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Definition
It is the average revenue produced by a typical user. It displays the precise revenue that each user is contributing.
Why is it useful?
ARPU shows a number of things like the position of the company in the market with respect to its competitors. For example, if company X has more ARPU than company Y, one can infer that company X sells products at a premium.
Example
In the year 2020,
YouTube India’s ARPU → $2 (150 rupees)
Now YT has 2 groups of users. One gives revenue by watching ads & the other has purchased YT Premium. In the 1st group, the revenue can differ on the number of ads a user watches. Hence, even though some users might have contributed more than $2 to YT’s revenue, on average it was $2.
Formula:
ARPU = {Total revenue} / {Total paying customers}
$100 = {$1000}/ {10}
Relation between ARPU & GMV:
GMV / total users= ARPU
