Duolingo: Making millions out of you | Sidebean

0:00This video was brought to you by Chad Mogul. Chad Mogul automatically generates all the SAS subscription analytics like MRR, ARR, Churn, and more. You need to run your business like a pro. Use Chad Mogul to measure, understand, and grow your recurring revenue. Go to Chad Mogul.com slash slightly into getting $50 a month discount for your first 12 months. Learning any language can be quite a challenge. It takes time, energy, and a lot of patience, plus it can be costly. One company wanted to change that by making language education free. And it's on its way to the top of the educational tech or tech segment. It earned fans and critics alike. Dualingo changed learning for millions of people. Or did it? Let's talk about dualingo in this episode of Company For Insects. Guadalman, Luis Juanan, and Swiss Severing Hacker come from vastly different countries, but language was vital for both. In Guatemala, English meant more job opportunities, but learning was expensive.

1:01Juanan wanted to pass the toll, which was unavailable in Guatemala, so he spent $1200 trailing to a Salvador only for the test. In the other hand, Hacker grew up surrounded by German, Italian, French, and English in his everyday life in Switzerland. Their passion for languages made them click when they met at Carnegie Mellon University. There, Juanan was a computer science professor and Hacker, a PhD student. Juanan was already famous for his ideas. First, he created the cap-chit test, those squiggly letters to certify that you're human. He did that, and then sold it to Google for millions. Now, Juanan wanted to solve another problem, teaching languages for free. Millions of people want to learn English, but can't afford it. Again, the challenge was clear, and the pair tried killing two birds with one stone. Juanan believed crowdsourcing could solve learning a new language. He would take users who wanted to learn a language and have them translate articles. With millions on board, Duelingah would translate articles in no time, but of course, not all users would translate articles. So first, they'd have to learn the basics. Then, as they advanced through the levels, they could translate longer sentences.

2:04Plus, they would do it all at no charge because their benefit is learning, but wait, isn't that free work? So why not turn it into a game? Duelingah then became a 100% free language learning site, and people learned by helping translate the web, having fun and earning points along the way. By October 2011, Duelingah had received $3 million in funding, and some of the names there were Tim Ferris, Ashton Kutcher, and Union Square Ventures. Then after heavy promotion, the company launched in 2012, offering four languages, French, English, Spanish, and German. By September 2012, the platform already had 250,000 users. 20% of those users came from Latin America and lower income countries. And with such a strong start, investors wanted in. By October, the company had landed $15 million in series B funding, and with this money, they released a Duelingah out for iOS in 2012 and Android in 2013. Now everybody learned a language on their phones. It's around that time one end looked for other sources of income, again, with crowdsourcing article translation.

3:04Only this time, he would charge for the service. The idea was controversial, but investors liked it, plus the app kept proving it's worth. By June 2013, it had four million users, and one more and later, a million more. Duelingah kept growing, but how do you make a profit out of those millions of users? Well, the founders thought of two ways to go about it. In 2013, the company launched its own incubator program for new languages. Volunteers could upload entire languages or individual classes. Also Duelingah offered translation services. For example, users were native in French, Spanish, and Portuguese translated articles from English as practice. Meanwhile, Duelingah charged outside consumers for these services. The idea was controversial, but both CNN and BuzzFeed used it. Duelingah's funding kept increasing as well, with $20 million in 2014, $45 million in 2015. Now, the company had a $470 million dollar valuations, and many questions around volunteer work. Few, if any companies reached this level, relying on volunteers. Duelingah had everything going for it.

4:06Millions loved the immersive game-like approach, but the leap from there to monetizing was still distant. In 2015, Duelingah changed its focus. The company tried to capitalize on the millions of users it had, and Vanana announced all their sources of revenue still centered around education. They were ambitious. Duelingah launched its version of the TOEFL certification program, the Duelingah English Test, or DET. For years, the TOEFL was vital for almost everybody who wants to study in the US. And now, an ATTECH starter wishes to compete for less. These tests have always been expensive. Duelingah got enough institutions to believe in the test. They could offer the DET for a mere $20. But money was still short. However, Duelingah's revenue went from $1 million in 2016 to $13 million in 2017. So the company took a significant risk that year. Ads would increase on the free app, so to avoid them, plus having offline access, all you had to do was get Duelingah Plus for $9.99 a month. But the monetization ideas didn't end there. Can you imagine breaking a 52-week Duelingah streak?

