hermes-brain/projects/passepartout/strategy/hosting-economics.org

:PROPERTIES:
:CREATED:  [2026-05-31 Sun]
:ID:       b2c3d4e5-f6a7-8b9c-0d1e-2f3a4b5c6d7e
:END:
#+title: Pass as a Service — Hosting Economics
#+filetags: :passepartout:strategy:hosting:economics:
#+STATUS: draft

* Assumptions

- Stage 2 instance: one SBCL Lisp process with Gate + PDS + environment in one address space
- User brings own LLM API key — no AI token cost to the provider
- Containerized: Docker image running on cloud VMs (AWS spot instances)
- Instances are embarrassingly parallel — no cross-instance coordination

* Unit cost per idle instance

At rest: ~500 MB-1 GB RAM. Active peaks at 2-3 GB. CPU at rest negligible.

* Packing density

AWS r6a instances (AMD, good price-to-RAM):
- r6a.4xlarge (128 GB RAM): ~$0.23/hr spot, ~80 instances per VM
- r6a.8xlarge (256 GB RAM): ~$0.45/hr spot, ~160 instances per VM

Cost per user per month at ~80 instances per 128 GB VM: ~$1.50 for compute.

* Infrastructure cost breakdown (100K users)

| Component | Detail | $/user/month |
|-----------|--------|-------------|
| Compute | r6a spot, 80 instances/VM | ~$1.50 |
| Storage | 10 GB EBS gp3 per user | ~$0.80 |
| Egress | Light protocol usage | ~$0.50 |
| Relay | K8s, stateless web service | ~$0.50 |
| **Infra subtotal** | | **~$3.30** |

| Overhead | | |
|----------|---|-------------|
| Engineering | 4-5 people | ~$0.80-1.60 |
| Support | 2-3 people | ~$0.40-0.80 |
| **Overhead subtotal** | | **~$1.20-2.40** |

| **Total** | | **~$4.50-5.70** |

* Pricing and margin

At $10/user/month:
- Cost: ~$4.50-5.70/user/month
- **Margin: 43-55%**

* Scaling inflection points

| Users | Provider cost/user/mo | Margin at $10/mo |
|-------|---------------------|-----------------|
| 1K | $25-40+ | Negative |
| 10K | $8-12 | ~0-20% |
| 50K | $5-7 | ~30-50% |
| 100K | $4.50-5.70 | ~43-55% |
| 1M | $2-4 | ~60-80% |

10K-20K users is the crossover to positive unit economics. Below that, the team overhead dominates.

* Cloud vs colo

At small scale (under 10K users): AWS wins. No hardware risk, no colo contract, elastic.

At large scale (100K+ users): Colo is 2-5x cheaper per instance. AWS premium comes from degraded packing density (hypervisor overhead, can't overcommit memory).

Crossover at roughly 50K-100K users where dedicated ops justify colo.

* Architecture

Relay on Kubernetes (stateless web service, standard pattern). Instances are Docker containers on raw VMs — one container = one SBCL Lisp process + volume mount for PDS. No orchestration magic needed for the instance layer.

The hardest operational problems: port mapping at scale (reverse proxy in front of VM pools) and PDS data persistence on VM failure (EBS snapshots or NFS-backed volumes).

* Why this works

Three things make the unit economics viable early:
1. Zero AI token cost (user brings own API key)
2. The Gate runs even without an LLM — caches common decisions, declines to reason when no key is configured. Not a degraded product, just a non-AI mode.
3. Docker-on-large-VM packing recovers bare-metal packing density on cloud, avoiding per-instance overhead.

* Addressable market

**AI chat vs AI agents — orders of magnitude gap:**

| Category | Users (Jun 2026) | Notes |
|----------|-----------------|-------|
| ChatGPT (chatbot) | 900M weekly active | Mostly text generation |
| AI agent users (all tools) | 5-10M | Actions, tools, environment control |
| Ratio | ~100:1 | Not 1000:1 as of mid-2026 |

Agent users are 1% of chatbot users today. If agent adoption follows the same growth curve as chatbots but lags by 18-24 months:

| Year | Est. agent users | 0.1% capture = users | MRR at $10/mo | Annual rev at 50% margin |
|------|-----------------|--------------------|--------------|--------------------------|
| 2026 | 5-10M | 5K-10K | $50K-100K | $300K-600K |
| 2027 | 50-100M | 50K-100K | $500K-1M | $3M-6M |
| 2028 | 300-500M | 300K-500K | $3M-5M | $18M-30M |

This is conservative — 0.1% capture of the agent market, $10/month (no AI tokens included).

Passepartout is not just an AI agent. It's a social protocol, verified computing environment, and knowledge system. It competes on more than agent UX. Even a fraction of the growing agent market funds the infrastructure.

* Price ladder

The most important constraint: the price users will bear must cover real infrastructure cost at whatever scale you're at. Two tiers solve for both growth and unit economics.

**Self-hosted tier (growth engine):**
- User downloads the image, runs on own hardware or $5-10/mo VPS
- Brings own API key for LLM access
- Provider cost: ~$0.50-1/user/month (relay + routing)
- Zero per-user compute or storage cost to provider
- Negative margin but negligible — scales to millions freely
- This is the wedge: proves the protocol, builds the network, costs nothing to operate per user

**Hosted tier (revenue engine):**
- Provider-managed container, user brings API key
- Packing density drives cost:
  - At small scale (<5K hosted users): cost = $20-25/user/month
  - At mature scale (50K+): cost = $5-7/user/month

| Phase | Scale | Hosted cost/mo | Charged price | Margin |
|-------|-------|---------------|---------------|--------|
| Bootstrap | <5K | $20-25 | $25-30 | 10-20% |
| Break-even | 5-20K | $10-15 | $20-25 | 40-50% |
| Mature | 50K+ | $5-7 | $15-20 | 60-70% |
| Commodity | 500K+ | $2-4 | $10-15 | 75-85% |

**Pricing strategy:**
- Never price below cost — ramp pricing down as infrastructure efficiency improves
- First 5K hosted users are enthusiasts and early adopters who pay a premium ($25-30)
- When costs drop below $10/user/month, you have room to price at $10-15 and open a much wider funnel
- Self-hosted grows the network regardless of whether the hosted tier succeeds

**What the price buys:**
- Persistent Passepartout environment (shell, editor, browser, agent in one image)
- Social protocol identity (DID, PDS, encrypted messaging)
- The Gate verifying every action
- Org data you own, in a format you own
- AI tokens are NOT included — user brings own API key

**Buyer profile:**
- Already spends $10-200/month on LLM API keys
- Values a verified, persistent environment over ephemeral chatbot sessions
- Wants to own data and identity
- Can't or won't self-host
- Developer, researcher, or knowledge worker

**The non-obvious constraint:** The addressable market at $25-30/month is narrower (0.1-0.5% of agent users) than at $10-15/month (1-5%). The hockey stick in user growth depends on infrastructure costs dropping far enough to price at consumer-friendly levels without burning capital.