What's Happening?
Duolingo, the language-learning platform, is advancing its advertising strategy by developing an in-house adtech platform named Duolingo Ads. This initiative aims to offer advertisers premium inventory and improve the quality of ads presented to its users. Historically, Duolingo has relied on demand-side platforms (DSPs) to serve ads to its free-tier audience, which constitutes about 90% of its user base. However, the company found that the quality of ads from DSPs did not align with its brand's premium positioning. By moving to direct sales, Duolingo seeks to better control its ad supply and partner with brands that match its app's quality. The platform has been testing these ads with brands like Marriott Bonvoy, Intrepid Travel, Universal Pictures, and Adobe since May. The company plans to continue using Google AdMob for programmatic ads while expanding its direct sales efforts.
Why It's Important?
This development is significant as it represents Duolingo's strategic shift to enhance user experience and ad quality, potentially increasing its advertising revenue. Currently, advertising accounts for less than 7% of Duolingo's $748 million revenue, with subscriptions being the primary income source. By improving ad quality and aligning it with its brand, Duolingo aims to attract more advertisers and increase engagement rates. This move could set a precedent for other tech companies seeking to balance ad revenue with user experience. The success of this strategy could lead to increased investment in direct ad sales across the tech industry, impacting how digital platforms monetize their services.
What's Next?
Duolingo plans to expand its ad sales team and focus on categories that performed well during initial tests, such as travel, tech, and entertainment. The company is also looking to partner with a third-party measurement firm to validate its attention metrics, ensuring advertisers receive accurate performance data. As Duolingo continues to refine its ad offerings, it may explore additional ad formats and partnerships to further enhance its advertising capabilities. The outcome of these efforts will be closely watched by industry stakeholders, as it could influence broader trends in digital advertising strategies.
