DUOL
Duolingo Inc
How Do They Make Money?
How Do They Make Money?Duolingo's mission is to develop the best education in the world and make it universally available.
What makes me most excited about that it is not constrained solely to language. In the age of AI, I believe no company is better positioned to expand their offerings outside of language. But I also like that Duo is staying locked into what made them great: language.
They are a founder-led company. In their annual report they call out their origin story:
Duo also calls out the Learning experience the aim to create. Namely that it's fun, effective, and free to access.
The next learning experiences they are going after are Math and Music. I could really see these being great. As a 33 year old former engineer, I'm not too interested in their Math offering, but I am quite interested in bite-sized music lessons
How they make money is through their solutions, which they define here:
Their Other Initiatives is interesting here. They are trying to break into schools, both at the early stage (Duo ABC, and Duo for schools)
Straight from the Annual report, they tell us exactly what their business model is:
"How We Generate Revenue
We use a freemium business model that relies on a premium subscription offering, advertising, and in-app-purchases (IAPs) to produce revenue. We believe the following key attributes of our freemium subscription business model are core to our success.
Large Market: There is an enormous pool of potential language learners globally that HolonIQ estimates at approximately 2 billion people.
Free Users: Since none of our learning content is behind a paywall, anyone can download the Duolingo App, use it for as long as they like, and complete any of our courses free of charge. This has allowed us to scale to more than 100 million MAUs for the three months ended December 31, 2024. These millions of learners provide two benefits to our business model: ◦
They become advocates for Duolingo and provide word-of-mouth publicity for our product, which enables our growth and has allowed us to make very selective and efficient marketing investments.
Our users complete over one billion exercises every day, generating large amounts of data that powers our high-volume A/B testing and novel AI techniques. We use this data and the insights that come from it to continually improve both engagement and efficacy.
Paid Subscriber Conversion: As learners tend to use our product for months or even years before they decide to subscribe, we enjoy economic benefits from users well into their tenure on the platform. As of December 31, 2024, subscribers made up 8.8% of our average MAUs over the last twelve months as compared to 8.3% of our average MAUs during the year ended December 31, 2023.
Subscription
Our subscription offerings as of the date of this filing are called Super Duolingo and Duolingo Max. Super Duolingo offers learners additional features to enhance their learning experience. Duolingo Max gives learners access to the existing features of Super Duolingo in addition to incremental features and exercises powered by generative AI technology.
Other Revenue
For users who are unable or unwilling to pay a subscription fee, we provide free access to our product and generate advertising revenue from the sale of display and video advertising delivered through advertising impressions. We generally enter into arrangements with the major programmatic advertising networks to monetize our advertising inventory. Our advertising revenue is primarily a function of the number of our free users, lessons completed by our free users, and our ability to provide innovative advertising placements that are relevant to our users and enhance returns for our advertising partners.
We also offer in-app purchases, which consist of learners purchasing one-time benefits within the app, such as “Streak Freezes” and “Timer Boosts.”
In addition to monetizing the Duolingo App, we generate revenue from the Duolingo English Test by charging test takers a one-time fee. University program acceptance is a driver of Duolingo English Test revenue. As of December 31, 2024, over 5,600 education programs around the world accept the Duolingo English Test results as proof of English proficiency for international student admissions, with over 4,700 of those being higher education programs. These include 24 of the top 25 undergraduate programs in the U.S. ranked by international enrollment, as well as top schools such as Yale, Stanford, MIT, Duke and Columbia."
It's wild that advertisements only make up 7.3% of their revenue. This makes sense when you use the App, the majority of ads are trying to get you to convert to subscription.
Their operating metrics are growing like wildfire. MAU's went from 88.4M to 116.7M from 2023-2024. Subscription bookings grew from $495M to $730M over the same period.
Overall they've created a really unique platform that it growing really well. The question I need to answer is: can this growth continue? What is the limit?