One of the big questions that we tackle at Reese News Lab is how we can make money from a media product.
According to the 2013 State of the News Media report, print advertising revenue fell in 2012 (no surprise), but the growth of revenue from digital ads has been slow.
In the Lab, we try as hard as we can to focus on creating business models that don’t rely on advertising because of this very fact. Revenue from advertising has been the status quo, but given today’s media landscape, the status quo is not good enough. But is there a way that the media can survive without advertising?
Enter Duolingo: an app that prides itself on being a source of “free language education for the world.” It’s a game. It’s effective. But most importantly, it’s financially sustainable.
Inside the app
The creator of the startup, Luis von Ahn, said that he saw a need for the product growing up in Guatemala where learning English meant that one would have a greater opportunity at finding work.
The app itself is beautifully designed and the approach it takes on learning a language is effective. Instead of having the user recite conjugations, the app dives right in to common phrases that are practical. However, its approach to language acquisition is not the most fascinating thing about the product: it’s the way it sustains itself.
Rosetta Stone charges $125 for one of its yellow boxes of knowledge. While some may say that price is worth it for what you get in exchange, the recreational user who wishes he or she could easily pick up another language on the side is unlikely to pay the money.
Duolingo is free. All you need is an iPhone or Android device and you’re ready to go. It must be full of advertising, right?
There are no ads. Duolingo makes its money from “students” of the app. Organizations like BuzzFeed and CNN who need webpages translated upload those webpages. The students of the app can tackle translating the document. Then BuzzFeed and CNN pay for the translated version.
This approach to financial sustainability can teach us a couple of lessons for sustaining the media industry.
1. Advertising should not be relied upon as the sole source of revenue.
The State of the News Media report shows that advertising is not the best way to sustain the media. It’s time to get creative, which is exactly what Duolingo has done and what we in the Lab strive to do.
2. Look at the market and see what that market wants.
Luis von Ahn saw the need for a free and easy way to learn English in Guatemala. If there is no market for the product, that product should not be created.
3. See what the market is willing to pay.
Language translation service is a $30 billion annual market but Rosetta Stone is forecasting its third year of annual loss, and looking at half of its shares being lost since its IPO in 2009. People are willing to pay for translation services, but people are not as willing to pay for learning a language
4. Consider multiple markets where the markets are working together with a common goal.
This aspect of Duolingo’s business model is my favorite. Duolingo essentially has two big markets: people who want to learn a language and people who want a translation service. This symbiotic relationship is the core of its sustainability. The students translate webpages for clients. The clients pay for those translations. The students get to keep their free language translation service.
Duolingo’s business model is a sign that there is hope for startups looking for new ways to fund products that people will be engaged in. This semester’s teams should use Duolingo’s ingenious model as a guide in their quest for media sustainability.