Like its meanders The road to monetization will demonstrate that Duolingo is not mission driven, he is mission obsessed.
Co-founders Luis von Ahn and Severin Hacker never wanted to charge consumers for access to Duolingo content, a goal permeated throughout the company’s culture. For years, working at Duolingo required being comfortable joining a Pittsburgh company that was in no rush to make money. The startup, filled with education enthusiasts and mission-oriented employees, has grown into “a very college-level pizza vibe,” described Gina Gotthilf, former vice president of marketing at Duolingo. Everyone was against making money and having a structure – some employees even threatened to quit if Duolingo charged users a dime.
“One thing that recruited me was this brilliance that we can kill two birds with one stone,” she said, referring to Duolingo’s original translation service business model we talked about in Part One. of this EC-1. “It was obviously related to Luis’s thought and reCAPTCHA and it was magical and brilliant.”
Free may not have paid the bills, but he has had one great advantage: growth. By 2017, Duolingo would boast of having 200 million users, which was double von Ahn’s goal when he first pitched to audiences on the TechCrunch Disrupt scene.
Duolingo launched by saying it would never do any ads, subscriptions or in-app purchases – approaches that now all exist on the platform. Today, Duolingo has a simple freemium business model that is remarkably unconventional. It has a free version with all of its learning content and charges a subscription of $ 6.99 per month for paid features like unlimited cores, no ads, and progress tracking. It is also developing a number of other sources of income, such as language proficiency tests.
As we will explore, Duolingo’s journey from anti-business rebel to conventional consumer subscription is complex, full of twists and turns. While Duolingo never wanted to look like other electronics tech companies, as we saw with their product strategy in Part 2, it turns out that evolving from the vibe of college pizza meant she would have to take a page from her peers.
Business only speaks one language: money
“They had users and in Silicon Valley there was this idea that if you have users you can turn anything into money,” said Bing Gordon, Kleiner partner Perkins Caufield & Byers (KPCB) who led Duolingo’s $ 20 million Series C in 2014..
“It wasn’t very controversial at the time, at least with investors,” said von Ahn. “It became controversial for us once we raised a ton of money, and we still weren’t making more money.”
While the company’s investors were relatively forgiving in the early years, patience began to run out. In June 2015, Duolingo raised a $ 45 million Series D round led by Laela Sturdy of Google Capital (later renamed CapitalG), valuing the company at $ 470 million. She invested due to Duolingo’s growth and engagement numbers, but confronted von Ahn with direct advice.
“She said to me, ‘Look, it worked for you to keep getting bigger and bigger checks from venture capital,” said von Ahn. “‘But this is the last time it works for you… if you try to scam people you can’t tell someone bigger than us [at Google]Duolingo’s valuation wouldn’t just be on the line the next time he does a fundraiser on Sand Hill Road – his very survival would be too.
Looking back, Sturdy said she always “felt confident they would find a revenue model” because of Duolingo’s passionate and organic users.
When a startup chooses to raise venture capital, it embarks on a strongly prescribed path. Suddenly, success isn’t simply defined as balancing cash flow with a long-term sustainable business. There must be some sort of exit, and a big one on top of that. While Duolingo has used risk as a lifeline to fund product development, risk has also come under pressure to grow into a billion-dollar or more business. And that meant generating income, not just growing engagement.
Von Ahn says his conversation with Sturdy is what really changed his mindset about money. After the Google check hit Duolingo’s bank account, he and Hacker began to think about ways to make Duolingo a financial and educational success.
Dr Ahn or: How I learned to stop worrying and love the income
“It was clear Luis didn’t have a commercial instinct, he had cultural instincts and a deep interest in learning,” Gordon said. “[When we invested] Duolingo predicted he was on the verge of revenue growth, and it turned out he was not on the verge of revenue growth. “
What Gordon is referring to was a litany of monetization attempts in Duolingo’s past. Translation, which helped von Ahn’s previous two startups, did not work when applied to language learning services, and the company only got two clients before terminating the service. Business partnerships, such as a relationship with Uber to certify and train drivers in Brazil to speak English, have not caught fire.