ARPU vs ARPPU

ARPU is average revenue per user
ARPPU is average revenue per paying users

When people develop metrics for games, many people debate the importance of ARPU vs ARPPU. Everyone agrees both are important but people debate what should be the key metric. 

Traditional game companies that originally started off with only subscriptions models always note that ARPPU is more important because its important to see what your revenue for paying user is since your free users are going to quit really fast anyways.  This especially true for traditional subscription based models where players buy a box for the trial and only have 30 days but have to pay to play the game afterwards.

Free-to-play companies on ARPU because they have a lot of free players and need to make sure their variable costs are covered by their variable revenue.  ARPU also helps you understand the overall revenue for everyone in your system. 

When looking at them as a pair, ARPU tells you how profitable you are and ARPPU tells you how well your monetizing your paying users.    So what is more important?  I would say ARPU because of the following reasons:

• Profitability is the most important number for any business.
• APRU tells you how much revenue your making for every player not just paying ones.  It is important to remember that free players also costs money to support.
• Free Players use up customer support costs, bandwidth, network infrastructure, and other hidden variable costs such as player experience (if you have negative free players) and latency if its a p2p game.
• Player acquisition is a marketing intensive activity.  If your average cost per acquisition (People should NEVER use cost per click) higher than your average lifetime ARPU then you might as well give away your money unless you have other goals that losing money supports.
• Free players are just as important as paying players.
• The most important thing is free players may eventually convert.  Yes the majority of Free 2 Play (F2P) games are powered by big fish or whales.   Some games have 2-20% conversion rates (depends on the platform and target audience - though mainly the target audience) with only 1-5% of those players making up the majority of revenue for the game, but your goal is to increase revenue not just from the 1-5% who pay the highest but also everyone else.
• Free players provide social networks and opponents for paying players.  Many people do not pay for Facebook games but you hear about them from your friends playing them.  It is very viral and maybe one of those random friends will be your next whale.  Also, in some client based games there is no AI to play with players are your only opponents.  Free players provide paying players people to compete with.  Free players also become friends of paying players which make them more likely to stay longer and pay more!
• ARPU is easier to forecast than ARPPU
• This many not be an important many people.  The larger the sample size the easier is it to use trend analysis as your combining many factors into ARPU, namely conversion %, retention % or average life, and ARPPU into one number.  To do a assessment of a business, you every number but if you need a simple model ARPU will do.

Remember these are just ramblings of an analyst so please give me your feedback, argument for or against this, or any topics that might be interesting to discuss.