Duolingo IR Case Study: Mission-Driven Outperformance

Start with the Mission; Operate from your Principles

Duolingo has been one of the standouts among recent tech IPOs. In the two years since its July ‘21 public market debut, Duolingo has more than doubled daily active users & revenue and increased EBITDA margins 2.5x to 16.5%. During that time, shares have increased by approximately 50% vs. their IPO price, making Duolingo one of the top-performing technology companies from the 2021 IPO class (95 tech companies in total, -56% median performance vs. IPO price).*

We interviewed Debbie Belevan, VP of Investor Relations (IR), to see how Duolingo differentiates itself as a long-term focused company. 

Duolingo keeps it simple. Everything starts with the mission and ties back to its twelve principles, from how it builds products to its monetization strategy to developing investor relationships. “To develop the best education in the world and make it universally available” is the mission and the bottom line.

Telling the Long-Term Story through the Shareholder Letter

Duolingo’s first two principles are “learners first” and “take the long view.” It does both as a public company, especially through its quarterly shareholder letter. Duolingo started life as a public company using the standard earnings deck but quickly pivoted to the shareholder letter format. The goal was to be transparent, concise, and emulate other companies admired by the Duolingo team.

The first Q4’21 letter was transparent but long (33 pages). It walked through Duolingo’s five strategy dimensions in detail. Using the learner mindset, Duolingo sought out internal & external feedback and dramatically shortened the letter. 

The CEO section is now three pages, and the CFO section is five, including graphics & tables. If CEO Luis von Ahn had his way, the CEO section would highlight only the most critical content on one page (“prioritizing ruthlessly,” principle three).

Duolingo also shifted its earnings call to a Zoom webcast to further enhance the conversation about its results. There have been cautionary tales from the few companies willing to host video calls, but Duolingo does it well with casual, approachable grace. And because they don’t take themselves too seriously, they also have fun, by occasionally featuring a cameo with their famous green mascot Duo or playing a viral TikTok created by one of their learners.

What hasn’t changed is starting with the mission. It’s the first page of each shareholder letter, never fail, every quarter. That mission gets reinforced by consistently stating results in a straightforward format and making its fun brand stand out. It’s a pleasure to read (like the product is to use) and gives a balanced, easy-to-understand view of the business.

As a result, Duolingo gets consistently positive feedback from investors on its earnings experience. “People appreciate the brevity and thank us for making it easy to understand our results,” says Belevan. Other companies now admire Duolingo for how it shares its story.

An Awesome Long-Term Story

Not only does Duolingo tell its story well, but it’s also an awesome business story to tell.

Of course, the business starts with the mission. Developing the best education globally and making it universally available means the product must be accessible and fun to use. The results speak to that focus. Duolingo is now the most used language learning app with 75 million MAU (monthly active users), and over 20 million DAU (daily active users), both growing over 50% y/y (easy to see on page 2 of the shareholder letter). Duolingo is in over 40 languages and is used by learners of all ages in all parts of the world, from refugees to celebrities.

From a classic investment standpoint, Duolingo is just getting started. Rarely do you find a company where most of the world’s population is a potential customer. Duolingo is just that, where the global number of smartphone users is nearly seven billion (or 85% of the population).* Duolingo believes there are over two billion active language learners worldwide. 

Against that massive market, Duolingo is committed to making the product both fun and primarily free for users. That combination creates viral word-of-mouth user growth, highlighted by the remarkable data point that 80% of users in the U.S. weren’t even learning a language before using Duolingo. It also leads to a great business that drives 40%+ revenue growth with only 15% of expenses invested in sales & marketing. The long view is working.

A more fun long-view example comes from the recent Barbie movie, where Duolingo’s famous “ding” was featured when a character used the app. This is earned media at its finest; Duolingo was approached to have the ding featured in the movie, not the other way around. The Duo mascot’s appearance became a hit at the premiere and evolved into a well-covered marketing campaign. It’s easy to love a company that has fun while working hard to grow its impact, brand, and business.

Having Fun with the Perfect Steward

Duolingo’s culture is a huge part of its success as a public company. It takes commitment and consistency to drive the scale and growth Duolingo has experienced for more than a decade. You see it in the public blog profiles for why employees work at Duolingo and in the drumbeat of references to Duolingo’s mission & principles. The Duolingo team enjoys the work and wants to be doing it.

My favorite culture example that ties to IR is bi-weekly all hands. Duolingo does all hands an incredible 1-2 times per week, once for company announcements and presentations and every other week for Q&A with leadership, where the CEO answers every question live. Aligning the Duolingo employee team with the investor perspective and company results is easy with that level of transparency.

And Belevan is the perfect steward. Duolingo is the fourth company where she’s led IR and the third company to IPO under her leadership. Belevan leans into her experience & confidence. She’s empowered to use company principles to drive success in the public markets. 

One operating principle is “all for one, one for all,” Belevan lives it by attributing the excellence and improvement in Duolingo’s investor experience to her highly collaborative cross-functional team. Belevan also embodies “be candid and kind” in how she operates her program, sharing feedback and insights from investors across the business and building her internal learnings into the narrative she shares with the market.

The bottom line is that Duolingo has outperformed all expectations as a public company. That performance comes straight from starting with the mission in everything it does.

Footnotes

* IPO share price analysis sourced from stockanalysis.com, “All 2021 IPOs”, subdivided by 95 companies categorized in the “technology” sector.