When we have a mobile app, it is very important to keep an eye on some monetization metrics to understand and predict how much profit we can expect from the users who engage with the app. One of these metrics is ARPU.
What is ARPU (Average Revenue Per User)?
The average revenue per user (or per unit), a.k.a. ARPU, is an indicator that measures the revenue generated per user or unit.
It is the total revenue, divided by the total number of subscribers. If you want to get the most accurate ARPU measure, it should be estimated for a given time frame, since the number of units can change daily.
Why is it important?
If compared with the cost per install or customer acquisition cost, we can determine whether a paid user acquisition campaign is profitable or not. For marketers, comparing the average revenue per user of different paid user acquisition campaigns and ad networks provides information on the quality of users brought in by those sources, and helps to establish the return on ad spend.
If an app's ARPU is too low, the problem may be that they are underpricing their products and services or focusing too much on low-LTV customers. In fact, one thing that can help increase ARPU is to run price experiments and A/B testing and focus marketing efforts on high-LTV users through CPA app campaigns.
ARPU is going to be high if we have high-quality users, meaning users that generate post-install events and that are consistent in using the app.
What you need to know about ARPU (Average Revenue Per User)
- ARPU is a clear indication of how profitable an app is, and at the same time it is an evaluation and optimization tool for marketers.
- ARPU is often reported by telecom and media companies.
- ARPU is useful for investors who use it to compare the ARPU numbers of rivals in the same industry. It indicates which one is doing the best job of maximizing revenue from its subscribers or users.
- ARPU makes it easier to understand if the users you are acquiring are high-quality users
- ARPU is often confused with LTV (Lifetime Value), but they measure different things: LTV is a measure of the entire value generated by a single user during their relationship with your company, while ARPU measures the average revenue per user in a given time frame.
- Calculating the ARPU is fundamental to monitor in-app revenue and to increase it by optimizing paid user acquisition campaigns.