A startup named Koah has just completed a $5 million seed round, betting that advertising will become a key way to monetize AI products. The company focuses on providing ad solutions for applications built on large AI models, especially those targeting users outside the United States.
Nick Baird, co-founder and CEO of Koah, said that while AI-generated ads are everywhere online, there are few ads seen during AI chatbot interactions. He believes this will inevitably change, especially when these AI products go beyond Silicon Valley and target global markets.
Baird pointed out that early consumer-level AI products mainly targeted "wealthy professionals," monetizing through paid subscription models. However, as AI applications reach millions of users in regions like Latin America, these users "won't pay $20 a month" for a subscription fee, making it difficult for developers to earn subscription revenue while facing the same computational cost pressures.
By solving the issue of ad placement in AI chats, Koah hopes to unlock the potential of more "context-driven" apps, allowing creative apps that were previously too costly to scale to operate without relying on venture capital.
Koah has already placed ads in AI assistants like Luzia, parenting app Heal, student research tool Liner, and creative platform DeepAI. Advertisers include companies such as UpWork, General Medicine, and Skillshare.
These ads are marked as sponsored content and appear at relevant moments in the conversation. For example, when a user asks for advice on starting a business, the app may display an UpWork ad offering freelance services.
According to Baird, many publishers initially thought ads wouldn't work effectively in AI chats or that traditional ad tech companies like Admob or AppLovin would only provide limited results. However, Koah's performance is 4 to 5 times better, with a click-through rate of 7.5%, and early partners can earn up to $10,000 within the first 30 days of launching on the platform.
Importantly, Koah claims that while providing better ad performance, it has a smaller negative impact on user engagement. Baird's ultimate goal is to make ads so relevant that they actually enhance user engagement.
This seed funding round was led by Forerunner, with participation from South Park Commons and co-founder of AppLovin Andrew Karam. Nicole Johnson, a partner at Forerunner, said that monetization in the AI space is "the elephant in the room for builders and investors." While the subscription model is the standard for current consumer-level AI services, over-reliance on subscriptions could "quickly lead to fatigue and attrition."
In the entire ad ecosystem, the Koah team found that AI chats sit in the middle of the purchase funnel, between Instagram ads for brand awareness and Google search ads for direct purchases. Baird noted that users usually don't make purchases directly in AI but consult bots for recommendations or product details, then "go to Google to buy."
