This metric can also be presented as revenue per visit (RPV), revenue per unique (RPU), or revenue per unique visit (RPUV). All of these terms refer to the same metric, which can be calculated through a simple formula:
ARPU = Revenue / Unique Visits
This metric traditionally incorporates multiple revenue streams. For example, if a site monetizes through display ads, affiliate marketing, and e-commerce the ARPU metric would include revenue associated with each of these strategies.
This metric is the ultimate measure of how effectively a site is monetizing its traffic. It also reflects one of the two primary ways a site can make more money: 1) get more visits or 2) improve ARPU.
ARPU also indicates the amount of money that a site can expect to generate for each additional visitor it receives. For example, if a site has an ARPU of $0.01 could expect to earn an incremental $100 for every 10,000 new unique visitors it attracts.
The benefits to track ARPU
There are several reasons why measuring ARPU helps you.
Track Performance of your paying users
ARPU is measured at any time period depending on the business model. Setting company-wide goals and objectives to increase this metric paired with full transparency into performance can boost the business into higher realms of success and profitability.
Revenue Comparison
ARPU is commonly compared between similar companies operating in the same industry to assess how well the company is doing in comparison to its peers. Understanding how your competitors are monetizing their users can be informative.
Segmentation analysis
Users can be segmented based on geographical region or on different tiers of customers. In doing so, the metric offers insight into which customer group is generating more revenue and how to drive further value in low ARPU Group
Forecast revenue growth
Measuring your ARPU consistently can help predict your monthly recurring revenue (MRR). if you know the current ARPU, and have grown users at a steady rate, you will be able to accurately forecast your revenue growth
ARPU vs. ARPU
The concept of average revenue per user, also abbreviated ARPU, is relevant to a number of different businesses. For example, a cable company may track ARPU to measure the amount of money made from each of their subscribers.
The revenue generated per user will typically be significantly higher than the revenue from a visit to a web site.
FAQ
What is ARPU means?
ARPU stands for Average Revenue Per User/Unit. This metric used by businesses to measure the amount of money that a company can expect to generate from an individual customer.
How to calculate ARPU?
To calculate ARPU is just simply by taking the total amount of revenue for a period, then dividing by total unique user in the same period
What is the difference between ARPU and LTV?
There is a difference between ARPU and LTV (Lifetime Value). LTV is a measure of how profitable each customer is on a unit basis, whereas ARPU is a way to measure the overall health of the business on an ongoing basis.