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