Editorial illustration for Baird: Koah Customizes Chatbot Ads Using AI Responses, Not Just Prompts
Koah Uses AI to Customize Chatbot Ads Beyond Prompts
Baird: Koah Customizes Chatbot Ads Using AI Responses, Not Just Prompts
Anthropic ran a Super Bowl ad this year promising Claude would stay ad-free, and the company's recent IPO filing backed that up by not even mentioning advertising as a revenue option. That's an easier stance to hold with roughly $112 billion in investor money sitting in the bank. Most of the chatbot industry doesn't have that luxury.
OpenAI has signed up more than 100,000 advertisers in ChatGPT since launching ads there in February. Google just expanded ads in its AI Mode search chatbot to 10 additional countries, claiming users find them "highly relevant," even as advertisers themselves remain unconvinced the experience works yet.
For smaller, niche chatbot platforms without venture capital piling up or a tech giant's balance sheet behind them, ads aren't a side experiment. They're closer to a survival strategy. Koah Labs, a San Francisco startup, is betting on exactly that gap, building ad infrastructure for over 200 apps including DeepAI and Liner, and working with brands like Hims and UrbanStems.
Koah's advertiser count is a fraction of OpenAI's. CEO Nic Baird argues the comparison misses what his company is actually selling.
Ads composed partly by AI rather than fully by a human generate double the clicks, Baird says. It’s difficult to assess exactly why, but AI-generated marketing copy likely feels more natural next to the output of an AI model.
Why this matters
Koah's pitch is that it reads the AI's answer, not just the question, before picking an ad. That's a meaningful step past keyword-matching, and it's worth watching closely because it changes what "ad targeting" means once a chatbot is doing the talking. If the system is parsing Claude- or ChatGPT-style responses for context, the line between "helpful answer" and "sponsored answer" gets blurry fast, and that's a problem OpenAI's 100,000-advertiser rollout hasn't fully answered either.
Anthropic's ad-free stance is easy to hold with $112 billion in the bank, but Baird's framing suggests the rest of the industry is betting that response-aware ad insertion is the only way to make the economics of inference work. For builders, the real question isn't whether this technology works, it's whether users will tolerate ads woven into AI-generated text that already reads like trusted advice. We'd rather see that disclosed plainly than discovered later.
Watch for how platforms label these insertions, because that's where trust gets won or lost.
Related Reading
LLMs & Generative AI ChatGPT's 'Nerdy' tweak rewards goblin metaphors in answers, study finds
LLMs & Generative AI Google to End Free Access to Gemini AI for Non-Subscribers
LLMs & Generative AI AI Engineers Face Rising Costs, Need New Strategies for Efficiency
From Archives OpenAI rates GPT-6 Cyber "Critical" for breaking and fixing systems
From Archives Google's Gemini Omni 1.2 Flash Extends AI Video to 15 Seconds, Cuts Prices 30%
Common Questions Answered
How does Koah's AI-powered ad customization differ from traditional keyword-matching approaches?
Koah reads the AI chatbot's actual response rather than just the user's prompt before selecting which ad to display. This represents a meaningful step beyond keyword-matching and allows for more contextually relevant ad placement based on the content the AI model generates.
What does the research show about AI-generated ads versus human-created ads in chatbots?
According to Baird, ads composed partly by AI rather than fully by humans generate double the clicks. AI-generated marketing copy likely feels more natural when displayed alongside AI model outputs, making it more effective for users interacting with chatbots.
Why is Koah's approach concerning for the distinction between helpful answers and sponsored content?
Because Koah's system parses AI responses for context to select ads, the line between a genuinely helpful answer and a sponsored answer becomes blurry. This raises questions about transparency and disclosure that OpenAI's current 100,000-advertiser rollout hasn't fully addressed.
How are major AI companies currently monetizing their chatbots through advertising?
OpenAI has signed up more than 100,000 advertisers in ChatGPT since launching ads in February, while Google has expanded ads in its AI Mode search chatbot to 10 ad placements. In contrast, Anthropic's Claude remains ad-free, backed by the company's substantial investor funding of approximately $112 billion.
Further Reading
- Ads in Chatbots Have Arrived. Here's What's Working—and What's Not - Wired
- Chatbot Ads Are Here. What's Working—and What Isn't - Mezha.Media
- Advertising in the Age of AI Conversations - Duke Fuqua School of Business
- Anthropic's IPO Filing Shows $16.3bn of Revenue and No Plan to Sell Ads - PPC Land
- Koah Builds Momentum as Advertisers Explore the Next Frontier in AI-Powered Discovery - Yahoo Finance
