Why usage-based pricing instead of subscriptions?

The Shift to Usage-Based Pricing

If you're building an AI product and wondering whether to charge per seat or per usage, here's why usage-based pricing is becoming the standard for AI companies.

Seats Don't Reflect Value Anymore

In the SaaS era, seat count was a reasonable proxy for value — if 20 people at a company used your product, it was clearly valuable. But AI changes this equation. A single user with an AI agent can generate 10x more value (and cost) than 20 casual users. Charging per seat means your best customers are your least profitable ones.

AI Costs Are Variable

Unlike traditional SaaS where marginal costs are near zero, AI products have real variable costs — every API call, every token generated costs money. If you charge a flat subscription and a customer's usage spikes, you eat the cost difference. This is fundamentally different from SaaS, and it's why AI pricing needs to reflect actual usage.

Agents Can't Buy Subscriptions

As AI agents become more autonomous, they need to access services and make payments on behalf of users. An agent can't pause mid-task to ask permission for a new subscription or upgrade a plan. Usage-based pricing with a prepaid wallet lets agents operate autonomously — they spend from available credits without human intervention.

The Telecom Analogy

Think of AI usage like mobile data. Even "unlimited" phone plans are still metered — your carrier tracks every megabyte. The pricing structure (prepaid credits, overage charges, throttling at limits) is proven at scale. Lava applies this same model to AI: prepaid credits, real-time tracking, and automatic enforcement when limits are reached.

You Can Do Both

Usage-based pricing doesn't mean abandoning subscriptions entirely. Many successful AI companies use a hybrid model:

• Monthly subscription that includes a set amount of usage credits
• Overage charges for usage beyond the included amount
• Credit rollover (optional) so unused credits carry to the next month

This gives customers the predictability of a subscription with the fairness of usage-based billing. Lava supports this model out of the box.

The Bottom Line

Your business model should reflect how your product creates value and how it costs you money. For AI products, that's per-use — not per-seat. The companies that align their pricing with their cost structure will have the healthiest margins and the happiest customers.