Knowing English raised a person's earning power in most countries, and in Latin America it could double or triple it DL2 DL27. The best-known self-study course sold boxed CD sets for about $600 to $700 DL2 and had only begun moving to online subscriptions in 2010 DL18. Babbel's co-founder Markus Witte later said every language company had aimed at people who could spend a lot and had strong outside reasons to learn, leaving many who wanted a language but had little time or money DL38. Babbel and Busuu opened free websites in 2008 and added paid subscriptions or a premium tier in 2009 DL26 DL36. Those prices fell hardest on the learners in poorer countries who stood to gain most. Learners on their own also struggled to stay motivated DL6, and many would-be learners in the US and UK were not studying any language at all DL6.
Duolingo
Duolingo's free phone course, paid for by investors for five years, reached people who had never bought a language lesson, then thousands of tests turned them into a daily streak few wanted to break.
Arena: Market Conditions Before Duolingo
What shaped the outcome
Step 1 of 5 · 2011–17 · Consumer language-learning app
Venture money let Duolingo give a full course away on the phone to people who were not paying for lessons
Luis von Ahn, who had built CAPTCHA and sold reCAPTCHA to Google, and his student Severin Hacker chose language learning because English raises earning power in most countries; the leading course then cost $600 or $700 DL2. They declined to make 'Rosetta Stone and make it free' and set out to build what von Ahn called a gateway drug for learning DL2. Investors offered term sheets because the founders had sold two companies to Google DL2, and Duolingo had raised more than $83 million by mid 2015 DL31. The first plan paid for free lessons by selling learners' translations to CNN and BuzzFeed, but it found two customers and worked only on the desktop, while interns built a full iPhone app that became Apple's iPhone App of the Year for 2013, and nearly 80% of traffic was mobile DL2 DL3. Duolingo dropped translation by the end of 2013 and kept lessons free, earning nothing for about five years DL2 DL6; Gina Gotthilf, who led growth, called that 'a luxury because we had so much venture capital money' DL27. Lessons were cut to a few minutes DL6. In the US and UK, von Ahn said, 80% of users had not been learning a language before they started DL6. Duolingo passed 100 million users by June 2015 DL31, and by 2021 more Americans were learning on Duolingo than in all US high schools DL4.
Removing the price and the time commitment turned language learning into something people tried on a phone in spare minutes, so most early demand came from people who had bought nothing before rather than from Rosetta Stone or Babbel customers. Free alone did not separate Duolingo from the other apps; its rivals that started free either had to charge early or reached the phone late. Babbel opened free in 2008, and Markus Witte told TechCrunch that advertising did not bring in enough money to stay afloat, so it began charging as a last effort before shutting down; it had raised about $12 million by early 2015 DL37 DL26 DL38. Busuu sold a Premium tier from 2009 DL36. Memrise co-founder Ben Whately said London investors wanted revenue at once and that building for the web first cost it traction; its phone app arrived in 2015, when rivals had tens of millions of users DL39. The incumbent could not follow without hurting itself. Rosetta Stone's annual report for 2015 named Duolingo, Busuu and Babbel, warned that venture-funded rivals chasing users rather than profit could give products away, and said that if free products won wide acceptance it might have to lower its prices, hurting revenue; it cut consumer spending and turned to enterprise and schools instead DL48 DL33.
Rivals Rosetta Stone sold boxed courses for hundreds of dollars and moved slowly to subscriptions DL2 DL18. In March 2015 it cut consumer sales, marketing and product spending to save about $65 million a year, set the consumer business to run for profit and refocused on enterprise and education DL48 DL33; consumer revenue fell 37% in the first quarter of 2016 as it chose higher-margin subscriptions over volume DL34, and CD revenue fell from $136 million in 2014 to $4 million in 2018 DL32. Babbel charged for lessons from 2009, keeping only the first lesson free DL26 DL31; Busuu kept a free tier but sold Premium, and Memrise reached phones only in 2015 DL36 DL39. Most people took a school class or did nothing DL6.
