What do you mean by Average Revenue Per User ?

Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, defined as the total revenue divided by the number of subscribers. This term is used by companies that offer subscription services to clients for example, telephone carriers, Internet service providers, and hosts. It is a measure of the revenue generated by one customer phone, pager, etc., per unit time, typically per year or month. In mobile telephony, ARPU includes not only the revenues billed to the customer each month for usage, but also the revenue generated from incoming calls, payable within the regulatory interconnection regime.

There is a trend by telecommunications and internet companies and their suppliers to sell extra services to users and a lot of the promotion that is used by these companies talk of increased ARPU for these operators. It typically manifests in the form of value-added services such as entertainment being sold to customers especially in markets where the primary service offered to the customer, such as the telephony or Internet service, is sold at a commodity rate.

Method of Calculation: To calculate the ARPU, a standard time period must be defined. Most telecommunications carriers operate by the month. The total revenue generated by all units (paying subscribers or communications devices) during that period is determined. Then that figure is divided by the number of units. Because the number of units can vary from day to day, the average number of units must be calculated or estimated for a given month to obtain the most accurate possible ARPU figure for that month

The ARPU can be broken down according to income-producing categories. For example, monthly or annual subscriber fees generate a steady revenue stream but do not take into account short-term changes in customer usage habits. The income generated by "excess minutes," roaming services or incoming calls can be highly variable. New, novel features may temporarily generate higher ARPU figures than established, proven functions. The ARPU can be calculated for each feature to identify sources of the greatest income per unit.