Definition: Average Revenue Per User (ARPU) is a financial metric used to assess the revenue generated per user or unit. It is commonly utilized by subscription-based businesses, telecom companies, and digital service providers to measure the profitability and performance of their customer base on a per-user basis.
Calculation: ARPU is calculated by dividing the total revenue generated during a specific period by the average number of users or subscribers during that same period. The formula is: ARPU = Total Revenue / Average Number of Users. This calculation provides insights into the revenue contribution of each user or subscriber within the business.
Importance: ARPU is a critical metric for evaluating growth strategies, pricing models, and customer lifetime value. By analyzing ARPU trends, companies can identify opportunities for enhancing revenue streams, optimizing pricing strategies, and improving customer engagement to drive higher profitability.
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