Duolingo: Binge-Learning Your Next Language
By: Shankari Sivanathan & Anjana Somasundaram
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
An Empty Nest
Duolingo is a language-learning platform that offers courses in 40 languages, allowing users to practice speaking, listening, and writing through bite-sized lessons. The company’s mission is to democratize access to language education worldwide.
Since its launch in 2012, Duolingo has sustained an impressive revenue trajectory, with 2021 revenues totaling $250.8 million, a boost of 55 percent relative to the prior year. The company’s freemium pricing model has enabled it to achieve tremendous scale, with the app boasting over 500 million downloads worldwide and 41.7 million monthly active users (MAUs). The business consists of four revenue-generating segments: paid subscriptions, advertisements, fluency certification tests, and virtual goods. The vast majority of its revenues (72 percent) originate from its subscription service, Duolingo Plus.
However, the premium package offers very few add-on features aside from an ad-free environment and the ability to make unlimited mistakes. The minimal value differential between the two tiers provides little incentive for free users to purchase a premium subscription. This is evident in the composition of Duolingo’s user base: in 2021, paid users accounted for a mere 5.5 percent of MAUs, illustrating the immense potential for revenue growth through upselling. In the same year, the company’s net loss totaled $60.1 million, compared to $15.8 million in the previous year. To become profitable, Duolingo must grow its user base, improve subscriber conversion, and increase paid user retention.
User demotivation remains a key challenge when pursuing these three objectives of adding, engaging, and retaining users. The company notes that “staying motivated is the hardest part of learning something new,” which is why CEO Luis von Ahn hopes to build a future where people want to spend their time learning. Consequently, to one day turn a profit, Duolingo must increase perceived value in its premium services to convert free users to paid users, and ensure that paid users have the tenacity to keep learning.
Language Learning is a Hoot
Duolingo has embedded gamification into its platform because it recognizes the importance of encouraging consistent learning behaviours by tapping into the brain’s pleasure and reward center. Users who are not intrinsically motivated to learn the language will eventually quit. Conversely, those genuinely invested in the culture would pursue the learning journey with conviction.
From an educational standpoint, studies reveal that the use of entertainment is beneficial for language learning. Film and television shows serve as a rich source of visual cues, colloquial phrases, and sounds that aid in language acquisition. Listening to dialogue between characters, for example, is a highly impactful way for an individual to grasp the natural flow of a language. Regularly viewing this type of content over a period of time has proven to yield significant gains in vocabulary knowledge. A survey conducted by the education publisher Pearson English found that 58 percent of English learners use film and television shows as study aids to help them learn the language. Thus, using entertainment as a language acquisition tool would align with Duolingo’s commitment to providing learning experiences through robust pedagogy. “The Friends Effect” is the most notable example of media as a language-learning tool.
Case Study: The Friends’ Effect
The popular sitcom, Friends, paved the path towards helping individuals around the globe learn English through easy-to-comprehend catchphrases and real-life scenarios. A survey conducted by Kaplan International found that 82 percent of people believe that watching television programs helped them learn English, while 26 percent improved their understanding of the language from watching episodes of Friends.
Monkey See, Monkey Duo
Duolingo’s own usage statistics validate that entertainment is a significant source of motivation in the language learning process. In the company’s Annual Language Report, 70 percent of survey respondents stated that a TV show could motivate them to learn a language. Furthermore, following the premiere of the popular Netflix Original Squid Game, Duolingo reported a 40 percent growth in new Korean language learners on the platform.
Because of the powerful effects culture and entertainment have on learners’ intrinsic motivation, Duolingo should incorporate popular foreign TV series into their programs to incentivize free users to become paid users, and maintain paid users’ motivation to continue learning from premium content. To do this, Duolingo should partner with Netflix to create a Duolingo Netflix language learning hub.
Taking Flight on the Big Screen
As of 2022, Netflix is the most popular streaming service worldwide with 220 million subscribers. In 2021, Netflix made history, winning 44 Emmy Awards from its Netflix Originals. The buzz generated by its most popular series is immense: in the first 28 days of its release, Squid Game garnered over 1.65 billion viewership hours with more than 9 million mentions of the series on social media. Queen’s Gambit, another popular Netflix Original series, also demonstrated the powerful behavioural impacts of Netflix’s intellectual property (IP): 10 days following the release of the show, searches for “chess sets” on eBay increased by 273 percent. Through the magnitude of its IP’s impact on behaviour and culture, Netflix emerges as the clear winner for a partnership with Duolingo.
