The Rise of AI-Gen Ad: 2 startups hit $10M ARR in less than 2 years
Grammarly ARR hit $700M, Cursor ARR hit $500M
I'm sorry, my friends. I've been going through some tough times lately, which has slowed down my post updates.
There have been some big ARR milestones recently, while Grammarly ARR hit $700M, Deel ARR hit $1B, and Cursor ARR hit $500M in only 3 years since it launched.
Today’s topic is about AI-Gen Ad, the AI-generated advertising sector is becoming a very hot industry with a validated business model.
The Rise of AI-Gen Ad
I previously wrote about Arcads.ai, a 5-person team in this space that reached $5 million in ARR. It mainly serves marketing teams at brands and agencies—especially those focused on digital products—because they need to produce a large volume of video ads quickly and efficiently.
I also covered a team behind Icon.com (formerly Icom.me), which secured investment from Peter Thiel’s Founders Fund and several Chinese founders. Their product integrates script writing, video editing, creative asset storage, UGC, creative analytics, and competitor ad monitoring.
The founder, Kennan, once claimed they hit $5 million ARR within 30 days. Although this was met with skepticism—some felt the product wasn’t as good as claimed and accused it of false marketing—he made headlines last month by purchasing the domain Icon.com for $12 million.
Most of these teams are working on similar things: using AI to generate ad videos at scale. You could describe them as ChatGPT + CapCut, Cursor for Marketing, or even AI CMOs.
M&A in AI-Gen Ad Space
This space is also seeing a growing number of acquisitions. In recent weeks, there have been two notable M&A announcements.
Last week, Photoroom, known for its AI-generated image tools, announced its acquisition of GenerateBanners. This automated visual marketing tool helps generate promotional graphics for social media, e-commerce, advertising, and personalized email campaigns. It automates banner creation from templates—ads, social posts, etc.—without requiring manual adjustments to text, color, or images.
This marks Photoroom’s first acquisition. In its official blog, Photoroom shared that its API already supports millions of product images daily, but clients needed text layout based on templates to make those images ad-ready. GenerateBanners solves this problem by enabling consistent branding across all marketing and business channels.
Photoroom CEO Matt Rouif stated, “When you need to shoot the same product in 10 languages and 50 formats, the traditional creative workflow just can’t handle it. In the future, automated AI agents will create most marketing assets.”
Photoroom still focuses on images, and it’s considered a capital-efficient AI product. Back in 2023, the team projected its ARR would hit $100M in 2024—I estimate it’s already surpassed that figure. When they raised their $43M Series B last year, they stated an annual growth target of 80%.
In February, another acquisition took place. The publicly listed company Appier announced the acquisition of AdCreative.ai for $38.7 million. AdCreative is an AI-powered platform that generates advertising creatives—including banners, copy, images, and videos—helping brands quickly produce high-converting ads. Their website claims to serve over 3 million users.
2 AI-Gen Ad Startups hit 10M ARR
Meanwhile, just in the past few days, another two AI-Gen Ad startups have each claimed to hit nearly $10M in annual revenue in under two years. I’ve actually spoken with one of them before. Interestingly, the two startups have very similar domain names.
However, their approaches and growth paths are quite different. One generates AI videos by allowing users to choose different ad elements. It pivoted from a former AI image product that had millions of monthly active users but little monetization.