Duolingo, the mobile application that helps users from all across the world learn other languages, reported earlier this month that its daily active users (DAUs) expanded remarkably during the first quarter of 2023 with a 62% year-on-year leap.
The performance of the companies across the deck was quite remarkable during the first three months of the year as reflected by the advance of other metrics shared by Duolingo as part of its quarterly earnings release. Daily active users stood at 12.5 million by the end of March while monthly active users (MAUs) increased from 49.2 million in Q1 2022 to 72.6 million in Q1 2023 for a 47% annual increase.
The company also saw a significant increase in the number of paid subscribers, with the figure moving from 2.9 million last year to 4.8 million during this first quarter resulting in a 63% leap. As of this quarter, 8% of Duolingo’s MAUs are paid subscribers, resulting in a 120 basis points improvement compared to the figure reported a year ago.
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“Our results were strong mainly because we continue to improve the Duolingo language learning app along three dimensions: teaching efficacy, user engagement, and monetization”, highlighted Luis Von Ahn, the company’s Chief Executive Officer and co-founder.
AI is Having a Big Impact on Duolingo’s Performance
Duolingo is leveraging artificial intelligence to improve personalization and productivity on its platform. Central to this effort is “Birdbrain” – Duolingo’s AI model that selects exercises tailored to each learner’s needs and abilities. Birdbrain analyzes data from over 1 billion exercises completed daily on the app to determine the optimal level of difficulty for each user.
Duolingo’s English proficiency test also employs AI at every stage – from generating test content to scoring and securing exams. The company began working with leading AI provider OpenAI in 2021 to develop what it says are responsible uses of AI in standardized testing.
The mobile app is now employing powerful generative AI models like GPT-4 to automatically generate sentences and exercises for intermediate and advanced language courses. This allows the company’s education experts to focus on more impactful improvements to its courses instead of spending time creating content.
As part of its new subscription tier called “Duolingo Max” the app introduced two AI features aimed at emulating a human tutor: “Explain My Answer” and “Roleplay.” These features provide personalized feedback and conversational practice to enhance learning.
These two tools were launched on 15 March and made Duolingo one of the first platforms to implement the fresh-out-of-the-oven LLM from OpenAI. The cost of Duolingo Max stands at $29.99 or $167.99 per year.
While adopting the latest AI gives Duolingo an edge, the company says its advantage ultimately comes from its huge amount of user data, expertise in AI and machine learning, gamified learning approach, and strong brand built around characters like its mascot “Duo”. Duolingo believes these factors have helped propel its organic growth.
Duolingo Reports 42% Jump in Revenues in Q1 2023
Duolingo’s positive performance on the user front helped the business grow its top-line results by 42% on a year-on-year basis, with revenues ending the period at $115.7 million while total bookings experienced a 37% yearly advance to land at $140.1 million.
The company also managed to reduce its net losses from $12.2 million in Q1 2022 to $2.6 million during these first three months while it kept generating positive free cash flows. Duolingo’s cash reserves stood at $641.09 million in Q1 2023.
For the entire 2023 fiscal year, Duoling expects to generate between $500 and $509 million resulting in revenue growth rates ranging from 35% to 38%. Meanwhile, the firm expects to generate positive adjusted EBITDA of 11% to 12% of its forecasted revenues.
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