revenue Per User (ARPU)?

It is a metric that helps businesses determine how much revenue they can expect from their customers in the future.

How to Calculate Average Revenue Per User

Calculating ARPU can seem complicated, but it is quite simple. It is calculated by taking the total revenue for a certain period and dividing it by the number of customers during that same time. For example, if you have $100 in monthly recurring revenue (MRR), but only 100 subscribers, your ARPU is $100/100 = $1000.

ARPU is used to determine how much money your customers are worth. This can be very useful when comparing the performance of different customer segments or evaluating the results of changes in acquisition strategy. For example, if you want to expand into a new region like China and only have an ARPU of $50, it might not make sense because China's average revenue per user is only $20.

However, by looking at ARPU within your existing customer base, you can uncover trends that will help you predict future financial performance and make the best decisions moving forward. For example, you should focus more on the region where a majority of your customers live.

What is a Good ARPU?

Most people ask, what is ARPU?  The target ARPU for most active users is approximately $0.04 per month. That means that if a company has 100 active users, they can expect to make around $400 in the following month. The average ARPU for companies with more than 25 million active users is approximately $0.12 per month or roughly 1000x higher than smaller businesses.

The standard for ARPU usually fluctuates with the industry and depends on the type of business, pricing model, and location. A downward trend in ARPU is also common towards the end of a customer's lifecycle. It occurs when the customers become more experienced and thus require less support and interaction from your company.

This downward trend can be offset by adding new features to your products or constantly iterating on existing ones. This will encourage older users to interact with their product again because it has become better over time.

Why Track ARPU?

Calculating an ARPU helps you determine how much revenue a specific customer segment is bringing in the future. In addition, it helps predict your financial performance months or years into the future.

You can use the ARPU in evaluating changes to acquisition strategies and processes, especially ones that have been successful. Furthermore, it can aid in assessing different pricing models and determining which one generates more revenue for your company. You can track the ARPU through a platform like AppsFlyer.

ARPU is a fundamental metric for all companies to track and monitor over time. It can help you make strategic decisions about your business, such as pricing models, customer acquisition strategies, and product differentiation. If you have any doubt, you can write for us.

Also Read - What does TMB mean ?

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