How the money flows

Four ways an AI company gets paid

Subscriptions. You pay $20 a month for ChatGPT Plus or Claude Pro. The biggest labs now have hundreds of millions of people on free tiers and tens of millions paying. This is the money that matters most to the labs, because it comes straight from people who chose to pay.

Per use, to developers. Every app that "has AI" pays its model maker per token, a fraction of a cent at a time, in enormous volume. When Cursor writes your code or your bank's app summarises a statement, a meter is running somewhere. This is the bulk of most labs' revenue.

Enterprise deals. A company buys thousands of seats, or a government buys a private copy. Big cheques, long contracts, lots of lawyers.

Advertising, so far only at Google. Search has always been paid for by ads, and AI Overviews sit on top of the same page. Whether ads appear inside chatbots is one of the open questions of 2026.

Why the free tier exists

Three reasons, all rational.

The free tier is the funnel: a small share of free users upgrade, and at a billion weekly users a small share is a lot of people. It is the training ground: every conversation teaches the labs what people want, and at some companies, with your permission, what the model should learn. And it is the moat: a person who has used one app for a year does not switch lightly.

The catch is only that free is not forever in any particular form. Limits tighten, models get swapped, features move behind the paywall. Nothing sinister, just the tide. Which is why what you build here is plain text you can carry to another app in a minute.

Why prices keep falling

Two forces push the same way.

Chips get better and the clouds get bigger, so each answer costs less to produce. And the open-weight labs, DeepSeek, Qwen, Mistral, Meta, publish models anyone can run, which means the closed labs cannot charge much more than "free plus convenience." The price of a given level of intelligence has fallen by roughly ten times a year for several years. A model that cost a fortune to use in 2023 is a free tier in 2026.

For you this means: never pay for capability that will be free in a year. Pay for the app that fits your life and connects to your things. That is the part that does not get cheaper.

The numbers in the news, decoded

Weekly active users. ChatGPT crossed a billion a week in 2026; Gemini's app is around 950 million a month; Claude around 245 million a month. Big, real, and also easy to inflate by counting a Google search as a Gemini use.

ARR. Annual recurring revenue: the last month's subscription income times twelve. A forward-looking guess dressed as a fact. Fine as a trend, not a bank balance.

Valuation. What the last investor paid, scaled up to the whole company. Perplexity at $20 billion, Mistral at $20 billion, the biggest labs at hundreds of billions. It is a price someone paid for a slice, not money the company has.

Compute deals. "Anthropic to spend $100 billion on AWS." "OpenAI commits $250 billion to Azure." These are promises to rent buildings over a decade, and they are the biggest numbers in the industry because the buildings are the biggest cost.

The honest worry

The industry is spending far more on chips and buildings than it earns from all of the above put together, on the bet that revenue catches up. Maybe it does. Maybe some companies do not make it. Nobody, including the people running these companies, knows which.

You do not have to have a view. You only have to avoid being stranded. Which brings us to the habit.

The one habit

Keep what you build portable. Instructions in plain text. Connectors that use the open standard. Nothing that only works in one company's app. If your AI app doubles its price or vanishes, you open a different one, paste, and carry on.

This site is built on that habit. Every agent is a text file. Every setup guide is written for five apps. The day one of them changes, you lose a morning, not your work.

What to remember

• Subscriptions, per-use fees, enterprise deals, and (at Google) ads.
• Free tiers are the funnel, the training ground, and the moat. They shift.
• Intelligence gets cheaper every year. Fit and connections do not. Pay for those.
• Keep everything portable. Then none of the big numbers can hurt you.