What Is ARPU? Meaning, Formula, and Calculator

Learn about average revenue per user (ARPU) and why it is one of the most important revenue metrics for mobile apps and games. I’ve also included the different ARPU formulas and our custom ARPU calculator!

ARPU Definition

It is an important KPI that helps developers, publishers, and marketers understand the average revenue each user brings, allowing for better financial planning and strategic decision-making.

Importance of ARPU in the Mobile App and Gaming Industry

ARPU provides insight into the monetization effectiveness of an app or game.

By understanding ARPU, you can identify which user segments are the most valuable and develop targeted strategies to increase overall revenue.

ARPU Formula

The basic formula to calculate ARPU is:

Here’s an example of an ARPU calculation

If a mobile game generates $50,000 in revenue over a month and has 10,000 active users during that period, the ARPU would be:

ARPU = 50,000 / 10,000 = 5

This means the game generates an average of $5 per user per month.

ARPU Variations and Specific Calculations

While the basic ARPU formula provides a general overview, there are several variations to consider for more detailed insights.

ARPPU (Average Revenue Per Paying User)

This metric focuses on users who make purchases within the app or game, providing a clearer picture of monetization efficiency among paying users.

ARPDAU (Average Revenue Per Daily Active User)

Useful for understanding daily revenue generation, especially for apps or games with high daily engagement.

ARPMU (Average Revenue Per Monthly Active User)

Similar to ARPDAU but focuses on monthly active users, providing a longer-term view of user engagement and revenue generation.

How to Calculate ARPU?

Here’s how you can calculate ARPU for your app – it’s quite simple!

Data Collection

To accurately calculate ARPU, start by collecting comprehensive and reliable data.. This includes:

Total Revenue

All sources of revenue generated by the app or game (in-app purchases, subscriptions, in-app advertising, etc.).

Number of Users

The total number of users active during the specified period (daily, monthly, or yearly).

Tools and Platforms for Data Collection

• Analytics Platforms: Google Analytics, Firebase, Mixpanel.
• In-App Tracking: Built-in analytics tools provided by app stores or custom tracking solutions.

ARPU Calculator

Now it’s time to calculate using the formula I mentioned earlier:

ARPU = Total Revenue / Number of Users

You can use our custom ARPU calculator for quick calculations.

Segmentation

Calculating ARPU for different user segments helps identify which groups are the most valuable.

Segmentation can be based on:

1. Geography:
   • Calculating ARPU for users in different countries or regions.
2. Device Type:
   • Comparing ARPU for users on iOS vs. Android.
3. User Behavior:
   • Analyzing ARPU for users with different engagement levels (e.g., frequent vs. occasional users).
4. Demographic:

• Calculating ARPU for users based on demographic variables like age and gender.

Cohort Analysis

Cohort analysis involves grouping users based on shared characteristics or behaviors within a specific time frame to calculate ARPU for each cohort. This helps track how different user groups evolve over time and their impact on revenue.

1. Defining Cohorts:
   • Group users based on their acquisition date (e.g., users acquired in January, February, etc.).
   • Other possible cohort definitions include users who made their first purchase in a specific month or users who signed up during a particular campaign.
2. Calculating Cohort ARPU:
   • Calculate the total revenue generated by each cohort over a specific period.
   • Divide the total revenue by the number of users in the cohort.

Benefits of Cohort Analysis

• Identify Trends: See how user value changes over time.
• Optimize Marketing: Tailor marketing strategies based on cohort performance.
• Improve Retention: Develop retention strategies for cohorts showing declining ARPU.

Factors Influencing ARPU

Understanding the factors that influence ARPU (Average Revenue Per User) is essential for optimizing revenue generation strategies in mobile apps and games.

Here are some key factors to consider

1. Revenue Streams

In-App Purchases (IAP)

• Users buy virtual goods, upgrades, or premium features within the app.
• Impact on ARPU: High-value items and frequent purchases can significantly increase ARPU.
• Optimization Strategies: Offer diverse pricing options, create limited-time offers, and develop enticing virtual goods.

Advertising Revenue

Subscriptions

• Users pay a recurring fee for premium content or services.
• Impact on ARPU: Subscriptions provide a steady and predictable revenue stream, increasing ARPU.
• Optimization Strategies: Offer tiered subscription plans, provide exclusive content, and promote long-term subscriptions with discounts.

Sponsorships and Partnerships

• Collaborations with brands for exclusive content, events, or promotions.
• Impact on ARPU: Can provide a significant revenue boost through exclusive deals and brand promotions.
• Optimization Strategies: Develop strategic partnerships with relevant brands, offer branded content, and organize sponsored events.

2. User Engagement

Session Frequency and Duration

User Experience (UX)

• The overall experience of the user while interacting with the app.
• Impact on ARPU: A positive UX leads to higher retention, more frequent use, and increased spending.
• Optimization Strategies: Invest in intuitive UI design, ensure fast load times, and minimize bugs and crashes.

Personalization

• Tailoring the app experience to individual user preferences.
• Impact on ARPU: Personalized recommendations and offers can boost user satisfaction and spending.
• Optimization Strategies: Use data analytics to personalize content, recommend products, and customize user interfaces.

3. Monetization Strategies

Pricing Strategies

Promotional Offers

• Discounts, bundles, and special offers to incentivize spending.
• Impact on ARPU: Can drive short-term revenue spikes and long-term user loyalty.
• Optimization Strategies: Create limited-time offers, bundle popular items, and use seasonal promotions.

Content Updates

• Regular updates with new content, features, and improvements.
• Impact on ARPU: Keeps users engaged and willing to spend on new features.
• Optimization Strategies: Plan a content calendar, listen to user feedback, and introduce new features based on trends and user needs.

