Duolingo CEO Luis von Ahn Defends the Language App’s A.I. Spend

Discover how Duolingo’s AI pivot has sparked remarkable user growth but faced a lukewarm reception from investors. The language learning app shattered Wall Street’s predictions by raking in a record $209.6 million in revenue from October to December, marking a 39% increase from the previous year. However, Duolingo’s shares took a hit, plunging 17% as earnings per share fell short of expectations and gross margin tightened for the quarter.

A substantial portion of Duolingo’s AI expenses are linked to a video call feature powered by OpenAI, introduced last year, as revealed by CEO Luis von Ahn. Exclusive to Duolingo Max subscribers, this feature enables users to hone their language skills through virtual conversations with a fictional character named Lily.

Lily has played a pivotal role in driving Duolingo’s premium tier success, now constituting 5% of all paying users. The company’s paid subscriber base, inclusive of Duolingo Max and a more economical option, has surged by 43% year-over-year to reach 9.5 million.

Von Ahn, the co-founder of the language-centric company, boasts an estimated net worth of $1.2 billion. Notably, he made his mark in Silicon Valley by creating the CAPTCHA verification system, later acquired by Google in 2009. Duolingo went public in 2021 and has since gained immense popularity, boasting over 40.5 million daily active users by the end of 2024.

A.I. Fuels Subscriptions Surge

A.I. integration has been a primary catalyst for Duolingo’s recent user growth, as emphasized by von Ahn, who defended the company’s tech expenditures during the earnings call. “We understand that these costs can be optimized in various ways,” he acknowledged. However, Duolingo is currently focused on swiftly delivering top-notch features, given the unprecedented opportunities presented by emerging technology.

Enhancing the video call feature remains a key objective for 2025. Von Ahn envisions a more personalized chatbot that remembers previous conversations and inquires about users’ concerns. Despite being accessible to the majority of international users, the feature is unavailable in China due to restrictions on OpenAI’s technology. It has resonated particularly well with English learners, being utilized twice as much compared to non-English learners.

‘Unhinged’ Marketing Strategies

While A.I. plays a significant role, Duolingo’s growth is not solely attributed to it. The app has garnered attention with its unconventional and viral marketing campaigns, such as a faux ice-skating musical and a collaboration with Netflix inspired by the hit series Squid Games.

The latest quarter saw a marketing gimmick revolving around Duolingo’s beloved owl mascot, Duo. Social media posts claimed that Duo staged his own demise, although he remained active for Japanese users as joking about death is deemed less acceptable there. Following completion of daily lessons to revive Duo, the mascot returned to motivate users to stay on track with their learning.