WEBVTT - ICYMI: The Future of Language-Learning

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business

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<v Speaker 1>Week with Carol Masser and Tim Stenevek on Bloomberg Radio.

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<v Speaker 2>Well, looking for outperformance in today's equity trade and really

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<v Speaker 2>the equity trade for the last year. Check out the

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<v Speaker 2>more than twenty three billion dollar market cap language learning app.

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<v Speaker 2>It's the most popular in the world. We are talking

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<v Speaker 2>about Dual Lingo. The stock up sixty percent year to date,

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<v Speaker 2>up around two hundred percent, Carol in the last year.

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<v Speaker 3>Yeah, and you know a.

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<v Speaker 4>Lot about this company. You actually talked with Our next guest,

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<v Speaker 4>delighted to have with us, the CFO of the company,

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<v Speaker 4>Matthew Scarupa. He is chief financial officer of due Lingo,

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<v Speaker 4>joining us from Pittsburgh. He is featured in the upcoming episode,

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<v Speaker 4>as is my co host Tim Senovek, chief Future Officer.

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<v Speaker 4>It's on Bloomberg Television this evening at nine thirty pm

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<v Speaker 4>Wall Street Time. I got to say, first of all, Matt,

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<v Speaker 4>nice to be talking with you. Tim, host of the episode.

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<v Speaker 4>He's been talking about you and the company so much.

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<v Speaker 4>I mean, you guys are on fire. Talk to us

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<v Speaker 4>about the growth at the company, where it's coming from.

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<v Speaker 4>In an environment that you know, there's a lot of

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<v Speaker 4>pressures on companies and leaders at this time.

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<v Speaker 5>Well, it's great to be here, Thanks for having me,

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<v Speaker 5>and you're absolutely right. You know, we've done a great

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<v Speaker 5>job of growing this year. Our Q one performance was

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<v Speaker 5>strong top to bottom. We saw really strong user growth.

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<v Speaker 5>That user growth translated into a really strong top line

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<v Speaker 5>and bookings and revenue, and we were able to keep

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<v Speaker 5>control of costs like we historically have been able to

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<v Speaker 5>to expand margins and it wasn't just a Q one story.

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<v Speaker 5>As we guided on our last earnings call, we believe

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<v Speaker 5>we're in a really strong position for the rest of

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<v Speaker 5>the year. We feel good about Q two and the

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<v Speaker 5>rest of the year, and it's going to continue to

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<v Speaker 5>come from the same sources. We're a company that grows

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<v Speaker 5>primarily organically by word of mouth, and we expect that

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<v Speaker 5>to continue.

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<v Speaker 2>Hey, Matt, good to have you join us. Thanks for

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<v Speaker 2>doing this today, and thanks again for participating with us

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<v Speaker 2>for the CFO Show premieres again tonight. Ten point three

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<v Speaker 2>million paid subscribers as of the end of the first

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<v Speaker 2>quarter of twenty twenty five. It's growth of forty percent

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<v Speaker 2>year over year. How much can how long can you

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<v Speaker 2>continue that growth? I mean, when we're talking the growth

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<v Speaker 2>at that percentage, like that's pretty substantial.

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<v Speaker 5>No, I appreciate. It was great to do the show

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<v Speaker 5>with you, and I look forward to seeing that. In

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<v Speaker 5>terms of growth, we've done it for several years. I mean,

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<v Speaker 5>we went public in twenty twenty one, and if you

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<v Speaker 5>look back from then to now, we've grown the top

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<v Speaker 5>line really nicely. So i'd say that you know, you

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<v Speaker 5>look back and you think that we have a strong

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<v Speaker 5>path going forward as well. I'd also just call out

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<v Speaker 5>that the ten point three million subs is great. We're

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<v Speaker 5>excited about that. We feel really good about that growth.

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<v Speaker 5>But we're also seeing really nice diversification of subscribe So

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<v Speaker 5>we have continued strength in our Family Plan, which is

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<v Speaker 5>a subscription where multiple friends and family can join, and

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<v Speaker 5>as of the last quarter, seven percent of our subs

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<v Speaker 5>we're on our Max tier, which is our highest tier service,

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<v Speaker 5>which has features like video call with Lily, and it's

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<v Speaker 5>doing really well. So it's it's a great story not

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<v Speaker 5>just on the overall top line numbers, but on how

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<v Speaker 5>we're growing the subscribers.

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<v Speaker 3>I mean, that's.

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<v Speaker 4>Wild almost fifty percent year every year growth Matt, I

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<v Speaker 4>am curious, who are these people that are signing up?

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<v Speaker 4>How long do they stay with you? And what's the

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<v Speaker 4>cost to acquire an individual user?

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<v Speaker 5>Yeah, so one of our core business model advantages is

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<v Speaker 5>that when we acquire a user, we acquire them mainly

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<v Speaker 5>for free. We do spend on performance marketing and some

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<v Speaker 5>brand spend, but it's relatively small as a percentage of revenue,

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<v Speaker 5>and so most of our growth comes from people tell

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<v Speaker 5>telling their friends and family that they've had a great

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<v Speaker 5>and engaging experience with our app.

