.png){kind=small}
Average Revenue Per User (ARPU) measures the revenue a company generates per user or unit.
ARPU helps businesses understand the profitability of different customer segments. It also helps them compare their performance with competitors. Almost every time, when ARPU is mentioned, it is regarding users, not units, but it is sometimes used in this way.
ARPU vs. ARPA
While ARPU and ARPA (Average Revenue Per Account) might seem similar, they are used in different contexts.
ARPU is commonly used in subscription and recurring business models, where revenue is tracked per individual user. In contrast, ARPA is often employed in traditional sales processes or B2B settings. This is because revenue is tracked per account, which may include multiple users. Often “account” is synonymous with the business with which a transaction is being completed.
ARPU (Average Revenue Per User) vs. ARPU (Average Revenue Per Unit)
While average revenue per user and average revenue per unit sound similar, they measure different things.
Average revenue per user (ARPU) generally refers to the revenue generated per user or customer. Therefore, it provides insights into how much each customer contributes to the total revenue. It’s particularly useful in sectors like digital media, software, and other subscription-based services.
On the other hand, average revenue per unit refers to the average revenue generated per unit of a product sold or service provided. For example, in a manufacturing industry, a “unit” might refer to each manufactured item sold.
How to Interpret ARPU
Businesses can break this metric down into new versus existing average revenue per user. Comparing these figures provides insights into upselling effectiveness and the value of new customers compared to existing ones.
