Average Revenue Per User (ARPU)

Average revenue per user

ARPU stands for Average Revenue per User, and it refers to the average amount of revenue an app generates from each active user. App growth teams that develop subscription or revenue-driven apps often include ARPU as a key performance indicator to measure their financial success. By calculating ARPU, you can determine the average amount of money you earn from each user.

While ARPU takes into account the revenue earned from both paying and non-paying users, there is another similar metric used specifically for subscription-based apps. This metric is known as ARPPU (Average Revenue per Paying User), which only considers the revenue generated by users who have made a payment.

The difference between ARPU and ARPPU

Mobile analytics commonly use both ARPU and ARPPU metrics. However, with ARPPU, you can focus on smaller groups of paying customers and understand their value to your business. This metric provides condensed data on app monetization, allowing you to concentrate on revenue without the interference of the non-paying majority. Therefore, ARPPU almost always exceeds ARPU.

A high ARPU doesn’t always equate to app success. Even with the high price of subscription products, a low number of users can still result in a high ARPU. Conversely, ARPPU provides a better understanding of app monetization success by tracking a smaller number of users who contribute the majority of your revenue. This makes it easier to assess the impact of new monetization methods on existing buyers.

How to calculate ARPPU

When calculating ARPPU, it is crucial to exclude non-paying players such as free trial users, canceled subscriptions, and inactive accounts.

In Adapty’s Analytics section, you can view the ARPPU metric along with other significant financial metrics like revenue, ARR, MRR, and ARPAS (Average Revenue per Active Subscriber). The ARPPU formula is simple: Total revenue divided by the number of users who paid.

For instance, if the revenue for a given day is $1000, and 50 users made at least one purchase, the ARPPU would be $20, calculated as follows: ARPPU = 1000 / 50 = $20.

However, it’s important to note that as one user may pay multiple times during the whole period, the chosen period’s ARPPU value may be higher than the daily ARPPU value.

How to grow ARPU and ARPPU

It’s crucial to monitor metrics like ARPPU to detect issues at an early stage. A drop in ARPPU can be caused by various unexpected factors. For instance, reducing the price of in-app purchases or subscriptions may lead to a decrease in ARPPU instead of the expected revenue growth and an increase in paying share. This may occur when only the previously paying users continue to pay, but now they pay a smaller amount. Alternatively, the structure of the paying audience may have changed, and only new or recent users are paying.

ARPPU is also useful for testing and comparing different offers on your paywalls, such as by running an A/B test with two paywall variations to determine which one generates more revenue. 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. Another option is to test your pricing by making slight differences between monthly and weekly subscriptions, for instance. By checking ARPPU after the test, you can understand the number of loyal users who bring stable revenue every month and how much users are willing to pay for subscribing to your mobile app.

To learn more about recommendations and best practices for Paywall A/B testing, check out our guides.