Translating success: How Duolingo stocks have rallied

An overview of Duolingo

One of the best performing stocks of 2023, Duolingo continues to grow in value YoY since it went public in 2021 and is listed on New York’s NASDAQ exchange under the ticker symbol “DUOL”.

Duolingo is a digital language-learning platform that offers free and paid-premium courses in over 40 languages and allows users to learn interactively at their own pace. Founded in 2011, it now serves over 500 million registered users and is arguably the most well-known brand in its sector.

One of the key factors contributing to Duolingo's success is its innovative business model that generates most of its revenue from digital advertising as most of their users are able to engage with the platform cost-free. Their Premium offering requires a small monthly subscription and allows users to view content ad-free, unlock advanced content and specialised services. This model has proven highly effective, allowing the company to reach a wide audience of language learners across the world whilst constantly generating revenue.

Duolingo's success can also be attributed to its innovative language learning approach. The platform uses gamification and personalised learning to make their content fun and engaging. Duolingo courses are designed to be bite-sized and interactive, helping users to stay motivated and progress quickly.

In addition to its innovative business model and content approach, Duolingo's strong branding and marketing efforts have similarly contributed to its success. The company has built a strong community of language learners, and its colorful and playful brand has helped it stand out from traditional models.

Examining Duolingo’s revenue stream

Duolingo earns money by leveraging a freemium business model that relies on offering premium subscriptions, advertising, and in-app purchases (IAPs) to generate revenue, which has helped them achieve $250 million in sales in 2021, a 55% increase from 2020.

72% of their 2021 revenue stemmed from Duolingo Plus, the premium subscription that offers users an ad-free experience and additional features to improve their learning experience. As of 2021, nearly 6% of monthly active users were paid subscribers.

The remaining 18% of revenue is sourced to advertising revenue, which is shown to users who are unable or unwilling to pay for a subscription. Duolingo also encourages users to switch to subscription by limiting free interactivity through gamification techniques, such as losing ‘hearts’ (game lives) for every mistake made in a lesson – which means you must wait one day until you can progress or upgrade to a subscription to continue on your educational journey.

What can we expect from Duolingo stock in the future?

Since the initial public offering, Duolingo's performance has been strongly bullish with the company reporting strong revenue growth and user engagement metrics, and this stable uptick supports that we can expect growth to continue.

Looking to the future, Duolingo has several growth opportunities which include expanding its course offerings, entering new markets, and developing new revenue streams. The company has also announced its intention to invest in research and development to continue improving its language learning platform.

Overall, Duolingo's innovative business model, interactive language-learning approach, and strong branding make it a compelling investment opportunity for those interested in EdTech. However, as with any investment, it is important to conduct thorough research and carefully evaluate the risks and potential rewards before making any decisions.