How is ARPU calculated?

ARPU, or Average Revenue Per User, is a metric used primarily to measure the revenue generated per customer in a given period. It provides insights into how effectively a company is generating revenue from its user base.

The correct method for calculating ARPU is by dividing the total revenue generated during a specific period by the total number of customers during that same period. This approach helps businesses understand the average income they earn from each customer, thereby enabling them to make informed decisions about pricing, marketing strategies, and resource allocations.

The rationale behind choosing the total number of customers instead of total users specifically reflects the focus on revenue derived from paying customers, which is usually more relevant for business performance analysis in terms of profitability and customer value. Therefore, using total customers creates a clearer picture of the revenue contribution per customer.