Koah, an advertising startup that recently secured $5 million in seed funding, is wagering that advertising will play a major role in the solution.
“Once these things get outside San Francisco, there’s only one way to make [them profitable] on a global scale,” Koah co-founder and CEO Nic Baird said. “It’s happened time and time again.”
To clarify, Koah isn’t attempting to add advertising to ChatGPT itself—that’s something OpenAI may eventually pursue. Instead, the startup targets the “long tail” of applications built on large AI models, particularly those serving users outside the United States.
Baird explained that when consumer AI products first gained traction, it made sense to focus on “wealthier, prosumer” audiences and monetize them through paid subscriptions.
However, he pointed out that someone could now create an AI app attracting millions of users in Latin America, and those users are “not paying 20 dollars a month.” As a result, developers might struggle to generate subscription revenue, even though “they have the same inference costs as everyone else.”
Baird suggested that if the advertising startup can successfully establish advertising within AI chats, it could unlock greater potential for “vibe coded” apps that might otherwise be “too expensive to operate at scale” without raising venture capital.
Currently, the advertising startup is already delivering ads in applications such as the AI assistant Luzia, parenting app Heal, student research platform Liner, and creative hub DeepAI. Its advertiser roster includes UpWork, General Medicine, and Skillshare.
The platform labels these ads as sponsored content and surfaces them at relevant points during a chat. For instance, if a user asks about startup business strategies, the app might display an UpWork ad offering to connect them with freelancers for their company.
According to Baird, when Koah engages with publishers, many assume ads don’t work in AI chat environments, while others report only limited success with solutions from older adtech providers like Admob and AppLovin.
However, Baird noted that the advertising startup performs “4 to 5 times more effectively,” generating clickthrough rates of 7.5%. He added that some early partners earned $10,000 within their first 30 days on the platform. Importantly, Koah delivers these results with less negative impact on user engagement — and, as Baird emphasized, the ultimate goal is for Koah’s ads to feel so relevant that they actually enhance engagement.
Koah’s seed funding round was led by Forerunner, with additional participation from South Park Commons and AppLovin co-founder Andrew Karam.
In an email exchange, Forerunner partner Nicole Johnson reinforced many of Baird’s perspectives. She noted that when it comes to AI, monetization is “the elephant in the room amongst builders and investors.” She added that while the “going standard for monetizing consumer AI services is subscription,” relying only on subscriptions can “quickly lead to fatigue and churn.”
“Multiple revenue models in Consumer AI are inevitable, and if the past decades of internet services are any indicator, ads will play a major role,” Johnson said, emphasizing that Koah is “building the essential monetization layer for consumer AI services.”
When it comes to positioning AI chats within the broader advertising landscape, Baird and his team view them as sitting in the middle of the purchase funnel — between the brand awareness driven by Instagram ads and the purchase conversions often triggered by Google search.
“People are not transacting on AI — they’re just not,” Baird explained. Users might turn to a chatbot for recommendations or product information, but ultimately, “they’re going to Google to buy.” For Koah, the challenge lies in determining how best to capture this “commercial intent.”
“It’s not interesting to me to try to figure out, ‘How do we show a display ad in AI?” Baird said. Instead, he wants to focus on, “What is the user looking for and how do we give that to them?”
