ARPU, or Average Revenue per User is the average revenue generated per users for each campaign. You can also look at ARPU for different demographics and geos to refine your target audience.
ARPU (Average Revenue Per User) is a crucial performance metric that marketers use to track the revenue they generate from each user over an extended period, often months or years. ARPU provides app developers, marketers, and business owners with insight into the financial health and monetization efficiency of apps or services they manage or market.
Calculating ARPU
ARPU is calculated by dividing total revenue earned during any given period by active users active during that same timeframe; its formula for calculation can be seen here:
ARPU= Total Revenue​ | Active Users
For instance, if an app generates $50K and has 10,000 active users within its monthly period of operation, its ARPU would be $5.00 on average per user, meaning each individual generates $5 in revenue monthly.
Importance of ARPU revenue evaluation: ARPU provides businesses with an accurate measure of user revenue contributions, providing quick insight into revenue streams and uncovering growth opportunities.
Benchmarking performance: By tracking their ARPU over time, businesses can evaluate how well their monetization strategies have performed in comparison with industry standards and competitors. By benchmarking ARPU against industry averages and rivals, companies can compare themselves against industry best practices for effective revenue strategy evaluation.
User segment analysis: ARPU can be further divided into individual user groups, such as free users versus premium subscribers or regions, to gain greater insight into which clusters are the most profitable.
Investment decisions: ARPU serves as an important metric that illustrates a company’s potential profitability and scalability. By showing effective monetization and user engagement strategies, a company can attract more investments.
Strategies to increase ARPU
Diverse revenue models such as in-app purchases, subscriptions, and premium features can boost average revenue per user (ARPU), with tiered subscription plans providing incentives to spend more with you.
User engagement: One way to increase in-app spending is to engage your user base through regular updates, new features, and interactive content. Engaged users are more valuable as they’re likely to make purchases and engage with ad content more often.
Targeted advertising: Customized advertisements designed around user behavior and preferences can increase engagement rates and click-through rates, ultimately driving up advertising revenues. Rewarded ads (where users receive incentives in return for viewing ads) also enhance ARPU significantly.
Promotions and special offers: Offering promotions, discounts, or events as an inducement can incentivize users to make purchases. Exclusive limited-time offers may drive urgency while simultaneously increasing revenue growth.
Customer retention: Focusing on keeping existing users through loyalty programs, regular communications, and excellent customer service can significantly increase lifetime value. Retained users tend to spend more and contribute to an ARPU increase.
Conclusion
ARPU is an essential metric for accurately understanding and optimizing the revenue potential of apps or services. It helps businesses make smarter monetization strategies that improve user engagement while driving sustainable growth. Tracking ARPU growth over time is integral for long-term success in an increasingly competitive digital marketplace.