The CQ | Investing in Koah, the Ad Rails for the Era AI
Plus our Team's Must-Reads of the Week
The CQ is Forerunner’s weekly newsletter rounding up the top consumer news, plus bonus musings from our investment team and portfolio highlights. Subscribe to get the latest each weekend.
While Consumer AI is exploding in popularity, sometimes, the elephant in the room is monetization. The going standard for monetizing consumer AI services is subscription, which can quickly lead to fatigue and churn. Consumers only have room to experiment with (and sustain) so many services that come with a monthly fee.
Meanwhile, decades of tech cycles have shown us that the best consumer businesses employ multiple monetization strategies. Take OURA, which monetizes through a mix of hardware sales, monthly subscriptions, brand partnerships, and employer sponsorships — and Duolingo, which monetizes subscription fees, in-app purchases, and ads. Multiple revenue models in Consumer AI are inevitable, and if the past decades of internet services are any indicator, ads will play a major role.
We invested in Koah because they are building the essential monetization layer for consumer AI services by placing relevant, contextual ads directly in chat-based interfaces. The approach takes advantage of the inherently productive nature of consumer AI discovery, where people are actively looking for answers and recommendations. The result is click-through rates that far outpace industry standards, and CPMs that are 4-5x better than Google AdMob and Apple Search Ads.
In just ~8 months in market, Koah’s ad network already reaches nearly 100M consumers through its platform, counting brands like Upwork as advertisers and Luzia as publishers.
Ultimately, Koah is about unlocking a new class of performance advertising that blends the contextual relevance of search with the native feel of social, embedded seamlessly within chat-based discovery experiences.
For more on Koah, see Nicole’s post and TechCrunch’s article.
What We’re Talking About This Week:
Is partying dead, or are you just old? Though Gen Z has been called “generation stay-at-home,” The New York Times reveals a different side of their social habits. While a 2023 survey showed that only 4.1% of participants "attended or hosted" a party on a typical weekend, and a Gallup poll that year found that adults under 34 are drinking about 10% less than they were two decades ago — this does not mean young people are not going out. It’s that the definition of "partying" seems to be changing. Instead, Gen Z is embracing "soft-clubbing" with events like wine raves, literary readings, and mid-afternoon lo-fi coffee shop D.J. sets.“Gen Z is looking for connection right now and out there, having fun, complex social lives.”
Data from the U.S. Census Bureau: The gender pay gap is getting wider, reversing progress. For the second year in a row, the gender pay gap is widening, with the pay disparity now back to where it was in 2017. In 2024, the median woman working full-time earned 81% of what the median man earned, a two-percentage-point drop from the previous year. While the median income for men increased by 3.7% to $71,090, women's earnings remained flat at $57,520. "At a time when women, including many mothers, are leaving the labor force at record rates, it is a five-alarm fire to see that the gender wage gap is widening for an unprecedented second year in a row."
American workers feel less confident about finding a job. A New York Fed survey found that the perceived probability of finding a new job within three months dropped by 5.8 percentage points to 44.9%, the lowest level since the survey began in 2013. A separate report from the Conference Board also indicated a weakening labor market, with its Employment Trends Index falling to 106.41 in August from 107.13 in July, its lowest point since early 2021. The U.S. economy added only 22,000 new jobs last month, and a recent Labor Department report showed a net loss of 13,000 jobs in June, the first decline since the end of 2020.
The Atlantic explains even more reasons why the job market is hell: The average time a person spends looking for a job has climbed to 10 weeks, two weeks longer than a few years ago. Over 10% of workers under the age of 24 are currently searching for a job, and the share of workers quitting has fallen to its lowest level in a decade due to economic worries. “The impossibility of getting to the interview stage spurs jobless workers to submit more applications, which pushes them to rely on ChatGPT to build their résumés and respond to screening prompts. And so the cycle continues: a surge in same-same AI-authored applications prompts employers to use robot filters to manage the flow. Everyone ends up in Tinderized job-search hell.”
From The Verge: Google admits the open web is in ‘rapid decline.’ In a recent court filing, Google said, “The fact is that today, the open web is already in rapid decline and Plaintiffs’ divestiture proposal would only accelerate that decline, harming publishers who currently rely on open-web display advertising revenue.” This statement contradicts what the company has previously stated, that the web is “thriving,” AI isn’t hurting traffic, and its search engine is still sending people to a wide range of websites. This admission from the tech giant reflects the decline in traffic many digital publishers are experiencing, following updates to Google's search algorithm and the rise of AI.
Increasing debt is giving rise to America’s ‘buy now, pay later’ economy. A recent LendingTree survey found that roughly half of consumers have used a buy-now-pay-later service, which often overextends them without dealing with traditional credit checks. A Federal Reserve paper found that BNPL users are more likely to have low credit scores, incur checking-account overdraft fees, and have more delinquent credit accounts. Meanwhile, serious credit card and auto loan delinquencies have risen to levels last seen during the 2008-09 financial crisis. In the housing market, more borrowers are struggling to pay their mortgages, with 69% of those with FHA-insured mortgages last year having a risky debt-to-income ratio, a significant increase from 28% in 2012. The Federal Housing Administration (FHA) has waived or reduced payments on nearly 1.2 million mortgages over the past two years, which is roughly 15% of its portfolio. A
Gen Z is forcing us to rethink the American Dream. The percentage of Americans who said the American Dream was "out of reach" increased from 17% in 2017 to 30% in 2024. For Gen Z, this disillusionment is compounded by factors such as a worsening job market and stagnant wages, with over half reporting they are worried about their financial future — a significant jump from 30% in 2019. “For so long, our dreams—and the time spent reaching them—have caught us in cycles of false promise. But Gen Z is refusing to be a part of that transaction. What becomes of a nation when its defining myth no longer holds?”
Holiday spending, especially by Gen Z, is expected to drop this year, according to a survey by PwC. Consumers plan to decrease their spending this holiday season by 5%. The most significant reduction is seen in Gen Z, who anticipate spending 23% less on average compared to last year, a stark contrast to their 37% spending increase from the previous season. “Price is Gen Z’s love language. They’ve been raised in an era of rising costs. They’re laser-focused on value and cost transparency. For them, dupes aren’t a downgrade. They’re proof of smart shopping.” Young people also prioritize experiences like travel and concerts over physical goods, and they’re feeling the crunch as those experiences cost more.
Portfolio Highlights
Colin Walsh is named the new CEO of Glossier, reports WWD.
Fast Company names Homebase one of best workplaces for innovators in North America.
Skift recognizes Fora Co-founder Henley Vazquez in its Generation Next: The Risk Takers list.
Entrepreneur profiles Sandra Oh Lin, founder and CEO of KiwiCo.
Tennis pro Serena Williams, Ritual women’s health advisor, speaks to Women’s Health about her top picks from the brand.
Forbes covers the launch of Chime’s cash-back credit card.
Job of the Week
Growth Lead at The Farmer’s Dog, the fastest growing pet care brand in the U.S.
There are ~1650 other open roles at Forerunner portfolio companies, check ‘em out.