The term Average Revenue Per User, or ARPU, is one which is commonly used these days in the internet and mobile phone industries. ARPU refers to data collected by companies which detail the mean value of revenue generated by a certain source, for example, a website with an advertisement users can click on, in relation to the amount of users visiting this given website. It is essentially a quick way to see which websites, companies, or call centers are generating the most revenue per user for a company. ARPU is often used by mobile phone companies to see how much money they bring in through call services versus monthly contract fees, but this data is as vital to business using websites for advertisements, particularly those in which the business is paid money for each click linking to their site. For sites which require a paid subscription or offer paid features, the ARPU data is garnered not from clicked link ads, but from revenue generated by paid use divided by the total of registered users.
A general ARPU statistic is one which calculates total revenue divided by total users from a source, but can be made to reflect more specific data as well. For example, a company which has been running pay per click ads on a popular website may want to determine how much revenue is being brought in by first time clickers versus extant patrons of the company. In this case, a specific ARPU can be determined for new versus existing customers. In the same vein, new products or even new advertisements can be tested for their efficacy in this way. Websites with free trials or limited use may want to see how many initial free users go on to pay for features or subscriptions offered by the site, and the ARPU can help calculate that data as well. The customization of ARPU data makes it extremely valuable for web-based companies since it can help provide information necessary for determining what is working and what isn’t in the company’s product offerings and internet ad campaigns.
Although calculating average revenue per user can be useful for a business, there are some caveats which must be observed. First, taking average statistics of users can lead to treating users of a product or website as a general group, which may lead a company to neglect the need of making advertisement design and placement catered to smaller, more individualized populations. Secondly, average revenue does not always reflect an accurate picture of which users are utilizing which features of a business. A pay per click ad where new users click twice, but existing users click four times will show an average of three clicks for this ad, and will not tell the business that there is a difference between user groups. Despite these risks, which are inherent in all statistical data using means, ARPU remains a great way for businesses to track user activity and refine their products and advertisements to better serve their customers.
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