A layman’s guide to figuring out how much to charge for AI apps that have underlying AI costs.
The Pricing Dilemma of AI Apps
It’s hard to know how to accurately price an AI app. Largely because you don’t know how much the underlying cost will be! Your cost is a what is known as a variable cost. That means your cost for providing AI usage to users depends on the AI model you use (different models have different prices) and the number of tokens that model processes. Each user of your AI app will cost you a different amount of money!
So how do you decide on a fair price for your AI app that covers your costs, even when you don’t exactly know what those costs will be? Some questions you might ask are:
- How to calculate the costs of using GPT models?
Token-based billing and pre-paid charges can make the math complex. - How to set a price without undercharging?
With low prices you risk losing money. With high prices, you might scare users away. - How to deal with varying levels of token usage?
Some users might use your tool occasionally, while others depend on it daily. Some users might process only a few hundred tokens. Other users might be dumping Moby Dick into your tool and processing millions of tokens.
Here are some basic tips on how to think about pricing your AI app. To get involved in a deeper discussion, check out this forum discussion about pricing AI apps based on tokens.
Calculate Your Costs
Calculate how much each session/query costs based on the API provider’s token pricing. For example, OpenAI’s GPT-4o-mini costs $0.000375 per 1,000 tokens, while GPT-4 costs $0.045 per 1,000 tokens.
Here is an example of a pricing sheet from OpenAI for their GPT-4o mini model.
Choose the Right Pricing Model
Subscription-Based Pricing:
For tools with moderate or regular usage, subscriptions starting at $5/month are common.
For tools with low-volume usage, $1/month may still be profitable if you use inexpensive models.
Pay-Per-Use Pricing:
Charge per interaction or session, especially for apps with occasional or unpredictable usage.
Choose the right AI model!
A very important factor is what model you select! Different models cost different amounts. For example GPT-4o mini is less expensive than GPT-4o. And both those models are much cheaper than Anthropic Claude models. This is probably the easiest way to control your underlying costs.
Cheaper Models for High-Volume Apps: Use inexpensive models like GPT-4o-mini or GPT-3.5 to reduce costs.
Premium Models for High-Value Outputs: For complex or sensitive tasks, premium models like GPT-4 or Claude-3 can justify higher pricing.
Flexibility: If your app needs multiple models (e.g., OpenAI, Mistral, Sonnet), consider the logistics and costs of managing different APIs.
Monitor your API costs
One important tip is to MONITOR YOUR COSTS. Because they are variable costs, it’s very important to stay on top of them.
Both OpenAI and Anthropic offer detailed dashboards where you can view your costs, broken down in a variety of ways. For example, in OpenAI’s API usage dashboard you can view your costs on day-by-day basis. It even breaks down which models were used, how much, and how many tokens!
Attract users while ensuring profitability. By balancing these factors, you can establish a sustainable pricing strategy and grow your app with confidence.
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