It is no secret that most games rely on many users generating small amounts of revenue over time to become profitable. This makes attracting as many users as possible important for any successful game.
However, game producers don’t have an infinite amount of money to spend on player acquisition. Therefore, it’s vital to get as much revenue out of each paying user as possible. Tracking and improving your ARPPU can help you achieve this goal.
Average revenue per paying user measures the average amount of revenue each paying user generates in a specific period. Producers of free-to-play games commonly track this KPI because a substantial portion of their revenue comes from the small percentage of users who make in-app purchases.
Average revenue per user serves a similar function to ARPPU, but it measures the average revenue for every user, rather than just the users who make purchases. ARPU is a useful metric for determining how many users you need to acquire to achieve a specific revenue level.
ARPU can also be useful for calculations that factor in revenue from sources other than purchases, such as ads. However, ARPPU is more useful for determining how much money paying customers are spending because the average isn’t artificially lowered by including users who never buy anything.
Only about 2%-5% of players make purchases in games. Calculating ARPPU helps you segment out those players to get an idea of how much the average paying player contributes to your overall revenue.
You can then look at the traits that players who spend more than the average share and use that information in your decision-making process. This allows you to target your player acquisition campaigns to the customers who are most likely to become high-paying players and tailor your game design and monetization decisions to the characteristics of your highest-paying players. If your campaigns are effective, your ARPPU and return on ad spend will increase.
To calculate ARPPU, divide the total revenue generated by paying players in a specific period by the total number of paying players for that same period. If you are tracking ARPPU for a subscription-based game, use the monthly recurring revenue as the numerator in your equation.
Cohort ARPPU tracks average revenues for various cohort groups. Cohort ARPPU can help you understand average revenue on a more granular level by segmenting customers into smaller groups with shared characteristics.
For example, suppose you want to assess the success of your holiday player acquisition campaign. You could track the total revenue generated by players acquired in December divided by the total number of paying players acquired in December and compare that figure to your ARPPU in November or for the previous holiday season.
Once you know what your ARPPU is, you can start working on improving it. There are multiple approaches you can take.
It is often easier and less expensive to convince the players you already have to make purchases than to attract new paying players. You can encourage first-time purchases by offering incentives, such as discounts or introductory rates on subscriptions. You can also encourage players who only occasionally make purchases to become regular customers by offering them perks and discounts through a loyalty program or inviting them to become influencers or brand ambassadors.
Increasing your prices can result in a higher ARPPU. However, you must be strategic, because if you increase prices too much, players may buy less or quit playing your game. To avoid these pitfalls, make sure you are offering real value for money and explaining that value clearly. You may want to test out price increases on new users before rolling them out to your existing players.
The players who spend the most money generate a significant portion of the revenue for most games. This means it’s extra important to keep your big spenders happy. Make these players feel valued by soliciting and acting on their feedback and offer them exclusive perks to encourage them to keep spending money and give other players a reason to spend more.
You probably have players who would become regular paying customers if you could convince them to make that first purchase. Experiment with your ad types and placements to find ads that best convert non-paying players into paying players.
If you are new to taking a data-driven approach to your game, Sonamine can help you get started. We can also help you track and improve your ARPPU with our engagement, retention, and monetization services. Contact us today to find out more.
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