What is ARPU?
Definition
Average Revenue Per User — the average monthly or annual revenue generated per subscriber, calculated by dividing total revenue by total subscribers.
Understanding ARPU
ARPU (Average Revenue Per User) helps subscription businesses understand their revenue efficiency. It is calculated as Total Revenue / Total Users for a given period. For example, if a service earns $100,000/month from 10,000 subscribers, the ARPU is $10/month.
ARPU can be increased through upselling, cross-selling, or price increases. Tracking ARPU over time reveals whether a business is becoming more or less efficient at monetizing its user base. For consumers, ARPU gives insight into what the 'typical' customer pays, which can help in negotiating better deals.
Related Terms
MRR
Monthly Recurring Revenue — the predictable total revenue a subscription business expects to earn each month from all active subscriptions.
Lifetime Value
The total revenue a business expects to earn from a single customer account over the entire duration of their subscription relationship.
Tiered Pricing
A pricing strategy where a service offers multiple plan levels with different feature sets and price points to serve different customer segments.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.