Monetizing AI products remains a major challenge for startups. Many have employed subscription models, but they work in limited markets and exclude millions of potential users.
Koah, a San Francisco–based startup, is pursuing another option. The company has secured $5 million in seed funding to integrate advertising into AI applications.
The round was led by Forerunner, with support from South Park Commons and AppLovin co-founder Andrew Karam.
Investors describe Koah as building a missing layer in the AI ecosystem: a sustainable way for consumer AI applications to generate revenue.
Subscriptions
In the early phase of AI adoption, subscriptions were effective. Many early users were professionals willing to pay $20 a month for access.
However, that model cannot spur global growth. Nic Baird, Koah’s co-founder and CEO, explained the problem.
A developer could create an AI app that attracts millions of users in Latin America. Yet those users are unlikely to pay high monthly fees.
The cost of running the AI models remains the same, but subscription revenue does not cover it. But advertising provides a way forward.
Also read: Google Brings Ads to AI Chatbots
Koah Ad Structure
Koah is not building ads for platforms such as ChatGPT. Instead, it focuses on smaller applications developed on top of large AI models.
These include tools for productivity, education, and creative work. Koah is already active in many of these apps.
Examples include Luzia, an AI assistant; Heal, a parenting app; Liner, a student research tool; and DeepAI, a creative platform.
Advertisers include UpWork, General Medicine, and Skillshare. The ads are labeled as sponsored content and appear during relevant interactions.
For instance, a user asking about startup strategies could see an UpWork ad offering freelance support.
This design is intentional. The company plans to show ads at useful moments, not as random interruptions.
Measuring Early Results
There is significant skepticism; some believe ads cannot work in AI chats. Others have tested solutions from older adtech firms, such as Admob or AppLovin, with limited success.
Koah claims its model is more effective. According to Baird, clickthrough rates reach 7.5%. Early partners have earned as much as $10,000 within their first month.
Importantly, Koah reports minimal negative impact on engagement. In fact, the company’s long-term goal is to make ads feel helpful enough to increase engagement.
Investor Interest
Nicole Johnson, a partner at Forerunner, highlighted the challenge. Subscription fatigue is real, she noted, and user churn often follows.
“Multiple revenue models in consumer AI are inevitable,” she explained. History shows that advertising will play a central role.
Forerunner views Koah as building the infrastructure needed for smaller developers. Without it, many consumer apps would struggle to cover costs or rely entirely on venture capital.
With it, developers can expand their reach without sacrificing stability.
Positioning Ads In The Sales Funnel
Koah believes AI chats occupy a middle point in the customer journey. Social media creates awareness. Search engines drive final purchases. AI conversations sit between these two stages.
Users often ask AI for recommendations or product details. However, they rarely complete a purchase inside the chat.
Instead, they move to Google or another platform to buy. Koah aims to capture this intent at the right moment and direct it to relevant advertisers.
