Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Average Revenue Per User (ARPU)

What it is:

Average Revenue Per User (ARPU) is a measurement of profit in terms of customers.

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.