Skip to content

Even more insights from Duolingo’s monetization product leader

One time purchases, A/B testing, and leveling up your own financial know-how

132 people showed up to a chat between me and Matt Long, Sr. Director of Product at Duolingo on Friday, Nov. 1. We had a great chat and you can watch it here

30 minutes isn’t much time, and so we saved the questions and recorded a follow-up. I wrote up the Q&A below or you can watch the recording. 

If this topic interests you, please do check out my course, Pricing and Finance for Product People, which runs Nov. 19-20 and has a 4.89/5 rating. As one participant put it: 

Her training course was crucial in helping our team learn to craft offers that can resonate with customers and support business goals. With a clear and practical teaching style, Jenny made complex concepts accessible and actionable. 

This interview has been lightly edited for brevity and clarity. 

The first thing we talked about in our chat was that, as you’re thinking of introducing this new tier of Duolingo pricing you were trying to maximize the average paid users’ average price per paid user. How did you figure out how to maximize that?

Matt: If you want to maximize how much your existing payers are paying, you have a few different levers you can pull. Assuming we’re talking about LTV:

  1. Increase retention (e.g., move users from monthly to annual plans)
  2. Move users to higher-value plans (e.g., individual to family subscriptions)
  3. Introduce a higher tier or adjacent product
  4. Offer one-time purchases in addition to subscriptions

We introduced a higher tier that allows people with higher willingness to pay to go above and beyond. Additionally, our two major products, Super Duolingo and Duolingo Max, are one-time payments. Subscription companies often augment their offerings with one-time purchases that have a more natural frequency than monthly subscriptions.

One-time purchase products can also get people into the purchase funnel. Once they’ve entered their credit card information, it becomes easier to potentially upsell or cross-sell them to another product. At both Twitch and Duolingo, we see many existing payers buying one-time use products, such as Gems, but we also get a sizable number of brand new purchasers through these products.

Packaging and pricing at Duolingo with Matt Long

How do you level up your skills in pricing and finance?

Matt: Find time with your finance team and ask them to walk you through the unit-level profitability and unit economics of your product. This will help you understand the profit levers for your product.

Also, if your company has some type of Monthly Business Review or Quarterly Business Review for monetization products or the company as a whole, try to get your hands on that. Read through it because that will help you understand how leadership thinks about monetization and finance, and what terms they care about. It helps you understand leadership’s thoughts on monetization finance! 

How would you translate these learnings and mental models around one-time purchases into something that’s not a subscription product, like premium games?

Matt: It’s really hard to stand out as a fully paid product these days. For indie game developers, Steam is flooded with other indie games, making it incredibly hard to stand out. 

Think about how you can stand out and get people in the door. For games, try to get people to add your game to their wish list.

Consider something like an open beta or free trial. It can be hard to get people to pull out their wallet for an unknown quantity, which is why you see so much of the entertainment industry moving towards sequels or free-to-play models.

How do you think about sales tax and other add-ons? Do you show that at the beginning or throw it on at the end? Have you run experiments on it?

Matt: We have run experiments. Different governments approach this differently. In Europe, value-added tax must be included in the marketed price by law. In the US, we generally show the base price, and sales tax is added after the fact.

What I’ve generally seen is that you want to optimize the price that you’re showing users. In the EU, that would be your all-in price. In the US, where sales tax is added at checkout, you generally optimize the price before taxes are added.

Why wasn’t growth marketing or growth as a team mentioned when discussing pricing and packaging?

Matt: We have a huge growth team at Duolingo, but they’re generally focused on getting free learners into the app and keeping them engaged. When we’re thinking about pricing, we’re not proposing such deviations that it would be damaging to the brand. We’re not proposing 5x higher prices.

One of the decisions you make at a company is how inclusive you want to be versus having decisions made by a relatively small group of people. [The smaller group] generally allows you to move faster. In this case, my team, with leadership oversight, has the ability to make these decisions independently.

This structure is probably more common in organizations that don’t do a lot of paid customer acquisition.

What’s an example of a small change you’ve implemented that improved your free-to-paid conversion rate?

Matt: We tested animating some of the images in our purchase flow. Even animating the images in the right way and highlighting messages actually drove a pretty significant impact on conversion.

Another example is pre-selection. We make it easy for users based on where they came into the purchase flow from within the app. We pre-select what they want, or if they’re agnostic between annual and monthly plans, we pre-select the one that makes the most sense for the business.

How do you deal with the fact that sometimes people might see different prices during A/B testing?

Matt: It is a concern. Anytime you A/B test, you run the risk of this happening. When people are spending money, it’s a higher risk. There’s a trade-off between how fast you move with A/B tests and how much risk you’re willing to accept.

Consider how interconnected your customers are and how likely they are to speak to one another. At Duolingo, this does happen. People write to us because they’re in a cohort with a higher price, and we take care of them. We are very customer-focused.

At Twitch, where viewers spend multiple hours together virtually, if one user sees $5 and another sees $7, that’s going to come up. Companies like Twitch have to take a different approach to A/B testing pricing. They might pick representative countries or analogous countries to test pricing before broader launches.