Something is changing in the unit economics of software
The integration of AI into software products is fundamentally altering traditional SaaS unit economics by introducing high, per-inference compute costs. This shift challenges the historical model where software distribution costs were negligible, forcing companies to balance margins against product quality.
Why it matters
This economic shift could reshape the software industry's business models and investment strategies as AI becomes a core component of product delivery.
Software had a superpower. Build the product once, distribute it to a million users for roughly the same cost as distributing it to one. Every incremental customer flowed largely to the bottom line. This created a gross margin profile, 75-85%, that made software unlike any other industry in history.
Those margins made the unit economics of aggressive customer acquisition work in a way that seemed almost too good to be true. Once a customer was on the platform, they cost you almost nothing to serve. The lifetime value calculus was extraordinarily forgiving. That justified burning cash on growth, which produced the SaaS playbook that defined the last fifteen years: land customers aggressively now, because the unit economics get better as you scale, not worse. It was a genuine anomaly. Most industries don't work like that.
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