ARPU is defined as total revenue divided by the number of users for a specific time period, typically over a month, quarter, or year. This is a meaningful metric as it demonstrates the value of users on your platform, regardless of whether those users buy subscriptions (such as telecom monthly subscriptions) or click on ads as they consume content.
For pre-revenue companies, investors will often compare the prospects of a company against the known ARPU for established companies. For example, we know that Facebook generated $9.30 ARPU in FY2015Q2 from its U.S. and Canada users, so if we’re evaluating a company with an advertising business that has monetization potential comparable to Facebook, we ask: Do we believe the company can generate a quarter, half, just as much, or even more ARPU compared to Facebook? What would need to be true to justify this belief? How would the company achieve that (and do they have the ability do so)?