ARPPU
DEFINITION
ARPPU (average revenue per paying user) is a metric that measures how much revenue a business generates on average from each paying user over a defined period, calculated by dividing total revenue by the number of paying users.
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ARPPU, or average revenue per paying user, is a metric that measures how much revenue a business generates on average from each user who actually pays, over a defined period. It is calculated by dividing total revenue for the period by the number of paying users during that same period, excluding free or non-paying users from the count. ARPPU is particularly useful for businesses with a freemium model, a free trial tier, or any product where a meaningful share of the user base does not pay anything. Because those non-paying users are excluded from the denominator, ARPPU isolates how much value a business is actually capturing from the customers who convert to paid plans, which is a different and often more actionable question than how much revenue is generated per user overall. A subscription billing platform such as Recurly can supply the underlying paid-account and revenue data needed to calculate ARPPU consistently period over period.
Why ARPPU matters for subscription businesses
For any business with a large free or trial user base, blending paying and non-paying users into a single average revenue figure can understate how well the paid product is actually monetizing. ARPPU corrects for this by focusing only on the segment of users generating revenue, which makes it a sharper tool for evaluating pricing, packaging, and upsell strategy for the paid tier specifically. ARPPU is also a useful lens on the health of upgrade and expansion motions. A rising ARPPU can indicate that paying customers are increasingly choosing higher-priced plans or add-ons, while a flat or declining ARPPU alongside user growth can suggest that new paying customers are concentrated in entry-level plans. Tracking ARPPU alongside conversion rate, the share of users who become paying customers, gives a fuller picture of monetization than either metric alone.
How to calculate ARPPU
The standard formula is: ARPPU = Total revenue in period / Number of paying users in period
Define the time period for the calculation, such as a calendar month.
Total the revenue generated during that period, typically from recurring subscription charges.
Count only the users who made at least one payment during that period, excluding free-tier, trial, or churned non-paying accounts.
Divide total revenue by the number of paying users to get ARPPU for the period. Illustrative example (hypothetical figures): Imagine a freemium app with 10,000 total registered users in a given month, but only 800 of them are on a paid plan, generating $32,000 in revenue that month.
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ARPPU = $32,000 / 800 = $40 per paying user.
For comparison, if the same $32,000 were divided across all 10,000 registered users, ARPU would be $32,000 / 10,000 = $3.20, a figure that says much less about how the paid product itself is monetizing.
How to use ARPPU
ARPPU is most valuable when tracked deliberately rather than as an isolated snapshot:
Track ARPPU trend over time to see whether paying customers are trending toward higher-value plans or add-ons.
Pair ARPPU with the free-to-paid conversion rate, since a business can improve overall revenue either by converting more users to paying status or by increasing what paying users spend, and the two levers call for different strategies.
Segment ARPPU by plan tier or cohort to identify which paid segments are the strongest revenue contributors.
Use ARPPU when evaluating pricing changes for paid tiers, since it isolates the effect of the change on customers who are already paying, without the noise of the broader free user base.
Be cautious comparing ARPPU across businesses with very different free-to-paid ratios or pricing models, since the metric is most useful for tracking a single business's own trend over time.
ARPPU vs ARPU
ARPPU and ARPU both measure average revenue per user, but they differ in whose revenue and whose user count they include. ARPU divides total revenue by the total user base, including free and non-paying users, which makes it a broader measure of overall monetization. ARPPU divides the same revenue only by the users who are actually paying, which isolates how much value paying customers specifically generate. For a business with a large free tier, ARPPU will always be higher than ARPU, since the denominator shrinks to only paying accounts. Businesses that want to understand total audience monetization typically look at ARPU, while those focused specifically on the paid customer relationship look at ARPPU.
Benefits and examples
Clearer view of paid-tier monetization. ARPPU strips out the noise of free or trial users, showing what the paying customer relationship is actually worth.
Better pricing and packaging decisions. Because ARPPU isolates paying customers, it is a more direct signal of whether pricing and plan structure changes are working for the segment that matters most for revenue.
Useful alongside conversion metrics. Comparing ARPPU with free-to-paid conversion rate helps a business decide whether to prioritize growing its paying base or increasing spend per paying customer. You can find data on free trial conversion rate benchmarks by industry in the Recurly State of Subscriptions report.
Example use case. A freemium subscription app sees flat overall revenue growth. Breaking the numbers down, the team finds that ARPPU has actually increased as existing paying customers upgraded to higher tiers, but the free-to-paid conversion rate has dropped, showing that the growth problem is on the acquisition side of the funnel rather than in how much paying customers spend.
Frequently asked questions
How is ARPPU different from ARPU? ARPU divides revenue by all users, including free and non-paying ones, while ARPPU divides revenue only by users who are actually paying, which typically makes ARPPU a higher number than ARPU for the same business.
Why would a business track ARPPU instead of ARPU? Businesses with a significant free or trial user base track ARPPU to understand monetization of the paying segment specifically, since ARPU can be diluted and less informative when a large share of users generate no revenue.
Does ARPPU include one-time purchases? It depends on how a business defines the metric; many subscription businesses calculate ARPPU using only recurring subscription revenue, while others include one-time in-app purchases or add-ons if those are a meaningful part of paid-user revenue.
Can ARPPU go down even if ARPU goes up? Yes. If a business converts many new users to low-tier paid plans, ARPU can rise because more users are paying at all, while ARPPU can fall because the average paying user is now spending less than the existing paying base did before.
