A versatile Service Designer and UX Designer with a solid foundation in graphic design and experience design. Proficient in using qualitative and quantitative research methodologies to identify problems/opportunities, and generate insights for improvement. Skilled in applying systems thinking approaches to address complex challenges and create sustainable solutions. Committed to developing user-centered/actor-centered/planet-centered designs that enhance experiences while aligning with business objectives.
DUOLINGO
#Market Analysis #Financial Forecasting #Business Model #Calculated Risk
Team Size: 4 Service Designer
Duration: Feb-Apr, 2022
Role: Market Analysis, Market Size Analysis, Business Model Analysis, Calculated Risk
Duration: Feb-Apr, 2022
Role: Market Analysis, Market Size Analysis, Business Model Analysis, Calculated Risk
Overview
In this comprehensive financial analysis & research and analysis of Duolingo, we delve into the current service's business model, market size, and revenue streams, while proposing new services. We also carry out a detailed examination of these new services, analyzing their business model, market size, and potential revenue streams, providing a proposed budget and balanced scorecard. The report concludes with a robust justification, bringing the research full circle. This rigorous, methodical approach ensures a compelling overview of Duolingo's financial landscape, providing strategic insights to drive growth and improve financial performance.
Market Research Part I
Business Description
Duolingo is a browser-based mobile application launched in 2012 that allows users to "Learn A Language for Free Forever." (Cunningham, 2015). Duolingo is a free online language education platform that provides diversified word and phrase training in four areas: listening, speaking, reading, and translating, and integrates social and game elements to let users learn a foreign language with fun game-level design(Sun, 2022).
Duolingo offers 98 courses in nearly 40 different languages. The platform makes it possible for anyone to learn a language for free. They can also pay $7 per month for a premium service "Duolingo Plus," that removes ads, provides offline access, and more. In addition, Duolingo offers "Duolingo for Schools," a feature designed to allow teachers to track students. It uses many of the services in the Amazon Web Services product suite. The company uses a freemium model; the application and website are free to access, but Duolingo also offers a fee-based service.("Duolingo", n.d.) In 2013 the Duolingo team launched the Duolingo Incubator program, a place created by the Duolingo team to connect bilingual volunteers worldwide to build new language courses for Duolingo ("Incubator," 2022). There is not much development of the project at the moment.
In 2014 Duolingo released Test Center, a testing service that allows users to take tests from home on their own devices and get certified in English language. ("How Duolingo Built a $700 Million Company Without Charging Users", n.d.). In fact, previous English certification tests were costly and required a trip to a testing center. However, for $20 Duolingo's test offers a new kind of user base for Duolingo. The Duolingo English test is also one of the more important products available today, and English test fees are one of the main sources of revenue for Duolingo today. About Duolingo's Experimental Projects Duolingo Labs is a part of the Duolingo website where users can try out experimental features of the site or products offered by Duolingo staff to help with language learning ("Duolingo Labs", 2022). These products include Duolingo stories, Duolingo podcast, Duolingo events, and Duolingo dictionary. The description of the Duolingo lab is no longer available, but related products still exist and are slowly being updated. Duolingo recently created a new app that is completely free called Duolingo ABC. it's a game where kids 6-7 years old can learn the alphabet in a fun way ("Duolingo ABC Literacy App for Ages 3 to 7", n.d.).
Business Model
In the beginning, Duolingo built its product around two tangentially related business models, a combination of affordable language education and web content translation. Duolingo's business model of testing and crowdsourcing helped them build an app for educational services that could be offered for free. In other words, Duolingo provided businesses with content translated by users as a byproduct of learning the language (Figure 1). Duolingo officially "shut down" its commercial translation service in 2014. They continue to work with CNN but are no longer accepting new partnerships with companies looking to purchase translations ("How Duolingo Built a $700 Million Company Without Charging Users", n.d.).Since then, Duolingo has released Test Center, and payment for testing in Test Center has thus become Duolingo's main source of revenue. Following the COVID-19 pandemic, the program has seen a 1500% year-over-year growth since its launch (Cuofano, 2021).
In 2017, the app moved to a freemium model, with revenue generated entirely from ad displays (Cuofano, 2021). Also later in 2017, Duolingo released the Duolingo Plus program. The paid plan eliminated ads and allowed users to download courses for offline use (Figure 2) ("How Duolingo Built a $700 Million Company Without Charging Users", n.d.). About 80% of Duolingo's revenue comes from Duolingo Plus, but it's worth noting that Duolingo Plus subscriptions account for only 4% of the 500 million registered users (Figure 3) (Cuofano, 2021).
Product Description
Product Features: Duolingo gamifies the learning process and increases users' motivation by integrating props, levels, rankings, and other game elements. At the same time, the learning process is "fragmented", with a 5-minute unit design, allowing users to complete it at odd hours(Figure 4).
Basic Functions: Select language type, practice (listening, speaking, reading, translating), test, friend ranking, points.
Special Features: Game breakthrough: The game concept is poured into each language course, each course is broken down into several skills, users learn skills one by one, practice tests, wrong answers lose blood, right answers grow experience until mastering the current skill, you can unlock new skills, improve the foreign language level, and get gold medals to indicate the learning effect (Duolingo, 2022).
Product History
A historical timeline of milestones by researching about the history of Duolingo and its app. From product habits’ s blog about Duolingo, which divided the timeline into three parts.The following chart is about Duolingo's development milestones and the evolutionary history of the product.
