Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Shares of dual Lingo
Speaker 1: are tanking today. The stock in fact right now down
Speaker 1: about seventeen percent. It did though, hit its lowest intra
Speaker 1: day since February of twenty twenty three, now down more
Speaker 1: than eighty percent since May of twenty twenty five, and
Speaker 1: about twenty two percent of the flow is short, so
Speaker 1: there's some real negative sentiment on the name. Shares sliding
Speaker 1: after the companies said it's drive to gain subscribers would
Speaker 1: mean slower earnings growth and narrower profit margins in the
Speaker 1: short term. Tim, you keep reminding us that there's a
Speaker 1: lot going on with the company, some transformations here. Yeah.
Speaker 2: The company said it would step up investment in AI
Speaker 2: and sacrifice some degree of monetization in order to accelerate
Speaker 2: user growth and engagement. The goal double the current number
Speaker 2: of daily active users to one hundred million in twenty
Speaker 2: twenty eight. Great to be talking again with a member
Speaker 2: of the Dulingo c suite, back with us. Luis von Ahn,
Speaker 2: co founder, chairman, president and CEO of Duelingo. He joins
Speaker 2: us from New York. Lou He's always good to see you.
Speaker 2: We're gonna talk about the quarter and the outlook in
Speaker 2: a minute, But I want to start big picture with
Speaker 2: AI because I mean, you've been thinking and researching AI
Speaker 2: for decades. At this point, you're a recipient of a
Speaker 2: MacArthur Genius Foundation grant back in the year two thousand
Speaker 2: and six. We're working on AI. This is nothing, nothing
Speaker 2: new to you, what's happening right now. But answer the
Speaker 2: question for investors, is AI a threat to your business?
Speaker 3: Well, first of all, thank you for having me.
Speaker 4: You know, I think that we're in a unique point
Speaker 4: in time where because of AI, we're going to be
Speaker 4: able to teach significantly better. And you know, Dueling was
Speaker 4: is by a wide margin, the largest app in education
Speaker 4: in the world, and I think because of that, we're
Speaker 4: going to be able to really take advantage of this,
Speaker 4: you know, AI boon to be able to teach significantly better.
Speaker 4: And our sense is that within the next few years
Speaker 4: we're going to have an app that teaches us well
Speaker 4: as a one on one tutor, but also so is
Speaker 4: as fun as a mobile game. And if we're really
Speaker 4: able to do that, I think there's just so much
Speaker 4: more that we encapture.
Speaker 3: So that's what that's what we're doing. We're really shooting
Speaker 3: for that.
Speaker 1: So jumping on the AI bandwagon, I mean, I guess
Speaker 1: what I guess what investors want to know is what
Speaker 1: is dual Lingo's advantage over potential new AI learning apps.
Speaker 4: Well, you know, at the moment, we're not we're not
Speaker 4: particularly concerned with competition in terms of you know, other
Speaker 4: other education apps.
Speaker 2: We have.
Speaker 4: For example, for language learning, we have about eighty five
Speaker 4: percent of the market share of all daily active usies
Speaker 4: of people who are learning a language.
Speaker 3: So we have huge scale.
Speaker 4: And what differentiates us is that, because of that scale,
Speaker 4: we just have more data into how people learn than
Speaker 4: anybody else and we can use that to train our
Speaker 4: own specific models. So we just have the advantage of scale,
Speaker 4: of being able to watch literally billions of exercises every
Speaker 4: day by people who are learning different things.
Speaker 1: But as you know, this is going and this is
Speaker 1: moving quickly, the AI impact it seems, and to be fair,
Speaker 1: you are right, like we'll see many say this is
Speaker 1: you know, we're kind of early in on this process
Speaker 1: and the impact. But what does dual lingo offer that
Speaker 1: can't easily be replicated by a large language model And
Speaker 1: how do you kind of view that competitive landscape evolving.
Speaker 3: Yeah, I mean there's a there's a there's a number
Speaker 3: of things.
Speaker 4: I mean, for one, with do a Lingo, what we
Speaker 4: do is we try to build a habit of learning.
Speaker 4: I mean, for example, fifteen million of our daily active
Speaker 4: users have a streak of longer than three hundred and
Speaker 4: sixty five days, meaning they have been using du Lingo
Speaker 4: for a year or longer and haven't missed the day.
Speaker 4: So we're really trying to build a habit for that.
Speaker 4: And this is why do a linguist part game, part education,
Speaker 4: And that's you know, I think that's just the right thing.
Speaker 4: It just turns out the hardest thing about learning something
Speaker 4: by yourself is staying motivated. The actually the content to
Speaker 4: learn has been there for a long time. So for example,
Speaker 4: it's you know, you've been able to learn a language
Speaker 4: by just reading a book for hundreds of years.
Speaker 3: That has been there.
Speaker 4: It's just what we do differently is we motivate people
Speaker 4: to continue doing it.
Speaker 3: And that's hard to get right.
Speaker 2: So what are what our investor is not getting right?
