Average Revenue Per User (ARPU)
Revenue generated per user over a period.
What it measures
Revenue per user over a specific period, typically monthly. Clarify whether you're measuring paying users only (ARPPU) or all users including free tier, as these are very different numbers.
Calculation Variants
- ARPU (Per User)
- Total revenue / Total active users. Common in B2C and consumer apps.
- ARPA (Per Account)
- Total revenue / Total accounts. The standard for B2B SaaS, as multiple users roll up into one paying account.
- ARPPU (Per Paying User)
- Total revenue / Only users who pay. Vital for freemium models where a massive free base distorts ARPU.
What to watch
- Rising: Users are paying more through upgrades, add-ons, or price increases. But watch for declining user count: ARPU can rise while total revenue falls if you're losing lower-value customers.
- Falling: Could indicate successful expansion into a lower-price segment (growth dilution), increased discounting, or downgrades. Segment by customer tier to understand the cause.
In practice
A streaming service launched a lower-priced ad-supported tier, causing ARPU to drop from $14 to $11. But total revenue grew 40% because the subscriber base doubled. The ARPU decline was intentional, a trade-off for market expansion.
Illustrative scenario — a representative composite, not a specific company.
Vanity Risk
ARPU can rise while total revenue falls if you are losing lower-value customers. A streaming service dropping from $14 to $11 ARPU while doubling subscribers is winning. ARPU in isolation tells the wrong story.
Related: LTV — lifetime revenue projection.; MRR — total recurring revenue.