Freemium In Education

We’ve been investing in the education sector for a few years now. We started our exploration of online education in early 2009 with an event called Hacking Education. The takeaways from that event have informed a lot of what we’ve invested in since then.

One of the key takeaways was that learning could and should become free. Our friend Bing Gordon said this at Hacking Education:

From an economic point of view, I would say the goal… is to figure out how to get education down to a marginal cost of zero. 

We have invested with Bing in online education. Bing and his partners at KP led the most recent round in our portfolio company DuoLingo. DuoLingo is the most popular language learning mobile app in the world. And one of the reasons for that is that DuoLingo is free.

So you might ask “how can you make money giving away a learning app?” This past week DuoLingo answered that question with the commercial release of the DuoLingo Test Center.

The DuoLingo Test Center is currently free but it won’t be for long. Give it a try if you’d like to see how it works. Once the DuoLingo Test is accepted at schools and employers, the company plans to charge $20 to take its test.

There’s an established incumbent (monopoly) in this market called TOEFL. If you’ve come to the US to study, you’ve probably taken this test. It’s a lot more expensive than $20 per test and DuoLingo is out to prove it can do this testing less expensively and better.

But what this example shows is something more than how one company plans to monetize its free app. It’s a model for freemium in online eduction. Provide the education for free but charge for the certification (testing). This is a very elegant implementation of freemium as its an easy on ramp and the customers who get the most value are the ones who pay.

I am pretty sure this will become the dominant monetization model in online education. We are already seeing it emerge in other sectors. A number of the attendees at Hacking Education predicted this over five years ago. It made sense to me then and it makes even more sense to me now.