What is Average Revenue Per User (ARPU)?
Average Revenue Per User (ARPU) is a measurement of profit in terms of customers.
How Does Average Revenue Per User (ARPU) Work?
ARPU is generally applied for financial analysis at companies which offer subscriptions to customers.
The formula for average revenue per user is:
ARPU = Total Revenue / Number of Subscribers
Suppose a local internet service provider makes $500,000 worth of revenue. Also assume it has 800 customers.
Average Revenue Per User = $500,000 / 800 = $625
Now, suppose the same company offers a premium service as an add-on. Some customers will opt to pay more for the service. This will boost revenue to, say, $600,000. This will increase the ARPU.
Average Revenue Per User = $600,000 / 800 = $750
Why Does Average Revenue Per User (ARPU) Matter?
The measurement of ARPU is most relevant in telecommunications and internet companies. This provides a way to track revenue growth as a result of promotions and supplemental services.