# Average Revenue Per Unit (ARPU): Definition and How To Calculate

![Average Revenue Per Unit (ARPU)](https://www.investopedia.com/thmb/8cDFOI8IsN0w-WRczZuhzXMayKQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/apru_sourcefile_final-35a3e096aa1e4e6caf62186bd393a4e9.png)

*— Investopedia / Jessica Olah*

## What Is Average Revenue Per Unit (ARPU)?

Average revenue per unit (ARPU) is an indicator of the profitability of a product based on the amount of money that's generated from each of its users or subscribers. It's a particularly useful measurement for companies in the telecommunications and media industries that rely on subscribers or users.

ARPU is usually calculated as total revenue divided by the number of units, users, or subscribers. It's often referred to as average revenue per user. Mobile phone service providers may even refer to it as average revenue per SIM card.  

### Key Takeaways

*   Average revenue per unit (ARPU) measures the earnings generated per user or unit.
*   This figure is most often reported by telecom companies and media companies.
*   Analysts and investors find it useful to compare ARPU numbers with rivals in the same industry. It indicates which is doing the best job of maximizing revenue from its subscribers or users.
*   Management delves into the ARPU number to see which products or business segments are performing best and worst.
*   Churn rate and subscriber growth rate are other metrics that are tracked closely in the telecom and media sectors.

## Understanding Average Revenue Per Unit (ARPU)

ARPU is not a [GAAP](https://www.investopedia.com/terms/g/gaap.asp) measure. A company isn't compelled to produce or track ARPU to comply with generally accepted accounting principles or GAAP.

ARPU is useful information to company executives and investors who want to understand and track a company's revenue generation capability and growth at the per-unit level, however. The number is published by many companies for that reason. It's particularly relevant to telecom and media companies because their businesses are based on subscribers or active users, not on buyers of physical products.

## How to Calculate ARPU

You must first define a standard period to accurately calculate ARPU. Most telephone and communications carriers calculate ARPU on a month-to-month basis.

The total revenue generated during the standard period is then divided by the number of units or users.

The end date for the period isn't used for the denominator because it could fail to capture fluctuations throughout the period. The start date and the end date of the period are typically averaged instead.

The number of users also fluctuates throughout any given period, especially in industries such as media and telecommunications. The number of units for a given period must therefore be estimated to reach the most accurate ARPU figure possible.

> **Fast Fact**
>
> The world's top social media sites in terms of ARPU in 2023 are Facebook and Instagram.

## Who Uses Average Revenue Per Unit (ARPU)?

ARPU is used in the telecommunications sector by Verizon, AT&T, and others to track the average amount of revenue that's generated per mobile phone subscriber.

> **Important**
>
> The revenue included in ARPU includes not only the monthly billings to subscribers in the mobile phone industry but also the revenue generated by incoming calls which are payable under the regulatory interconnection system.

### ARPU in Subscription Services

Cable companies such as Comcast Corp. also disclose ARPU figures. The values of the measures obtained can be used internally and externally as a comparison among subscriber-based companies and to assist in the forecasting of future service revenues produced from a customer base.

### ARPU in Social Media

[Social media](https://www.investopedia.com/terms/s/social-media.asp) companies such as Meta Platforms Inc. (formerly Facebook) and Snap report ARPU numbers to investors. Each company defines ARPU differently, however, and this goes some way toward explaining the large gap in the valuations of the two companies.

*   Snap's ARPU for the second quarter of 2024 was $2.86 compared to $2.69 in Q2 2023. The company's market capitalization was $15.49 billion as of September 2024.
*   Meta's average revenue per user for Q2 2024 was $11.89, up from $10.93 in Q2 2023. Its market capitalization was $1.32 trillion as of September 2024.  
    

## Advantages and Disadvantages of ARPU

A high ARPU is a bragging point for the companies that publish it, to the extent that it's sometimes dismissed as a "vanity metric." But a post on Profitwell, a publication for software-as-a-service businesses, argues that those who think so aren't using it correctly. ARPU can be analyzed for insights into customers' responses to the company's various price points and premium offerings.

It also can indicate the company's trajectory toward or away from growth. It may not be quite as useful to analysts and investors outside the company, however. They may have the ARPU number but lack the details. It's a macro-level measure in this case.

There may be tens or hundreds of millions of people who have signed up as users in the Meta example but they seldom or never interact on the Facebook platform or see the advertising that's being displayed for them there. The true ARPU figure therefore could be distorted and that distortion could be substantial.

ARPU can be useful to analysts and investors even as a macro-level measure. It can be used as a point of comparison among companies in a sector and used to forecast a company's growth potential. It also can yield insights into the relative success of the company's market segments.

Pros

*   For investors, ARPU is an easy point of comparison among competitors.
    
*   For companies, a starting point for analysis of business strengths and weaknesses.  
    