Step 2 of 5 · 2012–24 · Consumer language-learning app
Thousands of tests turned free lessons into a daily streak, and restarted growth when it stalled in 2018
With no revenue, von Ahn said, paying about $30 to acquire a user made no sense, so the company had to keep the ones it had; day-one retention rose from 13% to about 50% by 2017 DL6. The streak shipped at launch DL28; badges failed as a quick test and succeeded after a redesign; reminder copy and timing tests improved returns by about 5% DL5. By 2020 Duolingo had run over 2,000 experiments in three years and launched a winner only if it did not hurt learning, rejecting an offline-lessons promotion that raised revenue but lowered retention DL25. Even so, by mid 2018 daily users grew at a single-digit rate DL1. Jorge Mazal's team built a model of daily user states, found that retention of current users moved DAU five times more than any other input, and aimed tests at it; a casual-game moves counter and a referral program did little, while leagues copied from FarmVille 2, first tested in 2018 with five tiers, raised learning time 17% DL1 DL41. Over four years churn among the best users fell over 40% and DAU grew 4.5 times DL1. About November 2019 a test let a single lesson extend the streak instead of the daily XP goal; it raised day-14 retention 3.3%, and a year later just over half of daily learners held a streak of seven days or more, up from about a third DL40. The retention team ran over 600 streak tests in four years and shuts down neutral ones DL28; learners with a seven-day streak were 3.6 times likelier to finish a course DL24.
The habit mechanics came out of a testing routine with rules about what counts as a win, and the 2018 model gave that routine a single target. A long streak is something a learner loses by leaving. Gotthilf and the retention team describe loss aversion that sets in around day seven, learners paid for streak repair, and 15.4 million revived lost streaks in a single 2026 campaign DL5 DL28 DL3 DL8. Jackson Shuttleworth, who leads retention product, says any app can add a streak and that it works only on top of lessons people want to use DL28; what a rival cannot copy is the count a learner has already built. Hated Moats investors listed streaks among Duolingo's switching costs in 2025 DL30.
Rivals Babbel also asked learners for five to ten minutes a day and said it competed with Facebook for that attention DL31; more than half its subscribers renewed after a year DL26. Rosetta Stone sold courses. Von Ahn named Instagram, TikTok and mobile games as the real competition for learners' time DL6 DL20.
Step 3 of 5 · 2012–26 · Consumer language-learning app
Without an ad budget, growth came from word of mouth, the press and an unruly owl
Gina Gotthilf, who led growth from about 3 million to over 200 million users, was hired with no budget and never turned on paid ads DL27. She launched countries through the press and was nicknamed 'Link-zilla' for insisting that articles link to the app DL5. The team posted evidence of effectiveness every week and kept a quirky voice, and when users turned the crying owl from reminder emails into memes, the company leaned in DL27. The 2021 prospectus said Duolingo grew 'primarily relying on word-of-mouth virality' and that people searched for 'Duolingo' nine times as often as 'learn Spanish' DL4. Its VP of Engineering put word of mouth at about 90% of user growth DL15. From late 2021 a junior social manager made the owl a TikTok character with 8.2 million followers DL14, and von Ahn said about 15% of users came from the owl DL6. A formal referral program added only 3% DL1. In 2021, by Sensor Tower's estimate, Duolingo spent about $100 thousand on digital ads in Europe and took more than 40% of consumer spending on language apps there, and about two thirds of the UK market DL46.
Free, frequently used lessons gave people something to talk about, and the owl's voice made the brand itself shareable, so acquisition stayed cheap while Babbel paid for reach. Gotthilf tied the choice to the economics: a company with no lifetime value per user had no reason to pay to acquire one, and paid growth is hard to switch off once started DL27. By 2021 the name had become the way people looked for the task, with nine searches for 'Duolingo' to each for 'learn Spanish' DL4.
Rivals Babbel bought attention: by Sensor Tower's estimate it spent over $20 million on digital ads in Germany and the UK in 2021, and its European audience skewed to people over 45 DL46; a 2017 US campaign ran TV ads on news channels, podcasts and direct mail DL37. Rosetta Stone sold boxed sets from airport kiosks DL31. Duolingo itself added supplementary paid and creator marketing in the 2020s DL22 DL8.
Step 4 of 5 · 2016–24 · Consumer language-learning app
Learners paid to remove ads and friction while the full course stayed free
For about five years the app earned nothing; translation, a Brazilian driver-certification deal and in-app purchases were tried or rejected DL3 DL6. Google Capital led a $45 million round in 2015 and told von Ahn to start making money DL3 DL6. In 2017 Duolingo Plus launched at $9.99 a month on Android for ad-free and offline lessons, while 'learning content will always be free' DL21; it later added unlimited hearts and streak repair DL3. A Series C investor recalled earlier forecasts of revenue that did not arrive DL3. Telling users that paying makes learning accessible to millions improved conversion DL27, and tests that raised revenue at the cost of retention were rejected DL25. Bookings rose from $36 million in 2018 to $190 million in 2020 DL3, a year when closed test centres also sent learners to the at-home English test DL13. At the 2021 IPO von Ahn wrote that the app had become the top-grossing education app on both stores 'while we have still been offering all of our learning content for free' DL42. Paid subscribers reached about 5% of monthly users by 2021 and about 9% by 2025 DL4 DL22. The 2023 Max tier at $29.99 a month put GPT-4 conversation practice behind the higher price DL12; in 2026 AI video calls moved into the cheaper Super tier DL23. Revenue reached $1.04 billion in 2025, with advertising 7.7% of it DL23 DL22.
