Understanding Pricing in the Age of AI: Orb's Approach to Usage-Based Billing
As Shazage, co-founder of Orb, explores the complexities of pricing AI agents, he highlights the importance of considering value delivery mechanisms, margin structures, and audience insights to drive successful monetization strategies.
- 1. Shazage, co-founder of Orb, will discuss how to think about pricing.
- 2. Pricing is a form of friction for a product and should be considered as such.
- 3. Orb is a usage-based billing infrastructure company that helps companies with monetization and pricing.
- 4. The value delivered by the product and the audience it is intended for are important factors in determining pricing.
- 5. Traditional principles of pricing include simplicity, production of friction to determine value, and protection of margins.
- 6. In AI native pricing, predictability matters due to the need for budgeting and cost profile understanding in mature companies.
- 7. The friction point in pricing has changed, with more focus on speed, experimentation, and proof of value in the early stages of AI.
- 8. Costs are variable and change quickly in the world of AI, so it's important to consider the axes of scaling rather than just margins.
- 9. Giving yourself flexibility to experiment is crucial in pricing, as it's unlikely to get it right the first time.
- 10. Considering the buying journey and value sought by the audience is important in determining pricing.
- 11. Pricing and packaging can dictate use cases and position a product for specific users and workflows.
- 12. The price point, tiers, and overall experience of what someone sees on a pricing page are all part of the pricing strategy.
- 13. As the underlying architecture of a product changes, so do margins, with the need to think about differentiation and R&D innovation.
- 14. It's not necessary to protect margins at all costs; instead, consider reasonable usage incentives such as rate limits or guardrails.
- 15. Flexibility in pricing is important as value is closer to the end user in the AI world.
- 16. Rapid price changes are possible in the AI world, but it's important to manage the complexity and internal dynamics of the organization.
- 17. Simulating the impact of a pricing change on users, particularly in terms of revenue mix and usage patterns, is crucial.
- 18. Price wars will continue, with more companies offering effectively unlimited plans, caps, and guardrails.
- 19. Outcome-based pricing will become more real, with clear definition of success language and contracts.
- 20. Real-time visibility spend management and balance alerts are likely to become more sophisticated in the world of AI monetization.
Source: AI Engineer via YouTube
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