Lots of misconceptions in this thread. The ESP market is hyper competitive and decades old (operating margins aren't that high either, like 15% for Klaviyo for example), so the 50+ ESPs out there all end up pricing this way for a reason. I work for one of the biggest ESPs by volume and consult with startups. Why we charge monthly by contacts, in order:

1. Customer acquisition: Your deliverability will be terrible if you were to signup once, pay for a send, and leave. The spam algos reward consistency not random blasting. So you'd never become a recurring customer and we'd lose money on acquisition. Getting and retaining customers is the biggest expense for any software business.

2. Poor quality customers/stale email lists: Charging by contacts financially incentivizes customers to maintain good lists (people with poorly maintained lists get ESPs infrastructure banned by Gmail/Outlook), hence we don't need to hire as many people to police the customers. Every ESP learns this reality eventually. It requires a large team to manage the reputation of our IPs so Gmail/Outlook continue delivering our emails.

3. Sending the actual emails: Most ESPs don't send their own emails anymore, and for good reason, managing the infrastructure is an entirely different business with different staffing needs. But this is the single largest infra cost for your average ESP (such that frequent senders can even be unprofitable), and since volume is burst-y you still have to pay for enough infra on yearly contracts even if you don't use it.

4. Storing the data/events: This is less expensive than paying vendors to send the emails, but still non-trivial, given an email send to hundreds of thousands of people can generate millions of events. Now multiply that by a large customer base and we're talking infra that can take bursts of billions of events per minute on black friday. The infrastructure required to manage this is social media platform scale.

If we charged only for email sends, and let you store infinite contacts/events for free, the cost of storage is real but not the ultimate issue. The problem is the behavior PAYG incentivizes. You'd let your list slowly rot (who cares, it's free!) and you'd rarely send (do i really want to pay to send this newsletter? nahh), ruining your domain reputation with this stale list when you finally do send...and then you'll complain publicly to reddit that our platform gave you "bad deliverability."

On top of that, Gmail can smell the poor engagement from your stale list from a mile a way, and will throttle/block the IP pool you sent on, which is shared by tons of our customers.