What is Average Revenue Per User (ARPU)?
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.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Bombay. Linens 'n Things. Circuit City. These firms were ill-equipped to handle the duel pressures of a slowing economy...Read More →
I recently met someone who didn't think that he needed a financial advisor. It took two phone calls from me and a referral from a family member to convince him to hear...Read More →