Startups seeking to monetise their AI products face a complex challenge, particularly when relying solely on subscription models that may not suit all markets. Koah, a San Francisco-based AI startup founded in 2024, has recently raised $5 million in seed funding with the goal of pioneering advertising integration within AI applications. The company, led by co-founder and CEO Nic Baird, bets on advertising as a sustainable revenue stream for the growing ecosystem of AI chatbots and tools built on major AI models, especially targeting users outside of the United States.

Rather than attempting to insert ads into established platforms like ChatGPT, Koah focuses on the so-called “long tail” of AI applications, where developers often grapple with the high operational costs of running AI models without the benefit of strong subscription revenues. Baird highlights that in regions such as Latin America, subscription fatigue and lower purchasing power create hurdles for monetisation. By embedding contextually relevant advertising into AI interactions, Koah aims to empower developers to scale their applications sustainably without excessive reliance on venture capital or user fees.

Koah’s approach involves delivering native, relevant ads seamlessly within user conversations or interactions with AI-powered apps. This includes integration in products like the AI assistant Luzia, the parenting app Heal, student research tool Liner, and creative platform DeepAI. An example of this contextual advertising would be offering an UpWork ad when users seek advice on startup strategies. Early data from partners on Koah’s platform shows promising results, with clickthrough rates reportedly reaching 7.5%, and some early adopters earning up to $10,000 in their first month. Baird stresses that the company’s technology aims to enhance user engagement without detracting from the user experience, striving to make ads feel relevant and beneficial rather than intrusive.

This seed funding round was led by Forerunner, alongside investors such as South Park Commons and Andrew Karam, co-founder of AppLovin. Nicole Johnson, a partner at Forerunner, underscored the monetisation challenge in consumer AI, noting that while subscription models dominate, they often lead to churn and fatigue. She believes that multiple revenue streams, including advertising, are necessary to sustain the industry’s growth. Johnson lauds Koah as a pioneer in shaping monetisation frameworks for AI applications, pointing out that effective advertising within AI chats can uniquely capture commercial intent at a critical moment in the consumer journey — often bridging the gap between brand awareness and purchase.

Koah’s advertising technology is supported by SDK tools that developers can integrate to embed ads natively across various platforms while emphasising privacy and contextual relevance. This model not only promotes higher click-through rates but also maintains user retention, as Koah’s official website explains. The startup’s broader vision includes refining how AI understands user intent, tailoring advertising content to meet specific needs in a non-intrusive way, potentially redefining monetisation in the AI-driven digital economy.

The broader AI advertising landscape is seeing increased interest, as exemplified by other startups such as Kontext, which recently secured $10 million in seed funding to advance real-time contextual ads within conversational AI. Kontext has reported a 66% increase in average revenue per user for its partners by embedding such ads, signalling industry momentum toward integrating advertising into AI interfaces.

Koah’s innovative focus on bringing native advertising to AI apps could mark a significant evolution in AI monetisation strategies, offering developers a viable path to profitability beyond subscriptions while enhancing the user experience. As AI applications proliferate worldwide, particularly in emerging markets, such approaches may become essential to the sustainable growth of consumer AI products.

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Source: Noah Wire Services