Average revenue per user (ARPU)
Also known as: ARPU, average revenue per user, average revenue per account, ARPA
Average revenue per user (ARPU) is the revenue a business earns in a period divided by the average number of active users or customers in that period.
ARPU = revenue for the period / average number of active usersARPU answers how much revenue one user brings in over a fixed period, usually a month. Average order value looks at a single purchase. ARPU spreads all revenue across the user base, including users who paid nothing. If you divide only by paying users, you get ARPPU (average revenue per paying user), a different number.
Example
A B2B SaaS product had 2,000 active accounts at the start of March and 2,200 at the end. March revenue was $315,000, of which 1,400 accounts paid.
Average active accounts = (2,000 + 2,200) / 2 = 2,100. ARPU = $315,000 / 2,100 = $150. ARPPU = $315,000 / 1,400 = $225.
The gap tells you how much of the base sits on a free plan or trial. The figures are illustrative.
How to use it
In subscription businesses ARPU is the bridge between user counts and MRR: MRR equals paying accounts times their average monthly revenue. Watch ARPU by cohort and by plan. Rising ARPU with flat account numbers usually means price changes or upgrades. Falling ARPU with growing accounts usually means cheaper plans or more free users in the mix.
ARPU is also an input to customer lifetime value. Use the margin on that revenue, not the revenue itself, when you move to LTV.
Common mistakes
- Dividing by users at the end of the period during fast growth, which understates ARPU.
- Calling ARPPU “ARPU” in a deck and comparing it with someone else’s real ARPU.
- Counting one-off setup fees in monthly ARPU, so the next month looks like a drop.
- Defining “active” differently in the product team and finance, so the two ARPU figures never match.