Language education app Duolingo has chosen animation studio Gunner for its first acquisition. Steering clear of edtech sectors such as massive open online courses, aka Moocs, is a good idea. Animations help Duolingo convince users that learning a new language — a daunting proposition — can be fun.
The free-to-use app is fixated on growth. Monthly subscriptions cost $6.99 — lower than the rate introduced five years ago. A recent redesign has been unpopular with some long-term users but chief executive and co-founder Luis Von Ahn says the goal is “decreasing confusion”. Such strategies are proving effective. Super Duolingo, the company’s subscription plan, has 3.3mn users — up 71 per cent on last year. It is growing more than twice as fast as monthly active users.
For now, less than 7 per cent of monthly users pay subscriptions. Animations and other game features are designed to lure more of them in. If it can make learning into a habit — recording streaks of daily lessons for example — it should be able to avoid cancellations from users worried about inflation.
At $104, the share price is trading just 2 per cent above its listing price last year. But Duolingo is in line to show improved results in the second half of the year. Net loss of $15mn in the last quarter was largely because of stock-based compensation. It has regained its listing in China too. The country accounts for 2 per cent of monthly users but has a large market of potential English-language learners.
Focus on entertainment is what sets Duolingo apart from other edtech stocks. Investment in natural language processing poses a threat to language courses — a market Duolingo estimates to be worth $60bn. It is an area that companies such as Alphabet’s Google are investing in heavily. But Duolingo promotes itself as less a functional service than a source of self-improvement. Across Europe, the UK and US a large and growing population of older learners have both the time and the money to take them up on it.
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