Blog Details

  • Home / Bookkeeping / ARPU Explained: Calculate…

ARPU Explained: Calculate & Optimize Revenue Per User

arppu calculation

Total revenue is the total revenue generated over the desired measurement period. It’s easy to confuse ARPU and LTV , since they measure relatively similar things. However, there are a couple of key differences that you should keep in mind. Put simply, LTV is a measure of the entire value generated by a single user during their relationship with your company. So, when you’re thinking about ARPU vs. LTV, remember that while LTV measures the profitability of each customer on a per unit basis, ARPU measures your business’s overall health. ARPU is a powerful metric for both overall and comparative business analysis. One of the quickest ways to mess this up is by including items such as “free” or “inactive” customers from which you are not generating any revenue.

arppu calculation

This metric reveals how much revenue is generated from those users over a 24-hour period. If we multiply the average monthly subscription price by the number of users on the paid subscription tier, we arrive at $5mm for our company’s monthly revenue. The premise of the ARPPU is similar to that of popular metrics for internet companies such as daily active users per month. The objective is to count only those users that are “active” on the platform. ARPU answers a clear question and has a transparent and practical meaning. But we can try to calculate how much profit the average Facebook user has generated for the company by the time spent in the product so far.

Adjust your pricing model

Suppose you’ve had 120 monthly users, and now you’re expecting to acquire 144. If your ARPU is 30, your future revenue will be $4320 (while you had $3600). You can see arppu calculation your ad expenses paying off and predict your future revenues. Suppose you’ve decided to increase your subscription fee and see if ARPU for your new users’ changes.

arppu calculation

According to Game Analytics Mobile Gaming Benchmarks, there are two game genres that stand out most when it comes to average ARPDAU values → Role Playing and Strategy games. After all, one of the most common reasons why players churn is repetitiveness and lack of new content. When they launch it for the first time, give them a great first-time-user experience . Learning how to play the game should be as simple as possible, so work hard on your game tutorial.

MRR and Everything You Need to Know About It

Bringing them into the product conversation will make them feel valued and give you feedback from your most important users (win-win!). Your ARPPU is a reflection of your business’s monetization strategy and how much a user is willing to pay for your service. It combines all of the revenues generated in a given date range regardless of their acquisition date. When it comes to gaming, the vast majority of revenue comes from a small number of users, as little as 2-5%.

  • The ARPPU measure is useful in financial modeling, forecasting, and profitability analysis because it divides total revenue by the average number of paying users.
  • Perhaps your incentives aren’t very clear or maybe your business model doesn’t work for your genre.
  • For example, if you have an ARPPU of $1.00 and you spend $0.50 on acquiring a new customer, you are spending $0.50 to make $1.00.
  • But we can try to calculate how much profit the average Facebook user has generated for the company by the time spent in the product so far.
  • Benchmarking your business against competitors – The ARPU formula can be an excellent way to compare your business to your competitors, as well as companies in other verticals.
  • NPS® is one of the most commonly used metrics of customer loyalty, and it has a particularly strong correlation with growth of performances.

You can use ARPU to digitize your acquisition or retention hypotheses. Let’s say you’re launching an ad campaign and expect to acquire 20% more users.

Formula for Average Revenue Per Paying User

It also allows you to keep track of your annual growth progress and determine which premium offers stimulate revenue the most. To solve this, Singular collects and attributes revenue data including in-app purchases, ad revenue, and subscriptions. 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.

What does revenue per hour mean?

Revenue Per Hour is a dollar amount of revenue earned for every hour you paid people to work. Total Hours Paid includes all salaried and hourly employees and both direct and overhead staff. Use 40 hours to get total hours paid for salaried and part time FTEs.

The ARPPU metric tells us how much revenue an average paying user brings over a certain period of time. When calculating ARPPU, we divided the revenue by the number of paying users . This metric allows us to understand how much revenue the average paying user brings. 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. ARPU is calculated by dividing total revenue over a period of time, by the number of users over the same period. The most recent data tells us that the ARPU is growing, and many of the game publishers don’t need to rely exclusively on mobile gaming whales.

Leave a Reply

Your email address will not be published. Required fields are marked *