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<v Speaker 3>That's why Luis is so focused.

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<v Speaker 5>On engagement as a core driver of growth for us,

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<v Speaker 5>is that if you have this wonderful, joyful experience, you're

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<v Speaker 5>going to tell people about it and they're going to

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<v Speaker 5>try it. And then the other way is we have

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<v Speaker 5>a really amazing social first marketing strategy where we, you know,

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<v Speaker 5>insert ourselves into viral moments on online TikTok, Instagram, other platforms,

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<v Speaker 5>and users create their own content which goes viral, and

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<v Speaker 5>so on any given.

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<v Speaker 3>Day, a lot of what people are.

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<v Speaker 5>Talking about on dual Engo isn't generated by us. It's

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<v Speaker 5>generated by our you know, beloved fan base. You know,

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<v Speaker 5>when you have that type of user acquisition, and it

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<v Speaker 5>is global. We're seeing strong user growth around the world.

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<v Speaker 5>We get a lot of opportunities to then convert folks

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<v Speaker 5>from free subscriber to paid or from free user to

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<v Speaker 5>paid subscriber. And they stick around on the platform and

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<v Speaker 5>they come back frequently, and so we get multiple chances

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<v Speaker 5>to convert them. And while we're doing, while time is progressing,

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<v Speaker 5>we're making the subscription product even better and better.

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<v Speaker 3>So that's how we grow the subscriber base.

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<v Speaker 2>Well, we'll talk a little bit in a minute about

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<v Speaker 2>the social first marketing because something kind of wacky seems

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<v Speaker 2>to be happening right now if you look at the

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<v Speaker 2>social channels for Do a Lingo. But I'm wondering specifically,

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<v Speaker 2>mad about growth and about you know, at the end

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<v Speaker 2>of the day, the efficacy of the product. And I'm

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<v Speaker 2>wondering how you measure to what extent the product actually

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<v Speaker 2>resonates and works for people who are trying to learn

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<v Speaker 2>English as a second language, for example, to be able

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<v Speaker 2>to do business in the US or to be able

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<v Speaker 2>to do business in English. How do you measure that?

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<v Speaker 3>Yeah, well, it is core to our mission.

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<v Speaker 5>So our mission is to you know, build the best

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<v Speaker 5>education in the world and make it universally available. And

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<v Speaker 5>so to do that, we need to prove to our

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<v Speaker 5>users and to ourselves that we're teaching really well. We've

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<v Speaker 5>had some studies done that show just how efficacious we are.

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<v Speaker 5>So you know, if you compare us to learning a

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<v Speaker 5>language and a university, we are on par with that.

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<v Speaker 5>You can probably do it faster on dual Lingo. And

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<v Speaker 5>you know, there's plenty of evidence we've put on our

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<v Speaker 5>website that shows those studies in detail.

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<v Speaker 3>I think the bigger.

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<v Speaker 5>Evidence is that we're continuing to add features that just

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<v Speaker 5>really address some of the core desires of particularly English

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<v Speaker 5>learners like you reference. They want to practice conversation, and

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<v Speaker 5>so what we've done over the past you know several quarters,

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<v Speaker 5>is add this feature called video Call with Lily, where

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<v Speaker 5>you can practice your conversation with one of our characters, Lily.

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<v Speaker 3>She's a bit passive, aggressive, she's not impressed. I've yet

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<v Speaker 3>to impress her.

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<v Speaker 5>With my Spanish, and I don't think I'm going to,

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<v Speaker 5>but I'm going to keep trying.

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<v Speaker 2>She's the thing, and yeah, I just want to say,

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<v Speaker 2>she's over your right. Well, we're looking at pictures of

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<v Speaker 2>her on the screen right now, there's also a next

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<v Speaker 2>she's next to duo over your right. So that's the Carol.

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<v Speaker 2>That's Lily, who's not impressed you. By the way, in

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<v Speaker 2>the last couple of months, has unfortunately become a member

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<v Speaker 2>of my family. It seems like with doing this with

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<v Speaker 2>that it is passive aggressive.

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<v Speaker 5>Yeah, Lily is not impressed with me. And so that

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<v Speaker 5>kind of practice, though, is really helpful for folks who

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<v Speaker 5>are trying to learn English. They're trying to learn how

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<v Speaker 5>to speak it, and and that's what we've been able

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<v Speaker 5>to do over the past little bit.

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<v Speaker 2>So you use AI in a few different ways. Lily

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<v Speaker 2>is certainly one of them. When you think about the

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<v Speaker 2>cost associated with this. You're not using AI that a

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<v Speaker 2>platform that you developed actually at dual Lingo, You're you're

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<v Speaker 2>outsourcing the technology. How do you keep those costs and

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<v Speaker 2>control because that's pretty expensive tech, Matt, And you know

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<v Speaker 2>you're watching the bottom line and you're watching margins here.

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<v Speaker 5>Yeah, absolutely, And you know it comes down to the

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<v Speaker 5>fact that we have been using forms of AI, machine

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<v Speaker 5>learning and whatnot for a long time in our company.

