ACQ2 by Acquired: Why Duolingo Worked (with Luis von Ahn, CEO)
Release Date: November 11, 2024
Hosts: Ben Gilbert and David Rosenthal
Guest: Luis von Ahn, Co-founder and CEO of Duolingo

Introduction and Background

The episode begins with Ben Gilbert warmly welcoming Luis von Ahn to the show, highlighting his impressive background. Luis, originally from Guatemala, was a math professor at Carnegie Mellon University from 2005 to 2012 and the founder of reCAPTCHA, which was acquired by Google in 2009. He pursued his education in mathematics at Duke University and earned his PhD in computer science from Carnegie Mellon. Luis's transition from academia to entrepreneurship sets the stage for an insightful discussion on Duolingo's journey.

Ben Gilbert [00:00]:
"Luis was a math professor at Carnegie Mellon in Pittsburgh from 2005 to 2012... We have an excellent ACQ2 episode for you today."

The Genesis of Duolingo

Luis von Ahn defines Duolingo as the most popular language learning app globally, boasting around 100 million monthly active users. The platform began with a mission to teach English but quickly expanded to other languages, recognizing the transformative power of language acquisition not only in English-speaking countries but worldwide.

Luis von Ahn [00:47]:
"We're doing what we can to teach people languages... But if we were going to teach English, may as well teach other languages."

Key Reasons Behind Duolingo's Success

When asked why Duolingo succeeded at such a massive scale, Luis pinpoints their early understanding of user motivation as the primary factor. Unlike traditional education apps that focus solely on learning outcomes, Duolingo emphasized making the learning process enjoyable and engaging.

Luis von Ahn [02:07]:
"The insight is the hardest thing about learning something by yourself is staying motivated... We really have made it so that you want to learn."

Gamification and User Engagement Strategies

Luis delves into the specific strategies that fueled user engagement:

1. Lesson Chunking: Transitioning from 30-minute lessons to manageable three-minute segments made learning more accessible and less daunting.

   Luis von Ahn [04:22]:
   "We made the lesson experience be something that was quite palatable. Three minutes... you can do them while you're waiting for the bus."

2. Streaks: Implementing streaks, where users maintain consecutive days of activity, significantly boosted retention. Duolingo boasts about 8 million users with streaks exceeding 365 days.

   Luis von Ahn [06:12]:
   "We have 8 million daily active users that haven't missed a day in the last year or more. So much in our active users."

3. Notifications: Unlike many apps that overwhelm users with notifications, Duolingo strategically sends timely reminders, leveraging AI to determine optimal times and messages to encourage return visits.

   Luis von Ahn [06:15]:
   "We have a very sophisticated system that tries to figure out when to send you a notification and what to say in it to get you to come back."

4. Social Components: Features like leaderboards, quests with friends, and streak competitions have fostered a sense of community and competition among users.

   Luis von Ahn [07:18]:
   "Social components... leaderboards, you can have streaks with friends now, you can have quests with friends."

Fundraising and Market Perception

Luis recounts the early days of fundraising, particularly the initial skepticism from investors like Union Square Ventures regarding the scalability of the language learning market. Despite doubts, Duolingo's rapid user growth and eventual demonstration of product-market fit facilitated subsequent funding rounds.

Luis von Ahn [09:14]:
"Brad Burnham... they didn't think you were going to succeed because we didn't have a product."

Monetization Strategies

The conversation shifts to Duolingo's monetization approach. Initially, from its launch in 2012 until around 2017, Duolingo didn't generate revenue, focusing instead on building a robust user base. The transition to a freemium model, where users can access the app for free with ads or opt for a paid, ad-free experience, was a significant turning point.

Luis von Ahn [18:23]:
"We started thinking about monetizing in 2016... we have a freemium model... you can learn entirely for free."

However, monetization in non-US markets posed challenges due to differing attitudes towards digital subscriptions and payment willingness. Approximately 45% of Duolingo's active users are learning English, with the US contributing about half of the company's revenue, thanks to higher willingness to pay in wealthier markets.

Luis von Ahn [16:16]:
"People in the US are very accustomed to paying for digital subscriptions... whereas in countries like Vietnam or Brazil, it's much less."

Data-Driven Culture and Experimentation

A cornerstone of Duolingo's success is its rigorous A/B testing and data-driven culture. Luis emphasizes that Duolingo has conducted thousands of experiments annually to optimize user retention and engagement. This systematic approach ensures continuous improvement and informed decision-making.

Luis von Ahn [32:00]:
"We have run probably about 2000 AB tests per year of all kinds of things."

To balance experimentation with user-centric values, Duolingo employs a two-step process involving product review by company leaders before any A/B test implementation. This ensures that changes align with the company's mission and user respect.

Luis von Ahn [37:32]:
"We have a process called product review... we stop a lot of things before going out to prevent bad experiments."

Leveraging Artificial Intelligence

AI has emerged as a significant tailwind for Duolingo. The integration of large language models (LLMs) has revolutionized content creation, allowing Duolingo to generate language exercises and conversational practices at unprecedented speeds and scales.

Luis von Ahn [48:33]:
"Large language models are particularly good with language... we've been using them a lot."

This AI-driven automation not only reduces costs but also enables the development of features like Duo Radio, a conversational practice tool where users interact with animated characters, mimicking real-life conversations without the intimidation of human tutors.

Luis von Ahn [52:20]:
"You can have a conversation with one of the Duolingo animated characters... it's a really good way to practice a language."

Future Aspirations and Accreditation

Looking ahead, Duolingo aims to expand its influence by offering accredited testing, akin to TOEFL, through the Duolingo English Test. This initiative seeks to standardize language proficiency scores, making them widely recognized by educational institutions.

Luis von Ahn [57:18]:
"We have a standardized English test... 98 out of the top 100 U.S. universities accept our test."

Moreover, Duolingo aspires to develop a comprehensive language proficiency scoring system, allowing users to quantify their skills accurately, similar to traditional metrics.

Challenges and Headwinds

Despite numerous successes, Duolingo faces headwinds, primarily related to employee management and cultural dynamics within the company. Luis mentions challenges in maintaining a cohesive team culture amidst high talent influx and varying expectations.

Luis von Ahn [60:36]:
"Employee problems are tough... there are some people here who are like, why do we only have two flavors of coconut water?"

Founder's Influence and Motivation

Luis attributes his motivation to build Duolingo to his upbringing in Guatemala, where language learning was pivotal for success. Witnessing the stark educational disparities fueled his commitment to making language education accessible globally.

Luis von Ahn [62:20]:
"In a place like Guatemala, language learning is life-changing... we wanted to do something that would give access to education to everybody."

Conclusion

The episode concludes with reflections on Duolingo's unique position in the edtech landscape, blending rigorous data-driven methodologies with a mission to democratize language education. Luis von Ahn's insights provide a comprehensive look into the strategies, challenges, and future directions of one of the most influential education platforms today.

Luis von Ahn [63:10]:
"We are the most valuable edtech company... We are doing it with just one app."

This episode offers an in-depth exploration of Duolingo's ascent to a $9 billion valuation, emphasizing the importance of user motivation, strategic experimentation, and technological innovation in scaling an education technology company.