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I have been an avid user of Duolingo, Inc. (NASDAQ: DUOL) daily for over 860 days in May 2021 and I don’t plan to avoid it. Since I started it, I have gained significant intellectual benefits while improving my Chinese and Spanish.
At the same time, I used Google (throughout the article we will use Google (NASDAQ:GOOG), (GOOGL) to constitute Alphabet Inc. ) actively, either as an advertiser and as a normal user, as 60% of the population of this planet. I recently started employing Google Ads for my own business and for a nonprofit that concerns me and has a total monthly advertising budget of over $10,000; I now have a greater understanding of the strength of Google Ads.
While Duolingo tried to use advertising as a source of income, in my humble opinion, they did a very bad job. During my 2 years of using Duolingo, I still haven’t won an ad that has intrigued me enough to click on it. On the other hand, the Google classified ads I get on Google Search and/or YouTube are very applicable to me and I click on them frequently.
This stark contrast between Google’s advertising features and Duolingo’s poor advertising functionality made me think about the option of Google buying Duolingo. Google would then capitalize on its advertising expertise and large advertiser base to achieve a successful and successful acquisition.
On the lighter side, especially jokingly, we can’t say that alphabets are the foundation of languages and that Google’s parent company will have to provide in the language learning sector.
This article presents the justification for Google trying to get Duolingo. A key detail of the justification is the similarity of corporate cultures: the reactions of workers, business models, projectArray and the vision of the two corporations are quite similar, although they work at other scales.
Below are the reasons for Google’s acquisition of Duolingo, as well as the detailed synergies between the two companies.
Then duolingo’s dominance among its competition is presented. However, the investigation of why Duolingo has this domain may be just the subject of another article. Then the article goes on to how Duolingo’s valuation would result in a value of $200 or more. consistent with participation.
The article ends with what can happen with this prospective acquisition.
Created through the author
Source: created from the logos of both companies.
According to its 10-Q of the first quarter of 2022, section MD
In the last quarter, only the Google segment was the successful segment, while the other two segments (Google Cloud and Other Bets) suffered a net loss, as shown in the table below:
Alphabet Q1-2022 Finance
From the above, it is transparent that while Google seeks to expand into other areas, search remains its center and soul.
Google’s corporate project is “to organize the world’s data and make it universally available and useful. ” Google’s corporate vision is to “provide one-click access to the world’s data. ” Andrew Thompson provides a very insightful investigation of the project and Google’s vision in the Panamore Institute’s Business Control Publications. His research demonstrates the strength of those s.
Duolingo’s project is to expand the most productive education in the world and make it universally available. Duolingo was introduced in 2012 and has since become the world’s leading mobile information platform. With more than 500 million downloads, the company naturally has the most popular form in the world. to be informed languages and the most successful application in the Education category on Google Play and Apple’s App Store.
Introducing Duolingo to investors
Duolingo knows his project as follows: “We are here to expand education in the world and make it universally available. Our global team works together to make language learning fun, relaxed and effective for everyone who needs to learn, wherever they are. “. “
You’ll realize that being successful is rarely one of Duolingo’s goals, and that’s arguably why Duolingo is rarely doing very well but is doing very well by monetizing its 50 million active users per month to over 3 million subscribers and not monetizing its users from an advertising perspective.
Not because of the benefits as a key purpose is rarely necessarily bad and, in fact, it’s a commendable approach, at least according to Jim Collins and Jerry Porras’ bestseller “Built To Last. “the twentieth century, and discovered that “visionary” corporations had never had profit as their main goal. Surprisingly, those “visionary” corporations were several times more beneficial than comparison corporations.
Built to last
I am firmly convinced that the technique that corporations use to not make a profit is what made them and will continue to make them successful. It reminds me of the adage: if you run after the money, it will escape you.
There are many synergies between Google and Duolingo; this segment presents my opinion on why this fit is “made in paradise”.
Both corporations rely on advertising and subscriptions as their primary profit resources. While most of Google’s profits come primarily from advertising, the company is moving quite aggressively toward stronger subscription models. These include YouTube Premium, YouTube TV subscriptions, Google Cloud, Google Workplace, fitness services, and web services. The scenario is reversed in Duolingo, where Duolingo’s subscription earnings are five times higher than its advertising profits. The charts below show the earnings resources of the two corporations in the last quarter ending March 31. , 2022.
Duolingo Q1-2022 financial results
Alphabet’s First Quarter 2022 Financial Results
Both corporations have similar projects, visions and strategic directions. As stated in the previous section, any of the corporations has a project and vision aimed at improving the lives of their users. The two societies seem to have similar cultures; the comparison of painting cultures on Google and Duolingo shows a remarkable similarity. Such similarity would make integrating Duolingo painters into Google a simple exercise.
Duolingo has a source of advertising profit that it cannot exploit. As discussed above, Duolingo’s advertising profits account for less than 15% of its total profits. (compared to a global average annual profit of $46. 28 consistent with the user, ARPU, for Facebook/Meta). This shows the great opportunity that Duolingo has not yet exploited. Google, with its inconsistent advertising, can increase this number significantly.
Both corporations rely on AI in their operations. We all know that Google is the world leader in synthetic intelligence and that AI is used in almost every department of the company. Google has its own AI department with a vision:
At Google AI, we conduct studies that advance the state of the art in the field, applying AI to products and new areas, and developing teams to make sure everyone can AI.
