Definition
Average Revenue Per User or ARPU is a SaaS metric that tells businesses how much revenue they generated from each customer on average. ARPU can be calculated by dividing the net revenue generated by the total number of customers.
Example
Average Revenue Per User (ARPU) = Net revenue / Total customersIf Vareto earned $10 million in revenue from a total of 10,000 customers, its ARPU will be: 10,000,000 / 10,000 = $1,000This is interpreted as every customer bringing in $1,000 in revenue.
Why it matters
ARPU helps in determining if a company's monetization strategies are giving the benefits that they should. For any company, long-term profit generation is driven by how effectively the company can derive maximum revenues from a single customer.This mainly depends on the company's sales and marketing and product development strategies. With ARPU, a company can know the maximum amount that it can spend on such areas to achieve growth and expand further.