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Average Revenue Per User (ARPU)

Metric
Revenue

Definition

How much revenue you generate per user over a specific time period

Related Knowledge

LTV (Lifetime Value)Payback Period
ARPU=Total RevenueNumber of UsersARPU = \frac{\text{Total Revenue}}{\text{Number of Users}}

ARPU vs. ARPA

  • ARPU (Average Revenue Per User)

      Used more in B2C or user-centric products where each user is effectively their own account.

  • ARPA (Average Revenue Per Account)

      Used more in B2B where one account can have many users.

    • Example

  • A company pays $500 / month.
  • 10 employees use the product.

    • Then:

  • ARPA = $500
  • ARPU = $50

    • This distinction matters when you compare pricing, usage, and monetization across segments.

    How ARPU Connects to Other Metrics

    ARPU is a key input into several core growth metrics:

  • LTV (Lifetime Value)

      Often starts with ARPU × average customer lifespan. If ARPU rises, LTV usually rises.

  • Payback Period

      Uses ARPU (or ARPA) in the denominator. Higher ARPU shortens payback, all else equal.

    • When ARPU increases, your unit economics generally improve across the board.

    Levers That Affect ARPU

    You can change ARPU by changing either pricing or what customers buy:

  • Pricing changes
    • Increasing list prices (carefully).
    • Reducing over-discounting.
  • Upsell and packaging
    • Moving users to higher tiers or bundles.
    • Adding add-ons or premium features.
  • Usage-based pricing
    • Ties ARPU directly to how much customers use the product (seats, messages, API calls, etc.).
  • Pruning low-value segments
    • Removing unprofitable plans or segments can raise ARPU.
    • Be careful: sometimes this is only a cosmetic win if total revenue does not actually grow.

    • Segmented ARPU

    Aggregate ARPU can hide huge differences between segments. Breaking ARPU down helps you see where the real value comes from.

    Useful segment cuts:

  • By acquisition channel (for example, organic vs paid social vs partnerships)
  • By customer type (for example, SMB vs enterprise, students vs professionals)
  • By cohort (for example, users who joined in Q1 vs Q3)

    • Example

  • Users from organic search: ARPU = $80
  • Users from paid social: ARPU = $30

    • Insights:

  • You can justify higher CAC for the $80 ARPU segment.
  • You may want to cap or rethink spend on low-ARPU channels.
  • Segmented ARPU feeds directly into budget allocation, targeting, and LTV modeling.