What is Average Revenue Per User? (ARPU)

ARPU is total revenue divided by the number of users over the same period.

How does ARPU work?

Take revenue for a month or a quarter, then divide by the average user count for that window. Use the average, not the ending count, because the base moves daily. The definition of "user" is the whole game: free signups, active users, and paying customers produce very different numbers from identical revenue.

Why does ARPU matter?

It tells you whether growth is worth having. Users climbing while ARPU falls means you are buying a cheaper audience. Set against acquisition cost, ARPU is what says the business works.

Where did ARPU come from?

Telecoms built it. Phone carriers and internet providers needed a per-subscriber number they could compare against each other, and digital media, social platforms, and gaming borrowed it wholesale, as Wikipedia records.

How do you use ARPU well?

State your denominator every time you say the number. Report ARPPU, which counts paying users only, beside it when most of your base is free. Segment by cohort and by channel. Never compare your ARPU to another company's without checking how they count a user. And read it alongside ARR, which tells you the size of the base ARPU is describing.

Bottom line: ARPU is only as meaningful as the definition of "user" sitting behind it.

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