We can know the APP was launched in Apple App Store in 2012. Duolingo gave users a special user experience in the form of a game. In the following 2 years, languages and built-in features were added to help users grow. After that, some features were developed about the educational model to help schools, teachers, and students. In the midst of this, it also shows the changing business model of Duolingo.
Market Research Part II
Insight
Through Part I, we learned about the basic content and features of the app, based on Duolingo APP's functionality and thematic styles.We started with functional analysis and then dived into analyzing user usage and experience. We brainstormed 50 ideas to improve or create, and then filtered and discussed them before voting for the minimum viable Idea - the one that would enhance the content of Duolingo Plus.
Why did we choose ?
First, regarding the content included in Plus, it does not affect what users learn. There are some tricks to get all this in the free plan. For example, we can use the browser version(website) to get unlimited courses instead of using the mobile app.Second, we found that the Search Popularity of "Duolingo Plus" is not very high according to Google Trends. ("Duolingo Plus", 2022)
Third, through Duolingo's official website data "Duolingo Q3 2021 Earnings Call", we got that Duolingo has nearly 40M users, but only about 5% of users have purchased Duolingo's premium offer, Duolingo Plus. ("Investor Relations", 2022)
Therefore, we believe that Duolingo plus will not help users learn more in a better way. We have chosen to improve Duolingo Plus to provide more content to attract users to subscribe to the Plus service.
Duolingo APP's current Free Service and Plus Service
For the current service of Duolingo plus, there are "Basic" and "Plus".The first time a user opens Plus - "14 days free, then from $6.99USD/mo". In addition to the "Full access to lessons" offered in "Basic", "Plus" also includes "Ad-free, Offline access, Unlimited mistakes, and Track your progress".
New Service Vision
For the Duolingo Plus Program, we have added the following 4 sections. The figure below shows the existing content and the added content.
Credit Points
We try to monetize our subscription services. That is, the subscription fees paid by users are converted into credit points as a percentage of the service for personalized content, while other users can get credit points by providing related content answering services, and credit points can be converted into 1/10th of cash, but there is no limit to the number of credit points obtained and converted.
Q&A Community
Q&A Community is a personalized language learning communication platform that we are trying to build and monetize by incentivizing users to earn rewards for providing instructional services to other users. Instead of a simple subscription-based service, a consumer-to-consumer platform is used to take a cut of the profits. Simply put, users can pay for credits to post language learning related questions. Both member and non-member subscribers can earn credits by answering questions. It is important to note that in order to ensure that the Q&A is effective for high quality language learning, a short language proficiency test is provided to ensure that the respond
Listening and reading of original famous books
We want to give our users more access to the language environment, so we offer a selection of the original texts of famous books. First of all, users can listen to the original language recorded by native speakers, so they can learn the language in a more immersive and interesting way. Secondly, users can also read the original text. Common phrases and sentence patterns are marked so that users can accumulate authentic vocabulary and expressions.
Customized Themes, Styles, Icons
We give Duolingo Plus users a wider range of theme styles to choose from. In addition to the plain, raw green interface, Plus users can change a variety of themes and colors. Plus users can also enjoy specific icons and wallpapers. As a result, they can change the app's interface at any time to suit their unique stylistic needs.Target Market Size Research
In the initial analysis of the market size, we analyzed the subscription programs we added: Q&A Community, Famous Book Studying and Customized Themes.
SOM
Since Duolingo is a gamified language learning application, we are adding services based on the direction of Duolingo. Our market forecast remains the global market for language learning games, targeting users who convert the same type of competing companies and free users.
SAM
we have further expanded our market size based on SOM. We have identified the market size as the educational software/application market, which can be a potential market for us.
TAM
Duolingo is part of the global education technology market, and we present the global education technology market size to present the total market for the entire industry.
SOM
we tried to determine Duolingo's existing market size while adding the market shares of major players that complement Duolingo to estimate our SOM.
SAM
we considered that both online and offline language learning users are our potential target users.
TAM
people who learn new languages can be converted into our users; however, this is an idealized situation. We can provide a big picture of the total market we can study and serve accordingly. According to HolonIQ, approximately 2 billion people are learning new languages worldwide. We present the TAM market size based on Duolingo's subscription-based pricing multiplied by the 2 billion people learning new languages.
Revenue Models
We consider partnering the Duolingo plus service with educational institutions, schools, and multinational travel companies to sell a certain number of Duolingo plus memberships in a package at a discounted price for educational institutions, schools, and multinational travel companies to add diversified services to their subscribers.
Revenue Models
We've divided RM1's expenses into three categories: COGS, operating expenses, and essential expenses. For COGS, we need cloud computing providers and content editors, mainly due to our expanded services and the new Q & A community feature. These costs, except for stock-based compensation, are expected to increase over time.
Operating expenses are high at the onset, primarily due to advertising and promotion costs. We plan to reduce these expenses over time as we rely more on word-of-mouth and product reputation.
Essential expenses, guided by Duolingo's existing financial report, include cost utilities for new services and employee benefit programs for our staff. These expenses are projected to rise as we grow our user base.
Overall, our strategy is to gradually shift from heavy marketing to organic growth, backed by a mix of COGS and essential expenditures.
After consolidating the three categories of expenses, we see a trend of increasing total expenditure over time. Given that our product is digital-service-based, although our forecast predicts that the addition of new services will lead to increased expenditure, the graph shows that the increase is very limited. This is a very positive trend for us, further validating the feasibility of our pivot.
This chart visually demonstrates that, despite the increase in total expenditure, the proportion of total income it represents is decreasing. Consequently, RM1's net income shows an upward trend year by year. This serves as an important endorsement for our Duolingo Plus product.
Balanced Scorecard
Reference
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