Speaker 2: In your view, Carol? Carol mentioned some of the stock moves,
Speaker 2: and now you know down at a point that you
Speaker 2: haven't seen since February of twenty twenty three. What are
Speaker 2: investors missing here?
Speaker 4: I think it's a matter of timing. You know, on
Speaker 4: our end, we are trying to build a company for
Speaker 4: the very long term. We're trying to do something that
Speaker 4: you know, for example, in our shareholder letter, we said
Speaker 4: that we are we're shooting to have a double the.
Speaker 3: Daily active uses that we have now. I mean, at
Speaker 3: the moment, we have a little.
Speaker 4: North of fifty million daily active users worldwide. We're trying
Speaker 4: to have more than one hundred million. But we're saying
Speaker 4: that that's going to take some time, and so we're
Speaker 4: cons concentrated in the long term. And you know what
Speaker 4: we're doing is we're trading off this year's you know,
Speaker 4: financial metrics for a much larger thing in the long term.
Speaker 1: Go ahead, Well, I get that right. You know, companies
Speaker 1: have to invest in order to provide growth going forward.
Speaker 1: And I think it's fair to say that we understand
Speaker 1: why investors. I mean, they're not loving your forecast for
Speaker 1: first quarter adjusted EBITA that's missing the mark from what
Speaker 1: the street was expecting twenty twenty six revenue. Also that
Speaker 1: forecast missing same story for twenty twenty six adjusted EBITA overall.
Speaker 1: So you talk about building this to double your daily
Speaker 1: active users to one hundred million, how much will how
Speaker 1: long will that build actually take and what kind of
Speaker 1: visibility do you have on that to kind of maybe
Speaker 1: reassure investors at this isn't something that takes longer while
Speaker 1: the AI world continues to challenge established players.
Speaker 4: Yeah, I mean we're the way we're seeing it is
Speaker 4: We're going to spend this year really working on three things.
Speaker 4: Really teaching better, improving the free user experience, and also
Speaker 4: spanning to other subjects. I mean, by now we are
Speaker 4: we already teach math, music, and chess, and you know,
Speaker 4: we've been growing quite a bit. About fifteen percent of
Speaker 4: our active users are learning things that are you know,
Speaker 4: other than languages. Our chess course has grown quite significantly.
Speaker 4: So these are the three things that we're working on,
Speaker 4: and we're going to be working on that for the
Speaker 4: rest of the year, and we're expecting that towards the
Speaker 4: end of the year we're going to see some improvements
Speaker 4: in our year over year growth rate.
Speaker 3: We're still growing.
Speaker 4: I mean, we've had five years of really phenomenal growth.
Speaker 4: We iPod in twenty twenty one and since then, we've
Speaker 4: more than five x our active users, so you know,
Speaker 4: we expect that will continue growing pretty pretty strongly.
Speaker 2: Luis, is the idea in making changes to the free
Speaker 2: tier is it to get more people who don't use
Speaker 2: du lingo now to use the free tier, or is
Speaker 2: to get those free free tier users to upgrade to
Speaker 2: a paid tier.
Speaker 4: Historically, what we have done is we have, right, you know,
Speaker 4: the way we generate value on dualingo is there's two
Speaker 4: parts of it. One is how many active uses we have.
Speaker 4: That's kind of like the size of the pie that
Speaker 4: has grown quite significantly. And then there's how many of
Speaker 4: these people are paying us because we have this freemium model,
Speaker 4: that's you know, like the fraction of the pie that
Speaker 4: our payers. Historically we have worked on both. We have
Speaker 4: worked on growing the pie and also growing the fraction
Speaker 4: of the pie that is paying, which is why our
Speaker 4: bookings have grown really significantly over the last five years.
Speaker 4: This year, we're mainly concentrating on just growing the pie,
Speaker 4: that is the number of people that are actively using
Speaker 4: dual ingo, because it is our belief that.
Speaker 3: Because of the.
Speaker 4: Moment that we're in, we really want to have as
Speaker 4: many people as possible actually learning something meaningful and dual lingo.
Speaker 1: Uh.
Speaker 4: And once we're able to do that, I mean, one
Speaker 4: of the main advantages that we have, certainly against new
Speaker 4: entrants is scale. They're just there's there's no other education
Speaker 4: app that has the scale that we have.
Speaker 1: Well, great to away get a check on what you
Speaker 1: guys are up to and really appreciate it. Love to
Speaker 1: hear more too as we go out throughout the year.
Speaker 1: How things are going.
Speaker 2: I'm a three fifty five, I think, Lingo, how is this?
Speaker 2: I'm almost at a.
Speaker 1: Year I think I think Sebastian actually said he's on
Speaker 1: his streak is about seven hundred and seventy. That's one
Speaker 1: of our producers. Hey, Louise, thank you so much. Luis
Speaker 1: fan On, co founder, chairman, president, CEO of Duel Lingo.
Speaker 1: When we come back and check on trading and stocks
Speaker 1: on the move. This is Bloomberg Business Week Daily