Get ready for ads in your conversations with AI chatbots.
Nexad, an adtech startup building a native advertising solution for AI apps, has raised $6 million in seed funding. The round was led by A16z Speedrun (an accelerator under the Andreessen Horowitz umbrella) and Prosus Ventures, and included participation from firms like Point72 Ventures and Sequoia Capital’s Scout Fund.
“Our long-term bet is that the AI application field will be more fragmented and decentralized than the traditional internet platforms,” Nexad CEO Jason Hu told Business Insider. In that case, there would be value in a service that can provide advertising across various platforms.
Advertising on AI platforms is still nascent, though some of the largest AI companies are already testing or considering bringing ads into their products. For instance, OpenAI told the Financial Times in December that it was open to exploring advertising. Meanwhile, AI search startup Perplexity began testing ads in November.
Nexad wants to position itself as an AppLovin equivalent for AI apps. AppLovin made its mark by providing advertising within a large network of gaming apps before branching out into e-commerce.
Hu said that Nexad, which was founded in 2024, has onboarded seven AI companies to its network. Those include apps like iAsk (an AI search engine) and Dippy AI (an AI companion app). Hu said there are roughly 30 million consumers that ads across these AI apps can reach.
Hu said Nexad’s business has two main arms: one that matches ads with the right audiences, and another that creates the ads themselves.
Nexad runs its application with a “flywheel” model. It starts with a user search query or message sent to a chatbot. Along with the AI app’s response, Nexad serves an ad relevant to the original search. Then, it takes the engagement data from interacting with the user and uses it to refine its future ads.
“Ads need to be as smart or even smarter in order to keep up with the content,” Hu said.
The startup is focused slightly more on its ad generation offerings, which create text and image ads (Nexad doesn’t have video ads yet).
Nexad’s network runs through relationships with advertisers, affiliates, and third parties, such as e-commerce affiliate network Sovrn. The startup takes a commission of ad revenue from its publishers. It also offers different models for advertisers, including pay-per-click, per-view, per-install, and per-purchase.
For its ad-generation tech, Hu said Nexad uses open-source large language models like Llama, as well as proprietary models like Gemini, Anthropic, and OpenAI.
Although it’s a young space, some other startups, such as ProRata and OpenAds, are making plays in AI advertising.
Nexad’s seed investment will be used to hire more staff — it’s currently a team of six — and build out more partnerships, Hu said.
Read the 10-page pitch deck Nexad used to raise $6 million.
Note: The company redacted some details in the deck.
Read the full article here
