Nic Baird, CEO of KoahLabs, argues subscription revenue alone won't sustain AI chat apps. AI chat users lose $4 for every $1 earned, with only 3-5% converting to paid. Character AI users spend over three hours daily, but rejected intrusive ads. KoahLabs' native ads achieve 2% click-through rates versus 0.4-0.5% for display ads.
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ChatGPT is losing $4 to every dollar or something crazy like that, right? Makes it impossible to sustain that at scale unless they come up with a strong monetization method. And we saw all these companies that were getting a lot of engagement and growing really quickly just shut down because they look at the projections of unit economics going forward with subscriptions only converting at 3 to 5% and say, this is never going to make money. With Character AI, the average user engagement per day is over 3 hours. That's twice YouTube and TikTok. It's insane. Like, Character AI tried to bring in basically like a traditional interstitial ad, so like a full-screen ad that comes up once you switch talking to a different character. And they got really bad backlash from their Reddit community because that's just not the way that people want to see ads, right? Yeah, that's terrible. We're trying to keep it native and relevant. It's in the same font, the same coloring, not something that's like a huge banner ad. It's like flashing and trying to get your attention. It's really just trying to solve the user's problem. We're doing 2% CTR across the entire network. Traditional kind of display ads, they're usually in like the 0.4 or 0.5% CTR. And Open Evidence makes $150 million a year in revenue on a million users, which are all doctors. There's no payment option available to them. These people are having so much fun and their users are so engaged, like, why don't they deserve to live?
