Definition (canonical)
ARPU (Average Revenue Per User) is periodic revenue divided by active users or accounts: `ARPU = revenue ÷ users` for the month or year. It compresses your pricing, mix and expansion into one number — which is exactly its power and its trap.
Computing it without lying
Decide and freeze three choices: the unit (user vs account — B2B should track per-account ARPA to avoid seat-count noise), the revenue base (recurring only for subscription businesses — one-time fees pollute trend reading), the denominator timing (average actives over the period, not end-of-period — growth inflates the latter). Then never read ARPU blended: it's a MIX metric, and mix shifts masquerade as performance. Rising ARPU can mean successful upselling — or churning small customers (shrinking healthy volume while the average "improves"). Always pair ARPU with volume and churn before applauding.
Segmentation — where the number starts talking
ARPU per plan, per channel, per cohort and per geography converts trivia into decisions: channel A brings 2× the ARPU of channel B at similar CAC → reallocate; new cohorts landing at higher ARPU than old ones → pricing/packaging changes are working; a fat cluster just below the next tier's threshold → your upgrade path has a designable step. ARPU also anchors planning math: target revenue ÷ realistic ARPU = customers needed — the fastest sanity check of any growth plan ("we need 40,000 customers at our ARPU" ends many fantasies early).
The expansion lever
For most subscription companies, moving ARPU beats moving volume on effort-for-impact: existing customers already trust you, so seat expansion, usage growth into higher tiers, add-ons and periodic price work raise ARPU with near-zero acquisition cost — this is NRR mechanics viewed per account. The design question worth a quarterly review: what is our deliberate ARPU growth path — which natural customer success milestone maps to which paid step? Companies without an answer leave their cheapest revenue on the table.
FAQ
ARPU vs ACV vs LTV? ARPU = per-period average; ACV = annual value of a contract; LTV = margin over the whole lifetime. Snapshot, deal size, endgame.
What's a "good" ARPU? None in isolation — ARPU must clear your CAC-payback and support-cost math; a 5 ARPU works at consumer scale, a 5,000 ARPA needs sales-touch economics.
Gross or net revenue? Net of discounts and refunds, excluding taxes — ARPU on gross flatters every trend.
Related: MRR & ARR · LTV · Pricing · ACV Reviewed: 2026-07-16 · Sources: SaaS metrics canon