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.