ARPU — What It Is and How to Calculate It

ARPU stands for Average Revenue Per User and is a straightforward way to understand how much revenue, on average, each customer or account generates during a chosen time period. It’s commonly used in industries like telecom, streaming, gaming, SaaS, and digital services because it provides a quick snapshot of monetization performance that is easy to compare over time or between segments.

Why ARPU matters

For beginners, ARPU is valuable because it converts total revenue into a per-customer figure that’s easier to interpret and communicate. Rather than saying “we made $X in revenue,” you can say “each active user brings in $Y per month,” which helps teams set pricing, forecast growth, and spot early signs of product-market fit or decline.

Basic ARPU formula

The most common formula is simple:

ARPU = Total Revenue in Period / Number of Active Users (or Accounts) in Period

Key choices you’ll need to make when calculating ARPU:

• Period: Monthly ARPU (mARPU) and annual ARPU (aARPU) are common. Pick the period that aligns with your billing cycle and business rhythm.
• User vs. Account: For businesses where multiple users share one account (e.g., team SaaS), use revenue per account instead of per user.
• Which revenue: Decide whether to include only recurring revenue (subscription fees) or all revenue (one-time charges, add-ons, ad revenue). Be consistent.

Example calculation

Imagine a streaming app that earned $120,000 in subscription revenue in March and had 10,000 active users that month. ARPU for March = $120,000 / 10,000 = $12 per user for March. If you prefer annualized figures and March is representative, you could multiply monthly ARPU by 12 to estimate yearly ARPU.

Variations and related metrics

ARPU can be adapted to different business models

• Monthly ARPU (mARPU): Useful for subscription or usage-based services billed monthly.
• Annual ARPU (aARPU): Common for enterprise contracts or annual billing cycles.
• ARPA (Average Revenue Per Account): Preferable where teams or companies, not individuals, are the paying entities.
• Segmented ARPU: Calculate ARPU by cohort (signup month), geography, product tier, or user type to get actionable insights.

Practical tips for beginners

Start simple and be consistent. Pick the user/account definition and revenue scope that best reflects how your business makes money, and stick with it so trends are meaningful.

• Use cohorts: Looking at ARPU by cohort helps you see how revenue per user changes as users age (e.g., month 1 vs month 6).
• Compare apples to apples: Don’t mix trial users or inactive accounts with active, paying users unless you intentionally want to track that blended view.
• Watch the distribution: Average can hide extremes — a few big spenders may lift ARPU while most users pay little. Complement ARPU with median revenue or percentiles when needed.

Limitations to be aware of

ARPU is an average, so it glosses over variation across customers. It also does not account for acquisition costs (CAC), profitability, or customer lifetime (LTV). Relying solely on ARPU can mislead decision-making if not paired with other metrics like churn, LTV, and margins.

Real-world example

In telecom, ARPU is a standard KPI: if a carrier has $10 million in monthly revenue and 2 million subscribers, ARPU = $5/month. A rise in ARPU might signal successful upselling to premium plans; a fall could mean customers are downgrading or using promotional offers more often.

How to present ARPU findings

When you report ARPU to stakeholders, clarify your definitions: period, user vs account, and which revenue streams you included. Visualize ARPU over time and break it down by segments (plan type, region, cohort) so the number tells a story about where revenue is changing and why.

In short



ARPU is a beginner-friendly, powerful metric that turns total revenue into a per-user perspective. It helps teams monitor monetization trends, evaluate pricing and product changes, and communicate performance succinctly. Use it alongside other metrics to get a fuller picture of business health.