Language learning app Duolingo is the essence of a beloved brand. Users have created memes galore about Duo, its green owl mascot, who passive-aggressively (and sometimes just plain aggressively) messages them when they’re running out of time to complete their daily lessons. They’ve made Duolingo fanart and even gotten Duo tattoos. Characters use the app in SNL skits and the Barbie movie. Most recently, Duo appeared at the Super Bowl in an, um, cheeky ad reminding learners to study.
And the company’s growth reflects its cultural presence. In 11 years, it’s gone from a startup to the world’s most popular language learning app, according to the company. In 2021, it went public. It now employs more than 700 people in more than 30 countries. Between Q3 of 2022 and Q3 of 2023, it grew its daily users by 63% YoY, to 24.2 million; and its paid subscribers by 60% YoY, to 5.8 million; and its revenue by 43% YoY, to $137.6 million.
But it wasn’t always obvious that Duolingo had a strong business model. Many of the choices it made seemed, at first, counterintuitive: It didn’t spend much on marketing and it let people use the entirety of its product for free. Matt Skaruppa, who became the company’s CFO in 2020, had to sell investors on what Duolingo was all about before it could go public. He spoke with CFO Brew about how a focus on a great product—and a bit of sass—set the company up for success.
The freemium model: Duolingo operates on a freemium model: Users can join for free and then opt to upgrade to a paid version of the app that has no ads and allows them to progress more quickly. But the free version of the app is unusually robust. “Even to this day, you can use all of Duolingo, you can go through all the courses, without ever paying a subscription,” Skaruppa said.
That generous policy has made the app popular with people of all income levels—it’s even used by some refugees to learn the languages of countries they’ve fled to—but it also means the company needs to pay close attention to growing its user base and converting users to paid subscribers. Less than 10% of users, Skaruppa said, choose to subscribe.
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Devotion to testing: Duolingo’s been able to increase its user numbers, Skaruppa said, by offering a great product. The company invests heavily in R&D to make its app more fun, compelling, and useful. About a third of that spend is devoted to growing the user base, another third to monetization, and the final third to improving the app, Skaruppa said.
One of Duolingo’s operating principles is “test everything,” he said. “We don’t take the view that we know what the users are going to want ahead of time. We have hypotheses and then we run A/B tests.” The tests can be run on something as simple as the text on the subscribe button (the team found the language “Subscribe for $0.00” was more effective than “Subscribe for free”) or as major as the pathways people use to navigate the app.
The “flywheel effect”: The research has paid off, Skaruppa said, in the form of an app that users find fun, compelling, and useful. Its language lessons are gamified and feature a colorful cast of animated characters who pose questions and give users feedback. People “love our product. It’s engaging. It’s super fun. And so they tell their friends and family about it,” Skaruppa said.
This, in turn, creates what he calls a “flywheel effect.” The positive word of mouth “spurs more user growth, which then spurs more subscriber growth,” he said. Duolingo invests the proceeds from subscriptions into research and development to make the app more appealing. “It’s got a really great virtuous cycle,” he said.
As a result, Duolingo doesn’t have to do as much in the way of traditional marketing. It spends less on marketing now than it did when it first went public, Skaruppa said. Besides word of mouth, it builds its brand through “social-first media,” he said, interacting with users in snarky ways and cultivating a slightly subversive image.
“That’s helped us enter the zeitgeist,” Skaruppa said. “I never thought I’d describe it this way, but we have an unhinged green owl that rules social media.”
Temperamental avians aside, Skaruppa is proud of what Duolingo has accomplished. “A great user flywheel enables a quite frankly phenomenal business model,” he said. “And that’s why the chair of our audit committee tells me I’m the luckiest CFO in technology.”