“We believe true equality is when spending more can’t buy you a better education.” – Duolingo founders

The Duolingo founders identified a way to go after an even bigger market than Rosetta Stone’s. They wanted to tap into the hundreds of millions of people who wanted to learn a new language but couldn’t afford to shell out a ton of money for expensive software.

There are two main things that helped Duolingo grow a huge, successful company while sticking close to their original vision: they went after a big market, and they meticulously experimented and used their data to inform all of their decisions.

The need to monetize prompted Duolingo to double down on their business translation services, and to further engage users to generate these translations.

Duolingo founders Luis von Ahn and Severin Hacker saw how limiting it was. They were both born outside of the United States and knew there was a huge pool of people around the world who were very motivated to learn English, but couldn’t afford the available programs.

The size of the market was key to laying the foundation for Duolingo’s success. Duolingo was able to use the scale of their target market to beta test their idea and figure out early on what resonated with users.

von Ahn realized the potential market for translated web content when he saw that his family and friends who couldn’t read English didn’t have access to the same internet content as English speakers.

Duolingo’s early monetization plan was to charge businesses for the content that users translated as a byproduct of studying a language.

“learn a new language while translating the web”

Before they launched their beta, Duolingo had raised $3.3 million in a Series A led by Union Square Ventures and Ashton Kutcher, the celebrity-turned-tech-investor. According to USV’s investment announcement, Duolingo’s pitch to investors was less about creating a free education tool and more about building a sustainable way to generate human translations of the web on a large scale.

Google translate will give you some sense of what is on a page but humans can still do a much better job.

Their solution is to make translation the byproduct of something many humans around the globe are already doing: learning a new language.

the TED talk allowed von Ahn to reach a huge early audience with relevant, and not overtly sales-y ideas that primed them to love the Duolingo product. The talk was viewed by over 1 million people, and von Ahn attributes getting over 300,000 users to sign up for Duolingo’s private beta later that year as a result of his TED talk.

Of the 100,000 people who used Duolingo, about 30,000 became regular users, visiting the site for at least 30 minutes a week simply because it solved a pain point for them in a way that no other product ever had.

Learning through translating resonated with the end users.

The product was already improving and evolving—the app constantly learned about users’ abilities as they translated and only showed them exercises that were appropriate for their skill level.

Releasing a mobile app opened up options to grow engagement down the line with phone-specific features like push notifications. Features like these helped make the app even more addictive.

Duolingo had investor expectations to meet. They also had to build a machine that would allow for future growth. Now they had to shift their attention to monetization. Charging users wasn’t an option: keeping the product free and accessible was the central tenet of Duolingo’s mission.

von Ahn didn’t like the idea of selling ads. Duolingo had to focus on keeping users in the app, and ads would definitely detract from the user experience.

they started partnering with other companies and selling them the translated content that users generated. This subsidized the cost of learning for the users, and helped Duolingo continue providing the app for free.

To optimize their app for the user as much as possible, they meticulously tested every aspect of UX, gamified the product, and used their findings to make data-driven decisions.

There was obvious value for companies like BuzzFeed and CNN in getting these translations from Duolingo—they cost around 4 cents per word, where the translation industry average price was around 6 to 10 cents per word. User generated translations could also capture the nuances that companies like BuzzFeed and CNN cared about.

Around the time Duolingo started selling translations, users translated about 600 articles per day. But only 10% of those translated articles generated revenue for Duolingo.

“There’s no way one can learn a language on just Saturdays or Sundays. We need to get people to do it every day or every other day for languages to stick.” Retention is also essential for building a strong and growing user base.

One of their most important gamification features was the addition of streaks, which keep track of how many days a user logs lessons in the app.

von Ahn said, “Our objective is to teach the world languages for free, so we also expect others to collaborate for free.” This was enough incentive for people—von Ahn got thousands of emails from people willing to collaborate, and not long after launching the program, over 20,000 people had applied to create courses.

2014: In February, Duolingo announced their $20 million Series C. At this point, Duolingo had 25 million registered users and around 12.5 million active users.

von Ahn said that revenue still wasn’t his priority. “Our main goal going forward is to become the de facto way to learn a language.” His idea was that growing the user base would indirectly strengthen the translation—the moneymaking—side of the business.

Duolingo’s key tactic for successfully gamifying their product and making it addictive was simply running lots and lots of tests. By using data to understand exactly what their users responded to, they were able to tap into user psychology and create the right rewards and incentives.

The B2B service had been an experiment, and a successful one—but Duolingo realized it wasn’t going to help them build the type of company they wanted. Focusing on the B2B service would divert internal company attention and compromise the consumer product that was already wildly successful.

This eventually led them to options like serving ads and creating an optional paid plan. Even though they previously said they didn’t want to do this, it now seemed like the lesser of two evils because it still allowed them to focus attention on the consumer side.

Continuing to grow the translation service would have required building out a sales team and shifting to a more enterprise, B2B-style company internally, which would have bifurcated the team’s efforts and attention.

Duolingo for Schools was completely free for students and teachers—it wasn’t a revenue stream for the company, but it was essential for increasing usage and making their programming even more accessible and valuable in ways that consumers needed.

With over 100 million worldwide users, Duolingo raised a $45 million Series D. Google Capital led the round and said they were “blown away by Duolingo’s growth and engagement numbers” and cited their potential in the “future of education.”

2017: Since they stopped growing their business translation service, Duolingo’s main source of revenue was payments for tests in the Test Center. Though they had plenty of funding, they needed to continue building sustainable ways to monetize. This is how Duolingo finally came to the decision to start serving ads to users.

Maintaining a good experience for the users was still the top priority for Duolingo, so they made sure that the ads were unobtrusive. They only appeared at the end of lessons and didn’t take away from the main objective for users: language learning.

The paid plan removes ads and lets users download lessons for offline use. The purpose was to continue making Duolingo self-sustainable, while allowing all users the option to continue the service for free.

Duolingo recently reported over 200 million users, 25 million of whom are active monthly.

Monetization is challenging for them because they’re still trying to make money while upholding their core value: providing high-quality language education for users around the world for free.

It’s easy to look at the current market size of your product or your competitions’ products and take it as a given. But if you can look beyond this, you can find untapped potential that your competitors are completely oblivious to.

They noticed a lot of users were downloading and even opening the app, but weren’t signing up. To encourage signup, they experimented with moving the singup page back a few screens.

Being flexible and experimenting with their business model has allowed them to make important changes that pushed the company forward while staying true to their original mission.

for many companies, evolving your business model can be a catalyst for growth because it opens up new markets and opportunities.