5:08Well, you no longer had to, instead, for $4.99 you could ask Duelingah to repair it and keep going. The strategies, though, not fan favorites, eventually paid off. By 2018, the DET, for example, had the approval of 180 institutions, including Yale and Colombia. And that same year, the company tripled 2017's income. In 2019, Duelingah had a $30 million fund around, which ballooned the valuation to $1.5 billion, making it one of the few ATTECH startups to reach unique current status. By March 2020, Duelingah had a million paying users, and by the end of the year, it was 1.6 million users, according to its S1 filing. But the story isn't perfect. Duelingah has had its share of criticism. Though Duelingah is massive, it still relies heavily on volunteers. In fact, many consider the volunteers' value to be greater than that of its paid employees. But the profit from paid subscriptions all goes to Duelingah. So why keep using them? Then there's the app itself. The Duelingah owl is excellent in reminding you practice every day. And for many, this is a good thing as it brings discipline, but the owl has gotten more

6:09intense. He even cries if you ignore him for too long. But jokes aside, this isn't the most significant criticism. Banana has said, Duelingah is a tool for people to get a job, even a high-paying job. He only promises users will get to advanced, beginner, and early intermediate levels. The press loves criticizing Duelingah with many articles claiming it just doesn't work. Language experts have also highlighted that it's too rigid and that has an impractical vocabulary. Diane Larsen Freeman is a linguist who specializes in second language acquisition, and she told Forbes that Duelingah's method is ineffective since there's no conversation with other humans. One Duelingah employee didn't understand a basic question in Spanish, or does a spinyone. You speak Spanish, after six months of using the app. And then Steve Saco, a language expert, took 300 hours of Duelingah's Swedish lessons, only to fail a college introductory Swedish exam. And for the DET, critics call it a rudimentary test of exercises unfit for college level English, let alone how English works in the real life. And this did not slow Duelingah down.

7:12When in June 2021, Duelingah filed its S1-Friended Adventure IPO. Fans and investors took notice. The S1-Frilings figures were impressive. By March 2021, the app had 40 million monthly users and 500 million downloads while being the highest grossing education app. Income had increased as 5% of users paid for the premium edition. During the controversial DET tests, which cost $49 by March 2021, have been a hit with users taking it 344,000 plus times. Revenue for 2020 double to 2019's figures reaching $161 million. Yet, Duelingah still hasn't turned a profit. Instead, losses increased from 19 to 2020. And therein lies the challenge. Duelingah started as free and to a degree, it still is free. That's the reason why millions use it every month. So the company must keep them entertained and make money. And now, they have to entertain investors as well. So in the future, the question is the same in every single language. How? Thanks a lot for watching this one guys. I actually met Luis on a TEDx conference I was invited to speak back way back in 2013.

8:18I found him to be a great guy with some really cool ideas. One of the ideas that really blew my mind back then was how he apologized to everyone for the time that he had made the world waste solving capture puzzles. And the evolution of capture was going to recapture where the puzzles stopped being just random letters to figure out you're not a robot, but other ways to realize you're not a robot that could also help in other ways. And that's what we have today with Google. If you look at the recapture models today, you're trying to solve little puzzles that are actually useful for something. Right now, they're used by Google's AI for self-driving cars. So if Luis ends up watching the video, I hope you take no offense. I'm a big fan of your company. Have you been thinking about learning Chinese, Spanish, or some other language? Take a pause on that and instead learn how to read data. As a startup entrepreneur, nothing is more important than understanding your business metrics as our friends from a turned mogul would say, we've been using turned mogul for over five years to track the performance of our SaaS business. And if you haven't already, I highly recommend you to watch the video that we produced in partnership with them a little bit ago. Customer churn, how to save your startup.

9:20This video dives into what churn is and why it can be deadly for a SaaS business. And we know all that too well. Thankfully, a tool that Churn mogul can save your business by providing you with incredibly valuable insights about customer churns so that you can quickly reduce it by addressing the root of the issue. Chart mogul is free for any company with under $10,000 in MRR. And if you have over $10,000 in MRR, you can get a $50 month credit for 12 months by going to churnmogul.com slash slight b. A big thanks to the team for sponsoring this video. Thanks all for watching everyone and we'll see you next week.