How to estimate the revenue generated per user (ARPU) for my app’s business model?

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How can you easily figure out how much money each user will bring in with your app's business model?

What does ARPU mean, and why should I care about it for my mobile app?

How can I figure out the ARPU for my mobile app?

What's considered a good ARPU for a mobile game app?

How is ARPU different for subscription-based apps compared to ad-supported ones?

What are some ways to boost the ARPU of my mobile app?

How does breaking down users into segments help with ARPU analysis?

Does ARPU change between iOS and Android users?

How does the cost of acquiring users impact ARPU?

What effect does the churn rate have on ARPU calculations?

How are ARPU and a user's lifetime value connected?

Can seasonal trends change the ARPU for my mobile app?

What benchmarks should I use to see how my app's ARPU stacks up against the industry?

These are questions we frequently receive from entrepreneurs who have downloaded the business plan for a mobile app. We’re addressing them all here in this article. If anything isn’t clear or detailed enough, please don’t hesitate to reach out.

The Right Formula to Estimate the Revenue Generated Per User (ARPU) for Your App’s Business Model

• 1. Identify your app's revenue streams:

  Determine the different ways your app generates revenue, such as in-app purchases, subscriptions, advertisements, or any other monetization methods.

• 2. Collect data on active users:

  Gather data on the total number of active users over a specific period. This includes all users who have engaged with your app during that time frame.

• 3. Calculate total revenue:

  Add up all the revenue generated from your identified streams during the same period. This includes revenue from in-app purchases, subscriptions, ads, etc.

• 4. Compute the ARPU:

  Divide the total revenue by the total number of active users to find the Average Revenue Per User (ARPU). This will give you an average figure of how much revenue each user contributes.

• 5. Analyze and strategize:

  Use the ARPU metric to assess the revenue efficiency per user. Consider strategies to enhance monetization, such as optimizing in-app purchase offerings or increasing subscription conversion rates.

A Simple Example to Adapt

Replace the bold numbers with your data and discover your project's result.

To help you better understand, let’s take a fictional example. Imagine you have a mobile app that offers a freemium model with in-app purchases and a subscription option.

Over the past month, your app had 10,000 active users. Out of these, 1,000 users made in-app purchases, generating a total of $5,000. Additionally, you have 500 users subscribed to a monthly plan at $10 each, contributing $5,000 in subscription revenue.

To calculate the Average Revenue Per User (ARPU), you first need to determine the total revenue generated, which is the sum of in-app purchases and subscription revenue: $5,000 (in-app purchases) + $5,000 (subscriptions) = $10,000.

Next, divide the total revenue by the total number of active users to find the ARPU: $10,000 / 10,000 users = $1.00. Therefore, the ARPU for your app is $1.00, indicating that, on average, each user contributes $1.00 to your app's revenue over the specified period.

This metric helps you understand the revenue efficiency per user and can guide strategies to enhance monetization, such as optimizing in-app purchase offerings or increasing subscription conversion rates.

With our financial plan for a mobile app, you will get all the figures and statistics related to this industry.

Frequently Asked Questions

What is ARPU and why is it important for my mobile app?

ARPU stands for Average Revenue Per User and is a key metric for understanding the revenue generated by each user of your mobile app.

It helps in assessing the financial performance and growth potential of your app by providing insights into user monetization.

Tracking ARPU allows you to make informed decisions about marketing, pricing strategies, and user acquisition efforts.

How do I calculate ARPU for my mobile app?

To calculate ARPU, divide the total revenue generated by your mobile app in a specific period by the number of active users during that same period.

For example, if your app generated $10,000 in a month and had 2,000 active users, the ARPU would be $5.

This calculation provides a snapshot of how much revenue each user contributes on average.

What is a good ARPU for a mobile app in the gaming industry?

In the mobile gaming industry, a good ARPU can vary widely depending on the game's genre and target audience.

However, a typical ARPU for successful mobile games ranges from $1 to $5 per user per month.

High-performing games can achieve ARPU figures of $10 or more, especially if they have strong monetization strategies.

How does ARPU differ between subscription-based and ad-supported mobile apps?

Subscription-based mobile apps often have higher ARPU because users pay a recurring fee, which can range from $5 to $15 per month or more.

Ad-supported apps typically have lower ARPU, often less than $1 per user per month, as they rely on ad impressions and clicks for revenue.

The choice between these models depends on your app's content, target audience, and monetization strategy.

How can I increase the ARPU of my mobile app?

To increase ARPU, consider implementing in-app purchases, offering premium features, or introducing a subscription model.

Enhancing user engagement and retention through personalized content and regular updates can also boost ARPU.

Additionally, optimizing ad placements and targeting can improve ad revenue without compromising user experience.

What role does user segmentation play in ARPU analysis?

User segmentation allows you to identify different user groups within your mobile app and understand their unique behaviors and preferences.

By analyzing ARPU across segments, you can tailor monetization strategies to maximize revenue from each group.

This approach helps in identifying high-value users and optimizing marketing efforts to attract similar users.

How does ARPU vary between iOS and Android platforms?

ARPU can differ between iOS and Android due to variations in user demographics, spending habits, and platform monetization policies.

Generally, iOS users tend to have a higher ARPU, often 20% to 50% more than Android users, due to higher spending on apps and in-app purchases.

Understanding these differences can help you tailor your app's monetization strategy for each platform.

What is the impact of user acquisition cost on ARPU?

User acquisition cost (UAC) is the expense incurred to acquire a new user for your mobile app, and it directly affects profitability.

If UAC is higher than ARPU, it indicates that you're spending more to acquire users than you're earning from them, which is unsustainable.

To ensure profitability, aim for an ARPU that exceeds UAC, ideally by a margin of at least 20% to 30%.

How does churn rate affect ARPU calculations?

Churn rate, the percentage of users who stop using your mobile app, can significantly impact ARPU by reducing the number of active users.

High churn rates can lead to a lower ARPU as the revenue is spread over a smaller user base.

Reducing churn through improved user experience and engagement strategies can help maintain or increase ARPU.

What is the relationship between ARPU and lifetime value (LTV) of a user?

ARPU is a component of the lifetime value (LTV) calculation, which estimates the total revenue a user will generate over their entire relationship with your mobile app.

LTV is calculated by multiplying ARPU by the average user lifespan, providing a long-term view of user value.

Understanding LTV helps in making strategic decisions about user acquisition and retention investments.

How can seasonal trends affect ARPU for my mobile app?

Seasonal trends can lead to fluctuations in user activity and spending, impacting ARPU for your mobile app.

For example, shopping apps may see higher ARPU during holiday seasons, while educational apps might experience peaks at the start of school terms.

Analyzing these trends allows you to adjust marketing and monetization strategies to capitalize on peak periods.

What benchmarks should I use to compare my app's ARPU with industry standards?

Industry benchmarks for ARPU vary by app category, platform, and region, so it's important to compare your app with similar ones.

For instance, social media apps might have an ARPU of $1 to $3, while productivity apps could range from $5 to $10.

Regularly reviewing industry reports and analytics can help you set realistic ARPU goals and measure your app's performance.