*   Bragging rights (but only if the number is impressively high).
    

Cons

*   It's a macro level measure, ARPU can be presented without the detail that makes it meaningful.
    
*   User growth and user churn may be more useful for indicating a company's direction.
    
*   The number can be distorted.
    

## Special Considerations

ARPU is one of [several metrics](https://www.investopedia.com/ask/answers/122414/what-are-best-metrics-evaluate-telecommunication-company.asp) used to evaluate the financials of a telecommunications company. Other key figures include:

*   **Churn rate.** This indicates the number of subscribers who are dropping the company's service and presumably switching to a competitor. A high churn rate indicates that the company has a lot of dissatisfied customers. Either its customer base is shrinking or it's being forced to spend a great deal of money acquiring new customers to replace the departing ones.
*   **Subscriber growth.** Also called "net additions" in company financial statements, this is a strong indicator of the company's level of continuing success.

These can be equally important in evaluating media companies but the media landscape is extremely complex and segmented with competitors in social media, news media, entertainment, and business. Each of these has its own metrics for success.

## What Is Included in an ARPU Calculation?

ARPU is simply total revenue divided by the total number of users. The number typically will include:  

*   First-time buyers or subscribers who pay an upfront fee
*   Recurring revenue such as monthly payments
*   Upsells through purchases of premium products
*   Cross-sells or purchases of products from others in revenue-sharing deals  
    

This works for some companies such as Comcast which makes its money through basic subscriptions, premium subscriptions, and streaming purchases. Many media companies have very different revenue streams, however.

The bulk of their revenue is derived from advertising. They may have insignificant or no basic subscription fees but they may make money from premium levels of service or revenue-sharing deals. All of these would be included in their ARPU figures.

## How Can a Company Increase ARPU?

Many companies, particularly the telecoms, try to increase their ARPU by selling their existing customers higher tiers or bundles of services. Others such as media companies focus on increasing advertising revenue.  

Telecoms and media companies analyze their internal numbers to identify the demographic groups that are of greatest value to them. The company will target Gen Ex consumers for growth if they or their families with children appear to be their most valuable customers in terms of their contribution to ARPU.

## What Is Prepaid and Postpaid ARPU?

Prepaid and postpaid ARPUs are peculiar to telecom service companies. They offer their customers a variety of options that break down to either prepaid or postpaid versions.  

*   Prepaid service requires that the user pay a flat fee monthly in advance of using it. This is a "pay-as-you-go" option that can be canceled at any time.
*   Postpaid service is billed monthly. This is the type of plan that may come with a "free" or discounted phone and a contractual obligation to continue the service for a set number of months.  
    

It appears that the trend favors the prepaid option. Prepaid ARPU rose steadily between 2013 and early 2024 at T-Mobile, from 28.25% to 37.18%. Postpaid ARPU declined from 54.5% to 48.79% during the same period.

## The Bottom Line

You may find ARPU a good number to watch over time if you're considering investing in a telecom or a media company. It's also a useful point of comparison among competitors in the same space. Which company is doing the best job monetizing its customer base? It's a good bet that it's the company with the highest ARPU.  

> **Article Sources**
>
> 1.  Business of Apps. "[Social App Report 2024: Abstract](https://www.businessofapps.com/data/social-app-report/)."
>     
> 2.  Stock Dividend Screener. "[Facebook, Pinterest, Twitter And Snapchat ARPU Comparison](https://stockdividendscreener.com/information-technology/comparison-of-average-revenue-per-user-for-social-media-companies/)."
>     
> 3.  Snap, Inc. Investor Relations. "[Snap Inc. Announces Second Quarter 2024 Financial Results](https://s25.q4cdn.com/442043304/files/doc_financials/2024/q2/Q2-24-Press-Release_FINAL-8-1-24.pdf)." Page 12.
>     
> 4.  CompaniesMarketCap. "[Market Capitalization of Snap (SNAP)](https://companiesmarketcap.com/snap/marketcap/)."
>     
> 5.  Meta Investor Relations. "[Meta Earnings Presentation, Q2 2024](https://s21.q4cdn.com/399680738/files/doc_financials/2024/q2/Earnings-Presentation-Q2-2024.pdf)." Page 11.
>     
> 6.  CompaniesMarketCap. "[Market Capitalization of Meta Platforms (Facebook) (META)](https://companiesmarketcap.com/meta-platforms/marketcap/)."
>     
> 7.  Paddle. "[The Complete Guide to ARPU: Understand, Calculate & Optimize Average Revenue per User](https://www.paddle.com/resources/average-revenue-per-user)."
>     
> 8.  Statista. "[Average Revenue per User (ARPU) of T-Mobile in the United States from 2013 to 2024, by Quarter](https://www.statista.com/statistics/483672/t-mobile-us-postpaid-prepaid-arpu/)."