Because the paywall sat on convenience rather than the course, the free product kept doing the acquisition work while the most engaged learners paid; von Ahn said he was glad to charge iPhone owners in wealthy countries but not people on low-end phones in India DL3. Babbel shows that charging for the course also worked, for a different buyer: it wrote lessons in house for each language pair, reached an older audience with paid TV and digital ads, and grew to EUR 352 million of revenue in 2024 DL38 DL37 DL46 DL47. The free model reached the larger audience and, by 2021, the larger share of spending: Duolingo took more than 40% of consumer spending on language apps in Europe DL46, and its 2025 revenue of $1.04 billion was nearly three times Babbel's 2024 figure DL23 DL47. The English test, priced at $49 against $200 for incumbents, added a second, smaller revenue line DL13 DL6.
Rivals Babbel charged for the lessons themselves from 2009, keeping only the first lesson free, and had been profitable since 2011 DL26 DL31; its team argued that ads do not belong in a learning app DL37. Busuu, freemium with a smaller paid base, had about 500,000 paying subscribers when Chegg bought it for $436 million in 2021 DL35. Rosetta Stone told investors it had to convert users of its own free apps into payers DL48 and repositioned as a premium subscription, more than doubling consumer subscribers between 2015 and 2018 to about 447,000 DL32. Free apps and university offerings charged nothing DL4.
Step 5 of 5 · 2023–26 · Consumer language-learning app
AI made content cheap, then investors marked the stock down as Duolingo traded bookings for users
Generative AI let Duolingo build 148 courses in 2025, more than doubling its catalogue, and von Ahn said content that once needed five years now took months DL10 DL6. His April 2025 'AI-first' memo, which phased out contractors, drew public backlash; DAUs still grew 40% that quarter, and the company later reversed the rule tying reviews to AI use DL10 DL7. The 2025 annual report named chatbots as competitors DL22. In November 2025 a lighter bookings forecast and a shift toward teaching quality sent the shares down about 25% in a day DL11. For 2026 the company chose to 'prioritize teaching better and user growth,' giving up over $50 million of bookings and moving AI video calls into the cheaper tier, with bookings growth guided to 10-12% after 33% in 2025 DL23. By the second quarter DAUs were up 23% to 58.7 million and current-user retention hit 84%, while bookings grew 8% DL8. In May 2025 JPMorgan analysts wrote that AI-built courses would support growth; a year later the shares had lost about 77% even after a first-quarter beat, and von Ahn had blamed slower growth on toning down the owl's 'unhinged' marketing DL29. In August 2026 DA Davidson upgraded the stock to Buy while 19 of 27 analysts rated it Hold DL44. Market value fell from $14.66 billion at the end of 2024 to $6.66 billion on September 30, 2026 DL9.
The reallocation bets that a larger daily audience is the defense against free AI tutors, at the cost of near-term monetization. Investors have so far priced the bookings slowdown and the chatbot threat more heavily than the user growth.
Rivals General chatbots that can hold a conversation in any language for free or within an existing subscription DL22. Bears compared the threat to Google's effect on Chegg DL43, and investors at Hated Moats named free or operating-system AI tutors that 'siphon practice time' as the central risk DL30; bulls answered that Duolingo sells habits, not answers DL43.
Key dates
- 2011-11-27Private beta
- 2012-11Full iPhone app
- 2013Translation dropped
- 2015-06Google Capital round
- 2017-04-21Duolingo Plus
- 2018Growth stall and retention model
- 2018Leagues tested
- 2019-11One-lesson streak
- 2020-05-19English test surges
- 2021-07-28IPO
- 2021-09Owl on TikTok
- 2023-03-14Duolingo Max
- 2025-04AI-first and 148 courses
- 2025-11-06Share price falls
- 2026-02-26User growth over bookings
Sources
Oldest first.
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