Say, you have 20 paying users. arppu formula To do it, companies compare the ARPU of different campaigns to detect which advertising managed to attract more paying users. Entrepreneurs divide their total revenue by the number of customers to accurately estimate the necessary measure. The measurement focuses on customers’ activities that make up a recurring revenue, for example, in-app purchases and freemium games. If your ARPPU is high, it could be a good idea to invest in upsells or exclusive content to earn more from those paying users.

How to Calculate ARPU?

Sometimes, simply re-communicating the benefits of your offer can encourage more use and a wider footprint with a customer. There are lots of ways of getting customers to spend more. If you’re not in the consumer space or a space with hundreds of thousands (if not millions) of potential customers, then you shouldn’t be chasing sub $100/m customers. ARPU is often measured by month, as this is when most subscription payments are taken. To combat this, it’s best to analyze ARPU by specific segments, so that you calculate it in a way that makes sense to your business.

It is often used as a key performance indicator (KPI) for businesses that rely on incessant revenue models, such as subscription-based services or telecommunications companies. Lifetime value measures the average and estimated value of a customer for their entire period of doing business with you. A month is the most common time period for calculating ARPU because most subscription based companies have a monthly billing plan. To calculate ARPU, divide the total revenue in a set period by the total number of users in the same period.

But without a closer look at paying users, it’s easy to miss critical shifts in behavior. ARPPU focuses only on paying users and ignores the revenue potential from converting more free users. ARPPU combined with retention data provides more accurate Lifetime Value (LTV) predictions for paying users. It helps businesses understand if their pricing structure is effective and how much loyal, paying customers are willing to spend. Unlike ARPU which includes all users, ARPPU focuses exclusively on paying customers – providing a clearer picture of how much value your monetizing users deliver. ARPPU, or Average Revenue Per Paying User, measures the average revenue generated by users who actually make payments within your app.

Strategy 5: Personalize offers

The term ARPU stands for “Average Revenue Per User” and quantifies the typical revenue generated from each user. Pair it with other key financial metrics for a well-rounded view of your business health. Make sure each tier offers clear value so customers can pick the plan that suits them best. Loyalty programs incentivize customers to stick with your brand and invest higher amounts.

What is Average Revenue Per Paying User (ARPPU)?

A fiber-to-the-home provider earned $890,000 in broadband service revenue in Q1 (3 months). So you need reporting on metrics like customer lifetime value, among others. Ideally, you’d show half of your users your default paywall (or products or promotions) and the remaining half the newer ones. In most cases, you may see yourself testing higher pricing to make more revenue, impacting both your new user conversions and renewals. If you’ve got a subscription app, one way to do this could be to pitch your annual offer with a heavy discount or maybe even launch a lifetime plan. One of the most important use cases for performing Average Revenue Per Unit analysis is to see if you’re getting more of your users to buy your most profitable products.

• Cohort analysis of ARPPU is the process of grouping paying users by acquisition channel, location, demographics, purchase history, etc., to understand better how different cohorts generate revenue.
• The distinction between “user” and “paying user” collapses when your business model is subscription-based from day one.
• That term is used to describe a tiny group (around 2%) of users that drives the most revenue for mobile apps and game publishers.
• ARPPU (average revenue per paying user) is a metric that indicates the average revenue a paying customer generates during a certain time.
• Ideally, you’d show half of your users your default paywall (or products or promotions) and the remaining half the newer ones.
• ARPPU varies significantly based on the time period measured.

Lower user churn also means customers stick around longer. That’s why loyal customers who won’t churn are so valuable to a company, and why retention is so important to SaaS companies. High ARPU customers are valuable to your SaaS company for many reasons; namely, they contribute large portions of your MRR. Then cross-sell and up-sell customers as they grow and need more value from your product.

ARPPU is very closely tied to Lifetime Value (LTV)—the amount of revenue that a user will generate during their lifetime. In this case, the ARPPU is $50, implying that each paid user contributed an average of $50 during that month. By identifying and targeting https://bible-max.com/new-segment-reporting-disclosure-requirements/ high-value customer segments, businesses can measure and predict revenues more accurately, allocating resources more effectively.

