ARPU, or average revenue per user, is the key monetization metric for your game. In mobile gaming, ARPU is a catch-all term that can either refer to ARPDAU (average revenue per daily active user) or LTV/RPI (lifetime value, or revenue per install):
- In the context of ARPDAU or ARPMAU, you’re measuring how much revenue all active users generate in a single day or single month, for example on June 20th or in all of June.
- In the context of LTV or RPI, you’re looking at the revenue generated over the course of many days by a cohort of users who installed your game on the same day. For example, ARPU D60 is the revenue generated in 60 days by everyone who installed on June 20th.
As you see, there are two key distinctions between ARPDAU and LTV/RPI:
In this article, we’re going to focus on the “ARPDAU” definition of ARPU. Let’s dive deeper into the ARPU meaning, why it’s important, the ARPU calculation, and strategies to increase it.
Why is game ARPU so important?
After Apple deprecated the IDFA in April 2021, cost per install (CPI) on iOS increased by 78% for core games. That means your game monetization strategy needs to generate even higher game ARPU than before in order to stay profitable.
Game ARPU is important for two major reasons:
- First, you’ll understand the general health of your game’s monetization strategy
- Second, you’ll get clarity into which in-app events and ad formats have the biggest positive impact on your overall revenue, giving you the knowledge you need to make changes to increase profitability
What is the ARPU calculation?
There are a few steps to the ARPU calculation. The first step in the ARPU calculation is defining the time frame you want to measure: monthly, weekly, or daily. Historically, game ARPU is reported on a monthly basis (ARPMAU), but many developers are now reporting it weekly (ARPWAU) or even daily (ARPDAU). This is because retention is highest in the early days post install and it’s important to know how valuable these early users are.
Next in the ARPU calculation is to calculate all the revenue you made during that time frame and divide it by the number of active users during the same period.
For example, let’s say you want to measure ARPMAU for May 2024. In May, you generated $100,000 (way to go!) and you had 100,000 active users during the same time period. This means the ARPU calculation (or ARPMAU in this case) is $1 for May 2024.
$100,000 / 100,000 = $1
How to increase game ARPU
The mobile games ARPU is expected to increase by 11.45% between 2024 and 2027 according to Statista.
The most obvious strategy to improve your game ARPU, or average revenue per user, is by adjusting your monetization strategy. But you first must decide whether you want to focus on improving in-app purchase (IAP) or in-app advertising (IAA) revenue. Before we get to the strategies, it’s important to keep two things in mind:
- First, there’s often a tradeoff between IAA and IAP revenue - improving one may hurt the other. For example, if you add too many rewarded video ads , which give away your resources in exchange for watching an ad, players are less likely to spend money on those same resources in your in-app store. So always be aware and measure the impact.
- When solving for IAP revenue, which is what we’re focusing on below, it’s important to balance a mix of increasing conversions and spend depth. Increasing conversions means getting more players to spend money in your game, while increasing spend depth, or average revenue per paying users (ARPPU), means getting existing spenders to spend more. Let’s look at how to solve for each to improve your average per user.
1. Focus on conversions
By focusing on conversions to improve your average revenue per user, you’re effectively trying to get more players to spend. To increase IAP conversions, you can:
- lower pricing
- offer a broader selection of first time deals
- be more sophisticated with segmentation
It’s important, however, that getting more players to spend doesn’t come at the cost of generating less revenue from existing spenders. For example, you may choose to lower prices to increase conversion rates - which is a great tactic as long as there’s enough conversions to cover the decrease in revenue coming from existing spenders. It’d be a bonus if the lower prices also increased spend depth from existing spenders.
Most studios tend to over index on increasing conversion rates and neglect the opportunity from driving spend depth. After all, it’s often easier to get existing spenders to spend more than to convert new spenders.
2. Focus on spend depth
To increase spend depth (getting players to spend more) and improve your game ARPU, you want to focus on the two drivers of any game economy: supply and demand.
- “Supply” refers to how players acquire the resources in your game, like energy, gold, etc. This is often a function of your prices - how much players spend on each resource.
- “Demand” refers to how players use the resources they acquire - and when and why they want more of it. This has to do with the rate at which players expend their energy or need more resources to keep up with your game’s meta.
You can improve spend depth by tightening supply (e.g. increasing average prices) or increasing demand (e.g. boosting the rate at which players consume resources). Often, players respond better to increasing demand because it’s less invasive than a higher cost on their credit card statement.
For example, in social casino games, developers often decrease the cost of energy but increase the amount of energy players need to to progress through the game. The 100x bonus spin gives players 100x the rewards, which sounds like a hug win. However, developers also increase the amount of “rewards” needed to progress to the next tier in the game, so players will have to pay for the 100x spin more often. And since there is no cost to create virtual goods, developers can continue creating more spins without worrying.
3. Create a direct-to-consumer channel
To increase game ARPU without changing anything in your game, try creating a direct-to-consumer (D2C) channel - like a web shop you direct users to that’s hosted outside the game. There are a few ways D2C channels can boost average revenue per user:
- First, the increased margins: while the major app stores take a 30% cut of in-app purchases, using game websites to distribute your title directly to players keeps transactions between you and the player - no money to a middleman and more revenue in your pocket. Essentially, you’re increasing ARPU just by saving on Apple and Google’s 30% fees.
- Second, the user data: app stores have privacy policies that anonymize the data you get from players, making it hard to segment your users and personalize their experiences. But on the web, anything goes. With your own website, you collect and own the data, so you can personalize each users’ experience in ways you can’t in-app - like with loyalty programs. This will help you maximize both conversions and spend depth, which of course increase average revenue per user.
Let’s increase your game ARPU
With a D2C channel, you can boost both conversions and spend depth - which go a long way to increase your average revenue per user. Get in touch to start building your D2C channel with Stash.