Moreover, the respective user bases of Netflix and Duolingo overlap in terms of demographics. Duolingo is immensely popular among college students and millennials, with approximately 46 percent of users being ages 26 to 45 years old. With 75 percent of 18 to 34-year-olds in the United States having a Netflix subscription, this overlap suggests that there would be tremendous interest in a product resulting from such a partnership.
Duolingo is Hoo(t) Netflix Needs
As the streaming wars intensify, Netflix needs to keep users engaged during idle periods when there is a lack of new content. As such, the company must explore interactive ways for fans to engage with its IP beyond re-watching the series and help them form an emotional attachment to its franchises. This would help the platform retain its subscribers during a period of rising subscription prices, when customer loyalty becomes ever more important.
Such a partnership would yield financial gains as well. As it becomes increasingly difficult to compete on content alone, Netflix must seek diversification in their revenue streams. Through monetizing its IP, in the form of a licensing fee paid by Duolingo, Netflix could explore a new revenue stream and set a precedent for IP monetization in future strategic ventures. The platform also recognizes the importance of revenue diversification: in response to popular demand for its IP, Netflix launched Netflix.shop in June 2021, an online store consisting of limited-edition apparel, lifestyle merchandise, and collectibles from its most popular series. Through the monetization of its IP, Netflix could use proceeds to fund its increasing investment in foreign originals to appeal to changing viewership preferences.
Binge-Watching to Binge-Learning
Following the licensing of Netflix’s IP, Duolingo should create a Netflix Hub within their platform, offering Duolingo-style language lessons based on popular Netflix content. On Duolingo’s platform, each show would have associated exercises consisting of multiple-choice, fill-in-the-bank, and auditory questions based on iconic dialogues. In order to harness Duolingo’s strengths in gamification, the interactive lessons would be taught by animated versions of key characters in the respective series. Such an approach would effectively capitalize on the learners’ emotional ties to the franchise to ensure that they remain motivated throughout the learning journey.
In accordance with Duolingo’s tiered pricing model, the initial set of introductory skills for each show would be offered to all users. However, users would be required to purchase Duolingo Plus to unlock more advanced course topics as time progresses. Given the significant cultural impacts of Netflix’s IP, free Duolingo users would be incentivized to convert to Duolingo Plus, while Plus users would receive more value for their subscription. By implementing the Netflix Hub, Duolingo could effectively increase its free-to-paid conversion rate and increase its paid user retention.
Know-it-Owl
The Hub would be housed on the Duolingo application for iOS and Android users. Software development efforts would be required from Duolingo’s in-house team, taking an approximate time frame of three months for its initial beta launch, based on a historical average time required to develop a course that is ready for beta testing. To support Duolingo’s goal of producing engaging social content, the company should design a targeted campaign for their social media platforms. Given Duolingo’s strong organic word-of-mouth channels and established presence on applications such as TikTok, Duolingo could curate viral content that should entice potential, former, and current users.
Course content would be designed by Duolingo’s in-house experts, who are trained in learning science and second language acquisition. Netflix would provide Duolingo with all video assets required for the development of the feature, alongside tentative release dates for upcoming foreign-language television shows that they anticipate would garner high viewership rates. Duolingo’s data-driven approach to education relies on analyzing activity data to improve language learning, and through this partnership, the platform could assess how learners are responding to the new feature by conducting A/B tests on a subset of users. The data collected from the partnership would allow Duolingo to continuously create a better learning experience.
Spreading Duo’s Wings
Although Duolingo has achieved tremendous scale since its inception, the company has a long runway for monetization. It should launch a Netflix Hub on its platform, enabling users to learn a language by engaging with their favorite television shows. This offering would serve to attract new users who are heavily invested in Netflix’s content and improve user retention, as entertainment is proven to motivate language learning. In turn, the streaming giant would be able to monetize its IP and bolster fan engagement. Ultimately, this initiative should allow Duolingo to grow its user base, convert a greater portion of users to first-time subscribers, and increase renewal rates.
