How is Average Revenue Per Paying User (ARPPU) Calculated?
The average revenue per paying user is very similar to the average revenue per account. However, it is a little more specific.
What is the Average Revenue Per Paying User?
The average revenue per paying user, is a calculation that service and subscription-based businesses can use. The ARPPU is used to estimate how much income and revenue is generated from the accounts on their website.
It is very similar to the average revenue per account calculation. Unlike the Average Revenue Per Account, the ARPPU gives a slightly more specific answer as to how much users are paying to use the service.
It is based solely on those website users who are paying. This means that free users who are not generating revenue for the business do not get included in the calculation.
Calculation of the Average Revenue per Paying User (ARRPU)
Since the ARPPU does not include non-paying website subscription users in the calculation, it helps work out the average cost of a subscription for users. Since this equation does not have every user, it can sometimes be more helpful to businesses.
Application of the Average Revenue per Paying User
ARRPU is a simple calculation and is worked out similar to the ARPA. Total revenue for the subscription service is divided by the number of paying users.
This will give a figure that will represent the average amount of money spent on a business subscription service by each user over a set period.
Average Revenue Per Paying User is calculated over any time based on what is most useful for the business. It is best to calculate The length of the subscription plans; most companies work out an annual or a monthly ARPPU. Quarterly (or any other period that might be relevant) calculations are also possible.
Method of Average Revenue Per Paying User Calculations
When working out the average revenue per user, it is crucial to use the average number of paying users over the period in question as subscriptions will run out at different times.
The Average Revenue per User is easy to calculate. It can allow a business to understand better how much users want to pay for subscriptions. It is especially beneficial for carrying out comparisons with rival/competitor companies.