4. User Demographics

Age and Gender

Geographical Location

• Users’ location impacts spending behavior due to economic factors.
• Impact on ARPU: Users from different regions may have different ARPU due to varying purchasing power.
• Optimization Strategies: Localize pricing, offer region-specific promotions, and tailor content to cultural preferences.

5. User Acquisition Channels

Organic vs. Paid Acquisition

Quality of Acquired Users

• The long-term value of users acquired through different marketing efforts.
• Impact on ARPU: High-quality users (those who are more engaged and likely to spend) can significantly increase ARPU.
• Optimization Strategies: Focus on acquiring high-quality users through targeted campaigns, use lookalike audiences, and refine targeting criteria.

What Is a Good ARPU?

What constitutes a good ARPU (Average Revenue Per User) varies by industry, app type, and market conditions.

• Revenue Streams: ARPU can vary widely based on whether revenue comes from in-app purchases, subscriptions, or advertisements.
• User Engagement: Higher user engagement often correlates with a higher ARPU, as engaged users are more likely to make purchases or view ads.
• Market Segment: Different market segments (e.g., casual games vs. mid-core games) have different benchmarks for ARPU.

ARPU Statistics

Here’s are some industry benchmarks.

Data source: GameAnalytics

Mobile Games

Determining a Good ARPU for Your App

To evaluate whether your ARPU is good, consider the following:

1. Compare to Industry Benchmarks: Use industry reports and benchmark data to compare your app’s ARPU with similar apps in your category.
2. Analyze User Segments: Calculate ARPU for different user segments (e.g., geographic regions, device types) to identify high-value users.
3. Track Over Time: Monitor ARPU trends over time to assess the impact of changes in your monetization strategy.

How to Increase ARPU for Apps and Games?

Now that you know what ARPU and ARPDAU are, you’re probably wondering “how can I increase them?” Seeing that these metrics are a reflection of your app’s monetization strategy, you have to optimize it. That goes for in-app purchases, in-app ads, subscriptions, and hybrid models.

Encourage In-App Purchases

One of the most effective ways to increase ARPU and ARPDAU is to offer enticing in-app purchase offers players can’t refuse. Depending on the game and genre, in-app purchases can include various boosts, power-ups, weapons, gear, currency, extra lives, loot boxes, game characters, skins, etc.

Adjust Your Pricing Model

After you’ve added value to the app itself and set starting prices, you will have some initial information on ARPU. Based on this data, you can decide if you should go for pricing adjustments. 

Increasing your prices is the most obvious way to increase ARPU, but then comes the question –  how to determine the maximum amount the user is willing to pay?

For this reason, if you want to test different pricing models, it is a better idea to try them out on new users and observe their behavior.

Another strategy to apply when it comes to pricing is focusing on those users that have the highest growth potential. You can offer them optional premium features and see if they want to spend more than usual.

Switch Up Ad Placements

If you’ve decided to place ads in your app, choose wisely where you place them. Don’t place your ads too often or in the wrong spot. That will most probably annoy your users.

If your game has levels, a better option would be to place ads after or before a new level than in the middle of a level. The optimal rate for a mobile game is around 3 to 4 ads per gaming session.

There is no universal formula for knowing which ad placement will work best for your app. A/B testing will help you optimize for the right ad placement.

Implement Rewarded Video Ads Into Your Game

Generally, users are more likely to interact with this kind of ad because they like getting something in return for watching the ad.  Whether it’s in-game currency, extra lives, or something else, it will do the trick.

After all, app developers profit from every opt-in ad engagement. Consequently, that results in higher ARPU and ARPDAU.

However, don’t forget about other ad formats like interstitial and banner ads.

In-app ads in general work quite well for increasing revenue. That’s especially true for casual games – it’s the main monetization method for this genre because casual gamers are not big spenders.

Choose the Right Ad Formats

Try to take the opportunity of new ad formats and experiment with them. Banner ads are a thing of the past. They are being replaced with new formats like rewarded video, playable ads, direct play, and offerwalls.

Playable ads are interactive ads that users engage with by playing a part of the game, or by using the app before downloading. These ads are effective at increasing conversion rates, user retention, and revenue. Learn more about playable ads here. 

Try Subscriptions

Not all users will be open to making in-app purchases. Actually, almost half of the revenue of some game publishers will come from a very small group of users. In the mobile gaming lingo, those users are called mobile gaming whales. That term is used to describe a tiny group (around 2%) of users that drives the most revenue for mobile apps and game publishers.

For this group of users, you might want to consider introducing a subscription model. In this case, the key is finding out which features should be offered in exchange for a monthly fee.

Aim to Retain

Obviously, if you can’t even get your users to continue using your app, you can’t really expect great ARPU and ARPDAU.

Here are some strategies that can help you retain players in your app or game.

When they launch it for the first time, give them a great first-time-user experience (FTUE). Learning how to play the game should be as simple as possible, so work hard on your game tutorial. FTUE should also be rewarding and fun. Basically, it should showcase your game’s best features.

Furthermore, you can use different proven retention methods. For example, features like mini-games, push notifications, social features, personalization features, etc.

Moreover, you need to constantly add new content to your game to keep it fresh. After all, one of the most common reasons why players churn is repetitiveness and lack of new content.

All of these features should make your game more interesting. They should also make players want to come back to it.

ARPU: Final Thoughts

There are plenty of app metrics you need to track, but ARPU and ARPDAU are amongst the most important ones for your monetization journey.

Make sure to base your business decisions on data, not on your feelings. Having enough data and tracking the right metrics will give you leverage and help decide which changes you need to make for your app to succeed.