Tokenomics | The new AI currency & your options explained

Control what you're billed on. Tokens are the currency of AI, and how you design your app determines how many you spend. Compress conversation history instead of resending it raw, cap output tokens with matching prompt instructions, and cache static context so each reuse costs a fraction of the first request. Route each prompt to the right model by complexity, or set Model Router in Microsoft Foundry to handle that automatically — balanced, quality, or cost mode.

Then optimize the whole stack. Run Agent Optimizer to test your prompt, model, and tool configurations together and surface better setups. Use Toolbox to dynamically select only the tools each request needs and cut input token overhead by 90%.

April Gittens, Microsoft Principal Cloud Advocate, joins Jeremy Chapman, Microsoft 365 Director, to share how to seize control of AI token spend through smarter app design.

► QUICK LINKS:

00:00 - Tokenomics foundation

01:06 - Token cost basics

02:11 - Context Window creep

03:46 - Reduce unnecessary tokens

04:29 - Trim context costs

05:21 - Cap output tokens

06:27 - Cache for savings

07:54 - Model cost tradeoffs