TL;DR: Pay-as-you-go (PAYG) is the simple usage-based billing.
bill = rate × metered usageUsage-based pricing took off because value and activity aren’t flat. Some customers run a few jobs; others run millions. Mapping price to consumption keeps friction low to start, scales naturally as usage grows, and for AI workloads it tracks spiky, heterogeneous work better than seats or flat bundles. It also makes the math visible: you can see what each unit costs you and what you charge, then tighten the backend without touching pricing.
The on-ramp is the simplest form: pay-as-you-go. You pick a unit, set a public rate, meter what each account consumes during the billing period (usually monthly), and invoice rate × usage. Below are everyday PAYG scenarios:
Traditional gas pump (Single meter): The meter is gallons (or liters). You pay a posted price per gallon; total is simply gallons × price.
City parking apps (Single meter): The meter is time parked. You choose a duration and pay the posted rate per hour for that zone.
Ride-hailing (Multiple meters): Price is built from time and distance for the trip:
(time × rate) + (distance × rate)Home utilities on one bill (Multiple meters): Separate meters and rates for electricity (kWh) and gas (BTUs); each is priced independently and line-itemed on the same invoice.
Even with multiple meters, PAYG stays straightforward. Each meter has a clear unit and rate, and the bill is just the sum of
(usage × rate)PAYG matches how modern products are used: activity is uneven, value is variable, and teams want low-friction adoption. It’s simple to explain, quick to ship, and it scales with usage.
Why teams like it
Getting started is straightforward, pick a unit and set your rate without complex packaging work.
Customers can easily try the product and convert to paid without negotiating contracts upfront.
As customer usage grows, revenue grows without requiring plan changes.
The model handles usage spikes and seasonal patterns without extra complexity.
You can track different units (tokens, minutes, GB, actions) separately and combine them into one bill.
With clear per-unit costs and pricing, you can optimize your backend while keeping pricing stable.
The model fits well with self-serve products.
Where PAYG fits best
Your value maps cleanly to a countable unit (or a small set of units).
Customers have wide usage variance, and you want price to follow value.
You want fast price discovery and the ability to iterate without repackaging plans.
Procurement is lightweight, or your customers can tolerate variable invoices (alerts and soft caps cam be added as needed).
You can instrument a trustworthy meter and attribute usage per account.
PAYG is the clean on-ramp to usage-based pricing. Price follows usage, customers scale naturally, and you see margin per unit. It gets you to market fast, makes the math visible, and leaves you room to evolve as needs grow.