Ride-sharing companies like Uber and Lyft typically see ARPU of about $35/month. This includes riders who use it weekly and those who open the app once a month. At $250/month ARPU, you can build a solid revenue engine — if you keep churn low. If you’re in SaaS, and not sure whether to go SMB or enterprise, mid-market may be your fastest route to scale. They churn less than SMBs but don’t require the heavy procurement dance of big enterprise. Broadcast live metrics like Average Revenue Per User (ARPU) to your team, with an easy-to-understand dashboard.
ARPU can be useful to analysts and investors even as a macro-level measure. It can be used as a point of comparison among companies in a sector and used to forecast a company’s growth potential. It also can yield insights into the relative success of the company’s market segments. For example, imagine a company generated $50,000 in revenue during one month and had 10,000 active users during that month.
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It’s calculated by dividing the total revenue by the total number of active users. But don’t let its simplicity fool you—this number can tell you a lot about your business. ARPU is calculated by dividing your total revenue by your total number of users during the time period you want to measure. This could be a week, month, year, season, or any time frame relevant to a specific campaign or strategy where you want to measure revenue per user or revenue per customer.
Similarly, if you have a similar ARPU to ARPDAU but lots of inactive accounts — you might have a future issue with churn as those inactive accounts fail to renew their subscriptions. All this is made harder when you have multiple systems, each running specific tasks. Conversely, a unified billing & payments infrastructure – that covers subscription management, payments, and data analysis – allows for significant automation, flexibility, and speed. Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data. Choose one of the following available services to start tracking your Average Revenue Per User instantly. ARPU isn’t just a theoretical number; businesses use it every day to make important decisions.
That’s why it’s essential for SaaS companies to get to grips with and measure it accurately. Ashley Kemper leads the Revenue Marketing team at PandaDoc. She has worked in marketing for more than 12 years, building marketing teams at Asana, and launching new brands at Double and HyperComply. Before venturing into marketing, Ashley worked in content and publishing at National Geographic, Agence France-Presse, and Government Executive magazine. With PandaDoc CPQ software, you can make the quoting process seamless.
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They offer their customers a variety of options that break down to either prepaid or postpaid versions. It also can indicate the company’s trajectory toward or away from growth. It may not be quite as useful to analysts and investors outside the company, however. The number of users also fluctuates throughout any given period, especially in industries such as media and telecommunications. The number of units for a given period must therefore be estimated to reach the most accurate ARPU figure possible.
In this sense, adopting/including additional metrics that fit under the ARPU umbrella is advised for more specific insights. In short, it’s the average amount of revenue generated by each active user of your app over a given period of time. Average revenue per user, or unit, is a metric used by app businesses to calculate how much money they generate from a user during a specific, set time period.
Productivity Software (B2C) ARPU – $8/month
Each metric serves a specific purpose, helping companies identify opportunities and challenges that ARPU alone might miss. That’s where AMPU comes in—it looks at the margin (or profit) generated per user. This is crucial for businesses looking to balance growth with profitability. While the formula is straightforward, getting the inputs right can be tricky.
How ARPU is used
Lunch at work, dinner on lazy Sundays, late-night cravings — these are triggers that platforms want to own. The more a customer depends on the service, the higher their ARPU. That’s why ride-share companies push for deeper habits — rides to work, groceries, airport trips.
Users should be informed well in advance, provided with transparent pricing details, and given insights into the decision-making process. By leveraging ARPU data effectively, you can tailor your strategies to attract and retain high-value users, ultimately maximising your revenue potential. Additionally, ARPU assists marketers in determining the number of new users required to meet specific revenue targets, guiding strategic decisions and resource allocation. In a successful ad free freemium SaaS business model, ARPPU will always surpass ARPU significantly.
Your $45/month plan is your most popular plan, with 500 customers paying $45 in ARPU each month. You can look at the value that’s included in that plan to understand what makes this plan popular with customers. ARPU is the average monthly revenue that you receive per user.
How to improve ARPU for mobile apps
Typically, an increasing or high ARPU signifies effective monetisation of your user base, often attributed to successful marketing campaigns or valuable product offerings. Conversely, a decreasing or low ARPU can raise concerns, indicating potential customer dissatisfaction, sub-optimal pricing strategies, or the necessity to reassess your approach to marketing. ARPU, an acronym for average revenue per user, is a crucial metric that reveals the average revenue generated by each active user of your SaaS application over a specific period of time. Yes, ARPU can be applicable to non-subscription businesses as well.
