ARPU

Average Revenue Per User (ARPU) is a financial metric that measures the average revenue generated from each user or customer over a defined period. It is used to assess monetization efficiency across industries such as telecommunications, digital media, software as a service (SaaS), gaming, and e-commerce.

Calculation is straightforward: ARPU equals total revenue in the period divided by the average number of users in that period. The denominator is typically the average active users or subscribers, though some reports use end-of-period users. For example, if a service earns $5 million in a quarter from an average of 250,000 users, the ARPU is $20 for that quarter.

ARPU can be reported for different horizons, commonly monthly, quarterly, or annually. Related metrics include ARPPU (average revenue per paying user), which excludes non-paying users and is useful for freemium models, as well as cohort ARPU and paid versus total ARPU.

Interpretation and limitations: A rising ARPU can indicate price increases, improved monetization, or a shift toward higher-value users, while a decline may reflect discounts, churn among high-value customers, or weaker monetization. ARPU does not measure profitability or the distribution of revenue among users; it can be skewed by a small number of heavy spenders. Therefore, ARPU is most informative when used alongside other metrics such as churn, lifetime value (LTV), customer acquisition cost (CAC), and gross margin.

In practice, ARPU helps compare performance over time, across regions or product lines, and informs pricing, product strategy, and budgeting decisions.