If you have anything to do with mobile apps and advertising, you’ll hear people talking about ARPU and ARPPU as they are two of the most widely used measurements of app revenue.
While ARPPU focuses on paying customers exclusively, it is not the only measure of a user’s average contribution to revenues. Whereas ARPU looks at the average revenue of an app across all installs, ARPPU specifically measures the revenues created by paying users and players. It was originally designed as a measurement for apps based on a monthly subscription model, but today has become the most common way of measuring the revenues generated by ‘freemium’ games and apps that include in-app purchases.
ARPU (average revenue per user) includes all users who have installed and used an app in the calculation of revenue, while ARPDAU (average revenue per daily active user) focuses only on those individuals who use actively engage with or use the app every day.
ARPU is used to measure the overall effectiveness of a monetization strategy. ARPPU and ARPDAU, on the other hand, are more immediate and highlight specific pricing decisions and users’ reactions to them. More so, both the ARPPU formula and ARPDAU formula are similar, focusing on specific subsets of the overall user base.While revenues from paying users can be very high, conversion for paying users is typically very low, with as little as 2% of users choosing to make IAPs.
This means that ad monetization has become an increasingly important revenue stream for developers today, supplementing the revenue from paying users by monetizing non-paying users through ads. In the context of ad monetization, metrics like ARPDAU and ARPU can be helpful in that they include revenue generated from ads.