Disruptive AI Pricing Models: The Potential Decline of ARR and What's Next
AI is shaking up established XaaS models
What’s the buzz
Annual Recurring Revenue (ARR) is foundational in SaaS metrics. It’s the cornerstone of SaaS valuation multiples—high margin, predictable, and (usually) growing. This model enables SaaS companies to become highly profitable at scale.
However, the rise of AI is shaking up the traditional software revenue model. What happens when ARR isn’t the primary driver of value and can no longer be used as the basis for SaaS company valuations?
So what?
Different Non-Traditional Pricing Models
With AI-driven solutions, we’re seeing a shift in how AI companies charge for value:
Charging per successful AI resolution of a support ticket
Charging per photo edited by AI
Charging per audio/video (or audio/video minute) produced
Charging per assigned task completed by an AI agent
Charging per conversation finished by an AI agent
Charging per input/output token to access an LLM
We’re moving away from subscription-based models toward charging for outcomes and results—the work successfully delivered by software and AI agents.
Now what?
The Rise of Disruptive AI Pricing Models
The demand for new pricing models has been wild. In an era where automation and APIs are growing, the value of a service isn’t tied to how many people use it, how much bandwidth it consumes, or server calls it enables.
Instead, it is increasingly based on the tangible outputs and measurable and billable results it delivers.
Salesforce created a buzz by introducing Agentforce, charging $2 per conversation, and paving the way for others.
Intercom introduced Fin AI, charging $0.99 per resolved customer issue. “You only pay when Fin resolves a customer’s question,” they explain.
Zendesk charges based on autonomous resolutions, offering flexible pay-as-you-go or discounted upfront plans.
Different AI categories are in the process of developing their unique pricing flavors:
Legal AI might establish charging per AI-generated summary or demand package.
Creative AI might charge based on the number or volume of (audio-visual) content produced, like video/audio minutes generated or images completed.
GTM AI tools might charge per task completed or workflow executed.
Bardeen is another example of a disruptive pricing model. They use a credit-based system to charge for their AI and premium services. Key points about their pricing model entail:
Credit Currency: Credits are the "currency" used to pay for different premium actions and outcomes within the Bardeen platform
Premium Playbooks: Only premium playbook-runs consume credits. Non-premium playbooks remain available for unlimited usage at no charge
Credit Cost: Each premium action costs one credit, making it easier to understand and predict usage
Pricing Tiers: Bardeen offers different pricing tiers (Free, Pro, Business, and Enterprise) with varying amounts of monthly credits
AI-Specific Charging
AI-Powered Actions: Bardeen has introduced AI-powered actions like Categorizer, Message Generator, and Research Generator. These likely fall under the premium actions that consume credits
Complexity-Based Pricing: The number of credits spent varies based on the complexity of the automation. For example:
Basic automation, such as writing or categorizing an email, typically uses one credit.
More complex automation, such as exporting data to a CSV, may use multiple credits per line of data
Autobooks Example: For automated processes that run periodically:
If a scraper runs over one link and scrapes a list of 10 items, that's ten credits.
If those ten items go through a second scraper, producing ten results, that's another ten credits.
In total, this autobook would consume 20 credits per trigger
Pricing Structure
The Free plan offers a 14-day trial with 250 credits
Paid plans (Pro, Business, and Enterprise) provide a set number of monthly credits that replenish each month
Users can purchase additional credits if needed
It's worth noting that Bardeen has recently simplified their pricing structure to make costs more transparent upfront and to allow for unlimited team members on all plans
The table below lists the first 25 of 50 AI companies with (partially) disruptive pricing models (companies 26 to 50 follow in the next table):
And next?
Selling Work, Not Just Access
This shift mirrors usage-based or consumption-based pricing models but with a twist. Companies are moving from selling access or usage to selling completed tasks.
This means customers may have a lower total cost of ownership (TCO) with greater pricing flexibility employing much fewer people.
Knowledge Corner - A History of Software Pricing
In the early days, software was sold on-premise, with customers paying upfront and taking on the financial risk.
Subscriptions evolved to make software accessible, with lower upfront costs and the option to cancel if the product didn’t deliver value.
Today, most subscription-based SaaS captures around 10-15% of the economic value they deliver.
Success-based models, where billing fully aligns with outcomes, can easily capture up to 25-30%.
Closelooknet Lens: Spotting the ripple effects
The Challenges of Success-Based Pricing
Success-based billing sounds excellent, but a deep dive reveals it is complex. Attribution becomes tricky; success can lie in the eye of the beholder, and customers may wonder, "Did our team drive the outcome, or was it the product or something in between?" And if the latter, how do we divide and properly bill the “success cake”?
To solve the problem, Intercom’s Fin agent charges $0.99 per resolution. To avoid attribution issues, Intercom tracks “hard resolutions” (confirmed by the customer) and “soft resolutions” (when the customer exits the conversation without reopening it in 24 hours).
SaaS Valuation Metrics: A Closer Look at Revenue Multiples
The transition to success-based pricing will profoundly affect public and private SaaS company valuations.
