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In contrast, WeChat, a widely used social media app in China, earns approximately $7.00 per user. Yet, remember that these figures serve as examples, and the real numbers may fluctuate. Monitoring and analyzing the Average Revenue Per User (ARPU) might differ depending on your business model.

Gather feedback through surveys, reviews, or direct communication and act on constructive comments to improve your product and justify the higher price point. Loyalty programs incentivize customers to stick with your brand and invest higher amounts. Defining a “good” ARPU can vary widely depending on the industry, business type, and market conditions—a good ARPU for one company might not be the same for another. Retaining existing users is often more cost-effective than acquiring new ones. Helping the world’s leading studios and game developers turn their data into insights. We’re sure you’re keen to get started and we’re keen to see the results.

ARPPU stands for ‘Average Revenue per Paying User’, and it refers to the estimated revenue a single paying user generates during a specified period. Paying users are those who pay money for a service, either by subscribing, making in-app purchases, or paying for a download. This metric removes those users who don’t actively spend any money during the app cycle (for example those who drive revenue for an app developer through engaging with ads). In the subsequent step, we’ll calculate the average revenue per paying user (ARPPU), which only includes customers that are on paid monthly subscription plans. When customers stop using a company’s product or service, or ‘churn,’ it can significantly impact the company’s average income per user or ARPU. Those customers who offer a high ARPU are incredibly valuable to a company.

This approach helps you observe and modify promptly, maintaining a constant check on the results. While some businesses might opt for daily, weekly, quarterly, or yearly measurements, the key is to select a frequency that aligns with your service’s expected usage by the user. A thorough examination of ARPU offers insights into the effectiveness of your product pricing. A low ARPU in a SaaS business may indicate underpricing, providing an opportunity for price adjustments.

Consider making adjustments to your pricing plans, especially if you operate a subscription-based service, as this can positively impact your ARPU. Understanding and avoiding these common ARPU calculation challenges can give you a more accurate picture of your company’s financial health. In this scenario, the ARPU for the company is $100, indicating that, on average, each user contributed $100 in revenue during the given month. Join 30,000+ leading game industry professionals for monthly insights.

Increase the price — but wisely and with justification

Utilizing both metrics allows businesses to make informed decisions about customer acquisition, retention, and overall revenue strategy. While ARPU considers the average revenue generated from all users, ARPPU focuses only on paying customers. This distinction is particularly relevant for businesses that offer both free and paid versions of their products or services. While ARPPU focuses on paying customers exclusively, it is not the only measure of a user’s average contribution to revenues.

• Experiment with different formats such as rewarded videos or playable ads and see if they increase engagement and, in turn, your paying user conversion rate.
• In particular, ARPPU can be broken down by marketing channel, organic vs. paid advertising, campaign, and more.
• Introducing new product features creates additional revenue streams, and ancillary services like technical support and training can contribute to revenue growth.
• In this scenario, the ARPU for the company is $100, indicating that, on average, each user contributed $100 in revenue during the given month.
• A rising ARPU on a trended basis indicates greater profitability and revenue generation capability.
• The Average Revenue Per User (ARPU) quantifies the amount of revenue generated on average from each customer.

Advantages and Disadvantages of ARPU

ARPPU is similar to the marketing metric Average Revenue Per User (ARPU) except it only counts users that have spent money with the company. ARPPU is a metric commonly used by mobile app businesses in order to identify their most valuable customer segments and buyer profiles. Firstly, it helps businesses understand the profitability of their customer base. By comparing ARPU figures over different periods, companies can assess whether their revenue per user is increasing or decreasing, allowing them to adjust their strategies accordingly. Moreover, ARPU allows businesses to evaluate the effectiveness of their pricing models. It represents the average amount of revenue a business generates from each individual user or customer over a given period.

Target the Right Customers

Although you might feel that a higher ARPPU is better, it’s only a part of the equation. ARPU is commonly compared between similar companies operating in the same industry to assess how well the company is doing in comparison to its peers. The true ARPU figure therefore could be distorted and that distortion could be substantial. The world’s top social media sites in terms of ARPU in 2023 are Facebook and Instagram. You must first define a standard period to accurately calculate ARPU. Most telephone and communications carriers calculate ARPU on a month-to-month basis.

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Of course, a lot of games do stuff like this, and part of Machine Zone’s success is that other studios haven’t figured out how to duplicate its money-making techniques. In addition, you get in-depth reporting and analytics related to your sales, products, customers and visitors. Another common mistake businesses make while calculating ARPPU is that they take the Average Check as Average Revenue Per Paying User. Now, you might be wondering, “How can I use ARPPU to grow my business? We’ll give you actionable tips and strategies that you can apply to your business right away. Moreover, you need to constantly add new content to your game to keep it fresh.

• Average revenue per paying user (ARPPU) is a measurement that app marketers use to figure out how much revenue is generated by paying users and players, on average, over a certain time period.
• However, note that many companies use the “ARPU” and “ARPPU” interchangeably, so it is crucial to confirm how the company calculates each metric.
• Loyalty programs incentivize customers to stick with your brand and invest higher amounts.
• This metric goes beyond a single period and estimates the total revenue a customer brings to your business over their entire relationship.
• You’ve successfully understood the complexities of ARPU and its crucial role in evaluating your company’s growth and revenue generation.
• This strategic optimization ensures a focused allocation of resources, maximizing the return on your user acquisition efforts.

ARPU is an essential metric for businesses across various industries, especially those operating in subscription-based models, telecommunications, software-as-a-service (SaaS), and online platforms. It offers a clear perspective on the revenue generated by each customer, helping businesses make informed decisions regarding their pricing, marketing, and overall financial strategy. ARPU, or Average Revenue Per User, is a calculation of the income each user or customer contributes over a specific timeframe. For a SaaS company, you calculate ARPU by dividing the total income (typically the Monthly Recurring Revenue or MRR) by the number of paying users during the same period.

Some players will download your game to multiple devices but actively play on one, others might download the game only to uninstall it immediately. ARPU considers ALL your users (paying and non-paying), however, ARPPU focuses only on PAYING users and their average revenue contribution. ARPU (Average Revenue Per User) can be calculated both monthly and annually, depending on your needs and the specifics of your business. Your ARPPU is a reflection of your business’s monetization strategy arppu formula and how much a user is willing to pay for your service.

Factors Influencing ARPU

Other metrics, such as LTV, conversion rates, and churn, also play a critical role. A common example is to have one subscription tier that answers the needs of most users but leaves your most loyal and heavy users unsatisfied. In most cases, increasing ARPPU and lifetime value (LTV) goes in pairs. Increasing average revenue from the user tends to increase the value you capture from the user, but it’s not always the case.