Usage-Based Pricing

Also called Pay-as-You-Go and Consumption Pricing

Charging customers based on how much they use, API calls, compute, transactions, so the bill scales with consumption. Also called pay-as-you-go or consumption pricing.

Why it matters

Usage-based pricing aligns cost with value received, lowers the barrier to start, and lets revenue grow naturally as customers use more. It has surged in popularity, though it makes revenue less predictable than fixed subscriptions.

For example

AWS charges only for the compute and storage a customer actually uses, so the bill scales naturally with their business.

Worth your time

Usage-Based Pricing Is Popular, But Is It Right For You? Our Rule of Thumb Andreessen Horowitz (a16z) · article A16z boils the whole decision down to one honest rule of thumb: usage-based pricing tends to fit products whose main user is other software, while subscriptions tend to fit products with human users. It is short, opinionated, and gives you a lens to reason from instead of a list of pros and cons. Read it as a starting point for framing your own call, not a verdict. Open a16z.com →

Related terms

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