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【V+ Perspective】Your Company Is Running on One Leg — ARPU Growth Can’t Save User Stagnation

  • May 6
  • 6 min read

More and more companies are posting impressive results lately. Revenue is climbing steadily, gross margins are improving, and ARPU (average revenue per user) is rising month after month. If you only look at these three numbers, you’d conclude these companies are in the best shape they’ve ever been.


But when we decompose the numbers, the picture changes entirely.


Net new customer or user additions have been flat for months — some are even trending slightly downward. Nearly all revenue growth is being driven by deeper spending from existing users, i.e., ARPU going up. On the surface, the company is becoming more profitable. But underneath, the growth engine has been swapped out, and most teams haven’t even noticed.


This isn’t just a subscription business problem. From streaming platforms to mobile gaming, from e-commerce to enterprise software, the same script is playing out across industries.


When ARPU becomes the sole source of revenue growth, a company isn’t growing — it’s extracting.



1. The Two Faces of ARPU Growth


ARPU growth isn’t inherently bad. The question is what’s driving it.


Healthy ARPU growth comes from genuine increases in product value: users pay more because the experience is genuinely better, or the company moves into a higher-value market segment and naturally attracts higher-spending customers. This kind of growth is typically accompanied by simultaneous increases in both user count and revenue.


Dangerous ARPU growth is a different story.


The streaming industry offers the starkest example. In early 2025, Netflix announced it would stop reporting quarterly subscriber counts and ARPU, shifting to revenue-only disclosure. The stated rationale: “members times monthly price is increasingly less accurate in capturing the state of the business.” Disney and Roku subsequently followed suit, discontinuing their own ARPU disclosures. On the surface, this was a technical change in financial reporting. But the deeper signal is clear: when user growth slows and ARPU growth becomes increasingly dependent on price hikes rather than value creation, these companies chose to stop drawing attention to that number.


Spotify’s strategy has been even more explicit. Starting in 2025, the company rolled out consecutive price increases across more than 150 markets, pushing the U.S. Premium plan to $12.99 per month. The numbers tell the story: Spotify’s revenue growth thesis has shifted from “more subscribers” to “more revenue per subscriber.” Price-driven ARPU lifts have propped up the earnings narrative, but how far this road extends depends entirely on users’ tolerance for increases.


Mobile gaming shows the most extreme structural version. According to Unity’s 2025 Gaming Report, 5% of players account for 65% of all in-app purchase revenue, while 72% of players pay nothing at all. In 2025, global mobile game downloads fell 7.2% to 50.4 billion, yet total consumer spending still edged up 1.3% to $81.7 billion. The user pool is shrinking, but each download generates more revenue than ever — because spending is concentrated among a diminishing group of heavy spenders.


E-commerce is no exception. In 2025, global e-commerce average order value (AOV) grew approximately 8.7% year-over-year, while customer acquisition costs surged 40-60% over the same period. Many DTC brands show revenue growth on the surface, but a closer look reveals it’s driven by increased repurchase value from existing customers, not by new customer inflow.


On the B2B software side, the same script plays out under different names. New logo counts are flat, but because average contract values are getting larger, revenue numbers still look good. According to Benchmarkit’s 2025 data, the cost of acquiring each dollar of new revenue rose from $1.76 to $2.00 — a 14% increase. Companies are spending more and getting fewer new customers in return.


Different industries, same story: ARPU is rising, but the user pool isn’t growing.


2. Early Warning Signs That the Growth Engine Is Stalling


Most teams fail to catch this shift early because the metrics they watch are structurally designed to obscure it. Revenue keeps growing, but it doesn’t distinguish whether growth comes from new users or existing ones. Margins are improving, but they don’t tell you whether the improvement comes from genuine efficiency gains or the passive effect of a narrowing user base.


Here are cross-industry early warning signs:


First, user or customer count is flat, but revenue keeps growing.


This is the most fundamental signal. Whether it’s MAU, subscriber count, active buyers, or signed accounts — when this number plateaus or dips slightly while revenue still rises, it means each user is spending more, but the user pool itself isn’t expanding. The 2025 app market data illustrates this most clearly: global downloads grew just 0.8% (14.9 billion) while in-app purchase revenue surged 10% to $167 billion. Users didn’t grow; money did.


When growth comes solely from extracting more from existing users, the ceiling arrives faster than anyone expects.


Second, organic traffic is shrinking, paid acquisition is growing, but efficiency metrics still look acceptable.


The share of organic downloads, organic search traffic, and word-of-mouth referrals is declining while paid advertising takes a larger share. But because ARPU growth outpaces the rise in acquisition costs, overall LTV/CAC or ROAS still looks positive. This is the most dangerous combination for lulling teams into complacency. Research shows that average global customer acquisition costs have risen 60% over the past five years, with e-commerce CAC surging 40-60% in just two years. If you’re spending more but not acquiring more users, this isn’t an efficiency problem — it’s a demand problem.


Third, the user base is narrowing unintentionally.


Casual users are churning out while power users or high-value customers stay, and overall ARPU rises “passively.” In mobile gaming, this is the whale effect amplified: as free players and low-spenders leave, the proportion of heavy spenders naturally rises, ARPU looks great, but the entire ecosystem is actually contracting. In streaming, when price-sensitive users cancel due to hikes, the remaining loyal users push ARPU higher, but the addressable market has shrunk. In e-commerce, when new customer acquisition dries up and revenue increasingly relies on repeat purchases from existing customers, AOV might still be climbing, but the brand’s reach is narrowing.


On the B2B side, the same phenomenon takes a different form: new logo count is flat but revenue is rising, meaning growth comes from upmarket migration or upsells. Pipeline volume is shrinking but conversion rates are improving — on the surface it looks like better sales efficiency, but in reality a smaller denominator is creating a ratio illusion.


Fourth, price increases have become the primary revenue growth lever.


When a company’s revenue growth is primarily driven by raising prices rather than expanding its user base or increasing usage, this is a signal that demands close attention. Spotify raised prices multiple times within a single year. Netflix hiked prices twice in just over a year. In the short term, price increases do prop up earnings. But each increase tests users’ tolerance threshold, and once that line is crossed, churn accelerates non-linearly.


Conclusion


ARPU growth is a good thing — but it cannot be the only growth engine.


Truly healthy companies, whether running subscription, transactional, advertising, or hybrid models, need to walk on two legs simultaneously: one leg deepening existing user value through genuine product improvements, the other continuously acquiring new users to keep the pool alive.


The 2025 data sends a clear signal across industries: from streaming to gaming, e-commerce to enterprise software, a growing share of revenue is coming from existing users. On the monetization efficiency front, this is positive. But if the acquisition leg is simultaneously atrophying, the company is effectively extracting ever-increasing value from an ever-shrinking user pool.


When revenue growth runs on one leg, falling is just a matter of time.



References:

Deadline, "Netflix Will Stop Reporting Quarterly Subscriber Numbers In 2025": https://deadline.com/2024/04/netflix-will-stop-reporting-quarterly-subscriber-numbers-2025-1235889568/

TekRevol, "Mobile Game Revenue Statistics 2026": https://www.tekrevol.com/blogs/mobile-game-revenue-statistics/

Benchmarkit, "2025 SaaS Performance Metrics": https://www.benchmarkit.ai/2025benchmarks

Foundry CRO, "Ecommerce Marketing Benchmarks 2026": https://foundrycro.com/blog/ecommerce-marketing-benchmarks-2026/

Data-Mania, "CAC Benchmarks for B2B Tech Startups 2026": https://www.data-mania.com/blog/cac-benchmarks-for-b2b-tech-startups-2025/



 

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