Duolingo (DUOL 3.64%) is the world's most popular digital language education platform, and its stock was a top performer in 2023 with a 219% gain. The company routinely beat its own quarterly financial forecasts throughout the year, despite fears of elevated inflation and rising interest rates crimping consumer spending.
Total revenue of $531.1 million in 2023 was up an impressive 43% from the previous year. That success came on the back of strong user growth and an acceleration in the number of users upgrading from the free version of the mobile app to a paid monthly subscription.
Duolingo ended 2023 with 88.4 million monthly active users (MAU), marking a 46% year-over-year increase. And 6.6 million of those users were paying for a subscription, up 57%. As you can see below, those paid subscribers represented a record-high 8.3% of MAUs.
More upside could be ahead for Duolingo stock
Here's something many investors might not know: Most of Duolingo's user growth is organic.
That's right. Duolingo says up to 90% of its new users are acquired without any paid advertising. In fact, the company spent just $75 million on marketing last year, and it was the smallest of its three main operating costs by far. By comparison, it spent $194 million on research and development to create new features to help convert free users into paying subscribers.
Strong organic user growth is a powerful advantage because it allows Duolingo to invest in other areas of its business. For example, the company just integrated math and music learning into its flagship language app which will serve as further attractions for organic user acquisition.
More than 2 billion people are learning a foreign language worldwide, so Duolingo has barely scratched the surface of its opportunity. That makes the stock a great long-term buy.