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<v Speaker 5>The lesson you get served up, you know is for

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<v Speaker 5>many many years been based on a machine learning algorithm,

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<v Speaker 5>and now with generative AI, with video call with Lily,

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<v Speaker 5>and in some of our content creation, we are seeing

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<v Speaker 5>that there's an amazing advancement in this technology that helps

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<v Speaker 5>us do these things much quicker and more even producing

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<v Speaker 5>more content than we thought was possible. You know. For example,

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<v Speaker 5>you know, it took us about ten years to create

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<v Speaker 5>the first hundred courses, and then in less than a

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<v Speaker 5>year with this new technology, we created more than one

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<v Speaker 5>hundred more, and so this technology is really powerful. The

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<v Speaker 5>good news about it is that the costs are coming

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<v Speaker 5>down naturally. You know, we don't have to do much internally,

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<v Speaker 5>although we are still doing things to optimize the costs.

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<v Speaker 5>But just by the nature of this technology, we're seeing

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<v Speaker 5>rapid declines in the cost and we don't know for

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<v Speaker 5>sure that that's going to continue. But if it does,

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<v Speaker 5>you know, I think that you know, the use of

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<v Speaker 5>this will go up and margins will be will be good.

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<v Speaker 4>I just want to know. I'm one hundred percent Slovak,

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<v Speaker 4>and I just want to know how long would it

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<v Speaker 4>take me to learn a language with you guys? I

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<v Speaker 4>know a few keywords, you know, your parents, your grandparents

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<v Speaker 4>teach it the squear words and all that good stuff.

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<v Speaker 4>But how long does it take for someone to learn

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<v Speaker 4>certain languages?

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<v Speaker 5>Sure, well, you know, I don't know that I've ever

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<v Speaker 5>met anyone else or talked to them live on air.

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<v Speaker 5>But I am also Slovakian, which is which is quite

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<v Speaker 5>the coincidence, but I think, yeah, that's it's a very

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<v Speaker 5>nice coincidence. It turns out more will depend on your

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<v Speaker 5>ability to put in the time. You're learning a language

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<v Speaker 5>takes practice, and that's why we're so focused on engagement.

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<v Speaker 5>We want you to enjoy our app and come back

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<v Speaker 5>every day because it's going to take time to learn.

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<v Speaker 5>So if you're really committed and you want to learn

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<v Speaker 5>any language on du or lingo, and you put in

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<v Speaker 5>a bunch of time, you're going to learn it much faster.

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<v Speaker 5>And that's what the research shows. And so it's really

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<v Speaker 5>motivation dependent. What we find is that the hardest thing

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<v Speaker 5>about learning a languag which isn't verb conjugation or grammar

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<v Speaker 5>or speaking, it's your motivation to keep practicing and keep learning.

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<v Speaker 5>And that's why most of our company is geared around

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<v Speaker 5>bringing you back every day and making sure you're engaged

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<v Speaker 5>in the product. Because if you're engaged in the product,

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<v Speaker 5>you have a chance to continue to learn.

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<v Speaker 2>Yeah, the gamification, the alerts, the emails like the friends streak,

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<v Speaker 2>all the stuff that brings you back into the program. Matt,

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<v Speaker 2>I promise that we would go to this unhinged marketing

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<v Speaker 2>and social media strategy because you got to shed some

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<v Speaker 2>light on what exactly is happening across Dueling GOS social

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<v Speaker 2>channels right now. I checked in on it yesterday and

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<v Speaker 2>this morning, and it looks like Duo has been taken hostage.

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<v Speaker 2>There's like some sort of hostage video. Everything else has

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<v Speaker 2>been wiped. What can you tell.

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<v Speaker 5>Us, Well, I can only tell you that our owl

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<v Speaker 5>is truly unhinged.

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<v Speaker 3>You can never predict what that guy is going to do.

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<v Speaker 4>I was like my co host, I'm just gonna tell you, Matt,

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<v Speaker 4>never know what he's gonna do. Anyway, go ahead.

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<v Speaker 5>I've only spent a little bit of time with him,

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<v Speaker 5>but you know, I kind of can see it our

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<v Speaker 5>all mascot earlier this year, right after the Super Bowl,

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<v Speaker 5>decided that he was going to fake his own death

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<v Speaker 5>and then you know return and so like, you just

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<v Speaker 5>never can predict it. I would just encourage everyone who's

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<v Speaker 5>watching and listening. To check in again tomorrow. You'll get

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<v Speaker 5>some interesting insight.

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<v Speaker 2>All right, there it is Matt scarupa, Chief financial officer

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<v Speaker 2>over at DUA Lingo. Matt, thanks for joining us. Good

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<v Speaker 2>to see you once again. Chief Future Officer with Matt

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<v Speaker 2>premieres tonight nine thirty pm Wall Street Time on a

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<v Speaker 2>Bloomberg Television. You can also check it out online and

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<v Speaker 2>everywhere you watch Bloomberg TV.