The Amazing Success of Duolingo’s IPO in 2021 (Explained)

Duolingo is a language-learning website and smartphone app based in the United States, as well as a digital language competence test. The company operates on a freemium model, with the app and website available for free, but Duolingo also provides a premium service for a price. It was formed in 2011 by Luis von Ahn and Severin Hacker with the goal of ensuring that everyone has access to high-quality education, regardless of their financial situation or where they live. The concept that increased access to education may help greatly reduce global economic inequality is at the heart of the company.

It employs artificial intelligence (AI) to teach users new languages. The owl mascot, which has become a meme, speaks to the game’s enjoyable user interface. It’s not all fun and games; a closer look finds a fast-growing firm that, like the bespectacled owl, turns investors’ minds.

Duolingo was not required to publicly reveal any revenue or profit data because it was a private firm. However, in a 2020 interview with Forbes, he indicated that he expects the company to make more than $160 million in revenue in 2020. The company is cash flow positive, according to a spokeswoman, although exact statistics are unknown.

Why Did Duolingo Go Public?

Most long-lasting, long-lasting firms have gone public over time, and duo-lingo has a lot more to achieve, so they plan to be there for a long time. Being open to the public will assist them in developing into the firm they need to be in order to further our purpose.
They’ve already accomplished a great deal in the last ten years. They’ve expanded to a team of over 400 individuals, with over 40 million monthly active learners taking courses in over 40 languages. Last year, they administered over 300,000 Duolingo English Tests, making them a leader in online testing. They’re only getting started, though. They have lofty ambitions, and achieving them will necessitate the assistance of many more people. Being a publicly traded company will provide them with the resources and visibility they need to continue employing top people and expanding their workforce.

Duolingo would not be where it is today if it hadn’t been for the people who constructed it and the investors who helped us thrive. This IPO is an opportunity to thank them for their tireless efforts and unwavering support. I’d also like to recognise the significant contribution of our external course contributors, who assisted in the development of several of our courses, allowing us to teach a variety of smaller or endangered languages.

Luis von Ahn, Founder Duolingo

One of the things that makes them the most proud in life is that their flagship app has naturally become the top-grossing app in the Education category on both Google Play and the Apple App Store, despite the fact that all of our learning content is still available for free. They believe that learning a language should not be prohibitively expensive and should be accessible to all. They are also providing everyone the opportunity to invest in and profit from Duolingo’s success by becoming a public corporation.

It Doesn’t End At IPO For Duolingo

IPO for them, is not a goal in itself, it’s simply a stepping stone in achieving their mission. They prefer to think of it like a graduation, a transition from one chapter to the next.

As a public company, they expect their employees to work with an even greater focus and intensity, and to continue to uphold the core values that have helped them to get here: focusing all their energy on product development, and making sure that learning with Duolingo is always fun, effective, and available to everyone.

Let’s Get Technical

In 2017, Duolingo started talking about going public, but it was put on hold in 2018. Following an influx of money from Capital-G, the firm achieved unicorn status in December 2019 with a $1.5 billion valuation. They began discussing the IPO plans publicly again in 2020. During the global COVID-19 outbreak, the company saw a massive increase in users. Duolingo has yet to file for an initial public offering (IPO) or establish an IPO date. They have, however, hired Goldman Sachs and Allen & Co. to help with the IPO, which was expected to take place this summer.

How’s Duolingo Doing Today?

The Duolingo IPO occurred on the Nasdaq on July 28 2021 under the ticker DUOL. The company raised $521 million through the sale of 5.1 million shares at a starting price of $141.40 a share. This meant a company valuation of nearly $5 billion as shares closed.

Deep Analysis: Duolingo [NASDAQ:DUOL]

While all investments include some risk, let’s look at some of the unique concerns that investors should be aware of in the case of a Duolingo IPO. Duolingo has never been involved in a scandal concerning their business operations’ ethics. They used to use volunteers to improve their courses; however, they have stopped doing so, implying that the firm now has complete control over the creative process. English has 399 million registered users, Spanish has 142 million, French has 101 million, German has 61 million, Italian has 40 million, and Portuguese has 20 million.

The English for Spanish Speakers course is their most popular. Spanish for English Speakers is their second most popular course. User acquisition costs will be a major factor for the organisation in the future. This will influence whether they go after new consumers in their most popular language groups or in less popular language groups. It will also influence whether they concentrate on expanding the number of users in the most popular courses or on developing new courses and encouraging consumers to try them.

While a portion of their customers pay for their premium service, their user base has shrunk in the past when they have been aggressively pursuing monetization. To stay successful, the company will need to combine growth and monetization with the desires of its users and their willingness to pay for the service. They understand that the existing freemium model is unsustainable because less than 3% of users generate the majority of revenue. CEO von Ahn recently announced that he wants to move away from the freemium model and emulate Spotify’s successful monetizing of customers. Investors must assess not only if this is a good model, which Spotify’s success demonstrates, but also whether it is suitable to Duolingo’s sector.

According to Nielsen Music, 90 percent of the population in the United States listens to music. Language learning, on the other hand, does not have the same reach. It is frequently regarded as a luxury. While the global pandemic has increased some people’s free time and increased the number of free users, this does not indicate they are prepared to pay for Duolingo’s services.

Duolingo’s competitors are dealing with some of the same issues. Traditional places where individuals learnt languages before the arrival of free, online courses would be known competitors: community education centres, community colleges, colleges and universities. Others in the English as a second language industry who specialise in teaching English to non-native English speakers would be rivals. Babbel, Pimsleur, Kahoot!, and Rosetta Stone are among the other contenders. Kahoot! and Rosetta Stone are both publicly traded on the Oslo Stock Exchange and the New York Stock Exchange, respectively. The rest are privately held businesses. The TOEFL providers — who formerly had a near-monopoly on the language testing market – are competitors for the Duolingo Language Test offering.

Duolingo has used data to retain and enhance its competitive advantage by changing to meet the requirements of its users. It runs tests on a regular basis to find new methods to improve the design of a course or the user experience. Artificial intelligence is used in the app to detect errors and adjust the course to meet the needs of the user. Nonetheless, Duolingo has been chastised for its lack of depth, as most people who complete a course will only achieve an A2 CEFR level of language comprehension. In response, the company added more B1 and B2 level content in 2020, and wants to add podcasts, freeform writing, and audio classes to make courses even more in-depth. Von Ahn mentioned that Duolingo is interested in buying businesses in the education and language-learning industries to supplement its growth.

The Wrap Up

Duolingo will benefit from the current educational industry trends of learning moving beyond traditional learning institutions. If Duolingo can master a monetization strategy while continuing to expand their product offerings, there is potential for gain for investors.

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Charu Gyanchandani
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