Key takeaways
- ARPU divides a period's revenue by the users or customers served in the same period.
- In B2B, ARPA counts paying accounts rather than individual seats.
- ARPU moves with price, discounts, plan mix, seats and the size of new customers.
- An average hides the spread, so read ARPU by segment as well as overall.
The ARPU formula
The ARPU formula divides the revenue of a period by the average number of users or customers in that period. Subscription teams usually use monthly recurring revenue as the top line, so one-off fees do not swing the figure. The average count is often the number at the start plus the number at the end, divided by two.
As an invented example, a business with 10,500 of monthly recurring revenue and an average of 70 paying customers in the month has an ARPU of 150. Whatever you choose to count, keep the period and the definitions the same each time, or the trend means nothing.
ARPU vs ARPA: average revenue per account
ARPA, average revenue per account, divides revenue by paying customer accounts rather than by individual users. It suits business-to-business products, where one company might buy two seats or two hundred, and where the account is the unit that signs, renews and churns.
Some teams track both. ARPA shows how much a typical customer is worth, while revenue per seat shows how pricing holds up as accounts grow. A falling revenue per seat inside a rising ARPA often means large accounts are getting volume discounts.
What moves ARPU up or down
ARPU moves whenever the price paid per customer or the mix of customers changes. Not every rise is good news, so it helps to know which of these drove it.
- A price change, for new customers or at renewal.
- More or deeper discounts, which pull the average down.
- Customers moving to a higher or lower plan.
- Seats and recurring add-ons bought by existing customers.
- A run of small new customers, which lowers the average even as revenue grows.
- Losing small customers, which raises the average while revenue falls.
How ARPU differs from ASP and lifetime value
ARPU is an ongoing average across all paying customers, while average selling price is the typical value of a deal at the moment it closes. ASP tells sales how big new deals are; ARPU tells the business what its customer base earns per head over time.
Customer lifetime value goes a step further. It estimates the revenue, or the margin, one customer brings over the whole relationship, often built from average revenue per account and how long customers tend to stay.
Where ARPU misleads
ARPU misleads most when free and paying users share the count, which drags the average down and makes it swing with every sign-up campaign. Decide whether ARPU covers paying customers only, and label it clearly if it does not.
It also misleads when one figure stands for the whole business. A few large accounts can carry the average while most customers pay little, so split ARPU by plan, segment or size band before drawing conclusions about pricing.
Where Pebbles Ai fits
Common questions
Should free users be included in ARPU?
Only if you say so. Most subscription businesses report ARPU on paying customers, and track free users separately so a sign-up spike does not distort the average.
Is ARPU the same as average order value?
No. Average order value is the typical size of one purchase, common in retail. ARPU is revenue per user or customer over a period, whatever the number of purchases.
Is a rising ARPU always a good sign?
Not always. It can rise because small customers are leaving, which lowers total revenue. Check it beside the number of paying customers.
About this page. Written by the Pebbles Ai team for people who run sales, marketing and growth. Last updated .
