ARPPU (average revenue per paying user), calculated on a monthly basis is a similar number to APRU in that we’re determining the revenue per average user, but this is exclusive to users who are actually spending. As you would expect ARPPU is useless when looking at subscription based (with no MTX) games because it’s just going to be the subscription price, but when looking at a Free to Play model it’s going to paint a very interesting picture.
The formula for ARPPU is really basic and similar to that for ARPU
Total Revenue / # of users who have spent more than $0 = ARPPU
While still very different the ARPPU and the ARPU need to be compared to see another important ratio. Let’s say we’re looking at a game with no premium price, no expansion content, the game is just purely monetized through MTX. Let’s say we get the following stats
ARPPU – $5.00
ARPU – $.50
What this means is that if a user only has the option to spend $5.00 or simply nothing, only 1 out of every 10 users is MTX’ing. Your conversion rate is 10% which is a problem, because the average user isn’t generating revenue.
We can see that by dividing the ARPU by the ARPPU we get a conversion rate of users actually spending.While the majority of your users will likely never spend money, pushing your conversion rate as high as possible is best possible way to increase the revenue in a game where average revenue per paying user is applicable.
Back to the conversion rate of ARPU and ARPPU example above – we come to the discussion of variance. Variance here refers to the difference between the value of ARPU and ARPPU. Think about it purely from a % difference since games with a large cost to entry will be skewed when compared to a cheaper game. If your game is experiencing high variance between ARPPU and ARPU you have a game dominated by whales. I’ll explain.
You have an ARPU of 50 cents
ARPPU of 5 dollars
You can see on the distribution graph that the average user is spending $.5. Since there is an ARPPU of $5 it means that the whales (10% spenders) are buying on average 5 times much to compensate for the users who aren’t spending very much. If this seems confusing, just ignore it.