A week in AI is like a year in other industries. I hope these issues become your weekly source of AI information, inspiration, and ideas. If we haven’t met before, I’m Amanda Smith. I write about AI and the fascinating folks who are building in this brave new world.
Good morning. I love everything about this week’s AI founder story. In an era where AI is everywhere and everyone is building in it, there’s not much time to pause to think about monetization. “Build it and they will come” isn’t the best advice.
Many of these AI companies won’t survive unless they figure out monetization before they scale.
This AI company can help with that.
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This week in AI:
OpenAI will work with AWS to sell its AI products to the U.S. government for classified and unclassified work.
It's rumored to be DeepSeek’s latest release.
Atlassian’s AI layoffs
The Aussie software company is slashing 10% of its staff, in order to fund more investment in AI and sales.
Company background: Koah
Founded: 2024
Team size: 16
Funding to date: $26 million
ARR: Not disclosed
Growth metric: 8,000 brands on a waitlist for 6 months – all organic.
Nic Baird, Koah
Nic Baird was an eight-time national champion sailboat racer with his eye on the Olympics. As a pro sailor, he met the owners of the teams, many of which were billionaires, like Skype founder, Niklas Zennström.
This was also around the time all his friends were starting companies. Baird was so enamored by these entrepreneurs that he neglected his sailing because he was so interested in the world of business.
He wanted to find the most talent dense place full of folks starting companies, which is where he discovered Silicon Valley’s South Park Commons. It was an undiscovered founder community at the time. This is where Baird found his co-founder.
Like many companies, they started with a different idea.
An AI networking tool, an agentic version of LinkedIn.
But in the process, Baird spotted a big problem. All these AI apps and agents his friends were SPC building are going to quickly realize they need ads to scale.
Apps like an AI doctor or AI storyteller for kids would get 50,000 super-engaged users, but the team would still shut it down. Baird asked why. It came down to cost, with a hefty $1,000/day hosting fee.
Baird asked around and every single founder he spoke to said a version of the same: We have to figure out AI before we get destroyed by this thing.
And in comes Koah
Koah is a monetization platform for anyone who’s building on top of AI in capacity. “Anytime there’s an AI experience, we want to make it possible to just drop ads in there and make the experience revenue sustainable and long-term,” Baird said.
It’s AdSense for AI.
“If you need to be profitable from day one and your only option for that is a subscription method, you’re going to build a product that has gated features. That means you’ll slow your growth because all of your best features are blocked behind a paywall. If you could run ads, then you could give your best features away for free and your app will grow significantly faster.”
Koah is unlocking a lot of new surface areas, as it allows a lot of people to show ads who were never able to show ads before, while improving the UX. It’s a paradigm shift that ads can add to the experience in agentic environments.
It works like this:
Koah takes the advertisement/creative and embed that into the experience. For example, if you’re training for a marathon, Koah will extract a bunch of questions and serve up the most useful thing. It could be marathon training advice, a discount on running shoes or a mediation app.
“The logic engine is the proprietary technology we have. We take the query and we take the advertisement, and the match on relevancy.” When asked about bias, Baird said: “The model never sees the information because it’s injected on the front end after the model has given the response, and then the model doesn’t read the front end again to get the conversation history. It’s just sent to it via the API in the back end, so the model never sees the ad.”
In the beginning, publishers were asking the team not to create a separate ad and rather mask it with a link. Baird disagreed, as it would destroy the trust. “We didn’t have to look at it for very long. It’s much better to clearly market it as a sponsored experience or ad,” he said.
Walking the talk
Koah followed a sell-first approach. They had customers pre-product. Baird said they started with the format in order to show an ad, a matcher to determine whether something is relevant or not, then an advertiser dashboard. Everything needed to be accessible to the publisher, so they built SDK so the publisher could host the technology on their website or app.
Baird noted that none of the foundational LLM companies are doing ads. Even with OpenAI, it’s not the GPT model that’s doing ads. It’s the productized version of that model, the application layer (ChatGPT) that’s running ads. “That’s the way we think about our company. Ads are built on top of the models, not in the models themselves.”
In terms of customers, Baird said his favorite use cases are the very specific ones, like the AI pediatrician or the AI travel planner. Existing apps are another interesting customer type.
Koah’s business model is a marketplace take rate model, much like DoorDash or Uber takes a percentage of spend that’s processed through the platform.
Users “begging for AI ads”
“We have people tweeting us all the time that are asking us to put ads in this coding agent, so they can use it for free,” Baird said.
One of their customers, Open Evidence, is making $150 million a year on AI ads alone. “It makes it so they can deliver their product to doctors for free and it’s not a data collection play.”
Baird said Koah’s growth has been organic. “On the advertiser side, they’ve had 8,000 brands on a waitlist for six months. We have to disqualify people all the time, and the list keeps growing. Advertisers are desperate to get out of the channels they feel locked into that aren’t performing anymore.” Display ads, for example.
On the publisher side, it’s a lot of founder-led content, hosted events, and dinners. “A lot of people tell us they found us from ChatGPT and Perplexity, too. We just tell our story as authentically as we can.”
Takeaways
The dynamic internet interface is here. People will expect very soon that online experiences morph based on what’s most interesting to them.
Ads can help create amazing experiences in the agentic era. Monetization first, scale second.
Pay attention to signals from users. This will open up new use cases. For Koah, they’re excited about ads in coding agents and email clients.
How's the depth of today's edition?
If one of these stories stuck with you, I’d love to hear which one.
Speak soon,
Amanda
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