In categories ranging from retail to music to dating, consumers are increasingly gravitating to mobile, app-based experiences. Historically, education has lagged behind other industries in the shift from offline to online. However, the COVID-19 pandemic sparked a radical change in online learning, and its effects are likely to be enduring.
Consumers turning to online learning will prefer the convenience and control that mobile apps provide and expect highly engaging experiences. As subscriptions increase in popularity across categories, consumers will also gravitate towards subscription models in online learning.
According to HolonIQ, total consumer spending on both online and offline language learning represented $61 billion in 2019 and will grow to $115 billion in 2025, implying a CAGR of 11% over this period.
Online language learning is the fastest-growing market segment, projected to grow from $12 billion in 2019 to $47 billion in 2025, representing a CAGR of approximately 26% over this period, and to comprise 41% of total consumer spending on language learning in 2025.
Duolingo understood these emerging trends back in 2009. With over 500 million downloads, Duolingo has organically become the world’s most popular way to learn languages and the top-grossing app in the Education category.
As of 2021, Duolingo offers courses in over 40 languages to approximately 42 million monthly active users. To put Duolingo’s scale in context, there are more people in the United States learning languages on Duolingo than there are foreign language learners in all United States high schools combined, and more people are learning specific languages on Duolingo, like Irish and Hawaiian, than there are native speakers of those languages worldwide.
So, as strategy enthusiasts, we decided to evaluate the strategy and business model of Duolingo. We will also learn how Duolingo works and makes money.
What is Duolingo? How does Duolingo work?
Duolingo is a technology company founded by two engineers, Luis von Ahn and Severin Hacker, in 2009. Luis and Severin met at Carnegie Mellon University, where Luis was a computer science professor and Severin was his Ph.D. student. Luis and Severin bonded over the dream of building an intelligent learning system informed by massive amounts of user engagement data that could deliver superior learning outcomes.
Duolingo works on building the most sophisticated education platform in the world by using modern technology and a mission-driven approach. Duolingo works on sophisticated data analytics and artificial intelligence, making it easier for learners to stay motivated, master new material, and achieve their learning goals.
Duolingo started with a focus on teaching languages because of the profound impact learning a new language can have on people’s lives. Duolingo is a learning product built for the mobile generation: bite-sized, on-demand, and fun.
Duolingo has built gamification features to motivate learners, and it runs thousands of A/B tests, using the data generated by users to optimize each feature for maximum engagement.
According to Duolingo’s study, learners who complete five “Units” of Duolingo learn as much as students taking four university semesters of language education—and they do so in half the time.
Designed by language experts, Duolingo courses are comprised of Skills, each of which is divided into five Levels, each comprising a series of Lessons. Each Lesson consists of short, bite-sized exercises that help learners practice reading, writing, speaking, and listening skills.
Courses are supplemented by additional in-app learning features such as Stories and Audio Lessons, which provide further reading and listening comprehension practice. Duolingo’s gamification features, including XP, Streaks, Crowns, Gems, Leaderboards, and Hearts, provide learners with an engaging and fun learning experience and keep them motivated to continue learning.
Duolingo works on a freemium business model, allowing users to access its content free and charging a subscription for additional features, enabling significant user scale. Duolingo’s growth is driven by two mutually reinforcing flywheels: the learning flywheel and the investment flywheel.
- Learning flywheel: The greater the scale of the learner base, the more it can use insights to improve engagement and efficacy. With more engagement & effectiveness, the more learners speak about Duolingo, increasing the learner base.
- Investment flywheel: More leaners allow Duolingo to focus its capital investments on product innovation and data analytics instead of brand or performance marketing. As more learners use Duolingo and are converted into paid subscribers, the more Duolingo invests in creating an engaging and practical learning experience. Thus increasing the popularity and scale of Duolingo.
How does Duolingo make money? What is the business model of Duolingo?
Low friction: Duolingo has made the learning journey easy by making it intuitive.
Motivating game mechanics: Staying motivated is the hardest part of learning something new. Duolingo has built features to encourage learners to come back to Duolingo every day and to spend more time learning.
Engaging storytelling: Duolingo focuses obsessively on design to maximize learners’ delight, from the precise shape and color of each button to the mood of the celebratory animations that congratulate learners upon finishing each Lesson. Duolingo’s owl mascot, Duo, has become a famous brand icon and a marketing asset for the company.
Application of data analytics and artificial intelligence to optimize learning: Duolingo uses data from exercises to train sophisticated machine learning algorithms to improve learning efficacy. One example is Duolingo’s personalization algorithm, called BirdBrain, which predicts the probability that a given learner will get an exercise right or wrong, providing exercises of the appropriate difficulty. This personalization increases learner motivation and improves learning outcomes.
