Meet Duolingo: The 8 Billion Dollar Edtech Company

Hey Everyone - Harry here 👋

Welcome to Issue #6 of Deep Dive with Inquisition. In this issue, we will cover the story of Duolingo, from its founding to the strategies it used to become the company it is today (an $8 billion+ valued company with over 500 million registered users).

Early Days of Duolingo:

Duolingo was founded in 2011 by computer scientist Luis von Ahn, known for creating reCAPTCHA and selling it to Google for between $10 million and $100 million, and Severin Hacker, a graduate student under Luis von Ahn. The two scientists firmly believed in the transformative power of free education and sought to provide accessible means to achieve it. The company began as a project sponsored by the McArthur Fellowship program and the National Science Foundation. However, Luis von Ahn deemed the original nonprofit education model unsustainable and pivoted towards a for-profit approach. This transition was supported by revenue streams such as the English Test Certification program, advertising, and subscriptions.

Overview of the Global Education Technology (Edtech) Industry:

1. The global Edtech market is projected to reach approximately $185.20 billion by 2024, with an expected annual growth rate (CAGR) of 8.56%.

2. The Online University Education market is anticipated to reach a volume of $120.70 billion by 2024.

3. The average revenue per user (ARPU) in the Online Education market is forecasted to be around $210 in 2024. 

4. Among the numerous language learning apps and platforms, Duolingo stands out as the leading global language learning app, boasting over 16.2 million downloads in January 2024.

Rise of Duolingo - How It First Started:

The rise of Duolingo is a fascinating story. Founded by two computer scientists, the initial content for Duolingo was developed using resources like "French for Dummies" and other language learning textbooks. Luis von Ahn and Severin Hacker grappled with decisions such as whether to teach plurals before adjectives or vice versa. Despite their non-linguistic backgrounds, the co-founders embarked on creating a language learning app driven by their vision to make language education accessible and user-friendly. Their goal was to eliminate financial barriers that hindered language learning for over 1.2 billion people globally, aspiring to enhance their career prospects. 

To sustain a platform that could accommodate a large user base (over 300,000 users even before its official launch), the team implemented a business model where users translated documents online in exchange for language learning. This strategy enabled Duolingo to offer free access worldwide while maintaining ongoing content development. The journey to accumulating over 300,000 users on the waitlist was kickstarted by Luis von Ahn's successful TED Talk in 2011, which drove significant traffic to Duolingo's landing page and prompted many sign-ups. Leveraging his prior entrepreneurial successes, von Ahn and Hacker secured $3.3 million in Series A funding in October before the app's official launch. Entrepreneurship, whether starting out or building upon past successes, poses significant challenges. Duolingo's ascent was fueled by its innovative approach as a language learning app that differed markedly from traditional Edtech models like Rosetta Stone. By incorporating gamification elements reminiscent of video games into structured lessons, Duolingo rapidly expanded from an initial 300,000 waitlisted users to one million total users within just six months of its launch.

How Duolingo Became One of the Biggest and Fastest-Growing Edtech Companies:

Duolingo took a different approach compared to its competitors such as Rosetta Stone. Remember: the company was a small two-person startup that simply focused on trying to improve the experience for learning languages and make it accessible. 

This begs the following questions:

1. How did Duolingo become a public company with a valuation of over $8 billion? 

2. How did they secure over 500 million users from around the world? 

3. How did they become the world’s most popular and used language learning app? 

The answer is simple – by creating a high-quality product that provides value and entertainment while continuously implementing the voices of its users. Duolingo is known for its strategic approach towards creating a high-quality product that is so addictive that it made learning languages fun and cool again.

Below are the strategies that Duolingo used to become one of the most successful Edtech companies:

1. High-Quality Content

   → High-quality content is the core reason why Duolingo was able to keep its users and further increase it. The content on Duolingo is simply amazing and it covers the basics for every language that it offers on the platform. There are many successful Duolingo stories where users of the app had a successful experience after using Duolingo. This proves a point that Duolingo does actually teach people to learn the specific desired language successfully.

2. Implementation of the Freemium Model:

   → Not limiting the access to content and creating a subscription for people who want to avoid ads was a smart move for Duolingo since the free version provided users with a taste of the app’s high-quality content therefore lowering the entry barrier.

3. Successful Implementation of Gamification

   → Duolingo added game mechanics to non-gaming environments such as streaks, leaderboards, points, achievements, etc. This was a successful implementation from Duolingo since it continuously made users sign back in and be active on the platform every single day in order to keep their streaks. Having users be active on the platform daily contributed to the app being able to keep their Daily Active Users (DAU) and Monthly Active Users (MAU) high. DAU and MAU are one of the most important metrics for a consumer-focused startup. Not only did Duolinggo implement gamification but it also was really creative in implementing personalization of the content learning on the app including personalized pop-ups. Unlike the traditional language learning approach (using textbooks), Duolingo was able to provide the personalization while leveraging gamification strategy to make its users motivated to continue learning.

4. User-Centric Design:

   → The Duolingo platform is easy to navigate and makes lessons engaging for its users, allowing users to be more focused on learning and using the application.

5. Increasing Credentials for Duolingo:

   → Duolingo was able to further spread its app and improve the credentials through their official English test known as the “Duolingo English Test.” Duolingo established over 100 universities in the United States. These B2B partnerships allowed the company to have more credibility with its certificates and the application itself.

