ARPU stands for Average Revenue Per User. This refers to how much revenue a customer delivers to a company in a given period.

ARPU is mostly used in the areas of mobile telephony, pay TV and streaming. The value can be calculated for different periods such as weeks, months or years and can be further narrowed down using different categories (demographic characteristics or performance indicators). It can be used to assess the profitability of companies active in the above sectors.

Calculation of the ARPU

First a period of time is defined. Usually these are months. Now the total revenue per customer in one month is calculated and divided by the number of all customers of the company. End devices instead of customers can also be used as a basis for calculation. If the number of underlying units (customers or devices) fluctuates in a month – and this can be assumed – an average value is calculated for this month.

In most cases, only those customers are considered who use the services regularly and therefore count as subscribers. If a company’s portfolio contains different subscriptions with different services, the ARPU can be used to calculate which subscriptions and services generate the greatest profit. Since companies usually collect data on their users, they can calculate ARPU based on this data – for example, to find out the average revenue of people under the age of 30.

Calculation of the ARPU - Average Revenue Per User
Calculate the APRU

A telecommunications company generates monthly revenues of 10,000,000 million euros and has 100,000 customers. The ARPU is calculated as follows: ARPU = 10,000,000 / 10,000 = 100 euros. If some of these customers now use a premium offer, the ARPU increases relative to the original offer because the total revenue increases.

Significance for online marketing for e-commerce

The ARPU is an important key figure for assessing the performance of companies in mobile communications, pay TV and streaming. As the figure is calculated on a customer basis, it also provides information on the acceptance of premium models where certain services are only offered for a regular equivalent value. The ARPU is naturally lower for premium models, although acceptance is likely to be very high. For companies, however, paying customers and predictability are important. For this reason, ARPU is the means of choice for determining the profitability of certain offers and the complete portfolio.

One advantage is that the ARPU indicator takes a micro-perspective and makes both the sources (for example subscriptions) and the growth rates (development over months) for these sources visible. [2] This advantage comes into play when opening up new markets: Here, low ARPU values (low ARPU) are accepted at the beginning in order to later take advantage of demand in the upper price segment (high ARPU). ARPU values also serve as a basis for determining other key figures such as customer lifetime value or the marketing budget for mobile devices. However, this requires additional data and calculations.

Why is ARPU relevant on Amazon and in e-commerce in general?

On Amazon, the ARPU also provides retailers with important clues. For example, ARPU can be used to test the acceptance of price changes. By determining two equal time periods and then doing an A-B test, i.e. comparing the ARPU before and after the price change.

In addition, the seller can see how his products change over time, for example by determining the growth rate. Furthermore, the retailer can also use the ARPU to determine and compare the performance of individual products, so that he can then adjust his advertising strategies, for example to promote less performing products more strongly.