How can startups and developers actually monetize their AI products? A startup called Koah, which recently raised $5 million in seed funding, is betting that ads will be a big part of the answer.
If you spend any time online, there's a good chance you've seen plenty of ugly, AI-generated ads -- but few to none when interacting with AI chatbots themselves. Koah co-founder and CEO Nic Baird argued that will inevitably change.
"Once these things get outside San Francisco, there's only one way to make [them profitable] on a global scale," Baird told TechCrunch over Zoom. "It's happened time and time again."
To be clear, Koah isn't trying to introduce advertising to ChatGPT. (That's probably something OpenAI will do for itself one day.) Instead, it's focused on the "long tail" of apps that are built on top of the big models, including apps with a user base outside the United States.
Baird suggested that when consumer AI products were first becoming popular, it made sense for them to focus on "wealthier, prosumer" users, and to monetize those users by converting some of them into paid subscriptions.
But now, someone could build an AI app that reaches millions of users in Latin America, and those users are "not paying 20 dollars a month," Baird said. So the developer could struggle to bring in subscription revenue, but "they have the same inference costs as everyone else."
Baird suggested that by successfully figuring out how to make advertising work in AI chats, Koah could actually unlock more potential for "vibe coded" apps that might otherwise be "too expensive to operate at scale" unless their creators raise VC funding.
In fact, Koah is already serving ads in apps like AI assistant Luzia, parenting app Heal, student research tool Liner, and creative platform DeepAI. Its advertisers include UpWork, General Medicine, and Skillshare.
These ads are marked as sponsored content, and they're supposed to appear at relevant moments in your chats. For example, if you asking for advice about startup business strategies, the app could show you an ad from UpWork offering to connect you with freelancers who could work with your company.
When Koah talks to publishers, Baird said many of them believe that ads simply don't work in AI chats, while others have found limited success with AI offerings from older adtech companies like Admob and AppLovin.
But Baird said Koah is 4 to 5 times more effective, delivering clickthrough rates of 7.5%, and with early partners earning $10,000 in their first 30 days on the platform. He added that Koah achieves all that while having less of a detrimental effect on user engagement -- though his ultimate goal is for Koah ads to feel relevant enough that they actually improve engagement.