What is ARPU? Investing Explained
INVESTING EXPLAINED: What you need to know about ARPU – a way to compare a company’s performance against its peers
In this series, we break down the jargon and explain a popular investment term or theme. Here’s the ARPU.
A household cleaner?
It’s true that Arpu sounds a bit like one of those sprays that promise to make kitchen surfaces sparkle. But the letters of this increasingly important acronym stand for Average Revenue Per User or Unit.
First appearing in the wake of the 2000 dot.com boom, the number is a gauge of growth, as well as a means of comparing a company’s performance to that of its peers. It shows how much money certain types of companies in the communications, media, software and telecom industries actually make.
Why all the fuss about this song?
Arpu is an important metric for social media companies because they are “attention sellers,” trying to get users to return to their platforms as often as possible.
Arpu is also very important for streaming services such as Disney and Netflix, which are looking for new subscribers in a fiercely competitive market.
Measure of Value: Arpu is an important metric for social media companies because they are “attention sellers.”
Consumers are price sensitive.
But it is also argued that the potential global audience for streaming services may have been overestimated, adding to the drama surrounding Arpu songs.
How is Arpu developed?
The calculation is relatively simple. You divide the revenue by the number of users over a period of time, such as a month or a year. In the case of a service, such as some video games, where some customers pay and others don’t, a company can calculate its Arppu (Average Revenue Per Paying User) that includes only users who make payments.
A number of companies like Twitter use mDAU, which stands for monetize daily active use, which shows the daily earnings of an app’s users. Twitter’s Arpu is valued at about $4, versus about $13 at Google. But maybe Elon Musk can encourage more users to pay for blue checks to verify their accounts after removing it last week.
Which Arpu figures are being watched the most?
The Arpu numbers produced by the streaming services are the most closely monitored by analysts, with Netflix providing separate numbers for each of its services – and for the different regions in which it operates.
During the first three months of this year, Netflix added 1.19 million new subscribers – less than expected, underscoring the current challenges. But the Arpu did increase slightly to $14.78 in the US and Canada. Other regions were less lucrative. The Arpu in Europe, Middle East and Africa is $10.89 and $8.03 in the Asia-Pacific region.
Disney+’s US Arpu is $6.68. But the Hulu service, in which the Walt Disney group has a stake, has an Arpu of $87.01. Apple isn’t publishing Arpu numbers for Apple+, suggesting it may not be gaining traction just yet. But Paramount Global’s Paramount+ is moving forward with an Arpu of about $9.
What about other companies?
The numbers produced by Amazon, Alphabet, owner of Google, and the Facebook, Instagram and WhatsApp group Meta Platforms, among others, are also widely scrutinized. Meta’s rise to power in advertising over the past decade is highlighted by the rise in Arpu since 2011, when it hit $5. In 2021, it reached $40.96, tapering back a bit to $39.63 in 2022.