ARPU (Average Revenue Per User) is total revenue divided by total users over a period. It shows how much, on average, each user is worth — counting both paying and free users. Formula: ARPU = Total Revenue ÷ Total Users.
What is ARPU?
Average Revenue Per User (ARPU) measures how much revenue a business generates from each user, including both paying and non-paying users. It’s a key metric for understanding business health and growth potential.
Basic Formula and Example
ARPU = Total Revenue ÷ Total Number of UsersARPU formula
Simple Example:
- Monthly revenue: $10,000
- Total users: 1,000
ARPU = $10,000 ÷ 1,000 = $10 per user
Real-World Example:
SaaS Company Example:
- Free users: 9,000
- Basic tier ($10/month): 500
- Premium tier ($25/month): 300
- Enterprise tier ($50/month): 200
Total Revenue = $5,000 + $7,500 + $10,000 = $22,500
Total Users = 9,000 + 500 + 300 + 200 = 10,000
ARPU = $22,500 ÷ 10,000 = $2.25 per user
Industry Benchmarks
These are rough, order-of-magnitude ranges — ARPU varies enormously with pricing model, geography, and segment, and consumer figures depend heavily on whether free users are included (ARPU) or only paying users (ARPPU). Treat them as ballparks, not targets.
B2B SaaS
- Enterprise: $500–10,000+/month per account (scales with contract value)
- SMB: $50-200/month
- Small business / self-serve: $20-50/month
B2C Services
- Streaming: $8-15/month
- Gaming: $1-5/month
- Social apps: $1-3/month
Mobile Apps
- Premium games: $2-5/month
- Utility apps: $1-3/month
- Free apps with ads: $0.10-0.30/month
Ways to Increase ARPU
1. Monetization Strategies
- Premium features
- Tiered pricing
- Add-on services
- Usage-based billing
2. User Engagement
- Feature education
- Upsell campaigns
- Premium content
- Better user experience
3. Value Addition
- New features
- Better support
- Integration options
- Enhanced services
Common Calculation Mistakes
- 1. Time Period Consistency:
- Wrong: Mixing annual and monthly revenues
- Right: Convert all to the same time period
- 2. User Count Accuracy:
- Wrong: Using registered users only
- Right: Using active users in the period
- 3. Revenue Recognition:
- Wrong: Including future revenue
- Right: Only counting earned revenue
ARPU vs ARPPU: When to Use Each
Key Differences
ARPU:
- Includes all users (both free and paying)
- Shows overall monetization effectiveness
- Always lower than ARPPU
- Helps understand total user base value
ARPPU:
- Only includes paying users
- Shows value of paying customers
- Always higher than ARPU
- Helps understand premium user value
When to Use ARPU
Freemium Business Models
- When you have many free users
- Ad-supported products
- Apps with in-app purchases
- Social media platforms
Growth Stage Analysis
- Evaluating overall business health
- Understanding conversion potential
- Planning monetization strategies
- Investor presentations
Market Comparisons
- Comparing similar products
- Industry benchmarking
- Market analysis
- Competitive research
When to Use ARPPU
Premium Services
- Subscription-based products
- B2B services
- Enterprise software
- Professional tools
Revenue Planning
- Financial forecasting
- Pricing decisions
- Revenue projections
- Resource allocation
Customer Value Analysis
- Understanding paying customer value
- Optimizing premium features
- Planning upsell strategies
- Customer segmentation
Using Both Together
Example Scenario:
A mobile game with:
- 100,000 total users
- 5,000 paying users
- Monthly revenue: $50,000
ARPU = $50,000 ÷ 100,000 = $0.50 per user
ARPPU = $50,000 ÷ 5,000 = $10 per paying user
What This Tells You:
- Overall monetization: $0.50 ARPU
- Premium user value: $10 ARPPU
- Conversion rate: 5% paying users
- Growth potential: Room for conversion
Remember: While ARPU provides valuable insights, it should be viewed alongside other metrics like ARPPU, retention, and customer acquisition costs for a complete picture.
ARPU FAQ
What is ARPU?
ARPU stands for Average Revenue Per User. It measures the average revenue a business earns per user over a period, counting both paying and free users. It’s widely used to track monetization and to benchmark against competitors.
How do you calculate ARPU?
Divide total revenue for a period by the total number of users in that period: ARPU = Total Revenue ÷ Total Users. $10,000 in monthly revenue across 1,000 users is a $10 monthly ARPU. Keep the revenue and user counts in the same time window.
What is the difference between ARPU and ARPPU?
ARPU divides revenue by all users; ARPPU (Average Revenue Per Paying User) divides it only by paying users. ARPPU is always higher. Use ARPU for freemium and ad-supported models, and ARPPU to understand the value of your paying customers.
What is a good ARPU?
It depends on the model: enterprise B2B SaaS often sees $100–500/user/month, SMB SaaS $40–100, and consumer apps a few dollars or less. A “good” ARPU is one that, combined with your user volume, covers acquisition costs and supports profitable growth.
Related per-user revenue metrics
