Definition
ARPU (Average Revenue Per User) is calculated as revenue / average active users for a period. It's useful for tracking monetization and pricing performance over time.
ARPU formula
ARPU = revenue / average active users
How to calculate ARPU (step-by-step)
- Choose a time window (month/quarter) and define what counts as 'active user'.
- Sum revenue for the same window (be consistent: gross vs net of refunds).
- Compute average active users (e.g., average of daily active users, or (start + end) / 2).
- Divide revenue by average active users to get ARPU.
Example
If you made $50,000 this month and had 2,000 average active users, ARPU = $50,000 / 2,000 = $25 per user for the month.
ARPU vs ARPA (SaaS)
- ARPU is usually per active user; ARPA (average revenue per account) is per paying account/customer.
- B2B SaaS often uses ARPA because pricing is per company (not per user).
- Be consistent: if your denominator is accounts, label it ARPA/ARPC instead of ARPU.
How to segment ARPU
- By plan/tier to see packaging performance.
- By acquisition channel to understand lead quality and upsell potential.
- By geography to reflect different pricing and payment behaviors.
Data QA checklist
- Use the same revenue definition each period (gross vs net).
- Define "active user" once and reuse it across reports.
- If you include free users, label the metric and track ARPA separately.
What is a good ARPU-
- There is no universal benchmark. 'Good' depends on gross margin, CAC, and retention.
- A useful check is whether ARPU supports a reasonable CAC payback period for your growth stage.
- Compare ARPU by segment (plan/channel) rather than only the blended average.
ARPU vs LTV
- ARPU is a per-period monetization metric; LTV is the expected value over the customer lifetime.
- A simple relationship is LTV ~= ARPA * gross margin / churn rate (with consistent time units).
- Use ARPU/ARPA to track pricing; use LTV with CAC to evaluate unit economics.
Common mistakes
- Mixing active users with total signups (denominator mismatch).
- Including free/trial users without a clear definition.
- Comparing ARPU across periods while changing pricing or activation criteria without segmentation.
Pair ARPU with retention
- ARPU + churn roughly determines LTV in simple models.
- If ARPU rises but churn rises too, you may be pricing out the wrong segments.
- Look for stable ARPU growth without degrading retention cohorts.