AI Jargon Buster
AI news and the language around it, simplified.
What is Token Pricing?
Token pricing is a billing model where you pay for AI services based on the volume of text processed. An AI does not read words like a human. Instead, it breaks text into small chunks called tokens. A token can be a single character, a part of a word, or a whole word. When you send a prompt to an AI, you pay for the tokens in your input and the tokens the AI generates in its response. Because complex tasks require more back-and-forth communication, they consume more tokens and result in higher costs.
Why this matters to you
Knowing how token pricing works is essential for managing your department budget. Since every interaction has a cost, you can avoid unexpected expenses by optimizing your prompts and choosing the right AI model for the specific task at hand rather than using the most expensive option for simple work.
How you might hear this
We need to monitor our token pricing usage closely because the new summary feature is significantly more expensive than our previous search tool.
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