Finance & Billing
Definition
Usage-based billing (also called consumption billing or metered billing) charges customers based on what they actually use — API calls, data processed, seats active, events fired — rather than a flat subscription. UBB has grown popular in cloud infrastructure and AI products where usage varies wildly per customer.
Key points
- Measurement: raw usage events (calls, GB, seats)
- Pricing: per-unit rate, tiered volume discounts, committed usage discounts
- Billing cadence: typically monthly in arrears with overage billing
- Requires accurate metering — a missing or duplicated meter is revenue lost
Example
An API product charges $0.001 per call. A customer makes 5 million calls in a month. Their bill is $5,000, issued after month-end.
Related terms
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