Measurable learning outcomes. This adds to a learning experience that helps learners achieve their goals. In 2020, Duolingo conducted a formal study to evaluate Duolingo’s effectiveness versus traditional university language courses. Duolingo found that the Duolingo learners earned proficiency scores comparable to those of the US university students in about half the time.
The Duolingo Language Learning App: The Duolingo language learning app is Duolingo’s flagship product which is accessible for free. As of December 2021, it offers courses in over 40 languages to approximately 42 million monthly active users.
Duolingo Plus: While all course content on Duolingo can be accessed for free, Duolingo Plus offers learners additional features to enhance their learning experience. To more than 2.5 million paying subscribers of Duolingo Plus (as of 2021), Duoling offers features like no ads, personalized practice lessons, the option to skip levels, etc.
Duolingo English Test: AI-Driven Language Assessment: Launched in 2016, the Duolingo English Test is an online, on-demand, high-stakes English proficiency assessment. The test is “computer adaptive,” meaning it gets more challenging or accessible depending on the test taker’s performance and can be completed in less than an hour. As of December 2021, it generally costs $49 per test.
Duolingo For Schools: Duolingo for Schools is a free, web-based tool that aims to make it easier for teachers to use the Duolingo platform in a structured learning environment, like a classroom. With Duolingo for Schools, teachers can create a dashboard for a class, assign specific Duolingo content to students and track students’ progress through the content.
Duolingo ABC: Introduced in 2020, Duolingo ABC is a free app that teaches children ages three to six early literacy skills. Developed by learning experts, the app includes over 300 fun, bite-sized lessons that guide children on a step-by-step path to reading.
Marketing strategy of Duolingo
Duolingo’s learner community has grown organically for almost a decade through word-of-mouth virality. In recent years, Duolingo has invested in marketing to supplement its organic business model & marketing strategy. Vital elements of Duolingo’s sales and marketing strategy include
- Brand campaigns: Brand marketing increases awareness of Duolingo through online and offline campaigns that drive press, social sharing, and more word-of-mouth virality. The strategy enables Duolingo to drive long-term growth by attracting new learners and keeping existing learners engaged.
- Owned media marketing: Duolingo’s owned media marketing engages its learner community, creating millions of brand advocates who drive word-of-mouth virality by sharing their love of Duolingo within their networks. Duolingo sends its learners personalized emails and pushes notifications that provide progress reports, lesson reminders, and sometimes a simple message of positivity to encourage them to remain engaged.
- Paid acquisition: Duolingo complements and accelerates its organic user acquisition with strategic and targeted paid marketing spending. Duolingo’s paid acquisition strategy targets high-quality user segments more likely to subscribe and invest in new markets to kickstart its organic growth.
How does Duolingo make money: revenue model
Duolingo made $250 Million in 2021, a 55% increase from 2020. Duolingo is free to use. Duolingo makes money by leveraging its freemium business model that relies on a premium subscription offering, advertising, and in-app purchases (IAPs) to produce revenue.
Subscription: Duolingo’s subscription offering is called Duolingo Plus. It offers learners features such as an ad-free experience and additional learning and gamification features that enhance their learning experience. As of 2021, approximately 6% of monthly active users were paid subscribers of Duolingo Plus. Premium subscriptions contributed 72% to the revenue generated by Duolingo in 2021.
Advertising and Other Revenue: For users who are unable or unwilling to pay a subscription fee, Duolingo provides free access to its product and generate advertising revenue from the sale of display and video advertising delivered through advertising impressions. Advertising & others contributed 18% to the revenue generated by Duolingo in 2021.
The money Duolingo makes from advertising is primarily a function of the number of free users, hours of engagement of free users, and Duolingo’s ability to provide innovative advertising placements relevant to users and enhance returns for its advertising partners.
In-app purchases: In-app purchases consist of learners purchasing one-time benefits within the app, such as “streak freezes” and “timer boosts.” In addition to monetizing the Duolingo language learning app, Duolingo makes money from the Duolingo English Test by charging test takers a one-time fee that generally costs $49.
The success of Duolingo’s freemium business model depends on the following key attributes:
- Large Market: There is an enormous pool of potential language learners globally that HolonIQ estimates at approximately 2 billion people.
- Free Users: The strategy of providing free access to its content has allowed Duolingo to scale to 42 million MAUs who offer two benefits to Duolingo’s business model:
- They become advocates for Duolingo and provide word-of-mouth publicity, which allowed Duolingo to make very selective and efficient marketing investments.
- Duolingo’s users complete over 500 million exercises daily, continually generating large amounts of data to improve engagement and efficacy.
- Paid Subscriber Conversion: As learners tend to use Duolingo for months or even years before they decide to subscribe, Duolingo enjoys economic benefits from attracting new users well into their tenure on the platform.