ARPPU (average revenue per paying user) is the metric that indicates the average revenue a paying customer generates during a certain time. It’s often used by owners of mobile apps to identify audience segments that actively spend money inside the app.
In this article, we’ll uncover the difference between ARPPU and ARPU, and find out how to calculate and increase ARPPU.
ARPPU vs ARPU
If your business is related to mobile apps or advertising, you’ve probably heard such acronyms as ARPPU and ARPU. These two metrics are the most popular for measuring app revenue. Let’s now find out what makes them different.
ARPPU is a metric that measures revenues from paying users. In this case, paying users are people who actively spend their money on a specific service. The measurement focuses on customers’ activities which make up recurring revenue. For example, in-app purchases and freemium games. To correctly estimate their profits, business owners should know the recurring revenue a product generates during a month and the number of customers who actively use a product or service and pay for it.
While ARPPU pays attention to the paying users and money they bring to the business, ARPU (average revenue per user) is about the profit SaaS, subscription-based services, or the owners of apps earn from paying and non-paying users. Entrepreneurs divide the total revenue by the number of customers to accurately estimate the necessary measure.
The metric is also used to find out the performance of a product or service: in a certain region, during a certain month or week, or the number of paid and organic installs. Moreover, it helps figure out whether a specific campaign was successful. To do it, companies compare ARPU of different campaigns to detect which advertising managed to attract more paying users.
So now when you know the difference, let’s take a look at calculations to find out how to get the measure.
How to calculate ARPPU?
To estimate average revenue per paying user, you need to have the two most important indicators: monthly recurring revenue and the number of active paying users. Divide revenue by the number of paying users and get ARPPU for your company.
Let’s imagine that your app brings $2000 every month. The revenue you obtain goes from your active visitors. Say, you have 20 paying users. Now when you have the necessary measures, let’s calculate ARPPU for your product or service:
$2000 / 20 = $100
The result demonstrates that one paying user provides you with $100 revenue per month.
You are acquainted with estimations, so it’s time to move to the next section to explore the ways to improve the metric.
How to increase ARPPU?
Having a high ARPPU is very important since it defines that you have many loyal users who bring you stable revenue every month. Besides, it indicates that your business is in good financial condition, it obtains value from users, and your sales and marketing propositions are great. Use our effective tactics to improve your ARPPU.
- Consider cross-selling and upselling. A great idea to increase your revenue and APPU is to offer users some additional features. For this purpose, you need to determine the main pain points of your users and put your efforts into upselling (try to persuade customers to upgrade their accounts) or cross-selling (let users explore your additional services, for example, if you have another subscription type, encourage your customers to switch to it).
- Update content. Even the most interesting apps, services, and other products, especially games, eventually bore regular users or leave them unsatisfied. With this development of events, you should always be ready to offer your clients something new to stay up-to-date. To do everything in time and according to the plan, create a schedule of content releases and stick to it. Don’t forget about non-paying users as well, your new content should be engaging and interesting for all your clients. Say, you can create real products related to your game or conduct events online.
- Sell premium services. If you have a great experience, understand the market, and have long and strong relationships with your paying customers, consider offering them premium services. For this, you need to focus on your main active paying customers to understand their wants, needs, and preferences. Offer them special membership, premium support, or some other services available only for VIP clients that will meet their desires.
- Increase the price of your product. The easiest way to improve ARPPU is to increase the price of your product or service. However, it might have some negative consequences. To avoid them, you need to increase your price wisely: show users that your improved product is worth a new cost. Otherwise, your business will experience churn of existing customers.
- Inform users about your new releases through app store updates. To reactivate your users, it’s better to distribute new content as an update through app stores. It allows clients to notice and explore your releases.
With this metric, you’ll have a full understanding of the level of customer loyalty with your business, its financial performance, and how much money each paying customer brings into your company each month.
Last Updated: 30.08.2021