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What is Average Revenue Per User (ARPU)?

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Average Revenue Per User (ARPU) measures the revenue a company generates per user or unit. 

ARPU helps businesses understand the profitability of different customer segments. It also helps them compare their performance with competitors. Almost every time, when ARPU is mentioned, it is regarding users, not units, but it is sometimes used in this way. 

The formula to calculate ARPU is:
ARPU = Total revenue / Number of users
Often a timeframe is added as well. What is the Average revenue per user by month? or the average revenue per user annually? In this case, adding the time dimension to the calculation is simple.
Take the total revenue for that set amount of time, by the number of users, and there is your answer for Monthly average revenue per user or Annual average revenue per user. 


While ARPU and ARPA (Average Revenue Per Account) might seem similar, they are used in different contexts. 

ARPU is commonly used in subscription and recurring business models, where revenue is tracked per individual user. In contrast, ARPA is often employed in traditional sales processes or B2B settings. This is because revenue is tracked per account, which may include multiple users. Often “account” is synonymous with the business with which a transaction is being completed. 

ARPU (Average Revenue Per User) vs. ARPU (Average Revenue Per Unit)

While average revenue per user and average revenue per unit sound similar, they measure different things.

Average revenue per user (ARPU) generally refers to the revenue generated per user or customer. Therefore, it provides insights into how much each customer contributes to the total revenue. It’s particularly useful in sectors like digital media, software, and other subscription-based services.

On the other hand, average revenue per unit refers to the average revenue generated per unit of a product sold or service provided. For example, in a manufacturing industry, a “unit” might refer to each manufactured item sold.

How to Interpret ARPU

Businesses can break this metric down into new versus existing average revenue per user. Comparing these figures provides insights into upselling effectiveness and the value of new customers compared to existing ones.

Comparing your ARPU to competitors’ figures provides an industry benchmark, indicating whether you are over- or under-performing relative to the market. This comparison can help guide your strategies and pricing.
ARPU also informs your customer acquisition channels. If it’s high, this suggests your channels effectively attract high-value customers. If it’s low, this may indicate a need to revisit your marketing strategies.
Segmenting your users based on this metric can highlight the most profitable customer groups, helping you focus on those segments that bring higher revenue.
Lastly, this metric serves as an essential tool for forecasting. By understanding your current ARPU and how it has trended over time, you can more accurately predict future revenue. This makes it a powerful metric for business planning and decision-making.
Updated on 28. November 2023

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