Koah CEO on AI's Ecommerce Impact, What Makes Ads Successful

**SPEAKER_1** (0:00)
For that and more, let's bring in Nic Baird, the co-founder and CFO of Koah. Nic, great to have you on today.
Let's talk about Koah first. What is it that Koah does before we dive into AI and agentic commerce?

**Nic Baird** (0:14)
Yeah, so basically we are an ad network that sits on top of anything that's built on AI. And so if you think of Chachi PT as kind of the front door to AI for a lot of folks, there's also thousands of applications that use that underlying technology for various reasons. And so we allowed those companies to show ads in the same way that OpenAI shows ads on Chachi PT.

**SPEAKER_1** (0:33)
Okay, so you're seeing a hundred million plus queries. What is the biggest change that you've observed in how users are using AI and how consumers are interacting with it?

**Nic Baird** (0:46)
Yeah, I mean, consumer adoption is just happening. We've been around at this for about two years. When we first started, we had a really hard time actually converting users to end purchases. We'd show an ad and then they'd go and click on the website, but they wouldn't ever really get to converting.
Now, two years later, we've changed some things, but mainly what we see is the consumer behavior has changed and that through line to the purchase is actually happening.

**SPEAKER_1** (1:09)
We talked to Adobe last week and they were telling us that AI driven retail sites now converted a 60 percent higher rate than non-AI. So you can see in the data that it is translating. But when we're seeing AI move from just answering questions to actually making the recommendation of what to purchase and really guiding the user, how is that changing the economics of advertising, Nic?

**Nic Baird** (1:33)
Yeah, 100 percent. I think one of the biggest questions is, you've had Google search in the past where the user is coming with a very clear search intent. Hey, I want to buy Nike shoes and then you get a Nike branded app. Then you've got Meta and some of these other discovery platforms like Pinterest and Snapchat, right? Where people are just seeing things for the first time, there's a lot of brand awareness. But this middle of the funnel consideration phase, where the user is aware of a few brands that they know is going to solve their problem, but they're not exactly sure which one they're going to choose, it's historically been very difficult to get in front of as an advertiser. That is exactly the behavior that we see in AI. In AI, users are basically coming to these assistants to help them talk through problems that they have in their lives.
That is just a very unique set of behavior that we've ever seen. Within AI is something that's totally new. That's the opportunity for advertisers is to get at this middle of funnel and be relevant when the user is actually trying to solve a problem.

**SPEAKER_1** (2:28)
Then does the winner become the product that gets recommended as opposed to what it used to be with the person who had the most prominent ad?

**Nic Baird** (2:39)
Yeah, it's both probably.
In a very similar way to Google, the way that we imagine advertising happening in AI is very based on the relevance of the product. So your organic search results are going to matter a lot as well. Ideally, you're coming in organically, number one, that's the SEO and GEO worlds combining. Then in the advertising world, you want to make up for some of the stock gap. So some of the examples that we like to share with our advertisers is, a user might come with a problem that they have, and sometimes that problem may get an organic response from the model that includes a brand. Example of this would be like, hey, I'm training for a marathon. Great, if you're training for a marathon, here's a pair of marathon running shoes. But sometimes the model does not recommend a brand, in which case the only way to show up isn't an advertisement. So that's the most obvious way of describing this opportunity for brands.
A little bit less of an obvious way is like, look, the organic response is going to matter in the same way that organic responses matter today in search. The user is going to trust that to be the best recommendation that could be possible coming from the platform. But the ad itself, and whether it's relevant, highly relevant content, useful discounts, things like that is also going to be a huge contributing factor to the purchase.

**SPEAKER_1** (3:53)
Nick, when you say ads, people get this yucky taste in their mouth. You've got all these people paying to not have ads in their experiences. But you say that it's not actually the consumers don't like ads, that they don't like ads that aren't relevant to them or bad ads, I think is what you called them.