How can startups and developers truly monetize AI products? Koah, a company that recently secured $5 million in seed funding, believes that advertising will play a crucial role in achieving this goal. If you've spent time online, you've likely encountered many poorly designed AI-generated ads — but rarely while interacting with AI chatbots. Koah’s co-founder and CEO, Nic Baird, believes this will inevitably change. "Once these technologies move beyond San Francisco, there’s only one way to monetize them globally," Baird told TechCrunch via Zoom. "This pattern has repeated itself many times before." To clarify, Koah isn't aiming to introduce ads into ChatGPT (which might be something OpenAI considers in the future). Instead, the company focuses on the "long tail" of applications built atop large language models, particularly those with user bases outside the U.S. Baird explained that when consumer AI products first gained popularity, targeting "wealthier professional users" made sense, monetizing through paid subscriptions. However, now someone could develop an AI app with millions of users in Latin America, and those users “won’t pay $20 a month,” Baird said. As a result, developers may struggle to profit from subscription models, even though “their compute costs are the same as anyone else’s.” Baird suggests that by successfully figuring out how to integrate ads into AI chats, Koah could unlock the potential of more “ambient coding” apps — applications that would otherwise be “too expensive to operate at scale” without venture backing. In fact, Koah is already placing ads within apps like the AI assistant Luzia, parenting app Healo, student research tool Liner, and creative platform DeepAI. Its advertisers include UpWork, CommonSense Media, and Skillshare. These ads are labeled as sponsored content and appear contextually during conversations. For example, if you're asking for advice on startup business strategies, the app might show you an ad from UpWork promoting its service connecting you with freelance professionals. When Koah talks to publishers, Baird said many believe advertising simply doesn't work in AI chat environments, while others have had limited success using AI products from established ad tech firms like AdMob and AppLovin. However, Baird claims Koah's performance is 4 to 5 times better than others, with a click-through rate of 7.5%. Early partners earned $10,000 within the platform's first 30 days. He added that Koah achieves this with minimal negative impact on user engagement — though his ultimate goal is for Koah's ads to become relevant enough to actually boost engagement. Koah’s seed round was led by Forerunner, with participation from South Park Commons and AppLovin co-founder Andrew Karam. Forerunner partner Nicole Johnson echoed many of Baird’s views in an email discussion about the investment. She said monetization remains “a glaring issue among builders and investors” in the AI space. While “subscription-based monetization of consumer AI services is the default,” focusing solely on subscriptions may “quickly lead to fatigue and churn.” “Multiple revenue models in consumer AI are inevitable, and if history of internet services is any indicator, advertising will play a significant role,” Johnson said. In her view, Koah is “building a foundational monetization layer for consumer AI services.” As for where AI chats fit within the broader advertising ecosystem, Baird and his team found they represent the middle part of the purchase funnel — between awareness-driven Instagram ads and purchase-driven Google search ads. "People aren't transacting on AI — they just aren't," Baird said. They may ask chatbots for advice or product details, but then "they go to Google to buy." Therefore, one of Koah’s key challenges is figuring out the best way to capture users’ “commercial intent.” “I’m not interested in trying to figure out how to show display ads in AI,” Baird said. Instead, he wants to understand, “What are users looking for, and how can we deliver that to them?”