How did Duolingo turn a free language learning app into a $20 billion business?
The language learning app '
How Duolingo Turned a Free Language App Into a $7.7B Business | WSJ The Economics Of - YouTube
Duolingo is a popular language learning app used by over 30 million people every day, some of whom have been using it for over 10 years.
Duolingo's annual revenue exceeds $500 million, and
Despite being such a successful business, all lessons available on Duolingo are free to take, and only 8.6% of users are paid members. In other words, most users use Duolingo for free.
Additionally, advertising revenue, a common source of revenue for apps, accounts for less than 8% of the total, and the app does not display a large number of ads.
One of the reasons for Duolingo's success is its 'high game-like quality.' When you hear about language learning, you might imagine monotonous repetition like studying at school, but when you actually use Duolingo, you'll realize that it's more like a game than studying.
Free users are given 'HP' each day, and if they get a question wrong five times in a day, their HP will drop to zero and they will no longer be able to challenge the next question.
There is also a progress bar for each lesson, so you can keep track of your learning progress like you are progressing in a game.
In addition, Duolingo encourages users to continue using the app by allowing them to earn experience points by solving problems and by tracking the number of consecutive days they play.
These efforts helped Duolingo gain 3 million users in its first few years.
According to Duolingo founder and CEO
However, the board of directors that had invested in Duolingo eventually ordered the company to 'make a profit,' and efforts to monetize the company began in earnest. However, Ang said, 'We wanted Duolingo to be a way to learn languages for free, so we were a little troubled.'
So Duolingo began implementing advertising in 2017, but it still doesn't make up a large portion of its revenue stream.
The main source of revenue is the paid plan, which costs $10 (about 1,600 yen) per month and offers perks such as 'removing ads' and 'gaining unlimited homepages.'
Duolingo has grown significantly during the COVID-19 pandemic, as people who can't travel and want to learn a language instead have become more popular. Analysts say Duolingo has more than 10 times the downloads of its main rival and has 8 million paid subscribers.
'As you know, the majority of our revenue comes from less than 10% of our active users. They account for about 80% of our revenue,' Ahn said.
'Gamifying language learning' may sound simple, but a lot of experimentation goes into making it into a fun app that's constantly being improved.
'Every time a user uses the app, we measure how long they use it and whether they come back the next day,' An said. 'Then we try different things: when to send notifications, what to write in the notifications, whether to make the lessons a little harder or easier, longer or shorter.'
Duolingo has a variety of push notifications to alert you when your streak is about to end.
At first, Duolingo's message was simple, but it evolved into something unique by incorporating memes and appealing to users' emotions.
Some of the messages even make users feel guilty, like 'It looks like these notifidations aren't working. We're going to stop sending them for now.' These messages made users feel guilty and more likely to open the app again. Duolingo says that these messages increased user retention by 3%.
More importantly, Duolingo sends different messages to each user, and it uses AI to study the effectiveness of different times and message content for sending notifications to specific users.
Duolingo uses a machine learning technique called the '
Once they have identified the play that produced the jackpot, they will then investigate whether that play was actually effective or just down to luck, and look for a method that is truly effective.
Duolingo does the same thing by sending different notifications to a large number of users, and they've found that optimizing notification times works better for Chinese learners than for English learners, for example.
Duolingo users complete 13 billion lessons every week, and Duolingo can use all that data to improve its AI, which will personalize the learning experience and keep users learning.
In most A/B tests, about 5% of users are unwittingly selected as test subjects.
Although An doesn't know the exact number, he believes Duolingo has conducted more than 10,000 tests. 'We've been doing A/B testing to get more people to pay, to get more people to use it, and to get people to recommend it to their friends. Without this, we wouldn't have been successful,' An said.
Despite being the most successful language learning app in the world, Duolingo faces challenges: for example, it has a small number of paying users, so its revenue is not that far behind Babbel, which dominates in downloads.
Ahn asserts that Duolingo could quickly increase its paid membership numbers by implementing changes such as increasing the number of ads shown at the end of lessons, but points out that such measures would also hinder its growth.
So Duolingo is looking for new ways to get users to pay, including a new paid plan called
Duolingo Max costs about $30 per month and allows users to role-play conversations with AI-powered bots. Duolingo was previously considering a feature that would allow human users to talk to each other, but advances in AI technology have made it possible for humans and AI bots to converse naturally. This is a lower hurdle than actually talking to a human, and has been well-received as an easy-to-use feature for users.
Although Duolingo has launched a new paid plan, the company says it will continue to offer all lessons for free.
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