Average revenue per user (ARPU)
Also known as: ARPU
In short
Average revenue per user (ARPU) is the total revenue in a period divided by the number of users or customers in that period. It shows how much each user contributes on average.
In B2B, "user" often means paying account, in which case the metric is sometimes called ARPA, average revenue per account. Decide which unit you mean before comparing numbers.
How to calculate ARPU
- Formula: ARPU = revenue in the period / average number of users in the period.
- Example: Say a product earns 120,000 in a month from 400 paying accounts. ARPU is 300 per account per month.
- Recurring only: For subscription businesses, use recurring revenue so one-time fees do not distort the figure.
Why ARPU matters
Pricing and packaging
A rising ARPU can show that upsells and higher tiers are working. A falling one can signal discounting or a shift toward small customers.
Segment comparison
Calculating ARPU per segment shows which customer types are worth the most, which informs your ideal customer profile.
Unit economics
ARPU feeds lifetime value. Lifetime value is roughly ARPU times gross margin divided by churn rate, so ARPU changes ripple through the LTV to CAC ratio.
ARPU vs. similar metrics
- ARPU vs. ACV: ACV is the yearly value of a single contract. ARPU is an average across all users in a period.
- ARPU vs. ASP: Average selling price is per sale of a product. ARPU is per user over time.
- ARPU vs. average deal size: Deal size describes new deals at signing. ARPU covers the whole installed base.
Common mistakes
- Blending free and paid users: Free users drag the average down. Report paid ARPU separately.
- Hiding segments: A single average hides the gap between a few large customers and many small ones.
- Reading a rise as pure success: ARPU can rise because small customers churned, not because anyone paid more. Check it alongside churn and customer count.
Average revenue per user FAQs
What is average revenue per user (ARPU)?
Average revenue per user is the revenue a business earns in a period divided by its number of users. It shows what each user is worth on average and is common in subscription, SaaS, and telecom reporting.
How do you calculate ARPU?
Divide revenue for a period by the average number of users in that period. For example, 120,000 in monthly revenue across 400 accounts gives an ARPU of 300 per account per month. Use recurring revenue for subscriptions.
What is the difference between ARPU and ARPA?
ARPU divides revenue by individual users, while ARPA divides it by accounts. In B2B, where one customer company has many users, ARPA is often more useful because pricing and contracts are set at the account level.
Is a higher ARPU always better?
Not always. ARPU can rise because low-paying customers left, which shrinks the base. It can also fall when you successfully add many small customers. Read it together with churn, customer count, and total recurring revenue.
