How Does Duolingo Make Money?

by Chris Kolmar
Business Models, Study - 8 months ago

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First off, what is Duolingo?

Language learning platform Duolingo is the brainchild of CAPTCHA and reCAPTCHA creator Luis von Ahn, and co-founder Severin Hacker, who was von Ahn’s grad student at Carnegie Mellon University in Pittsburgh. Duolingo comes in the form of a smartphone app and is the world’s hottest language learning tool. It allows users to learn a new language while translating sentences and words into different languages to be used across the web,

So, how does Duolingo make money?

Duolingo Pricing
The short answer here is that they don’t. At least, not yet. The company isn’t profitable but was cash flow positive in 2019. Von Ahm is planning for an IPO by the year 2021.

That being said, the company does bring in money. It does this in a number of ways. From selling data (that the users provide) to premium subscriptions, to ad revenue from the free version of the app.

Duolingo’s Business Model: The Brilliance of Crowdsourcing

Other language learning tools, Rosetta Stone, for example, have historically been only available to those with the disposable income to fund their learning. One thing that von Ahn wanted in this product was that it be available to people of all socio-economic classes. And he did that by making it free.

The second part of the Duolingo business model is Crowdsourcing. Von Ahn’s former company, reCAPTCHA, was a trailblazing effort in the world of Crowdsourcing. The program would present users with two words, one that his algorithm was having trouble deciphering and one that was in place to verify that the user was a human. By typing the verification word correctly, reCAPTCHA then had confidence that the user typed the other word correctly, and thus, it had been discovered. Duolingo is doing something very similar.

Von Ahn’s goal with Duolingo, and his research, is to make the web accessible to people everywhere, no matter what language they speak, read or understand. He created Duolingo to crowdsource people from around the world to translate the web for him. And do it for free.

But it isn’t a one-way street. The users of Duolingo get something in return. They get to learn a new language. Science has proven that Duolingo’s teaching methods actually work. So not only does the web and von Ahn win, but the users become fluent in languages they want to learn.

How Is Duolingo Funded?

Venture Capital-Backed with a Plan for the Future

Because of his previous successes, von Ahn didn’t have a whole lot of trouble getting investors to jump on board the Duolingo train. Some of the main VCs that got on board with Duolingo were Ashton Kutcher, Tim Ferriss, Kleiner Perkins, CapitalG and Union Square Ventures.

Only about 2% of Duolingo’s active user base pays for the premium version of the app. The fee is $84 a year. But because their base is so huge, that is revenue upwards of $36 million. Von Ahm expects that that number will only grow as more users realize the value of the app and support it with premium subscriptions.

Why is Duolingo so successful? The Gamification of Learning

The same reason why Candy Crush and arcade-style video games are so successful. They are easy to start, offer a recess from daily boredom and are, frankly, fun to play.

Duolingo is a lot like those games in many ways. It has virtual prizes for getting things right and reaching milestones. It sends you notifications when you haven’t logged on in a while. And it progressively gets harder as you go.

So, where does the extra money come from?

Put simply, crowdsourcing mass translations.

One of the unique ways that Duoling has generated revenue is through the sale of user data to companies like Buzzfeed and CNN. But this isn’t data that was taken in secret from the users, it is data that the users are providing Duolingo.

The data is translated words.

They use sentences from sites across the web that they want to have translated, and have users translate the sentences for them. They are able to sell the translated articles to companies that want to broaden their audience and go global.

What languages does the App offer?

Duolingo offers 36 different languages. There are the most common language courses, such as Spanish, French, English, German, Italian, Portuguese. But Duolingo also offers a wide range of uncommon language courses. They can do this because of their crowdsourcing business model. Some of the languages they offer, that aren’t ones you might see in other services are:

  • Esperanto
  • Klingon
  • Navajo
  • Hungarian
  • Haitian Creole
  • Yiddish
  • Maori
  • Finnish

How does Duolingo Match Up Against the Competition?

Duolingo’s most notable competition is probably Rosetta Stone. But there are other companies that offer similar services for learning new languages. The Berlin-based company Babbel is also in the mobile linguistics business but differs from Duolingo in the fact that they charge users an $85-a-year subscription fee. Compare that to Rosetta Stone’s $120-a-year subscription, and that free version of Duolingo isn’t looking to bad. And that is exactly what language learners all over the world think.

Duolingo’s worldwide usership blows their competition out of the water. Rosetta Stone has roughly 500,000 active subscribers, while Babbel boasts around 1 million. Duolingo’s active usership is upwards of 38 million. While the disparity could be down to the fact that Duolingo is free where those others are not, there are a few other differentiating factors at play that could be deciding factors. For one, Duolingo offers more languages than its competitors. They offer 36 while Rosetta and Babbel offer 25 and 14, respectively. Another factor could be that Duolingo is just a bit easier.

Duolingo for the Greater Good

Duolingo’s mission is philanthropic and their approach is genius. They get to offer free access to language education, which is something that can change lives for the better. At the same time, they make the wonderful resource that is the internet more accessible to people that it, in the past, has not been accessible to.

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