What practical options do startups and developers have for generating revenue from their AI products? Koah, a new company that recently secured $5 million in seed investment, believes advertising will play a significant role in solving this challenge.
If you spend time online, you’ve likely encountered numerous unattractive, AI-created ads — yet, such ads are rarely seen within AI chatbot experiences. Koah’s co-founder and CEO, Nic Baird, believes this is bound to change sooner or later.
“Once these tools move beyond San Francisco, there’s only one viable way to make them profitable globally,” Baird explained to TechCrunch during a Zoom interview. “This pattern has repeated itself over and over.”
To clarify, Koah isn’t attempting to bring advertising into ChatGPT itself. (That’s something OpenAI may pursue in the future.) Instead, Koah is targeting the wide range of applications built on larger models, particularly those with international user bases outside the U.S.
Baird noted that in the early days of consumer AI, it was logical to target “affluent, prosumer” customers and monetize them through paid subscriptions.
But as AI apps reach millions of users, say, in Latin America, Baird pointed out that many of those users won’t spend $20 a month. As a result, developers may struggle to earn subscription income, yet they still face the same inference costs as everyone else.
Image Credits:Koah
Baird believes that by effectively integrating ads into AI chat platforms, Koah could unlock new opportunities for “vibe coded” applications — those that might otherwise be too costly to operate at large scale without venture capital support.
Currently, Koah already provides ad services for apps such as AI assistant Luzia, parenting solution Heal, student research tool Liner, and the creative platform DeepAI. Advertisers working with Koah include UpWork, General Medicine, and Skillshare.
These advertisements are clearly labeled as sponsored and are designed to appear during suitable moments in chat conversations. For instance, if you request guidance on startup strategies, the platform might display an UpWork ad offering to connect you with freelancers for your business.
In discussions with publishers, Baird said many remain skeptical that ads can succeed in AI chat environments, while others have only seen modest results using older adtech solutions like Admob and AppLovin.
However, Baird claims Koah is four to five times as effective, achieving clickthrough rates of 7.5%. Early adopters have reportedly earned $10,000 within their first month on the platform. He also emphasized that Koah’s ads have less negative impact on user engagement, and ultimately, he hopes Koah’s advertising will be relevant enough to actually boost engagement.
Image Credits:Koah
Koah’s seed funding round was led by Forerunner, with additional backing from South Park Commons and Andrew Karam, co-founder of AppLovin.
Forerunner partner Nicole Johnson, in an email about the investment, echoed Baird’s views, noting that monetization remains a major concern for those building and funding AI products. She pointed out that while subscriptions are the typical monetization method for consumer AI, overreliance on them can quickly lead to user fatigue and churn.
“It’s inevitable that consumer AI will adopt multiple revenue streams, and if the last few decades of internet services are any indication, advertising will become a key part,” Johnson said. She sees Koah as “developing a core monetization layer for consumer AI applications.”
When considering AI chats within the broader advertising landscape, Baird and his team have found that these interactions occupy the middle of the purchase funnel — between the awareness generated by an Instagram ad and the final purchase that might result from a Google search ad.
“People aren’t making purchases through AI — they just aren’t,” Baird commented. Users may turn to chatbots for recommendations or product information, but ultimately, “they go to Google to complete the transaction.” Therefore, Koah faces the challenge of figuring out how to best capture users’ commercial intent during their chat sessions.
“I’m not interested in simply figuring out how to insert a display ad into AI,” Baird remarked. Instead, his focus is on understanding user needs and finding the best way to address them through relevant advertising.
