OSS Article 2 | Duolingo

Duolingo is now the biggest language

Author

Justin Abrams
June 25, 2024

Duolingo: The Gamified EdTech Giant

Duolingo is now the biggest language learning platform in the world. It is the only one among its publicly listed competitors that has reached profitability, and its gamification and tech-powered approach result in an outstanding product. Duolingo’s ability to sustain its remarkable growth will depend on its expansion among English learners, the rollout of product enhancements, and the expansion of current revenue streams.

Past: Evolution of Duolingo’s business model

Duolingo was founded in 2011 by Luis von Ahn and Severin Hacker with the mission of delivering a free high-quality platform for learning languages. Since its beginnings, Duolingo has been committed to ensuring users can access all its educational content for free. Such commitment led to several iterations of its business model:

  • Until 2013, Duolingo generated revenue by providing translation services to news companies like CNN or Buzzfeed, converting Duolingo’s users’ inputs into news translations.[1]

  • From 2013 to 2016, the company deferred its monetization efforts, sustained its operations with venture capital, and prioritized improving the product.  By 2016, Duolingo was spending about $42,000 per day on operating expenses, making the company consider making a monetization plan.[2]

  • In 2016, Duolingo started experimenting with ads and optional in-app purchases. The company also released the Duolingo English Test (DET) — an online English language proficiency test—.[3] 

  • By 2017, it launched its first paid subscription, enabling more personalized learning and no ads.

Present: Duolingo is currently the biggest language learning platform

Duolingo is currently the biggest language learning platform in the world, with more than 500 million registered learners.[4] The company has a promising operating and financial outlook:

Duolingo has over 100 million monthly active users,[5] and more than 6,6 million paid subscribers —a figure that grew a staggering 633% compared to the 900,000 subscribers in 2019—.[6] Consequently, the company’s revenue increased by 651% over the past five years , rising from $70M[7] in 2019 to $531M in 2023. Throughout the same period, the cost of revenue increased at a lower rate of 585%, turning from $20M to $389M, signaling a growing trend for gross profits.

The company has also recently implemented new features to its platform, expanding beyond language learning and incorporating Generative AI. In 2023, Duolingo announced the implementation of math and music courses within its platform.[8]

Furthermore, the company  is currently exploring pricing and releasing strategies for Duolingo Max —a new subscription tier that adds two AI-powered features: real-world conversations with AI-powered characters, and detailed explanations of answers.[9]  

Competitors Analysis

Duolingo stands out among its competitors, both in its financial metrics and market share:

Duolingo is currently the only language learning app listed in the US stock market. However, when compared to other listed companies within the EdTech sector, its financial and operating metrics depict a more sustainable and promising company:

On the other hand, Duolingo is the most popular language learning platform by far. While Duolingo had more than 16M downloads in January 2024, Lingokids —the second most downloaded language learning app— had 1.8M downloads. Similarly, other established language learning platforms like Busuu or Babbel had less than 1.9M downloads combined over the same period.[10]

Future: Sustaining Promising Growth

Ensuring that Duolingo maintains its dominance within the EdTech industry will be conditioned on several factors:

Capturing the Language Learning Market: English Learners

The language learning market could be as big as 2 billion people[11]. Although Duolingo is the largest language learning platform, its current 100 million monthly active users are just 5% of the total addressable market. Duolingo has an enormous opportunity to further expand its user base, especially among English learners:

The overwhelming majority of language learners are learning English[12]. However, less than 50% of Duolingo’s daily active users are learning this language.[13] The company already started to expand its English courses[14], but improving its value proposition and reach for English learners will be at the core of Duolingo’s future growth.

Expanding the Duolingo English Test

Duolingo’s CEO Luis von Ahn expected that the DET would account for 20% of the company’s revenue by 2021.[15] However, the test currently represents ~8% of Duolingo’s revenue.[16] The test is currently accepted by more than 5000 universities across the world,[17] signaling widespread adoption among educational institutions. Hence, efforts to expand DET should be centered around increasing the number of test-takers.

 

 Furthering Product Development: Gamification and AI

Technology, data, and gamification —making the learning experience feel like a game— have been at the core of Duolingo’s success. The ability to further enhance these elements will be instrumental to the company’s future:

A successful rollout of Duolingo Max and other AI-powered features would make Duolingo’s learning offering even stronger, and cater to an audience wanting the most premium experience. Currently, Duolingo Max costs twice as much as the standard subscription, is offered  in limited regions, and its features are only available in 2 language courses.[18] Ensuring the correct pricing and rollout strategy will be instrumental to the growth of Duolingo’s biggest source of revenue: paid subscriptions. Moreover, Duolingo now has the world’s largest collection of language-learning data. Turning its data into further product enhancements represents an enormous opportunity

Finally, the effectiveness of a language learning product depends on its ability to sustain the user’s motivation throughout time. Duolingo’s gamification approach has proven to be effective for reaching up to intermediate foreign language proficiency, as shown by research. Finding ways of expanding the product’s effectiveness beyond intermediate-level proficiency while maintaining Duolingo’s game-like style will be a challenge that the company will have to address.  


[1] 13:30 Tim Ferris

[7] All figures in United States Dollars

[16] Own calculations based on Duolingo’s info