Unlike ARPU, this metric focuses only on users who actually spend money. This formula includes all users of your app, game, or platform, both the ones who spend money and the ones who don’t. It’s a key metric used to measure how much money, on average, each user brings in, whether they pay or not. For example, according to Statista, in 2025, the average ARPU for mobile game users in the U.S. stands at $60.58. You can test different designs, such as dark vs. light versions, or combinations of products, such as 3 months and 1-year subscriptions or 1-, 3-, and 6-month subscription options. Alternatively, the structure of the paying audience may have changed, and only new or recent users are paying.

• By measuring ARPU, you’re armed with the tools to learn which users are the most valuable to your business, and which ones aren’t.
• As you just saw, the Average Revenue Per User (ARPU) metric is one of the most important metrics when it comes to designing, pricing, and optimizing in-app products.
• ARPPU reflects the average revenue generated from current paying customers over a period instead of broader metrics considering all users.
• High ARPU customers retain better than low ARPU customers.
• Remember, ARPU provides an average value and can be calculated over different time periods, such as a month, quarter, or year.
• The popular dating app, reported an ARPPU of $18.48 in Q3 2020, up from $15.99 the previous year.

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If you are modeling the feasibility of a new build or an edge expansion, understanding this revenue-to-capital relationship is critical. What matters is whether it supports sustainable margins after you account for network costs, customer acquisition costs (CAC), and churn. If you’re connected to the network, you’re paying something—even if it’s a low-cost prepaid plan. More sophisticated operators use daily or weekly averages to account for mid-period fluctuations. It typically excludes one-time hardware sales, installation fees, and non-recurring charges (though practices vary by operator).

By focusing on community engagement and special in-game events, the game successfully encouraged more spending from its paying users, boosting overall revenue. Since we are calculating ARPU (and ARPPU) on an annual basis, the next step is to convert the company’s monthly revenue into an annualized metric by multiplying it by 12 months. Suppose we’re tasked with calculating the ARPU of a subscription streaming service company with the following product and customer data points in the fiscal year ending 2021.

ARPU for FTTH and ISPs

It isn’t always the best leverage to increase actual revenue. Although you might feel that a higher ARPPU is better, it’s only a part of the equation. Although both are important, they answer different questions and have different relationships to other metrics.

ARPPU is a metric commonly used by mobile app businesses in order to identify their most valuable customer segments and buyer profiles. ARPPU is similar to the marketing metric Average Revenue Per User (ARPU) except it only counts users that have spent money with the company. Having a high ARPPU is crucial since it defines your number of loyal users who bring stable revenue every month. The result demonstrates that one paying user provides you with $100 revenue per month.

In the context of ad monetization, metrics like https://kenya.mypocketdoctor.com/2025/11/25/output/ ARPDAU and ARPU can be helpful in that they include revenue generated from ads. With our service, you can track five key metrics, including ARPU and ARPPU for FREE! Understanding your customer is the key to your app’s success where ARPU and ARPPU play an essential role.

Cohort analysis of ARPPU is the process of grouping paying users by acquisition channel, location, demographics, purchase history, etc., to understand better how different cohorts generate revenue. ARPPU provides insight into how well monetization strategies work and what paying users are prepared to spend, which helps companies determine which pricing models are effective. Average Revenue Per Paying User (ARPPU) is a critical metric measuring the average revenue generated by the users who make a payment. Should you maximize the revenue you get from paying users or increase the number of paying users? One of the key metrics showcasing the effectiveness of your monetization efforts is the average revenue per paying user (ARPPU). Your average revenue per user would be $0.05.

If “inactive” users (or non-paying customers) are included, the average payment value can easily become skewed, so splitting up customer types allows companies to better grasp spending patterns and amounts. For example, if ARPPU for new paying users by Day 3 is $1, this means that an average paying user brings $1 to the 4th day of their lifetime. For instance, a streaming service has generated \$100,000 in a month from 500 paying users. Let’s wrap up the section with a dose of common sense — to improve the average revenue you get from paying users, and maximize the value you deliver.