Average Revenue Per User (ARPU) is a measure of the average income generated by each active user over a specific period, typically a month. It is a core unit economic metric that helps businesses understand their pricing power and the value they capture from their user base. ARPU is calculated by dividing total recurring revenue by the total number of paying users. In a multi-tiered pricing model, ARPU reflects the distribution of users across different plans. A rising ARPU suggests that your 'Move Upmarket' strategy is working or that your expansion efforts are successful. Conversely, a declining ARPU may indicate that you are attracting lower-value users or that you are over-relying on discounts to close deals. ARPU is vital for calculating LTV and for determining how many users you need to reach your revenue targets. It helps founders decide whether to pursue a 'volume' strategy (millions of low-paying users) or a 'value' strategy (thousands of high-paying enterprise users).