ARPU
Average revenue per user or account over a period — the numerator in most unit-economics calculations, and the one most often averaged badly.
ARPU is total revenue for a period divided by the number of users or accounts in it. It feeds LTV and appears in most unit-economics work, so an error here propagates everywhere. The first decision is user or account: in B2B, ARPA (per account) is almost always the meaningful figure, because a 40-seat contract is one buying decision, not 40.
The deeper problem is that revenue distributions are skewed, and a mean over a skewed distribution describes nobody. A product with a €29 self-serve tier and a handful of €4,000 enterprise contracts reports an ARPU that neither group resembles. Report it by segment, and look at the median alongside the mean — when they diverge sharply, the average is being driven by a small number of accounts whose loss would move it substantially.
In practice
A product reported ARPU of €180 and priced a new tier around it. The median was €34; three enterprise accounts produced 60% of revenue. The tier launched to almost no uptake, because the actual customer base sat nowhere near the average the pricing had been built on.
Where teams get it wrong
- One ARPU across segments with very different pricing.
- Counting free users in the denominator without saying so, which halves the figure.
- Reporting the mean when the distribution is skewed, with no median beside it.
- Mixing ARPU and ARPA between reports.
- Comparing ARPU across companies with different definitions and calling it a benchmark.
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Related terms
All terms- Lifetime Value (LTV)The total gross profit a customer is expected to generate before they leave — the ceiling on what acquiring them can be worth.
- Customer Acquisition Cost (CAC)The fully loaded cost of winning one new customer — all sales and marketing spend divided by the customers it produced.
- LTV:CAC RatioWhat a customer is worth against what they cost to acquire — the headline test of whether growth creates value.
- ChurnThe rate at which customers stop paying or stop using a product over a given period — the mirror image of retention.