Business
December 9, 2022 - 2 min

Duolingo's growth crisis

Duolingo has gone for growth rather than profitability, and it has worked, but now it needs to look for the latter.

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Would you like to learn French while playing, or perhaps Valyrian, the language of Game of Thrones?

That is why Duolingo was born, the app developed by Luis Von Ahn, the scientist from Guatemala who invented Captcha, together with a university colleague. The app has so far had 600 million downloads and has 15 million active users per day, but 10 years after its founding, it needs to figure out how to be profitable.

What is the main attraction of Duolingo? That its interface is fun and approaches learning as a game. Y is used by a wide range of users, from Americans to learn the basics of the language of the country they are traveling to, to Syrian refugees in Stockholm to learn Swedish. After the Russian invasion of Ukraine, the number of people in Europe interested in learning Ukrainian on Duolingo to help refugees from the war multiplied. Half of its users are located outside the U.S.

At the core of Duolingo is a massive machine-learning system that compiles and analyzes data from nearly a billion daily user interactions, refining and customizing courses. The company went public in 2021, and by the end of November had half a thousand employees and a market capitalization of US$2.7 billion.

Duolingo has bet on growth rather than profitability, and it has worked. It dominates the language app category, with two-thirds of downloads and usage, according to Sensor Tower. Most users occupy the free, ad-supported version of the app.

A small percentage opt for the plus versionThe U.S. subscription costs US$12.99 per month.

The philosophy behind Duolingo is to develop the best education in the world and make it universally accessible. This year it launched two apps, Duolingo ABC, to teach reading, and Duoling Math, to teach basic mathematical operations.. Under this philosophy, the idea is to bet on volume, so that the small percentage of users who opt for the plus version, if it is maintained, will be increasingly significant. In principle, it seems to have worked: paid subscribers tripled since the beginning of the pandemic, totaling 3.7 million users. It is estimated that the company's revenues could exceed US$365 million this year.. The company has other revenue-generating mechanisms, such as intra-app sales and English tests. Will it be enough to reach profitability? It is too early to say, but for many analysts the company still has a lot of potential.

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