What is Average Revenue Per Paying User ARPPU?

By understanding your customers’ needs and behavior, you can create products and pricing strategies that keep them coming back for more. ARPPU indicates the number of loyal customers you have and allows you to decide whether it’s rational to increase prices for your service. 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. The exception is if growing the user base takes precedence over monetizing the users for the time being, but eventually, the company must become more profitable. For example, let’s say you generated $500 in revenue last month and had 1,000 active users.

Find answers to your questions about buying products and services from Paddle By breaking down ARPPU into subclasses, Singular helps mobile app businesses determine their most profitable channels and improve ad budget allocation. This is done through accurately attributing app installs, revenue, as well as the source of each install. As a leading mobile analytics and attribution provider, Singular helps app businesses calculate and report on their ARPPU.

So, it’s best for you to use both strategically, don’t pick one over the other. It’s easy to fall into the trap of thinking ARPU and ARPPU are competing metrics when they’re not. ARPU helps evaluate whether your ad placements, user sessions, or order fill rates are performing well.

Developing a good product mix and monetizing better

It's reported quarterly by every major carrier and dissected by analysts looking for signs of pricing power and competitive positioning. Mobile ARPU is one of the most closely watched metrics in telecom investor relations. That's why FTTH operators obsess over attach rates for value-added services. This creates a margin expansion that's sustainable and doesn't rely on pricing power alone. If you can reduce your cost to serve through better peering, edge caching, or network optimization, you achieve the same margin improvement without the customer friction of a price increase. Retention programs that target high-value segments can stabilize or increase ARPU without any pricing changes.

Guides acquisition strategy

This means operators can maintain competitive ARPU while improving margins, or they can pass savings to customers to defend market share without sacrificing profitability. IXPs don't directly affect ARPU (which is a revenue metric), but they significantly impact the profitability of that ARPU. High ARPU can also indicate you're under-investing in customer acquisition (serving only premium customers) or that you're extracting maximum value from a declining customer base. For strategic planning, look at 12-month rolling averages to see true directional trends. Most telecom operators calculate ARPU monthly for internal management and report it quarterly to investors. The margin per user is determined by the gap between ARPU and the total cost to serve, which includes cost per bit multiplied by usage.

ARPPU indicates the number of loyal customers you have and allows you to decide whether it's rational to increase prices for your service.
Average Revenue Per Paying User (ARPPU) is a critical metric measuring the average revenue generated by the users who make a payment.
It can help businesses evaluate the effectiveness of their pricing strategies by understanding how much revenue they are generating per user or customer and whether their pricing strategies are generating sufficient revenue.
In the example we just saw, we calculated the average revenue for the annual plan, which came out to be $50, meaning that you make $50 with the sale of each plan.
Its significance lies in its ability to provide businesses with a way to measure the average revenue generated per user or customer over a period.
This can mean higher LTVs and more opportunities for your company to monetize these customers through cross-sells and up-sells.

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While both ARPU and ARPPU measure revenue, they offer very different perspectives on monetization. In this article, we’ll break down ARPU vs ARPPU, what each metric means, how to calculate them, and when to use them to improve your monetization strategy. ARPU (Average Revenue Per User) offers a big picture of overall revenue. PlainSignal’s cookie-free model leverages custom events and data attributes for revenue capture. ARPPU is also useful for testing and comparing different offers on your paywalls, such as by running an A/B test with two paywall variations to determine which one generates more revenue. It’s crucial to monitor metrics like ARPPU to detect issues at an early stage.

A high ARPPU indicates that paying users perceive significant value and are willing to spend. By focusing exclusively on paying users, ARPPU removes the dilution effect of free users. The critical distinction is that ARPPU excludes non-paying users entirely. It’s easier to make decisions about revenue by isolating the customers spending the most money, rather than appeasing the ones who will likely utilize your app for free no matter how you adjust and advertise. ARPPU is a useful measure to demonstrate how much loyal customers are willing to pay for a service, therefore validating a developer’s pricing model, and it can also highlight reactions to pricing decisions. This setting might be used to understand the average revenue to the Nth day of the paying user's life.

The more revenue individual customers contribute each month, the more monthly revenue intake for your company. For example, if an app is generating $10,000 per month with a total of 200 active paying customers, ARPPU would be $50. Divide your revenue by the number of paying users to get your company’s ARPPU. ARPPU is a metric that measures revenues https://www.joenix.be/how-to-calculate-credit-and-debit-balances-in-a/ from paying users. By isolating paying users from the broader user base, ARPPU provides precise insight into how much your monetizing customers are worth.

