Duolingo is seeing subscription growth, launching new tiers and constantly testing new features and enhancements to drive revenue and lifetime value (LTV).
The company shared in its third-quarter 2023 earnings report Wednesday (Nov. 8) that total paid subscribers increased by 60% year over year to 5.8 million and more than 160% on a two-year stack.
“The way we have done this has been through our process of making small changes, running a test to see how users react, and then doubling down where we see gains,” Duolingo CEO and Co-founder Luis von Ahn said of the subscriber growth on a call with analysts. “We’ve also hit some exceptional home runs.”
Among these “home runs” were marketing initiatives such as partnering with HBO’s “House of the Dragon” last year, launching an updated course to learn the fictional High Valyrian language, and earlier this year, launching a social media campaign centered on the app’s inclusion in the wildly popular Barbie movie.
Earlier this year, the company added a Duolingo Max tier to its existing paid Super Duolingo tier and its basic, free option, with Max promising artificial intelligence features leveraging generative capabilities — “Explain My Answer” and “Roleplay.” The former offers more insight into why a user may be incorrect, and the latter enables users to practice conversations with a chatbot.
While these were the features that the Max tier launched with, this super-premium option may change, as the company tests different features and as the cost of the AI for Duolingo decreases.
“It may be the case that ‘Explain My Answer’ goes into Super, as opposed to Max, and then we take some features from Super and put them into Max,” von Ahn said. “… The idea is really to maximize the revenue that we can make and also to maximize the … value that we give to our users. … We knew … when we introduced the three-tiered system it was going to take us a while to figure this out.”
Duolingo’s strategy of adding new subjects to its main app has further contributed to subscriber growth. The company announced the launch of math and music courses Thursday (Nov. 10). By integrating these subjects and leveraging their gamification mechanics, Duolingo aims to scale the new courses and increase user engagement and retention. Von Ahn noted on Wednesday’s call that premium subscribers will have access to “certain extra things” within these subjects.
The subscription growth comes as consumers become more conservative in their subscription spending overall, according to PYMNTS Intelligence’s study “Subscription Commerce Readiness Report: The Loyalty Factor,” created in collaboration with sticky.io. The study, which drew from an April survey of more than 2,000 U.S. consumers with retail product subscriptions, revealed that the average number of retail subscriptions per subscriber was down to 2.6, the lowest number on record since February 2021.
“The key for subscription services, we believe, is that for them to stay relevant with the fragmented digital life of that consumer, they need to offer a more compelling 360-degree set of subscriptions that are [suited to] that consumer,” Jesus Luzardo, vice president and head of global partnerships and international sales at subscription management platform Vindicia, told PYMNTS in an interview last year.