6. Establishing Its Own Community:

   → Duolingo focused heavily on establishing its community since Day 1. The community building happened via various methods such as allowing people to flag/provide suggestions on the content provided via the app for improvement. Allowed native speakers to directly contribute to developing the content as a course contributor via Duolingo Incubator. (This program was stopped during 2021 because of the company deciding to develop its content internally.) Duolingo hosted in-person events for its users to meet with other like-minded users and learn the specific language. This was a huge success because it fostered in-person social connection and allowed people to not feel alone when learning something new. Duolingo focused heavily on building its fanbase from various social media platforms such as TikTok, X, and more using its fictional character “Duo” and making jokes related to learning languages. Community building is a must for any company inside almost every sector, stage, and region. It is not an exaggeration to say that Duolingo became the company it is right now because of its community since Day 1.

7. Continuous A/B Testing

   → Duolingo is known for listening to its users' feedback and suggestions. But how do you know which feedback or suggestion is the right one to listen to? Remember from Issue #5 where filtering feedback is one of the most crucial things to do and also a success factor for Stripe? Duolingo filtered and decided feedback and/or suggestion is good by continuously doing A/B tests in order to decide which feedback and suggestions should be implemented. Not only A/B testing but the company is also known for leveraging its user data to figure out which language to further expand its content, which parts to teach first, the features to keep and remove, etc. The lesson to be learned by Duolingo is to never be scared to take a risk, experiment, and make sure to collect data since you will be able to leverage the collected different types of data to truly understand your users.

Duolingo mastered and checked the boxes for the “musts” when it comes to starting and scaling a startup (e.g., providing high-quality content, user-centered design, and continuous validation of feedback and suggestions from its users through A/B testing). However, what allowed them to achieve scalability can be divided into two critical factors:

1. Making the app accessible for everyone no matter where they are in the world; aka the “Freemium” model. Remember, Duolingo didn’t introduce their premium (paid) plan known as “Duolingo Plus” until 6 years after its official launch. Also, the premium plan focused on removing ads and allowing users to not lose streaks (shoutout to its gamification); this demonstrates how focused the company was to provide high-quality content for free which allowed them to achieve continuous scalability.

2. Establishing a community from Day 1 can be understood as the next critical factor for Duolingo’s success towards scalability. Especially during the early days, the company focused on user volunteers for its course development to hosting in-person events to make people feel more “connected” with each other. In addition, the company used to have a forum feature where users can ask questions to other native users whenever they were stuck, etc which really allowed users to not feel alone and positively influenced users to continue to learn using Duolingo.

Duolingo had a lot of trials and errors, and was only able to become the company it is today due to these strategic trials and errors it went through. However, it is not an exception that any startup working on providing a solution for a problem, should ship their product or service with the best quality possible while focusing on building their own community from Day 1 in order to build the fanbase just like how other companies such as Atlassian and Stripe.

Challenges for Duolingo:

1. Continuously Improving the Content on Duolingo:

   → Content creation, improvement, and expanding the provided content is crucial for Duolingo because of the rapid increase in competition from its competitors (e.g., Busuu, Rosetta Stone, etc) and improving the “lack of in-depth content” needs to be solved by improving its provided content.

2. Monetization - Keep Earning Money:

   → Monetization, especially as a publicly traded company, is crucial. Duolingo needs to continue to find a way to increase its monetization without having any negative impacts/changes across its core model of the Freemium Model. This is definitely a challenge for Duolingo as it needs to continue to increase its user number and activity.

Future of Duolingo:

1. Expansion: 

   → As e-learning becomes more normalized across the globe, Duolingo should further expand to other areas under the big scope of education - which is something the company is already doing. Duolingo launched courses on Math and Music back in October 2023 for iOS users and further expanding.

2. User Retention and Growth:

   → It will be crucial for Duolingo to further expand its user base while maintaining retention in order to keep and further increase its valuation while distancing the traction from its rising competitors.

Key Takeaways from the Story of Duolingo:

There isn’t any doubt when it comes to Duolingo’s impact on the global education industry, specifically the language learning industry. The mission of making language learning accessible for everyone from anywhere is being achieved through a high-quality product that leverages various strategies that were consistently tested and validated. Below are the strategies that Duolingo used to rise and scale:

1. Have a Big Strong Clear Mission:

   → Duolingo had a crystal-clear vision from Day 1: to make language learning accessible for everyone. The company identified and had a clear mission, which allowed the two co-founders to have clear objectives from Day 1 to focus on.

2. Build a High-Quality Product with Value towards Your Targeted Users.

   → Quality matters a lot, especially during 2024, since there are so many tools to create a personalized platform just by using no-code tools.

3. Be Smart with Your Business Model - Whether it is Paid Only or Freemium, it is Crucial to Choose the Right Business Model for the Targeted Users.

   → The freemium model doesn’t always work just like other business models. What is wise is to actually understand your targeted users and implement a business model based on this.

4. Leverage Gamification to Make People Become Addicted.

   → Gamification can be powerful if used properly, however at the same time, it also can be annoying for the users. Be smart when using it. Duolingo aced leveraging gamification for its product - making people from around the world in various ages become addicted to Duolingo.

5. Never be Scared to Experiment:

   → Duolingo was able to successfully implement the needs and wants of its users through continuous series of A/B testing from the feedback/suggestions while leveraging data. One of the only possible methods for founders to further scale is to listen, test, and implement the one that works the best while fulfilling the needs and wants of the users.

6. Establish Your Own Community.

   → Duolingo has had a strong influence from its community members since Day 1 through having volunteers from the community to create language learning content to forums where native speaker users can answer questions from non-native speakers.

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Thank you so much for reading!

-Harry