Duolingo has also implemented AI in its courses to analyze errors and modify course delivery to meet user requirements. As an avid Duolingo user, I can see how the app should be informed about my mistakes and how it adjusts the course delivery accordingly. Bernard Marr has a very clever article on how Duolingo AI is used published in Forbes. While AI is actively used in Duolingo, Google’s AI department may make Duolingo’s use of AI even more noticeable than it is lately.
Google would possibly use its wisdom about its users for targeted advertising. Most of the classified classified ads classifieds that I find in Duolingo are classified classified ads classified classifieds classified by Google through the Google network. These classified ads are not targeted and are connected to cookies from the sites I have visited. On the other hand, when I watch a video on YouTube, I place the classified classified ads classifieds classified very targeted. The probability of clicking on classified classified ads classified classified ads on YouTube is an order of magnitude greater than clicking on classified classified ads classified classified classified classified in Duolingo. Having targeted advertising, which Google can provide, is what would generate an ARPU for Duolingo.
Cross-advertising marketing with existing Google advertisers can provide a very large visitor base to Duolingo advertising. Finding advertisers is one of the most demanding situations for businesses that rely on advertising for their revenue. This is a challenge for Duolingo, as their use of the Google Ads network, they will pay a small fraction of their potential ad revenue. On the other hand, as a Google department, Duolingo would appeal to advertisers who already advertise in other Google locations.
The synergies between Duolingo and Google has a glorious Translate. Google tool for translation between the languages database. The behind this feature is something that can be interpreted as the coincidence with Duolingo. However, which these two products to be complementary; the two databases can be merged to create a single, more complete language database.
Google has the connections to make the use of Duolingo in classroom number one bigger. Google Classroom is one of the main classroom control tools, and it’s a dating that Duolingo doesn’t have. Google could offer Duolingo for free, thus removing the beauty of Google Classroom, or it could make Duolingo an additional offering for Google Classroom. Either way, cross-marketing between Duolingo and Google Classroom would increase the profitability of either of Google’s divisions.
Google already knows the founder of Duolingo. Duolingo’s founder has a history with Google. Louis von Ahn, Ph. D. in the past he sold two Google companies in his 20s. The first is Google Image Labeler, and now it’s reCAPTCHA. This past dating is very interesting, which puts Google in the most productive position among its competition to win Duolingo. Luis von Ahn is the type of user who would raise a lot of price on Google. Usually, if he works for Google, he could be the company’s next CEO after Sundar Pichai.
Duolingo Blog through Luis von Ahn
Source: Duolingo blog; Duolingo is now a public company through Louis von Ahn
The above is just a list of possible synergies that would drive Google to get Duolingo. I’m pretty sure there are other synergies that would only be known internally within Google and Duolingo.
The query might now be wondering why Google would buy Duolingo compared to some other competitor. To better answer this query, let’s take a look at how Duolingo is leading the language learning software industry. First of all, Duolingo is the cheapest among its competition. as shown in the following table:
Society
No user-consistent discount consistent with the month
Duolingo
$6. 99
hellotalk
$6. 99
Tandem
$6. 99
Memorism
$8. 49
Ling visit
$9. 60
Busu
$9. 99
Mondi
$9. 99
Rosetta Stone
$11. 99
LingoCerf
$14. 99
mango languages
$17. 99
Babel for companies
$19. 99
Source: Compiled through the writer of the sources.
In addition, Duolingo has the most subscribers and dominates the language software industry. The chart below shows that Duolingo has almost twice as many subscribers as all of its core competition combined.
Application Company
Duolingo’s dominance has made it a very attractive buying target for Google. Given Duolingo’s existing capitalization ($3. 3 billion at the time of writing), I think Google wants to play as soon as possible.
A detailed comparison of Duolingo’s features compared to its competition is beyond the scope of this article and is possibly the subject of the article.
To compare Duolingo, I started with the 2021 financial statements and the most recent results for the second quarter of 2022. Adjustments were made to the expressed portions in the financial statements to offload the full 2022 monetary projection. I then used the classic method of discounting money, employing net pre-tax and pre-refund earnings based on stocks as a loose money matrix approximation.
To get to the 2022 projection, I made the following assumptions:
Based on previous conservative assumptions, the company’s valuation was $8. 5 billion. With 40 million shares, we’re talking about a valuation of $212. Obviously, a lot of assumptions are made here, and you may want to play with converting them and see what happens. The final results would be. I make my evaluation spreadsheet to download.
Created through the author
Based on this analysis, Google would possibly be offering to buy Duolingo for around $212, but not much less than the all-time high of $204. Google wants to act very fast, otherwise it would lose the opportunity to master the language. Learning market, and a competitor can also beat you to win Duolingo.
While Google’s acquisition of Duolingo makes a lot of sense from the perspective of any of the companies, there are occasions that may derail this deal. These occasions include:
The more I study on this topic, the more convinced I am that previous occasions would materialize and that Google would win Duolingo.
Duolingo, the world leader in language learning solutions, is a company that has the best compatibility to be a Google department. The synergies between the two companies may not be better, and either company would benefit greatly from compatibility with this acquisition.
Due to synergies and potential growth, Google is expected to offer value in excess of $200 according to the constant percentage (more than double the existing value). However, this number can accumulate especially if there is a bidding war from some other competitor, in all likelihood Microsoft or Meta.
Before you make your decision to buy or sell any of the companies, you will need to do your own due diligence.
This article written by
Disclosure: I have/have a long advantageous position in DUOL shares, whether through stocks, features or other derivatives. I wrote this article myself and expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose shares are discussed in this article.
Additional Disclosure: I have a long position at Microsoft.