- A company isn’t compelled to produce or track ARPU to comply with generally accepted accounting principles or GAAP.
- Below, we’ll explain why average revenue per user matters, how to calculate it, and best practices for managing it.
- All this is made harder when you have multiple systems, each running specific tasks.
This is especially true in mid-size and enterprise segments. If the product arrives late, or quality drops, customers churn fast. But if it becomes part of their routine — skincare, meals, vitamins — they’ll stay for years. You get steady cash flow, and users get consistent product. Unlike subscription platforms, these OTTs aim for massive reach — then layer monetization later. The biggest lift in ARPU comes from increasing advertiser demand or improving targeting accuracy.
- To calculate total revenue determine the number of products, goods, or services sold during the time frame you choose.
- It allows businesses to deepen their analysis of growth potential on a per-customer level and helps them model revenue generation capacity.
- Many financial models involve first forecasting your users based on acquisition, customer acquisition, and retention assumptions.
By submitting this form, I agree that the Terms of Service and Privacy Notice will govern the use of services I receive and personal data I provide respectively. The longer a customer stays, the more revenue they’ll generate for your business. Our study of 941 SaaS companies found that customers with 4-digit ARPU were nearly 50% less likely to churn than customers with 1- or 2-digit ARPU. ARPU can help you to identify trends and implement change that can shift the trajectory of your business towards that large pool of SaaS profits we all dream of. Discover what influences ARPU, why it matters, and how to grow it. Our new set of developer-friendly subscription billing APIs with feature enhancements and functionality improvements focused on helping you accelerate your growth and streamline your operations.
The end date for the period isn’t used for the denominator because it could fail to capture fluctuations throughout the period. The start date and the end date of the period are typically averaged instead. Consider Facebook, whose 2017 Q4 ARPU was $6.18 compared to its 2014 Q4 ARPU of $2.81 – the company’s ARPU more than doubled over the three-year period. It’s no coincidence that shares of Facebook saw an impressive run up over the same timeframe.
If you’re in B2B SaaS and want to model your pricing after cloud providers, think usage-based billing. B2B marketplaces connect buyers and sellers of products or services — often in logistics, manufacturing, wholesale, or SaaS procurement. At $1,200/year per user, the ARPU is significantly higher than B2C platforms. The $12.50/month ARPU is pulled down by massive global user bases where pricing varies widely. U.S. users may pay $15, but users in emerging markets might contribute just $3–5.
The easiest way to do this is to ensure that a value metric is central to your pricing strategy to bake in expansionary revenue. An alternative to this strategy is to make sure you have a clear add-on and upgrade strategy. The easiest is to raise your prices while keeping your service affordable and competitive. New product features present new revenue streams; as do ancillary services such as technical support and training. Sometimes, simply re-communicating the benefits of your offer can encourage more use and a wider footprint with a customer. ARPU looks at all users, but ARPPU zeroes in on paying customers.
The total revenue generated during the standard period is then divided by the number of units or users. While ARPU measures revenue generation per user, CAC focuses on the cost incurred to acquire each new customer. If your customer acquisition cost is higher than your ARPU, you’re losing money on each customer acquisition. In today’s world, ARPU tells us more than just how much each customer is worth. It shows us if the business model is working, how sticky users are, and how much value each industry pulls from its base.
However, note that many companies use the “ARPU” and “ARPPU” interchangeably, so it is crucial to confirm how the company calculates each metric. Each of the company’s customers contributed $100 in revenue. For example, if a company has produced $10 million in revenue with 10,000 customers, the ARPU is $100. At LawnStarter, we expect people to get their lawns cut at least once per month, so we measure it on a monthly basis.
Let’s delve into these variances to understand their significance in making better decisions for your business. Packaging products together to provide value at a competitive price is a common marketing strategy seen in the e-commerce and B2C industries. Think of a trip to the shop for groceries and average revenue per user all the “buy any 3 for the price of 2” offers you see, for example. Identifying opportunities to enhance the value of your existing product is key to increasing users and ARPU as your business scales up. This information is essential for determining things like your return on ad spend (ROAS) and return on investment (ROI) for each marketing effort you make.