Average Revenue Per User (ARPU)
What it is:
How it works (Example):
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 it Matters:
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.