Duolingo filed to go public yesterday, giving the world a deep look inside its enterprise outcomes and the way the pandemic impacted the edtech unicorn’s efficiency. TechCrunch’s preliminary learn of the corporate’s submitting was typically constructive, noting that its development was spectacular and its losses modest; Duolingo not too long ago started being profitable on an adjusted foundation.
Whereas the corporate’s top-level numbers are spectacular, we wish to go one degree deeper to develop our understanding of the corporate past our EC-1.
Duolingo is probably going getting into a interval through which it must make investments closely in options like pronunciation, efficacy and new apps — which may come at a steep upfront price.
First, we’ll discover the expansion of Duolingo’s whole consumer base, how a lot cash it makes per energetic consumer, and the way successfully the corporate has managed to transform free customers to paid merchandise over time. The numbers will set us as much as perceive what else might be discovered about Duolingo’s enterprise past our unique deep dive into the corporate’s funds — particularly underscoring the strain cooker it finds itself in when on the lookout for new income sources.
Beginning with Duolingo’s development in whole energetic customers, guess how briskly they rose from 2019 to 2020. Maintain that quantity in your head.
The precise numbers are as follows: In 2019, Duolingo closed the 12 months with 27.3 million month-to-month energetic customers (MAUs); it wrapped 2020 with 36.7 million MAUs. That’s a acquire of 34%. If we slim our gaze to Q1 2021 numbers in comparison with Q1 2020, we are able to see that Duolingo’s MAUs rose from 33.5 million to 39.9 million, or development of round 19%.
The majority of Duolingo’s development, then, got here in early 2020 after we take into account its pandemic bump. Put extra merely, the corporate scaled from 27.3 million MAUs on the finish of 2019 to 33.5 million MAUs on the finish of Q1 2020; from then, the corporate added 3.2 million extra MAUs all through 2020 and 6.4 million in the course of the subsequent 4 quarters.
One other lens by means of which to view the numbers is solely a recognition that first-quarter outcomes at Duolingo look like stronger than leads to the remainder of the 12 months, maybe attributable to New Yr’s resolutions to study a brand new language or brush up on a second language discovered in highschool.
Subsequent, let’s study Duolingo’s monetization efforts concerning changing free customers to paying customers.
Right here we are able to see a really totally different development story. Whereas the corporate’s MAUs rose 34% from 2019 to 2020, the corporate’s paying customers rose from 900,000 on the finish of 2019 to 1.6 million on the finish of 2020. That could be a far sharper acquire of 84% on a year-over-year foundation.
So, whereas Duolingo did see materials consumer development throughout 2020, it noticed turbocharged enlargement within the customers it was in a position to shake income from. Improved monetization, greater than acceleration in consumer development, was the pandemic’s impact on Duolingo.
What can we see within the firm’s more moderen outcomes? From Q1 2020 to Q1 2021, Duolingo’s paid subscribers rose from 1.1 million to 1.8 million, a acquire of round 64%. That was a slower tempo than the corporate managed extra typically in 2020, which matches Duolingo’s slower income development in Q1 2021 than it recorded in 2020.
The quantity continues to be robust, we predict. However not as spectacular because the greater than 100% income enlargement that the corporate placed on the board final 12 months.
In proportion phrases, 3.3% of Duolingo’s MAUs have been paid subscribers in 2019. That determine rose to 4.4% in 2020. And in Q1 2021, it reached 4.5%. Duolingo rounds that quantity to five% in its S-1, which feels considerably aggressive to us, given the considerably modest tempo at which the metric is enhancing. Right here’s the wording:
As of March 31, 2021, roughly 5% of our month-to-month energetic customers have been paid subscribers of Duolingo Plus. Our paid subscriber penetration has elevated steadily since we launched Duolingo Plus in 2017 and, mixed with our consumer development, has led to our income greater than doubling yearly since.
A acquire of 0.1 proportion level in 1 / 4 is development, we suppose.
Subsequent, let’s chat about income per MAU. To get constant numbers, we’ll divide quarterly revenues by MAU figures from the identical interval. So, we’ll examine This autumn 2019 income at Duolingo with its year-end MAU determine. We’ll do the identical for 2020, and for Q1 2021 we’ll use each numbers from that interval.