Mostly, you’ll see businesses use these terms interchangeably, but as you can see, they’re fundamentally different.
As mentioned, ARPU is a great way to benchmark your business against direct competitors and companies in similar verticals.
It’s calculated the same way as average revenue per unit by dividing the company’s total revenue by the number of units sold.
ARPU is not a GAAP metric but there is a generally accepted process for calculating.
Use those metrics to focus your resources on the most high-growth potential customers to obtain a higher ARPU.
If you aren't a subscription, think of how often a user ‘should’ use your service.

Furthermore, ARPU can be distorted due to rare instances such as one-time large purchases. Implement a loyalty program offering discounts, rewards, or early access to new products. It also allows you to keep track of your annual growth progress and determine which premium offers stimulate revenue the most.

For example, it’s quite likely that your enterprise users have a much higher ARPU than your entry-level plan. It’s an easy, high-level way to compare how much one company makes off its users compared to another. Lifetime value is a measure of how profitable each customer is on a unit basis, whereas ARPU is a way to measure the overall https://betberi.com/what-you-need-to-know-about-hiring-a-virtual/ health of the business on an ongoing basis.

What Is ARPPU (Average Revenue Per Paying User)?

But unless you have an extremely high ARPPU, that usually means you have somewhere arppu formula to go in terms of monetizing premium features, subscriptions, or in-game items. ARPPU is especially pertinent in freemium models prevalent in many mobile gaming and mobile applications. ARPU is a good high-level indicator of overall monetization health, but ARPPU gives helpful insight into the profitability of the paying subset. But in today’s fast-moving, privacy-restricted, AI-assisted ad ecosystem, they’re essential directional metrics. Knowing this helps you make the right decisions with your app or game and its marketing priorities.

So you don’t make a lot of recurring revenue from your subscription plans from most of your users. It realized that its annual plan felt a little steep to its users, and so it introduced a 6-monthly plan and successfully got a good share of its monthly users to go with the bi-annual plan. But sometimes, the price point for your best products feels a little steep to your users, which might get in the way of selling more of it.

How can a company that targets the SMB market increase ARPU?

Clearly, how you define your ‘user’ is going to change the ARPU you get. One of the criticisms leveled against ARPU as a metric is that it is too general. ARPU should be increasing over time as sales pitches improve and value propositions get clearer and more targeted. Low ARPU might be a sign that you're not adequately extracting value from certain buyer personas for the service that you're providing to them.

You could also double the number of your paying customers by reducing your ARPPU and achieve a similar result. This might level out or even reduce the user’s lifetime value, thus the long-term revenue. ARPU, on the other hand, takes a broader approach and answers the question, “How much revenue, on average, does one active use generate for us.”

If you’re running a freemium or hybrid monetization model, ARPPU is critical for revenue optimization. Use ARPU when you want to measure broad monetization efficiency across your entire user base. The key is knowing when each one makes sense based on your product model and goals. So, which metric should you track, ARPU or ARPPU? ARPPU lets you focus just on the people who actually spend money, so you can see more clearly how they’re helping your business grow.

Sure, this makes less revenue upfront than the annual plan, but still! In such cases, you can design a product that effectively works the same way. You might even just hike your price, offer a better discount, and still generate decent revenue per sale. If you do your ARPU analysis for all potential options, you’ll already know how much revenue you’ll make from your sales.

Be careful to make sure you don’t end up comparing yourself to businesses with very little in common, or ones that have different priorities to yours. Unlike many other SaaS metrics, ARPU is an absolute number, not a rate. Average ARPU fluctuates based on the industry, pricing model, location, and other factors. Unfortunately, there is no universal average ARPU to serve as a benchmark.

How users pay

It shows how much money on average an active user brings to your company in a given timeframe. So, if you want to find out what value your customers are generating for your app and how to maximize your business, keep reading! The premise of the ARPPU is similar to that of popular metrics for internet companies, such as daily active users (DAU) per month. Each of the company’s customers contributed $100 in revenue.

Automatically win back lapsed customers Even though some businesses mistakenly assume that ARPU and ARPPU are the same terms, there is a considerable difference between the two metrics. For example, we have 100 new users created within the selected period. We have 100 new users created within the selected period.

This metric is used by businesses to measure the factors that are contributing to the organization’s overall revenue. ARPU is a common metric that’s useful for all types of businesses, but it's most commonly used to analyze subscription based uses. The flipside of this is that revenue growth is lost when customers can’t do what they want when they want. This can mean higher LTVs and more opportunities for your company to monetize these customers through cross-sells and up-sells.