What is Token Billing?
Token billing is a usage-based billing model in which a unit called a 'token' serves as the atomic measure of software consumption for pricing and billing purposes. Tokens may represent compute units, AI inference inputs and outputs, API request capacity, or other abstract units of work, depending on the platform. Customers purchase or are allocated a number of tokens and consume them as they use the software. Token billing is particularly prevalent in AI and large language model APIs, where tokens correspond directly to input and output text length.
Examples
- An AI API bills customers based on the number of input and output tokens processed per request, with pricing per million tokens varying by model capability.
- A software platform sells token packs that customers use to invoke premium features; each feature consumes a defined number of tokens per invocation.
- A creative AI tool grants a monthly token allowance per subscription tier and allows customers to purchase additional tokens when their allowance is exhausted.
- A developer platform uses a token abstraction to normalize billing across different types of API operations that have varying computational costs.
Common Applications
- AI and large language model API billing
- Generative AI product monetization
- Prepaid credit and draw-down billing systems
- Platform services with heterogeneous operation costs normalized into a single unit
- Startup and enterprise AI application pricing