Why Do AI Models Cost Money?
Running AI models requires specialised chips (GPUs) costing thousands each. Companies operate massive data centres to serve millions of requests. Per-token pricing covers this infrastructure cost.
How Tokens Work
AI models read tokens, not words. A token is roughly 4 characters or ¾ of a word. "Hello, how are you today?" is about 7 tokens. $2.50 per 1M tokens means processing 750,000 words — about 10 novels — costs $2.50.
Input vs. Output Pricing
Output is typically 3-5x more expensive because generating text requires much more computation than reading it. If your use case sends long documents but gets short answers, costs are mostly input tokens. Content generation? Output costs dominate.
Model Tiers
Flagship (GPT-4o, Claude Sonnet 4, Gemini 2.5 Pro) — Best quality, moderate cost. Complex tasks.
Mini/Flash (GPT-4o mini, Gemini Flash, Claude Haiku) — Good quality, very cheap. Simple tasks.
Reasoning (o1, DeepSeek-R1) — Best for maths, coding, logic. More expensive per query.
Real-World Cost Examples
Customer service chatbot (1,000 conversations/day): $30-150/month. Blog generator (50 posts/month): $5-25/month. Document analyser (100 PDFs/day): $50-500/month.
💡 Use our cost calculator to estimate costs for your specific workload.