Average revenue per user
Encyclopedia
Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, defined as the total revenue
divided by the number of subscribers.
This term is used by companies that offer subscription services to clients for example, telephone carriers, Internet service provider
s, and hosts. It is a measure of the revenue
generated by one customer phone
, pager
, etc., per unit time, typically per year or month. In mobile telephony, ARPU includes not only the revenues billed to the customer each month for usage, but also the revenue generated from incoming calls, payable within the regulatory interconnection regime.
This provides the company a granular view at a per user or unit basis and allows it to track revenue sources and growth.
There is a trend by telecommunications and Internet companies and their suppliers to sell extra services to users and a lot of the promotion that is used by these companies talks of increased ARPU for these operators. It typically manifests in the form of value-added services such as entertainment being sold to customers especially in markets where the primary service offered to the customer, such as the telephony or Internet service, is sold at a commodity rate.
Method of Calculation:
To calculate the ARPU, a standard time period must be defined. Most telecommunications carriers operate by the month. The total revenue generated by all units (paying subscribers or communications devices) during that period is determined. Then that figure is divided by the number of units. Because the number of units can vary from day to day, the average number of units must be calculated or estimated for a given month to obtain the most accurate possible ARPU figure for that month.
Also related is ARPPU (Average Revenue Per Paying User) which is calculated by dividing up the revenue amongst the users who paid anything at all. This yields a figure that is significantly larger than ARPU. For example in the case of a subscription game (that has a free play version), the ARPPU, measured by accounts, is the subscription price, diluted slightly by free trials.
A related (but less used) measure is AMPU, or average margin per user
.
ARPU is widely used by Internet Protocol television (IPTV) service providers.
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
divided by the number of subscribers.
This term is used by companies that offer subscription services to clients for example, telephone carriers, Internet service provider
Internet service provider
An Internet service provider is a company that provides access to the Internet. Access ISPs directly connect customers to the Internet using copper wires, wireless or fiber-optic connections. Hosting ISPs lease server space for smaller businesses and host other people servers...
s, and hosts. It is a measure of the revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
generated by one customer phone
Phone
Within phonetics, a phone is:* a speech sound or gesture considered a physical event without regard to its place in the phonology of a language* a speech segment that possesses distinct physical or perceptual properties...
, pager
Pager
A pager is a simple personal telecommunications device for short messages. A one-way numeric pager can only receive a message consisting of a few digits, typically a phone number that the user is then requested to call...
, etc., per unit time, typically per year or month. In mobile telephony, ARPU includes not only the revenues billed to the customer each month for usage, but also the revenue generated from incoming calls, payable within the regulatory interconnection regime.
This provides the company a granular view at a per user or unit basis and allows it to track revenue sources and growth.
There is a trend by telecommunications and Internet companies and their suppliers to sell extra services to users and a lot of the promotion that is used by these companies talks of increased ARPU for these operators. It typically manifests in the form of value-added services such as entertainment being sold to customers especially in markets where the primary service offered to the customer, such as the telephony or Internet service, is sold at a commodity rate.
Method of Calculation:
To calculate the ARPU, a standard time period must be defined. Most telecommunications carriers operate by the month. The total revenue generated by all units (paying subscribers or communications devices) during that period is determined. Then that figure is divided by the number of units. Because the number of units can vary from day to day, the average number of units must be calculated or estimated for a given month to obtain the most accurate possible ARPU figure for that month.
Also related is ARPPU (Average Revenue Per Paying User) which is calculated by dividing up the revenue amongst the users who paid anything at all. This yields a figure that is significantly larger than ARPU. For example in the case of a subscription game (that has a free play version), the ARPPU, measured by accounts, is the subscription price, diluted slightly by free trials.
A related (but less used) measure is AMPU, or average margin per user
Average margin per user
Average margin per user is one of several criteria for measuring the success of telephone companies. It is an alternative to ARPU, which focuses on revenue per unit. The central premise is that by attention to the margin produced per sold unit, not the amount of cash earned from each customer,...
.
ARPU is widely used by Internet Protocol television (IPTV) service providers.