ARPPU: Average Revenue Per Paying User

What is ARPPU?

ARPPU measures how much revenue you generate from each paying user. Unlike ARPU (Average Revenue Per User), ARPPU only considers users who actually pay, giving a clearer picture of customer value.

How to Calculate ARPPU

Basic Formula

ARPPU = Total Revenue ÷ Number of Paying Users

Example Calculation

A SaaS company has:

• Monthly revenue: $100,000
• Total users: 10,000
• Paying users: 1,000
• Free users: 9,000

ARPPU = $100,000 ÷ 1,000 = $100 per paying user

Compare this to ARPU:
ARPU = $100,000 ÷ 10,000 = $10 per user

This shows why ARPPU gives a more accurate picture of paying customer value.

Why ARPPU Matters

Business Insights

• Shows true customer value
• Helps with pricing decisions
• Indicates monetization effectiveness
• Guides product development

Investment Planning

• Resource allocation
• Marketing budget
• Feature development
• Support resources

Industry Benchmarks

SaaS

• B2B Enterprise: $500-$2000+
• B2B SMB: $50-$200
• B2C Premium: $10-$50

Mobile Apps

• Gaming: $15-$25
• Productivity: $5-$15
• Entertainment: $10-$20

Subscription Services

• Content streaming: $10-$20
• Online education: $20-$100
• Professional tools: $30-$150

Using ARPPU Effectively

1. Segmentation Analysis

• Break down ARPPU by:
  • Customer segments
  • Product tiers
  • Geographic regions
  • Usage patterns

2. Growth Strategies

• Use ARPPU to:
  • Optimize pricing
  • Identify upsell opportunities
  • Target high-value segments
  • Improve features

3. Tracking Over Time

• Monitor changes in:
  • Monthly ARPPU
  • Quarterly trends
  • Annual comparisons
  • Segment variations

Common Mistakes to Avoid

• 1. Including Free Users: Wrong: Counting trial or free tier users. Right: Only counting paying customers.
• 2. Inconsistent Periods: Wrong: Mixing monthly and annual payments. Right: Converting all to the same time period.
• 3. Ignoring Segments: Wrong: Using overall ARPPU only. Right: Analyzing by customer segment.

Improving ARPPU

1. Upselling Strategies

• Feature upgrades
• Premium services
• Add-on products
• Package deals

2. Customer Value

• Better features
• Improved support
• Enhanced experience
• More integrations

3. Price Optimization

• Value-based pricing
• Tiered offerings
• Usage-based options
• Premium features

Remember: ARPPU helps understand the true value of your paying customers, guiding better business decisions for growth and profitability.