Monetization
Monetization & Pricing in AI
A pricing model has four parts (Scale, What, Amount, When), must pass three tests (Customer View, Growth Loops, Cost of Revenue), and converts via one equation: Perceived Value > Perceived Price + Friction.
Core thesis
A pricing model has four parts (Scale, What, Amount, When), must pass three tests (Customer View, Growth Loops, Cost of Revenue). AI breaks SaaS pricing in three ways: cost-to-serve variance, frontier model prices stay constant, and outcome attribution unlocks 25-50% value capture.
The Frontier Model Trap
Flat AI subscriptions are mathematically broken
Frontier models will always cost ~$60 per million tokens — customers always switch to the best. Token-per-task doubles every six months.
- Usage-based day one: slower growth, surviving margins — the safe path
- Insane switching costs: one enterprise at $10M ARR beats $500M in prosumer ARR
- Vertical integration: lose on tokens, capture on hosting, database, deploy, monitoring
Explore other frameworks
The AI Growth Imperative
Strategy
AI Growth Defensibility
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Acquisition
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AI-Native Product Teams
Product
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